EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made and entered into as of February
22, 2007 (“Effective Date”) by and between RXi Pharmaceuticals Corporation
(“Employer”), a Delaware corporation and a majority owned subsidiary of CytRx Corporation,
a Delaware corporation (“CytRx”), and Xxx Xxxxx, an individual and resident of the
Commonwealth of Massachusetts (“Employee”).
WHEREAS, Employer and Employee desire to enter into an employment agreement under which
Employee shall serve on a full-time basis as Employer’s President and Chief Executive Officer on
the terms set forth in this Agreement, with the term of this Agreement to commence on the Effective
Date.
NOW, THEREFORE, upon the above premises, and in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows.
1. Engagement. Effective as of the Effective Date, Employer shall continue to employ
Employee, and Employee shall continue to serve, as Employer’s President and Chief Executive
Officer. Employee shall also continue to serve as a member of Employer’s Board of Directors
(“Board”). Employee understands that his duties as President and Chief Executive Officer may
change from time to time over the term of this Agreement in the discretion of Employer’s Board of
Directors, but such duties shall in all events be consistent with the duties customarily assigned
to the Chief Executive Officer of a company such as Employer.
2. Duties; Place of Employment. Employee shall perform all duties assigned to him by
the Employer’s Board faithfully, diligently and to the best of his ability. Such duties include,
without limitation, the overseeing and implementation of the business plan adopted by the Board (as
may be revised from time to time by the Board). Employee shall perform the services contemplated
under this Agreement in accordance with the policies established by and under the direction of the
Board of Directors. Employee shall have such corporate power and authority as shall reasonably be
required to enable him to discharge his duties under this Agreement. Employee’s services hereunder
shall be rendered at Employer’s offices in Worcester, Massachusetts, except for travel when and as
required in the performance of Employee’s duties hereunder.
3. Time and Efforts. Employee shall devote all of his business time, efforts,
attention and energies to Employer’s business and the discharge of his duties hereunder, except as
noted on Schedule A, which contains other potential activities of the Employee and disclosed
conflicts of interest.
4. Term. The term (the “Term”) of Employee’s employment shall commence on the
Effective Date and shall expire on December 31, 2008, unless sooner terminated in accordance with
Section 6. Neither Employer nor Employee shall have any obligation to extend or renew this
Agreement. In the event the Agreement shall not be extended or renewed by Employer beyond the
Term, Employer shall continue to pay Employee his salary as provided for in Section 5.1 during the
period commencing on the date on which the Term ends and ending on the earlier of (a) June 30, 2009
or (b) the date of Employee’s re-employment with another employer.
5. Compensation. As the total consideration for Employee’s services rendered under the
Agreement, Employer shall pay or provide Employee the following compensation and benefits:
5.1. Salary. Commencing on the Effective Date, Employee shall be entitled to receive
an annual Base Salary of Two Hundred Fifty Thousand Dollars ($250,000).
5.2. Discretionary Bonus. Employee may be eligible for an annual bonus for his
services during the Term. Employee’s eligibility to receive a bonus, any determination to award
Employee such a bonus and, if awarded, the amount thereof shall be in Employer’s sole discretion.
5.3. Stock Options. At the first regularly scheduled meeting of the Board following
the date upon which Employer closes an equity financing, in a single transaction or series of
related transactions, of at least $15,000,000 (a “Financing”), Employer shall grant
Employee a stock option under RXi Pharmaceuticals Corporation’s 2007 Incentive Plan (the
“Plan”) to purchase a number of shares of Employer’s common stock equal to 3/70th of the
number of shares of Employer’s common stock held by CytRx immediately prior to the Financing (the
“Option”). The Option shall vest and become exercisable in 36 equal monthly installments
beginning on the one-month anniversary of the date of grant, in each case, that Employee remains in
the continuous employ of Employer through such anniversary date. The Option shall (a) be
exercisable at an exercise price equal to the fair market value at the time of granting as
determined by Employer, (b) have a term of ten years, and (c) be on such other terms as shall be
determined by Employer’s Board of Directors (or the Compensation Committee of the Board) and set
forth in a customary form of stock option agreement under the Plan evidencing the Option.
