EXHIBIT 10.5
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
17th day of December, 1996, by and between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D. ("Employee"),
and CELL THERAPEUTICS, INC., a Washington corporation (the "Company"). In
consideration of the mutual covenants and conditions set forth herein, the
parties hereby agree as follows:
1. Employment. The Company hereby employs Employee to serve as its
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President and Chief Executive Officer and Employee hereby accepts such
employment. In his capacity as President and Chief Executive Officer, Employee
shall be responsible for developing and presenting Company strategies and
potential products or technologies, negotiating licensing and sublicensing
agreements, an directing product research and overall corporate direction.
Employee's duties will also include coordinating planning leading to the
development of research facilities and business offices, in addition to
overseeing daily operations of the physical/corporate plant. As President and
Chief Executive Officer, Employee agrees to perform such other duties during the
term hereof as the Board of Directors of the Company shall, from time to time,
reasonably direct. Employee agrees to utilize his skills and to render
services to the best of his ability on a full-time basis during the term of this
Agreement; provided that the Employee may engage, with the prior written consent
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of the Board of Directors, in other ventures that do not violate the covenant
not to compete contained in Section 9 and do not materially interfere with the
performance of the Employee's duties hereunder.
2. Term. Unless earlier terminated pursuant to the provisions of
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Section 6 below, Employee's employment hereunder shall be for a period
commencing on the date hereof (the "Effective Date") and continuing through and
including December 31, 1999. Prior to the expiration of the Term, the parties
shall in good faith negotiate the terms of any extension thereof.
3. Compensation.
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Base Salary. For all services rendered by Employee under this
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Agreement, Employee shall receive a salary at an annual rate of $358,032 for
1996 and $393,835 for 1997 (effective January 1, 1997), as increased under
Section 3b ("Base Salary"), or such higher annual rate as the Board of Directors
of the Company may from time to time establish in its sole discretion.
b. Annual Bonuses. Employee shall receive such annual bonuses as
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may be declared from time to time by the Board of Directors in its sole
discretion.
c. Stock Option Plans. The Company has adopted stock option and/or
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stock purchase plans for the benefit of certain employees of the Company.
Employee shall be
entitled to participate in such plans, consistent with the terms of such plans
and applicable law.
d. Loan Forgiveness. Notwithstanding anything to the contrary
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contained in that certain promissory note dated December 23, 1993 made by the
Employee in favor of the Company (the "Note"), the parties agree that the Note
shall be amended to provide that, on each anniversary of the Effective Date of
this Agreement, the Company shall forgive one-third of the principal amount of
the loan which is evidenced by the Note together with the interest accruing
thereunder pursuant to the terms of the Note; provided that in the event that
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the employment of Employee terminates prior to the forgiveness of all of the
obligations under the Note for any reason other than by the Company without
cause or by the Employee for cause (as such terms are defined in Section 6a and
Section 6c, respectively) or as a result of death or disability (as defined in
Section 6f below) of Employee, the unpaid principal amount and the interest
accruing thereunder shall become immediately due and payable. In the event that
(i) the employment of Employee is terminated by the Company without cause or by
the Employee for cause or as a result of death or disability of Employee, (ii) a
Change in Ownership (as defined in Section 14) occurs, or (iii) following a
public offering (a "Public Offering") of stock of the Company pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), the market capitalization of the Company equals or
exceeds $500 million, the unpaid principal amount and the interest accruing
thereunder shall be forgiven. The Company shall pay to the Employee such
additional compensation as is necessary (after taking into account all federal,
state and local income taxes payable by the Employee as a result of the
cancellation of indebtedness described above. The amount of such payment shall
be determined by an accounting firm jointly selected by the Company and the
Employee and paid by the Company, and which may be the Company's independent
auditors.
Upon the cancellation or payment of all the obligations under the
Note, the Company's security interest in the shares of common stock of the
Company pledged to the Company pursuant to the Stock Pledge Agreement dated
December 23, 1993 by and between the Employee, the Company and ▇▇▇▇▇ & Gates, as
escrow agent, shall terminate.
4. Benefits.
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a. Medical/Health Insurance. The Company shall provide Employee
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with Company paid medical and dental insurance for Employee, his spouse and
dependents in accordance with such policies as shall be maintained by the
Company, which shall be comparable to that currently enjoyed by Employee.
b. Vacation/Sick Leave. Employee shall be entitled to vacation and
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sick leave in accordance with Company policy, provided Employee shall be
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entitled to (i) a minimum of four (4) weeks vacation annually during the Term,
and (ii) a minimum of four (4) days of paid sick leave for each ten (10) weeks
of consecutive employment. Any unused vacation time shall be paid in a cash
lump sum payment promptly after Employee's termination of employment, regardless
of the reason for such termination, or at such earlier time as required by
Company vacation policy to avoid forfeiture of accrued but unused vacation time.
c. Life/Disability Insurance. The Company shall provide, at Company
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expense, universal (or other non-term) life insurance for the benefit of
Employee in amounts no less than $5 million. The Company's benefit plan for
executive officers shall provide, at Employee's expense, disability insurance
for the benefit of Employee and his beneficiaries through a company reasonably
acceptable to Employee. Employee's Base Salary shall be increased by the amount
of the annual premiums for such coverage. The Company shall cause its records to
reflect that the premiums for the disability policy have been paid by the
Employee, including Form W-2 prepared by the Company. The above benefits are
subject to the same being available to the Company at reasonable cost and any
limitations resulting from Employee's physical condition.
d. Expense Reimbursement. The Company shall pay or reimburse
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Employee for all reasonable travel and other expenses incurred or paid by
Employee in connection with the performance of services under this Agreement
upon presentation of expense vouchers and such other supporting information as
the Company may from time to time reasonably request.
e. Health Club Membership. The Company shall reimburse the Employee
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for one health club membership, including any initiation fee and dues incurred
in connection therewith.
