EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of the 1st day of June,
1997, between FLEMINGTON PHARMACEUTICAL CORPORATION, a New Jersey corporation
(together with its successors and assigns referred to herein as the
"Corporation"), with principal executive offices located at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, Ph.D., residing at ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Executive").
W I T N E S S E T H
WHEREAS, the Corporation desires to employ Executive as the
Corporation's President and Chief Executive Officer to engage in such activities
and to render such services under the terms and conditions hereof and has
authorized and approved the execution of this Agreement; and
WHEREAS, Executive desires to be employed by the Corporation under the
terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Services. During employment hereunder, Executive shall be
President and Chief Executive Officer of the Corporation, shall have the powers
and duties set forth in the Corporation's By-laws and normally held by a
corporate officer holding such a position and shall report directly to the Board
of Directors of the Corporation of which Executive shall be a member (the
"Board"). Executive shall devote Executive's business time, attention, knowledge
and skills faithfully, diligently and to the best of Executive's ability in
furtherance of the business and activities of the Corporation (the "Services").
The principal place of performance by Executive of services hereunder shall be
at the principal offices of the Corporation or such other place as the Board may
designate.
1.2 Acceptance. Executive hereby accepts such employment and agrees to
render the Services.
2. Term of Employment.
2.1 Term. The Executive's employment under this Agreement (the
"Term") shall commence as of the Effective Date (as hereinafter defined) and
shall continue for a term of three (3) years, unless sooner terminated pursuant
to Sections 5 or 9 of this Agreement. Notwithstanding anything to the contrary
contained herein, the provisions of this Agreement governing Protection of
Confidential Information shall continue in effect as specified in Section 10
hereof and survive the expiration or termination hereof.
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2.2 Effective Date. The effective date of this Agreement (the
"Effective Date") shall be the date of the closing of the Corporation's initial
public offering of equity securities (the "IPO").
3. Base Salary and Expense Reimbursement.
3.1 Base Salary. The Corporation shall pay Executive a salary
(the "Base Salary") at the rate of $200,000 per year for the first year of
employment under this Agreement. Payment shall be made monthly, on the last day
of each calendar month. For each subsequent calendar year of employment, the
Base Salary shall be increased by the greater of the "cost of living increase"
(as defined below) or seven and one-half percent (7 1/2%)
3.2 Expense Reimbursement. All travel and other expenses
reasonably incurred by Executive incidental to the rendering of Services to the
Corporation hereunder shall be paid by the Corporation or reimbursed to
Executive upon receipt and approval of expense reports on Corporation forms
supported by appropriate documentation. From time to time, Executive shall
submit, and obtain approval for, proposed expense budgets. All unbudgeted
expenses in excess of $1,000.00 (individually, or collectively if in connection
with a single, related subject or project within a given month) shall require
advance approval.
3.3 Bonuses. In addition, Executive shall be entitled to (a)
such other cash bonuses and other compensation in the form of stock, stock
options or other property or rights as may from time to time be awarded by the
Board in connection with Executive's employment and (b) receive a cash bonus for
each NDA for one of the Corporation's products which is accepted for filing by
FDA, in the amount of $10,000.
3.4 Cost of Living Increase. For purposes of this Agreement,
"cost of living increase" means the annual percentage increase of the U.S.
Department of Labor, BLS, Consumer Price Index (CPI-W) (Philadelphia-New Jersey)
during the twelve month period ending on the date of the most recently available
data as of the respective dates of adjustment.
4. Stock Options.
In connection with this Agreement, the Corporation has granted the
Executive stock options (outside of the Corporation's stock option plans) to
purchase 300,000 shares of the Corporation's common stock, at an exercise price
of $1.84 per share (the "Nonplan Options"). The Nonplan Options may be exercised
by the Executive at any time during the ten (10) years following the date of
grant and, notwithstanding the status of the Executive as an employee of the
Corporation, can not be terminated or revoked by the Corporation.