Notwithstanding anything to the contrary in Section 6.2 or other provisions of this Agreement or of
the stock option agreement evidencing the Option, in the event that either (a) a Covered
Transaction as defined in the Plan occurs or (b) CytRx votes its shares of capital stock of
Employer to elect individuals who are (i) employees, officers or directors of CytRx, (ii)
employees, officers or directors of any entity that has a contractual business relationship with
CytRx, or (iii) employees, officers, directors of any entity that has a contractual business
relationship with any officer or director of CytRx (collectively, “Affiliates”) to constitute a
majority of the Employer’s Board of Directors, the Option shall thereupon vest in full and become
exercisable as to all of the shares covered thereby in accordance with the terms of the Plan.
Furthermore, in the event that the Employee is terminated without Cause or resigns for Good Reason,
the shares that would have vested during the Severance Period (as defined in Section 6.2 below)
shall vest and become exercisable as of the date of such termination.
5.4. Expense Reimbursement. Employer shall reimburse Employee for reasonable and
necessary business expenses incurred by Employee in connection with the performance of Employee’s
duties in accordance with Employer’s usual practices and policies in effect from time to time.
5.5. Vacation. Employee shall be entitled to twenty (20) business days of vacation
each year during the Term in accordance with Massachusetts law.
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5.6. Employee Benefits. Employee shall be eligible to participate in any medical
insurance and other employee benefits made available by Employer to all of its employees under its
group plans and employment policies in effect during the Term. Employee acknowledges and agrees
that, any such plans or policies now or hereafter in effect may be modified or terminated by
Employer at any time in its discretion.
5.7. Payroll Taxes. Employer shall have the right to deduct from the compensation and
benefits due to Employee hereunder any and all sums required for social security and withholding
taxes and for any other federal, state, or local tax or charge which may be in effect or hereafter
enacted or required as a charge on the compensation or benefits of Employee.
6. Termination. The Agreement may be terminated as set forth in this Section 6.
6.1. Termination by Employer for Cause or Voluntary Resignation Without Good Reason.
Employer may terminate Employee’s employment hereunder for “Cause” upon notice to Employee and
Employee may voluntarily resign his employment hereunder upon notice to Employer. “Cause”
for this purpose shall mean any of the following:
(a) Employee’s breach of any material term of the Agreement; provided that the first occasion
of any particular breach shall not constitute such Cause unless Employee shall have previously
received written notice from Employer stating the nature of such breach and affording Employee at
least ten days to correct such breach;
(b) Employee’s conviction of, or plea of guilty or nolo contendere to, any felony or other
crime of moral turpitude;
(c) Employee’s act of fraud or dishonesty injurious to Employer or its reputation;
(d) Employee’s continual failure or refusal to perform his material duties as required under
the Agreement after written notice from Employer stating the nature of such failure or refusal and
affording Employee at least ten days to correct the same;
(e) Employee’s act or omission that, in the reasonable determination of Employer’s Board of
Directors (or a Committee of the Board), indicates alcohol or drug abuse by Employee;
(f) Employee’s act or personal conduct that, in the judgment of Employer’s Board of Directors
(or a Committee of the Board), gives rise to a material risk of liability of Employee or Employer
under federal or applicable state law for discrimination, or sexual or other forms of harassment,
or other similar liabilities to subordinate employees; or
(g) The termination, on or before June 30, 2007, of any exclusive license agreement entered
into between Employer and the University of Massachusetts Medical School due to the failure of
Employer to close the Financing.
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Upon termination of Employee’s employment by Employer for Cause or by Employee due to a
voluntary resignation without Good Reason, all compensation and benefits to Employee hereunder
shall cease and Employee shall be entitled only to payment, not later than three days after the
date of termination, of any accrued but unpaid salary and unused vacation as provided in Sections
5.1 and 5.5 as of the date of such termination and any unpaid bonus that may have been previously
awarded Employee as provided in Section 5.2 prior to such date.
