EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as
of June 16, 1998 by and between Discovery Laboratories, Inc., a Delaware
corporation (the "Company"), and Xxxxxx Xxxxxxxx, Ph.D. (the "Executive").
WHEREAS, the Company and Executive desire that Executive be
employed by the Company and that the terms and conditions of such employment be
defined;
NOW, THEREFORE, in consideration of the employment of
Executive by the Company, the Company and Executive agree as follows:
1. Term of the Agreement. The Company shall employ Executive
and Executive shall accept employment for a period of four (4) years commencing
on June 16, 1998 (the "Commencement Date") and continuing until June 15, 2002,
subject, however, to prior termination as hereinafter provided in Section 5 (the
"Employment Period").
2. Executive's Duties and Obligations.
a. Duties. Executive shall serve as President and
Chief Executive Officer of the Company. Executive shall be responsible for
overall management of the Company and all operating managers of the Company
shall report to Executive. Executive shall at all times report to, and shall be
subject to the policies established by, the Company's Board of Directors (the
"Board") or any Executive Committee thereof. The Company agrees that, at all
times during the Employment Period, it will nominate Executive for election to
the Board of Directors of the Company. Executive shall immediately resign from
any Board position held by
1
him at the expiration or termination of the Employment Period.
b. Location of Employment. Executive's principal
place of business shall be at the Company's offices to be located within thirty
(30) miles of Doylestown, Pennsylvania. Such office shall serve as the Company's
principal executive office.
c. Proprietary Information and Inventions Agreement.
Upon commencement of employment with the Company, Executive shall execute the
Company's standard form of Intellectual Property and Confidential Information
Agreement (the "Confidentiality Agreement") a copy of which is attached to this
Agreement as Exhibit A.
3. Devotion of Time to Company's Business
a. Full-Time Efforts. During his employment with
the Company, Executive shall devote substantially all of his business time,
attention and efforts to the high quality performance of his duties to the
Company.
b. No Other Employment. During his employment with
the Company, Executive shall not, whether directly or indirectly, render any
services of a commercial or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of the Company's Executive Committee or Board of Directors.
Notwithstanding the foregoing provisions of this Section 3.b., Executive may
perform services in connection with charitable or civic activities to the extent
such participation does not materially interfere with the performance of
Executive's duties for the Company.
c. Non-Competition. During the Employment Period and
for eighteen (18) months after its termination, Executive shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity compete with the Company's business of developing or
commercializing pulmonary surfactants, Vitamin D analogs or any other category
of compounds which forms the basis of the Company's products or products under
development (a "Competing Business"), or (ii) directly or indirectly solicit
employees of the Company. Notwithstanding the provisions of this Section 3.c.,
nothing herein shall prohibit Executive from (i) holding less than one percent
(1%) of the outstanding capital stock of a publicly held corporation engaged in
a Competing Business; (ii) serving on one or more Boards of Directors of
for-profit or non-profit corporations so long as, in the aggregate, such
commitments do not interfere with the performance of Executive's duties for the
Company and such corporations are not engaged in any Competing Business; or
(iii) after his employment with the Company terminates for any reason, being
employed by a multi-division corporation that engages in a Competing Business so
long as Executive works in a division of such corporation which is not primarily
engaged in a Competing Business and Executive has no responsibilities for the
direct supervision of, and will not in the ordinary course of discharging his
responsibilities become involved in the analysis of proprietary data or
marketing strategies relating to, any Competing Business.
4. Compensation and Benefits.
a. Initial Bonus. The Company shall pay to Executive
an initial sign-on bonus of One Hundred Thousand Dollars ($100,000) upon the
execution of this Agreement.
b. Base Compensation. During the first year of the
Employment Period, the Company shall pay to Executive, payable in accordance
with the Company's standard payroll policy, base annual compensation of Two
Hundred Thirty Six Thousand Two Hundred Fifty Dollars ($236,250), less all
required withholdings. Such base salary shall be increased annually during the
Employment Period by a minimum of five percent (5%) per year.
c. Bonuses. During the Employment Period, Executive
shall be entitled to a minimum year-end bonus equal to twenty percent (20%) of
his base compensation for each year and, at the discretion of the Compensation
Committee of the Board of Directors of the Company, any additional bonus that
may be awarded him.
d. Benefits. During the Employment Period, Executive
will be entitled to all such family health and medical benefits and disability
insurance as are provided to officers of the Company generally. In addition, the
Company will provide to Executive (i) term life insurance on behalf of
Executive's beneficiaries in the amount of Two Million Dollars ($2,000,000) for
the term of this Agreement, and (ii) long-term disability insurance, subject to
a combined premium cap of Fifteen Thousand Dollars ($15,000) per year.
e. Incentive Bonus. Executive shall be eligible for
incentive bonuses as follows:
(i) Fifty Thousand Dollars ($50,000) upon
the execution of each partnering or similar arrangement involving Surfaxin
having a Value (as hereinafter defined) to the Company in excess of Ten Million
Dollars ($10,000,000). For purposes of this Agreement, "Value" shall mean the
total payments, including without limitation, contingent payments prior to or at
receipt of marketing approval for the compound under development in the
Company's portfolio (each a "Portfolio Compound") involved in the relevant
agreement, to be paid to Discovery from corporate partnering transactions or
from any other transactions for the development, clinical testing, regulatory
approval, manufacturing and/or marketing of a Portfolio Compound, including
without limitation upfront fees, milestone payments, research and development
and other contractual commitments.
