Exhibit 10.8
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (this "Agreement") is made and entered into
this ___ day of _____ by and between Texas Biotechnology Corporation, a Delaware
corporation with its principal office at 0000 Xxxxxx, Xxxxxxx, Xxxxx 00000 (the
"Company"), and ______________ (the "Executive").
R E C I T A L S
A. The Company desires to enter into an agreement with the Executive
whereby severance benefits will be paid to the Executive on a change in control
of the Company and consequent actual or constructive termination of the
Executive's employment.
B. This Agreement sets forth the severance benefits that the Company
agrees that it will pay to the Executive if the Executive's employment with the
Company terminates under one of the circumstances described herein following a
change in control of the Company.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall be effective immediately on the
date hereof and shall continue in effect through _____; provided, however, that
commencing on _____ and each _____ thereafter, the term of this Agreement shall
automatically be extended for one additional year unless not later than _____ of
the preceding year, the Company shall have given notice that it does not wish to
extend this Agreement; provided, further, that notwithstanding any such notice
by the Company not to extend, this Agreement shall automatically be extended for
24 months beyond the term provided herein if a Change in Control (as defined in
Section 3 hereof) has occurred during the term of this Agreement.
2. Effect on Employment Rights. This Agreement is not part of any
employment agreement that the Company and the Executive may have entered.
Nothing in this Agreement shall confer upon the Executive any right to continue
in the employ of the Company or interfere with or restrict in any way the rights
of the Company, which are hereby expressly reserved, to terminate the Executive
for any reason, with or without cause.
The Executive agrees that, subject to the terms and conditions of this
Agreement, in the event of a potential Change in Control of the Company (as
defined below), the Executive will remain in the employ of the Company during
the pendency of any such potential Change in Control and for a period of one
year after the occurrence of an actual Change in Control. For this purpose, a
"potential Change in Control of the Company" shall be deemed to have occurred if
(a) the Company enters into an agreement the consummation of which would result
in the occurrence of a Change in Control, (b) any person (including the Company)
publicly announces an intention to take or consider taking action which if
consummated would constitute a Change
in Control or (c) the Board of Directors of the Company (the "Board") adopts a
resolution to the effect that a potential Change in Control of the Company has
occurred.
3. Change in Control. For purposes of this Agreement, a "Change in
Control" of the Company shall be deemed to have occurred if any of the events
set forth in any one of the following paragraphs shall occur:
(a) any "person" (as defined in section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as such term is
modified in sections 13(d) and 14(d) of the Exchange Act), excluding the
Company or any of its subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company of any of its
subsidiaries, an underwriter temporarily holding securities pursuant to an
offering of such securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substantially the same
proportions as their ownership of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding
securities; or
(b) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (a), (c) or (d) of this Section 3) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holder of securities under an employee
benefit plan of the Company, at least 50% of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
Notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred if there is consummated any transaction or series of
integrated transactions immediately following which, in the judgment of
the Compensation Committee of the Board, the holders of the Company's
common stock, par value $.05 per share (the "Common Stock"), immediately
prior to such transaction or series of transactions continue to have
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the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately prior to such
transaction or series of transactions. Except during a potential Change in
Control of the Company, the Board may (i) deem any other corporate event
affecting the Company (other than those described in clauses (a)-(d) of
Section 3 above) to be a "Change in Control," and (ii) may amend this
provision and the definition of "Change in Control" in connection with an
identical amendment being made to the Termination Agreements entered into
by the Company and certain of its executives.
4. Termination of Employment Following a Change in Control. The Executive
shall be entitled to the benefits provided in Section 5 hereof upon the
subsequent termination of the Executive's employment by the Company within two
years after a Change in Control which occurs during the term of this Agreement,
provided such termination is (a) by the Company other than for Cause (as defined
below) or (b) by the Executive for Good Reason (as defined below). The Executive
shall not be entitled to the benefits of Section 5 hereof, any other provision
hereof to the contrary notwithstanding, if the Executive's employment
terminates: (i) pursuant to the Executive retiring at age 65, (ii) by reason of
the Executive's total and permanent disability (as defined below), or (iii) by
reason of the Executive's death. As used herein, "total and permanent
disability" means an illness or other disability that prevents the Executive
from discharging his responsibilities for a period of 180 consecutive calendar
days, or an aggregate of 180 calendar days in any calendar year, during his
employment with the Company, all as determined in good faith by the Board (or a
committee thereof).