6.2. Termination by Employer without Cause or by Employee for Good Reason. Employer
may also terminate Employee’s employment without Cause upon notice to Employee. Employee may also
terminate Employee’s employment for Good Reason upon notice to the Employer. Upon termination of
Employee’s employment by Employer without Cause or by Employee for Good Reason, all compensation
and benefits to Employee hereunder shall cease and Employee shall be entitled to payment of: (a)
any accrued but unpaid salary and unused vacation as of the date of such termination as required by
Massachusetts law and any unpaid bonus that may have been previously awarded Employee as provided
in Section 5.2 prior to such date, which shall be due and payable upon the effective date of such
termination; (b) an amount, which shall be due and payable within ten (10) days following the
effective date of such termination, equal to the salary that would otherwise be payable as provided
in Section 5.1 for the period of time which is equal to the earlier of either (i) the
twelve-month anniversary of such termination date; or (ii) the remainder of the Term of the
Agreement but in no event less than six (6) months (either (i) or (ii) shall be referred to as the
“Severance Period”) and (c) continued participation, at Employer’s cost and expense, during
the Severance Period in any Employer-sponsored group benefit plans in which Employee was
participating as of the date of termination. For purposes of this Agreement, Good Reason shall
mean any of the following: (i) a material reduction in Employee’s duties, position, or
responsibilities in effect immediately prior to such reduction; (ii) the Company reduces Employee’s
Base Salary or bonus opportunity by more than 5% relative to his salary and bonus opportunity in
effect immediately prior to such reduction; (iii) there is a material reduction by the Company in
the kind or level of benefits to which Employee is entitled immediately prior to such reduction
with the result that Employee’s overall benefits package is significantly reduced; (iv) without
Employee’s express written consent, Employee’s relocation to a facility or a location more than
thirty five (35) miles from his then current location in Worcester, Massachusetts; or (v) CytRx
votes its shares of capital stock of Employer to elect individuals who are Affiliates to constitute
a majority of the Employer’s Board of Directors.
6.3. Death or Disability. Employee’s employment will terminate automatically in the
event of Employee’s death or upon notice from Employer in event of his permanent disability.
Employee’s “permanent disability” shall have the meaning ascribed to such term in any
policy of disability insurance maintained by Employer (or Employee, as the case may be) with
respect to Employee, or if no such policy is then in effect, shall mean Employee’s inability to
fully perform his duties hereunder for any period of at least 75 consecutive days or for a total of
90 days, whether or not consecutive. Upon termination of Employee’s employment as aforesaid, all
compensation and benefits to Employee hereunder shall cease and Employer shall pay to the
Employee’s heirs or personal representatives, not later than ten days after the date of
termination, any accrued but unpaid salary and unused vacation as of the date of such termination
as required by Massachusetts law and any unpaid bonus that may have been previously awarded
Employee as provided in Section 5.2 prior to such date.
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7. Confidentiality. While this Agreement is in effect and for a period of four years
thereafter, Employee shall hold and keep secret and confidential all “trade secrets” (within the
meaning of applicable law) and other confidential or proprietary information of Employer and shall
use such information only in the course of performing Employee’s duties under this Agreement;
provided, however, that with respect to trade secrets, Employee shall hold and keep secret and
confidential such trade secrets for so long as they remain trade secrets under applicable law.
Employee shall maintain in trust all such trade secret or other confidential or proprietary
information, as Employer’s property, including, but not limited to, all documents concerning
Employer’s business, including Employee’s work papers, telephone directories, customer information
and notes, and any and all copies thereof in Employee’s possession or under Employee’s control.
Upon the expiration or earlier termination of Employee’s employment with Employer, or upon request
by Employer, Employee shall deliver to Employer all such documents belonging to Employer, including
any and all copies in Employee’s possession or under Employee’s control.
8. Equitable Remedies; Injunctive Relief. Employee hereby acknowledges and agrees that
monetary damages are inadequate to fully compensate Employer for the damages that would result from
a breach or threatened breach of Section 7 of this Agreement and, accordingly, that Employer shall
be entitled to equitable remedies, including, without limitation, specific performance, temporary
restraining orders, and preliminary injunctions and permanent injunctions, to enforce such Section
without the necessity of proving actual damages in connection therewith. This provision shall not,
however, diminish Employer’s right to claim and recover damages or enforce any other of its legal
or equitable rights or defenses.