5. Severance and Change in Control.
5.1 Termination for Good Reason. In the event that Executive's
employment hereunder shall be terminated for Good Reason (as defined in Section
9.4 hereof) at any time prior to the end of the Term, Executive shall be
entitled to receive from the Corporation, in addition to any Base Salary earned
to the date of termination, a severance payment in an amount equal to
Executive's Base Salary for the remainder of the entire Term, payable to the
Executive in biweekly increments until the date on which the Term would have
otherwise expired, had the termination not occurred. Nothing in this Section 5.1
shall affect the exercisability of the Nonplan Options in Section 4 hereof. In
the event of such termination, the amounts due hereunder shall be payable
without offset or defense or any obligation of the Executive to mitigate
damages.
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5.2 Executive's Termination without Good Reason. In the event
that the Executive terminates employment without Good Reason (as defined in
Section 9.4 hereof) at any time prior to the end of the Term, Executive shall be
entitled to receive from the Corporation payment of any unpaid accrued Base
Salary earned through the date of termination. In the event of such termination,
all obligations of the Corporation hereunder shall terminate on the date of
termination and the Executive's termination without Good Reason shall act as a
waiver of all claims to compensation which would have otherwise accrued after
the date of termination. Nothing in this Section 5.2 shall affect the
exercisability of the Nonplan Options in Section 4 hereof or the obligations of
the Executive under Section 10 hereof.
5.3 Change in Control. Executive, at his option, shall be able
to terminate this Agreement upon written notice given to the Secretary of the
Corporation within ninety (90) days of an occurrence of a "Change in Control". A
"Change in Control" of the Corporation shall mean a change in control of the
Corporation or any entity controlling the Corporation (referred to collectively
in this Section 5 as the Corporation) of a nature that would be required to be
reported in response to Item 1 of a Current Report on Form 8-K, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇");
provided that, without limitation, such a Change in Control shall be deemed to
have occurred at such time as (a) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a person who or which is a
shareholder of the Corporation immediately prior to the IPO, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing twenty-five percent
(25%) or more of the combined voting power of the Corporation's outstanding
securities ordinarily having the right to vote at elections of directors; or (b)
individuals who constitute the Board (the "Incumbent Board") immediately prior
to the Corporation's IPO cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election or nomination for election by the Corporation's
shareholders was approved by a vote of at least three quarters of the directors
comprising the Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a sale by
the Corporation of all or substantially all of its assets occurs.
Notwithstanding anything in the foregoing to the contrary, no Change in Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transactions which result in the acquisition by the Executive, or by a group of
persons which includes the Executive, directly or indirectly, of a majority of
either the outstanding shares of common stock of the Corporation or the voting
securities of any corporation which acquires all or substantially all of the
assets of the Corporation, whether by way of merger, consolidation, sale of such
assets or otherwise. Notwithstanding anything contained in this Agreement to the
contrary, if, while the Executive is employed by the Corporation, a Change in
Control shall occur with or without the prior approval of the Incumbent Board,
then the Corporation shall immediately pay the Executive a lump sum amount equal
to the product of the Executive's Base Salary for the year in which the Change
in Control occurred, and 2.99; provided, however, that the amount so paid shall
not exceed 2.99 times the Executive's "base amount", as such term is defined in
Section 280(G)(b) of the Internal Revenue Code. The lump sum payment specified
in the preceding sentence shall be made in addition to any other compensation
due to the Executive, or his beneficiaries, by the Corporation, including but
not limited to salary, severance pay, consulting fees, disability benefits,
termination benefits, retirement benefits, life and health insurance benefits,
stock ownership or stock option benefits.
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6. Additional Benefits.
During Executive's employment, the Corporation shall cause Executive to
be covered by all the Corporation's employee benefit plans, in effect from time
to time, for which Executive is eligible, including without limitation, any
retirement plan or group insurance. In addition, to facilitate Executive's
travel on Corporation business, during employment the Corporation shall furnish
Executive, without cost to Executive, but in accordance with any applicable IRS
requirements and limitations, a Corporation owned or leased, and Corporation
insured, automobile chosen by the Corporation. Notwithstanding the foregoing,
Executive recognizes that each year the Corporation must report to the IRS an
amount of income to be charged to Executive as taxable income representing the
fair value of Executive's personal use of such automobile. In addition, the
Corporation shall pay or reimburse all reasonable expenses of maintaining and
operating such automobile.