(a) Cause. The Company may terminate the Executive's employment with
the Company, upon written notice to the Executive delivered in accordance
with Sections 4(c) and 12 hereof, for Cause. For purposes of this
definition of "Cause," the term "Company" shall mean the Company and/or
its Affiliates. For purposes of this Agreement, subject to the notice
provisions set forth below, "Cause" means (i) the conviction (or plea of
nolo contendere or equivalent plea) of the Executive of a felony (which,
through lapse of time or otherwise, is not subject to appeal), (ii) the
Executive having engaged in intentional misconduct causing a violation by
the Company of any state or federal laws which results in a material
injury to the business, condition (financial or otherwise), results of
operations or prospects of the Company as determined in good faith by the
Board or a committee thereof (a "Material Injury"), (iii) the Executive
having engaged in a theft of corporate funds or corporate assets of the
Company or in an act of fraud upon the Company, (iv) an act of personal
dishonesty taken by the Executive that was intended to result in personal
enrichment of the Executive at the expense of the Company, (v) the
Executive's refusal, without proper legal cause, to perform his duties and
responsibilities as contemplated in this Agreement or any other breach by
the Executive of this Agreement, and (vi) the Executive's engaging in
activities which would constitute a breach of the Company's business
ethics policy, the Company's policies regarding trading in the Common
Stock or any other applicable policies, rules or regulations of the
Company which results in a Material Injury. If the Company desires to
terminate the Executive for Cause pursuant to the provisions of this
Section 4(a), the Executive will be given a written notice by the Board of
the facts and circumstances providing the basis for termination for Cause,
and the Executive will have 30 days from the date of such notice to
remedy, cure or rectify the situation giving rise to
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termination for Cause to the reasonable satisfaction of the Board (except
in the event of termination for Cause pursuant to subparagraph (i) above
as to which no cure period will be permitted).
(b) Good Reason. After a Change in Control, the Executive may
terminate employment with the Company at any time during the term of this
Agreement for Good Reason, upon written notice to the Company delivered in
accordance with Sections 4(c) and 12 hereof.
(i) Definition. For purposes of this definition of "Good
Reason," the term "Company" shall mean the Company and/or its
Affiliates. For purposes of this Agreement, "Good Reason" means (i)
the assignment to the Executive of any duties materially
inconsistent in any respect with the Executive's duties or
responsibilities as contemplated in this Agreement, provided that
the Executive specifically terminates his employment for Good Reason
hereunder within 120 days from the date that he has actual notice of
such material breach; (ii) any other action by the Company which
results in a material diminishment in the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities, provided that the Executive
specifically terminates his employment for Good Reason hereunder
within 120 days from the date that he has actual notice of such
material breach; (iii) any breach by the Company of any of the
provisions of this Agreement, provided that the Executive
specifically terminates his employment for Good Reason hereunder
within 120 days from the date that he has actual notice of such
material breach; (iv) requiring the Executive to relocate to any
office or location other than Houston, Texas, without his consent;
(v) a 5% or more reduction, or attempted reduction, at any time
during the Executive's employment with the Company, of the base
salary of the Executive unless such reduction is also applied to all
other executives of the Company; or (vi) the taking of any action by
the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits
provided under the Company's welfare benefit plans, unless (A) there
is substituted a comparable benefit that is at least economically
equivalent (in terms of the benefit offered to the Executive) to the
benefit in which the Executive's participation is being adversely
affected or to the Executive's benefits that are being materially
reduced, or (B) the taking of such action affects all other
executives of the Company. Notwithstanding the preceding provisions
of this Section 4(b), if the Executive desires to terminate his
employment for Good Reason, he shall first give written notice of
the facts and circumstances providing the basis for Good Reason to
the Board or the Compensation Committee thereof, and allow the
Company thirty (30) days from the date of such notice to remedy,
cure or rectify the situation giving rise to Good Reason to the
reasonable satisfaction of the Executive.