(ii) In amounts to be determined by the
Company's Compensation Committee, to be paid in either cash or equity, upon the
achievement of each of the following milestones (which bonuses shall be paid
only once for each of the milestones): (a) the successful completion of Phase II
studies for any Portfolio Compound; (b) the successful completion of Phase III
studies of any Portfolio Compound; and (c) receipt of marketing approval in the
United States for any Portfolio Compound.
f. Stock Options. The Board of Directors of the
Company has granted to Executive, on the date hereof, incentive stock options to
purchase: (i) 115,090 shares of Common Stock, $0.001 par value of the Company
(the "Common Stock"), pursuant to the terms of the Notice of Grant attached
hereto as Exhibit B, (ii) 59,500 shares of Common Stock, subject to acceleration
at such time as the market capitalization of the Company exceeds $75 million,
pursuant to the terms of the Notice of Grant attached hereto as Exhibit C, and
(iii) 54,240 shares of Common Stock, subject to acceleration upon consummation
of a corporate partnering deal having a total Value of at least $20 million,
pursuant to the terms of the Notice of Grant attached hereto as Exhibit D.
5. Termination of Employment.
a. Termination for Cause. The Company may terminate
Executive's employment at any time for "Cause," as herein defined. For the
purposes of this Agreement, "Cause" shall mean (i) breach of any contractual
obligations relating to noncompetition, assignment of inventions, protection of
intellectual property or confidentiality, (ii) gross negligence or willful
misconduct relating to the performance of employment responsibility or (iii) the
commission of any felony or any other crime involving moral turpitude.
b. Termination without Cause. If Executive's
employment is terminated by the Company without Cause, the following provisions
shall apply:
(i) Executive shall be entitled to any
unpaid compensation accrued through the last day of Executive's employment;
(ii) Executive shall be entitled to receive
severance payments equal to his base compensation for an eighteen (18) month
period, not subject to setoff by the Company, but subject to the execution by
the Executive of a Release, substantially in the form attached hereto as Exhibit
E, with respect to all employment-related matters. Such severance shall be
payable in six (6) equal installments, with the first installment payable on the
date of receipt of the foregoing release and the subsequent installments payable
at three (3) month intervals thereafter.
c. Death or Disability. This Agreement shall
terminate if Executive dies or is mentally or physically "Disabled" as herein
defined. For the purposes of this Agreement, "Disabled" shall mean a mental or
physical condition that renders Executive incapable of performing his duties and
obligations under this Agreement for three (3) or more consecutive months or for
a total of six (6) months during any twelve (12) consecutive months; provided,
that during such period the Company shall give Executive at least thirty (30)
days' written notice that it considers the time period for disability to be
running. If this Agreement is terminated under this Section 5.c., Executive or
his estate shall be entitled to any unpaid compensation accrued through the last
day of Executive's employment but shall not be entitled to any severance
benefits.
d. Lock-up Period. Executive shall not directly or
indirectly, sell, offer, contract to sell, transfer the economic risk of
ownership, make any short sale, pledge or otherwise dispose of any shares of
Common Stock issued or issuable upon the exercise of options, or any securities
convertible into or exchangeable or exercisable for such options, granted to
Executive for a one-year lock-up period following any termination of Executive's
employment by (i) the Company for Cause or (ii) Executive to the extent such
termination constitutes a breach of this Agreement.
6. Miscellaneous.
a. Governing Law. This Agreement shall be
interpreted, construed, governed and enforced according to the laws of the
Commonwealth of Pennsylvania as applied to agreements among Pennsylvania
residents entered into and to be performed entirely within Pennsylvania without
regards to the application of choice of law rules.
b. Amendments. No amendment or modification of the
terms or conditions of this Agreement shall be valid unless in writing and
signed by the parties hereto.
c. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be construed, if possible, so as to be enforceable under applicable law,
else, such provision shall be excluded from this Agreement and the balance of
the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
d. Successors and Assigns. The rights and
obligations of the Company under this Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of the Company. Executive
shall not be entitled to assign any of his rights or obligations under this
Agreement.
e. Notices. All notices required or permitted under
this Agreement shall be in writing and shall be deemed effective upon personal
delivery, on the date of scheduled delivery by a nationally recognized overnight
service or two (2) days after deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address shown below such party's signature, or at such other address or
addresses as either party shall designate to the other in accordance with this
Section 6.e.
f. Entire Agreement. This Agreement, including the
exhibits attached hereto, constitutes the entire agreement between the parties
with respect to the employment of Executive. The Employment Agreement by and
between Executive and Acute Therapeutics, Inc., dated October 1, 1996, is hereby
terminated and shall be of no further force or effect and that he shall have no
further rights under said agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date set forth above.
DISCOVERY LABORATORIES, INC.
/s/ Xxxxx X. Xxxxxx
_____________________________
By: Xxxxx X. Xxxxxx
Its: Director (on behalf of
the Board of Directors)
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
EXECUTIVE:
/s/ Xxxxxx X. Xxxxxxxx
_____________________________
Xxxxxx Xxxxxxxx, Ph.D.
Address: 0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
ACUTE THERAPEUTICS, INC. (for
purposes of Section 6.f. only)
/s/ Xxxxxx X. Xxxxxxxx
_____________________________
By: Xxxxxx X. Xxxxxxxx, Ph.D.
Its: President and Chief
Executive Officer
Address: 0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