7. Vacation.
Executive shall be entitled to such holidays as are in effect for all
of the Corporation's employees, and to sick leave in accordance with Corporation
policy as in effect from time to time. In addition, Executive shall be entitled
to six weeks vacation days (thirty business days) during the initial year of
this Agreement. During the second and third years of this Agreement, Executive
shall be entitled to seven and eight weeks vacation time, respectively. The
timing of the taking of vacation is left to the discretion of Executive,
provided the same is not inconsistent with the reasonable business requirements
of the Corporation. Vacation days not used by Executive during a given year may
be accumulated and carried forward to future years.
8. Indemnification.
The Corporation shall indemnify Executive and hold Executive harmless
against any and all expenses reasonably incurred by him in connection with or
arising out of (a) the defense of any action, suit or proceeding to which
Executive is a named party, or (b) any claim asserted or threatened against
Executive, provided, in either case, the matter has arisen because of or in
connection with Executive's being or having been an employee, officer or
director of the Corporation, whether or not he continues to be such at the time
the expenses indemnified against are incurred, except insofar as (a) such
indemnification may be prohibited by law, (b) the expenses were incurred in
connection with a matter where the Corporation is or was in an adversarial
position to Executive and the Corporation prevailed against Executive in such
matter, or (c) the expenses were incurred in connection with a matter arising
out a material breach by Executive of this Agreement or of Executive's
obligations to the Corporation. Expenses indemnified against include, without
limitation, reasonable attorneys fees, money judgments and money settlements,
provided the Corporation's advance approval has been sought and obtained. This
Section 8 is independent of any similar indemnification obligation which may be
contained in the Corporation's Certificate of Incorporation or By-laws, and
applies as well to matters attributable to Executive's employment by the
Corporation before the Effective Date of this Agreement, if applicable.
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9. Termination.
9.1 Death. If Executive dies during the Term of this
Agreement, Executive's employment hereunder shall terminate upon his death and
all obligations of the Corporation hereunder shall terminate on such date,
except that Executive's estate or his designated beneficiary shall be entitled
to payment of any unpaid accrued Base Salary through the date of his death.
9.2 Disability. If Executive shall be unable to perform a
significant part of his duties and responsibilities in connection with the
conduct of the business and affairs of the Corporation and such inability lasts
for a period of at least 180 consecutive days by reason of Executive's physical
or mental disability, whether by reason of injury, illness or similar cause,
Executive shall be deemed disabled, and the Corporation any time thereafter may
terminate Executive's employment hereunder by reason of the disability. During
such 180 day period, the Base Salary and other benefits payable to Executive
hereunder shall not be suspended or diminished, except to the extent equivalent
to the extent of any Corporation-provided disability insurance in effect. Upon
delivery to Executive of notice to terminate, all obligations of the Corporation
hereunder shall terminate, except that Executive shall be entitled to payment of
any unpaid accrued Base Salary through the date of termination. The obligations
of Executive under Section 10 hereof shall continue notwithstanding termination
of Executive's employment pursuant to this Section 9.2.
9.3 Termination For Cause. The Corporation may at any time
during the Term, with 30 days prior written notice, terminate this Agreement and
discharge Executive for Cause, whereupon the Corporation's obligation to pay
compensation or other amounts payable hereunder to or for the benefit of
Executive shall terminate on the date of such discharge. As used herein the term
"Cause" shall be deemed to mean and include: (i) a material breach by Executive
of this Agreement including without limitation a breach by Executive of the
obligations set forth in Section 10 hereof; (ii) excessive absenteeism,
alcoholism or drug abuse; (iii) substantial neglect or inattention by Executive
of or to his duties hereunder; (iv) willful violation of specific and lawful
written or oral direction from the Board of Directors of the Corporation
provided such direction is not inconsistent with the Executive's duties and
responsibilities as President and Chief Executive Officer of the Corporation; or
(v) fraud, criminal conduct or embezzlement. The following shall be deemed a
material breach for the purposes of Subsection (i) hereof: (a) the Executive's
conviction for, or a plea of nolo contendere to, a felony or a crime involving
moral turpitude (which, through lapse of time or otherwise, is not subject to
appeal); (b) willful misconduct as an employee of the Corporation; or (c)
willful or reckless disregard of his responsibilities under this Agreement. The
obligations of the Executive under Section 10 shall continue notwithstanding
termination of the Executive's employment pursuant to this Section 9.3.