(ii) Determination by the Executive Presumed Correct. Any
determination by the Executive pursuant to this Section 4(b) that
Good Reason exists for the Executive's termination of employment and
that adequate remedy has not occurred shall be presumed correct and
shall govern unless the party
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contesting the determination shows by a clear preponderance of the
evidence that it was not a good faith reasonable determination.
(iii) Severance Payment Made Notwithstanding Dispute.
Notwithstanding any dispute concerning whether Good Reason exists
for termination of employment or whether adequate remedy has
occurred, the Company shall immediately pay to the Executive, as
specified in Section 5 hereof, any amounts otherwise due under this
Agreement. The Executive may be required to repay such amounts to
the Company if any such dispute is finally determined adversely to
the Executive.
(c) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive hereunder, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with this Agreement. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated and (iii) specifies the termination date, if such date is other
than the date of receipt of such notice (which termination date shall not
be more than 15 days after the giving of such notice, unless otherwise
provided herein). Notwithstanding the foregoing, the Company may elect to
consider the Executive as an employee after the date of termination for
purposes of complying with the provisions of Section 5 hereof.
5. Severance Payment Upon Termination of Employment. If the Executive's
employment with the Company is terminated during the term of this Agreement and
after a Change in Control (a) by the Company other than for Cause, or (b) by the
Executive for Good Reason, then the Executive shall be entitled to the
following:
(a) The Company shall pay to the Executive in a lump sum in cash
within five (5) days after date of termination, if not theretofore paid,
the Executive's base salary (as in effect on the date of termination)
through the date of termination, and in the case of compensation
previously deferred and bonuses previously earned by the Executive, all
amounts of such compensation previously deferred and earned and not yet
paid by the Company.
(b) The Company shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any costs and
expenses paid or incurred by the Executive which would have been payable
pursuant to the Company's policy regarding the reimbursement of such costs
or expenses as in effect from time to time during the Executive's
employment with the Company if the Executive's employment had not
terminated.
(c) The Company shall pay to the Executive in a lump sum in cash
within five (5) days after the date of termination a severance payment
equal to one and one-half (1.5) times the sum of (i) the Executive's base
salary (as in effect on date of termination) and (ii) the Executive's most
recent annual bonus. If the most recent annual bonus was a
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stock option or a stock grant, the value of the bonus will be deemed to be
the number of option shares times the closing price of the Common Stock
for the 20 trading days prior to the date of termination.
(d) During the 18-month period commencing on the date of
termination, the Company shall continue benefits (other than disability
benefits), at the Company's expense to the Executive and/or the
Executive's family at least equal to those which would have been provided
to them under the Company's welfare benefit plans if the Executive's
employment had not been terminated (without giving effect to any reduction
in such benefits subsequent to the Change in Control which reduction
constitutes or may constitute Good Reason).
6. Certain Payments by the Company
(a) In the event that the Executive is deemed to have received an
"excess parachute payment" (as defined in Section 280G(b) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations
promulgated by the Internal Revenue Service thereunder (the "Code")) which
is subject to the excise taxes (the "Excise Taxes") imposed by Section
4999 of the Code in respect of any payment pursuant to this Agreement or
any other agreement, plan, instrument or obligation, in whatever form, the
Company shall make the Bonus Payment (defined below) to the Executive
notwithstanding any contrary provision in this Agreement or any other
agreement, plan, instrument or obligation.