9. Indemnification; Insurance. Employer and Employee acknowledge that, as the Chief
Executive Officer of Employer, Employee shall be a corporate officer of Employer and, as such,
Employee shall be entitled to indemnification to the full extent mandated by Employer to its
officers, directors and agents under the Employer’s Certificate of Incorporation and Bylaws as in
effect as of the date of this Agreement. Subject to his insurability thereunder, Employer shall
maintain Employee as an additional insured under its current policy of directors and officers
liability insurance and shall use commercially reasonable efforts to continue to insure Employee
thereunder, or under any replacement policies in effect from time to time, during the Term.
Furthermore CytRx shall indemnify, defend and hold harmless Employee and IPIFINI, Inc. for any
claim against Employee arising from his work for Employer from the commencement of Employee’s
service as Employer’s President and/or Chief Executive Officer through the Effective Date.
10. Severable Provisions. The provisions of this Agreement are severable and if any
one or more provisions is determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions, and any partially unenforceable provisions to the extent enforceable,
shall nevertheless be binding and enforceable.
11. Successors and Assigns. This Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns and Employee and his heirs and representatives;
provided, however, that neither party may assign this Agreement without the prior written consent
of the other party.
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12. Entire Agreement. This Agreement including Schedule A 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 that are
not set forth otherwise therein or herein. Except as expressly provided herein, this Agreement
supersedes any and all prior or contemporaneous agreements, written or oral, between Employee and
Employer relating to the subject matter hereof. Any such prior or contemporaneous agreements are
hereby terminated and of no further effect, and Employee, by the execution hereof, agrees that any
compensation provided for under any such agreements is specifically superseded and replaced by the
provisions of this Agreement. The parties agree that Employee’s fiduciary responsibility will be
to RXi Pharmaceuticals, and not to CytRx, with no prejudice to the fact that CytRx may be advancing
the compensation prior to the date of the Financing.
13. Amendment. No modification of this Agreement shall be valid unless made in
writing, approved by the Compensation Committee and signed by the parties hereto and unless such
writing is made by an executive officer of Employer (other than Employee). The parties hereto
agree that in no event shall an oral modification of this Agreement be enforceable or valid.
14. Governing Law. This Agreement is and shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to Massachusetts’s
choice-of-law rules.
15. Review by Counsel. Following the closing of the Financing, Employer shall
reimburse Employee for consultation and review of this Agreement by legal counsel of his choosing
up to a maximum of $3,000.
16. Notice. All notices and other communications under this Agreement shall be in
writing and mailed, telecopied (in case of notice to Employer only) or delivered by hand or by a
nationally recognized courier service guaranteeing overnight delivery to a party at the following
address (or to such other address as such party may have specified by notice given to the other
party pursuant to this provision):
| If to Employer: | ||
| RXi Pharmaceuticals Corporation Xxx Xxxxxxxxxx Xxxxx Xxxxxxxxx, XX 00000 |
||
| and | ||
| Until the closing of the Financing, with a copy to: | ||
| CytRx Corporation | ||
| 00000 Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000 | ||
| Xxx Xxxxxxx, XX 00000 | ||
| Facsimile: (000) 000-0000 | ||
| Attention: Chief Executive Officer |
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| If to Employee: | ||||
| Xx. Xxx Xxxxx | ||||
17. Survival. Sections 8 through 19 shall survive the expiration or termination of
this Agreement.
18. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original and all of which together shall be deemed to be one and the same
agreement.
19. Attorney’s Fees. In any action or proceeding to construe or enforce any provision
of this Agreement the prevailing party shall be entitled to recover its or his reasonable
attorneys’ fees and other costs of suit in addition to any other recoveries.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first above written.
| “EMPLOYER” | ||||
| By: | /s/ XXXXXX X. XXXXXXXXX | |||
| Xxxxxx X. Xxxxxxxxx | ||||
| Director | ||||
| “EMPLOYEE” | ||||
| /s/ XXX XXXXX | ||||
| Xxx Xxxxx | ||||
| For the purposes of Section 9 only, CytRx Corporation has executed this Agreement as follows: | ||||
| CYTRX CORPORATION | ||||
| By: | /s/ XXXXXX X. XXXXXXXXX | |||
| Xxxxxx X. Xxxxxxxxx | ||||
| President | ||||
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