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9.4 Termination by Executive. The Executive shall have the
right to terminate this Agreement for Good Reason, as hereinafter defined. Good
Reason shall mean any of the following: (i) the assignment to the Executive of
duties inconsistent with the Executive's position, duties, responsibilities,
titles or offices as described herein; (ii) any material reduction by the
Corporation of the Executive's duties and responsibilities (including the
appointment, without the Executive's consent, of an executive officer senior to
him); (iii) any reduction by the Corporation of the Executive's compensation or
benefits payable hereunder (it being understood that a reduction of benefits
applicable to all employees of the Corporation, including the Executive, shall
not be deemed a reduction of the Executive's compensation package for purposes
of this definition); or (iv) requiring the Executive to be based without his
consent at a location not within reasonable commuting distance of Flemington,
New Jersey.
10. Confidentiality; Non-Competition.
10.1 Confidentiality. The Corporation and Executive
acknowledge that the services to be performed by Executive under this Agreement
are unique and extraordinary, and, as a result of Executive's employment
hereunder, Executive will be in possession of confidential information and trade
secrets relating to the business and affairs of both the Corporation and its
clients. Executive agrees that Executive will not, other than in the ordinary
course of business and subject to receipt of an appropriate Confidentiality
Agreement, during or after any term of employment, directly or indirectly use or
disclose to any person, firm or corporation any confidential information
regarding the clients, customers, business practices, products, research
programs of the Corporation or its clients acquired by Executive during
Executive's employment, unless Executive has obtained the Corporation's advance
written consent specifically authorizing Executive's disclosure or use thereof.
10.2 Non-Competition. Executive agrees that, for a period
beginning with the Effective Date of this Agreement and ending twelve months
after the date of termination of employment by the Company, Executive will not,
either individually or in conjunction with any person, firm, association,
syndicate, company or corporation, directly or indirectly (as principal, agent,
employee, director, officer, shareholder, partner, independent contractor,
individual proprietor, or as an investor who has made advances, loans or
contributions to capital, or in any other manner whatsoever) compete with
company in the business then conducted by Company. Executive also agrees that,
during such period, Executive will not solicit or encourage any persons who,
during such period, were employees of Company to (i) terminate such persons'
employment with Company; or (ii) become affiliated with any person, firm,
association, syndicate, company or corporation which is in a business similar to
that of the Company and in which Executive, either directly or indirectly, has
an interest. If Company directs Executive to cease and desist a proposed
post-termination course of conduct, on the grounds that he is proposing to
compete with the Company's business, during this one-year post-termination
period, Company shall compensate Executive by paying him his base Salary during
the period he is prevented from pursuing such activity.
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10.3 Anti-Raiding. Executive agrees that during the term of
his employment hereunder, and, thereafter for a period of one (1) year,
Executive will not, as principal, agent, employee, employer, consultant,
director or partner of any person, firm, corporation or business entity other
that the Corporation, or in any individual or representative capacity
whatsoever, directly or indirectly, without the prior express written consent of
the Corporation approach, counsel or attempt to induce any person who is then in
the employ of the Corporation to leave the employ of the Corporation or employ
or attempt to employ any such person or persons who at any time during the
preceding six months was in the employ of the Corporation.
10.4 Injunction. Executive acknowledges and agrees that,
because of the unique and extraordinary nature of his services, any breach or
threatened breach of any of the above provisions of this Section 10 hereof will
cause the Corporation irreparable injury and incalculable harm and, therefore,
the Corporation will have "no adequate remedies at law". Executive, therefore,
agrees in advance that Corporation shall be entitled to injunctive and other
equitable relief for such breach or threatened breach and that resort by the
Corporation to such injunctive or other equitable relief shall not be deemed to
waive or to limit in any respect any right or remedy which the Corporation may
have with respect to such breach or threatened breach. The Executive agrees that
in such action, if the Corporation makes a prima facie showing that Executive
has violated or apparently intends to violate any of the provisions of this
Section 10, the Corporation need not prove either damage or irreparable injury
in order to obtain injunctive relief. The Corporation and Executive agree that
any such action for injunctive or equitable relief shall be heard in a state or
federal court situated in New Jersey and each of the parties hereto agrees to
accept service of process by registered mail and to otherwise consent to the
jurisdiction of such courts.