(b) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (i) all Excise Taxes payable by the Executive, plus (ii) all
additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that the
Executive shall be in the same after-tax position and shall have received
the same benefits that he would have received if the Excise Taxes had not
been imposed. For purposes of calculating any income taxes attributable to
the Bonus Payment, the Executive shall be deemed for all purposes to be
paying income taxes at the highest marginal federal income tax rate,
taking into account any applicable surtaxes and other generally applicable
taxes which have the effect of increasing the marginal federal income tax
rate and, if applicable, at the highest marginal state income tax rate, to
which the Bonus Payment and the Executive are subject. An example of the
calculation of the Bonus Payment is set forth below. Assume that the
Excise Tax rate is 20%, the highest federal marginal income tax rate is
40% and the Executive is not subject to state income taxes. Further assume
that the Executive has received an excess parachute payment in the amount
of $200,000, on which $40,000 ($200,000 x 20%) in Excise Taxes are
payable. The amount of the required Bonus Payment is thus computed to be
$100,000, i.e., the Bonus Payment of $100,000, less additional Excise
Taxes on the Bonus Payment of $20,000 (i.e., 20% x $100,000) and income
taxes of $40,000 (i.e., 40% x $100,000), yields $40,000, the amount of the
Excise Taxes payable in respect of the original excess parachute payment.
(c) The Executive agrees to reasonably cooperate with the Company to
minimize the amount of the excess parachute payments, including, without
limitation,
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assisting the Company in establishing that some or all of the payments
received by the Executive that are "contingent on a change," as described
in Section 280G(b)(2)(A)(i) of the Code, are reasonable compensation for
personal services actually rendered by the Executive before the date of
such change or to be rendered by the Executive on or after the date of
such change. In the event that the Company is able to establish that the
amount of the excess parachute payments is less than originally
anticipated by the Executive, the Executive shall refund to the Company
any excess Bonus Payment to the extent not required to pay Excise Taxes or
income taxes (including those incurred in respect of receipt of the Bonus
Payment). Notwithstanding the foregoing, the Executive shall not be
required to take any action which his attorney or tax advisor advises him
in writing (i) is improper or (ii) exposes the Executive to personal
liability. The Executive may require the Company to deliver to the
Executive an indemnification agreement in form and substance reasonably
satisfactory to the Executive as a condition to taking any action required
by this Section 6(c).
(d) The Company shall make any payment required to be made under
Section 6 hereof in a cash lump sum after the date on which the Executive
received or is deemed to have received any such excess parachute payment.
Any payment required to be paid by the Company under Section 6 hereof
which is not paid within 30 days of receipt by the Company of the
Executive's written demand therefor, delivered in accordance with Section
12 hereof, shall thereafter be deemed delinquent, and the Company shall
pay to the Executive immediately upon demand interest at the highest
nonusurious rate per annum allowed by applicable law from the date such
payment becomes delinquent to the date of payment of such delinquent sum
with interest.
(e) In the event that there is any change to the Code which results
in the recodification of Section 280G or Section 4999 of the Code, or in
the event that either such section of the Code is amended, replaced or
supplemented by other provisions of the Code of similar import ("Successor
Provisions"), then this Agreement shall be applied and enforced with
respect to such new Code provisions in a manner consistent with the intent
of the parties as expressed herein, which is to assure that the Executive
is in the same after-tax position and has received the same benefits that
he would have been in and received if any taxes imposed by Section 4999
(or any Successor Provisions) had not been imposed.
(f) All determinations required to be made under Section 6 hereof
including, without limitation, whether and when a Bonus Payment is
required, and the amount of such Bonus Payment and the assumptions to be
utilized in arriving at such determinations, unless otherwise expressly
set forth in this Agreement, shall be made within 30 days from the date of
termination by the independent tax consultant(s) selected by the Company
and reasonably acceptable to the Executive (the "Tax Consultant"). The Tax
Consultant must be a qualified tax attorney or certified public
accountant. All fees and expenses of the Tax Consultant shall be paid in
full by the Company. Any Excise Taxes as determined pursuant to Section 6
hereof shall be paid by the Company to the Internal Revenue Service or any
other appropriate taxing authority on the Executive's behalf within five
(5) business days after receipt of the Tax Consultant's final
determination by the Company and the Executive.
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(g) If the Tax Consultant determines that there is substantial
authority (within the meaning of Section 6662 of the Code) that no Excise
Taxes are payable by the Executive, the Tax Consultant shall furnish the
Executive with a written opinion that failure to disclose or report the
Excise Taxes on the Executive's federal income tax return will not
constitute a substantial understatement of tax or be reasonably likely to
result in the imposition of a negligence or any other penalty.