10.5 No Indemnification. The provisions of Section 8, above,
do not apply to any expenses incurred by Executive in defending against any
claim made pursuant to this Section 10.
10.6 Severability. If any provision contained within this
Section 10 is found to be unenforceable by reason of the extent, duration or
scope thereof, or otherwise, then such restriction shall be enforced to the
maximum extent permitted by law, and Executive agrees that such extent, duration
or scope may be modified in any proceeding brought to enforce such restriction.
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11. Arbitration.
Except with respect to any proceeding brought under Section 10 hereof,
any controversy, claim, or dispute between the parties, directly or indirectly,
concerning this Employment Agreement or the breach hereof, or the subject matter
hereof, including questions concerning the scope and applicability of this
arbitration clause, shall be finally settled by arbitration in the State of New
Jersey pursuant to the rules then applying of the American Arbitration
Association. The arbitrators shall consist of one representative selected by the
Corporation, one representative selected by the Executive and one representative
selected by the first two arbitrators. The parties agree to expedite the
arbitration proceeding in every way, so that the arbitration proceeding shall be
commenced within thirty (30) days after request therefore is made, and shall
continue thereafter, without interruption, and that the decision of the
arbitrators shall be handed down within thirty (30) days after the hearings in
the arbitration proceedings are closed. The arbitrators shall have the right and
authority to assess the cost of the arbitration proceedings and to determine how
their decision or determination as to each issue or matter in dispute may be
implemented or enforced. The decision in writing of any two of the arbitrators
shall be binding and conclusive on all of the parties to this Agreement. Should
either the Corporation or the Executive fail to appoint an arbitrator as
required by this Section 11 within thirty (30) days after receiving written
notice from the other party to do so, the arbitrator appointed by the other
party shall act for all of the parties and his decision in writing shall be
binding and conclusive on all of the parties to this Employment Agreement. Any
decision or award of the arbitrators shall be final and conclusive on the
parties to this Agreement; judgment upon such decision or award may be entered
in any competent Federal or state court located in the United States of America;
and the application may be made to such court for confirmation of such decision
or award for any order of enforcement and for any other legal remedies that may
be necessary to effectuate such decision or award.
12. Notices.
All notices, requests, consents and other communications required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by prepaid telegram, telecopy or
mailed first-class, postage prepaid, by registered or certified mail (notices
sent by telegram or mailed shall be deemed to have been given on the date sent),
to the parties at their respective addresses hereinabove set forth or to such
other address as either party shall designate by notice in writing to the other
in accordance herewith. Copies of all notices shall be sent to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq. at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
13. General.
13.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the local laws of the State of New
Jersey applicable to agreements made and to be performed entirely in New Jersey.
13.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof. No representation,
promise or inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
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13.4 Severability. If any of the provisions of this Agreement
shall be unlawful, void, or for any reason, unenforceable, such provision shall
be deemed severable from, and shall in no way affect the validity or
enforceability of, the remaining portions of this Agreement.
13.5 Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement by any other party shall not operate or be construed
as a waiver of any subsequent breach of the same provision or any other
provision hereof.
13.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same Agreement.
13.7 Assignability. This Agreement, and Executive's rights and
obligations hereunder, may not be assigned by Executive. The Corporation may
assign its rights, together with its obligations, hereunder in connection with
any sale, transfer or other disposition of all or substantially all of its
business or assets; in any event the rights and obligations of the Corporation
hereunder shall be binding on its successors or assigns, whether by merger,
consolidation or acquisition of all or substantially all of its business or
assets.
13.8 Amendment. This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. No superseding
instrument, amendment, modification, cancellation, renewal or extension hereof
shall require the consent or approval of any person other than the parties
hereto. The failure of either party at any time or times to require performance
of any provision hereof shall in no matter affect the right at a later time to
enforce the same. No waiver by either party of the breach of any term or
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: FLEMINGTON PHARMACEUTICAL CORPORATION.
By: By:
------------------------------- --------------------------------
, Title ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman of
the Board of Directors
WITNESS:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III, individually
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