(h) The Company shall indemnify and hold harmless the Executive, on
an after-tax basis, from any costs, expenses, penalties, fines, interest
or other liabilities ("Losses") incurred by the Executive with respect to
the exercise by the Company of any of its rights under Section 6 hereof,
including, without limitation, any Losses related to the Company's
decision to contest a claim of any imputed income to the Executive. The
Company shall pay all fees and expenses incurred under Section 6 hereof,
and shall promptly reimburse the Executive for the reasonable expenses
incurred by the Executive in connection with any actions taken by the
Company or required to be taken by the Executive hereunder. Any payments
owing to the Executive and not made within 30 days of delivery, in
accordance with Section 12 hereof, to the Company of evidence of the
Executive's entitlement thereto shall be paid to the Executive together
with interest at the maximum nonusurious rate permitted by law.
7. Reimbursement of Legal Costs. The Company shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to any payments under this Agreement
including all such fees and expenses, if any, incurred in contesting or
disputing any notice of termination under Section 4(a) hereof or in seeking to
obtain or enforce any right or benefit provided by this Agreement. Such payments
shall be made within five (5) days after delivery of the Executive's respective
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
8. Damages. The Executive shall not be required to mitigate damages with
respect to the amount of any payment provided under this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment provided
under this Agreement be reduced by retirement benefits, deferred compensation or
any compensation earned by the Executive as a result of employment by another
employer.
9. Successor to the Company. The Company shall require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to 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 or assignment had taken place. A
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor or assign to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this section or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
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10. Heirs of the Executive. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amounts are still payable to the
Executive hereunder, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be so much designee, to the
Executive's estate.
11. Arbitration. Any dispute, controversy or claim arising under or in
connection with this Agreement, or the breach thereof, shall be settled
exclusively by arbitration in accordance with the Rules of the American
Arbitration Association then in effect. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. Any
arbitration held pursuant to this section in connection with the Executive's
termination of employment shall take place in Houston, Texas at the earliest
possible date. If any proceeding is necessary to enforce or interpret the terms
of this Agreement, or to recover damages for breach thereof, the prevailing
party shall be entitled to reasonable attorneys' fees and necessary costs and
disbursements, not to exceed in the aggregate one percent (1%) of the net worth
of the other party, in addition to any other relief to which he or it may be
entitled.
12. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when (i) delivered by hand or sent by
facsimile, or (ii) on the third business day following deposit in the United
States mail by registered or certified mail, return receipt requested, to the
addresses as follows (provided that notice of change of address shall be deemed
given only when received):
If to the Company to:
Texas Biotechnology Corporation
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: President and Chief Executive Officer
Facsimile No.: (000) 000-0000
If to the Executive to:
Name: _____________________
Texas Biotechnology Corporation
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 12.
13. General Provisions.
(a) The Executive's rights and obligations under this Agreement
shall not be transferable by assignment or otherwise, nor shall the
Executive's rights be subject to
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encumbrance or subject to the claims of the Company's creditors. Nothing
in this Agreement shall prevent the consolidation of the Company with, or
its merger into, any other corporation, or the sale by the Company of all
or substantially all of its properties or assets; and this Agreement shall
inure to the benefit of, be binding upon and be enforceable by, any
successor surviving or resulting corporation, or other entity to which
such assets shall be transferred. This Agreement shall not be terminated
by the voluntary or involuntary dissolution of the Company.
(b) This Agreement and any employment agreement with the Executive
plus terms of any stock option plans or grants constitutes the entire
agreement between the parties hereto in respect to the rights and
obligations of the parties following a Change in Control. This Agreement
supersedes and replaces all prior oral and written agreements,
understandings, commitments, and practices between the parties (whether or
not fully performed by the Executive prior to the date hereof), which
shall be of no further force or effect.
(c) The provisions of this Agreement shall be regarded as divisible,
and if any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts thereof and
the applicability thereof shall not be affected thereby.
(d) This Agreement may not be amended or modified except by a
written instrument executed by the Company and the Executive.
(e) This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of
Texas.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first written above.
Texas Biotechnology Corporation
By:
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Xxxxx X. Given, M.D.
President and Chief Executive Officer
Executive:
By:
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Name:
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