5. Warranties and Indemnification. Employee represents to the
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Company that Employee is free to enter into this Agreement and that Employee has
no commitment, arrangement or understanding to or with any third party which
restrains or is in conflict with this Agreement; or which would operate to
prevent Employee from performing the services to the Company which Employee
hereby has agreed to provide. Employee agrees to indemnify and hold the Company
harmless from and against any and all liabilities or claims, including costs,
expenses and reasonable attorney's fees arising out of any acts by Employee
which, the foregoing representation or warranty to the contrary notwithstanding,
shall be in violation of or shall constitute a breach of any such commitment,
arrangement or understanding.
6. Termination.
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a. By the Company with Cause. The Company may terminate Employee's
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employment hereunder at any time during the Term upon written notice to Employee
for cause, and except as provided below, the salary and benefits referred to in
Sections 3 and 4 above shall cease upon the effective date of any such
termination for cause. As used herein, with respect to termination by the
Company, the term "cause" shall mean (i) any material breach hereof by Employee
which is not cured within thirty (30) days following notice of such breach given
by the Company, provided that no such prior notice and opportunity to cure need
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be given where such breach, or similar breach, has been the subject of such a
notice and cure period on more than two prior occasions; or (ii) conviction of
Employee for commitment of a felony; or (iii) any act of Employee, which in the
reasonable judgment of two-thirds of the Board of Directors of the Company,
constitutes willful dishonesty, larceny, fraud or gross
negligence by Employee in the performance of his duties to the Company, or
willful misrepresentation to shareholders, directors or officers of the Company.
b. By the Company without Cause. The Company may, by action of
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two-thirds of the Board of Directors, terminate Employee's employment at any
time upon thirty (30) days' prior written notice and without cause; provided
that prior to the effective date of termination, the Company shall pay to
Employee an amount equal to twenty-four (24) months' Base Salary then payable to
Employee. In addition, the Company shall continue to provide Employee the
benefits described in Section 4a, at the same or greater levels, through the
expiration of the term of this Agreement as set forth at Section 2 above or the
Company shall reimburse the Employee for his cost in obtaining substantially
equivalent benefits for the specified time period.
c. By the Employee with Cause. Employee may terminate his
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employment hereunder at any time upon written notice to the Company for cause.
The amounts identified in Section 6b shall be paid to Employee as of the
effective date of termination, together with the continuing benefits described
therein, as Employee's sole remedy with respect to his termination of employment
(but not limiting Employee's remedies with respect to any defamatory conduct).
As used herein with respect to termination by Employee prior to a Change in
Ownership (as defined in Section 14 below), "cause" shall mean (i) any material
breach hereof by the Company which is not cured within thirty (30) days
following notice of such breach given by Employee; (ii) repeated and consistent
bad faith attempts to bring about Employee's resignation through obstruction by
the Company of the operations and programs of Employee in his capacity hereunder
which are not cured within thirty (30) days following notice of such acts given
by Executive; (iii) the removal of Employee from the position of President of
Chief Executive Officer, or the appointment of another person to perform the
duties ordinarily associated with such position(s) without the formal removal of
Employee's title(s); (iv) the transfer of Employee or the relocation of the
principal offices from which the activities of the Company are conducted to an
area more than fifty (50) miles outside the City of Seattle, Washington; or (v)
the failure of a Successor (as defined in Section 14 below) to assume and agree
to be bound by the terms of this Agreement. As used herein with respect to
termination by Employee on or following a Change in Ownership (as defined in
Section 14 below), "cause" shall mean (i) any breach hereof by the Company; (ii)
bad faith attempts to bring about Employee's resignation through obstruction by
the Company of the operations and programs of Employee in his capacity hereunder
which are not cured within thirty (30) days following notice of such acts given
by Executive; (iii) the diminution of, or adverse change in, the duties, status
or responsibilities of Employee whether or not the formal removal of Employee's
title(s) has occurred; (iv) the transfer of Employee or the relocation of the
principal offices from which the activities of the Company are conducted to an
area more than fifty (50) miles outside the City of Seattle, Washington; or (v)
the failure of a Successor (as defined in Section 14 below) to assume and agree
to be bound by the terms of this Agreement.
d. By the Employee without Cause. If Employee terminates his
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employment without cause, such termination shall be treated as a termination
with cause by Company, as provided in Section 6(a) above.
e. Disputes. With respect to disputes involving the existence of
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"cause" hereunder, each party hereunder consents to submit itself to personal
jurisdiction of the United States District Court in the Western District of
Washington and state courts in the Seattle Washington area. Notwithstanding the
foregoing, on or following a Change in Ownership, the determination as to
whether "cause" exists shall be made by Employee in good faith.
f. Death and Disability. This Agreement and Employee's employment
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and salary shall in any event terminate upon the death of Employee or the
inability of Employee to perform the duties and functions of his position for a
period of 120 days during any twelve (12) consecutive month period due to
sickness or disability ("disability"), after which period Employee shall
commence receiving benefits under the Company's short- and long-term disability
policies in accordance with their terms.
g. Acceleration of Vesting. In the event this Agreement is
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terminated by Employer without cause, or by Employee with cause, or Employee
dies or is disabled, all stock and stock options of employee in the Company
shall immediately become vested.
h. Life Insurance. In the event this Agreement is terminated by
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Employer or by Employee, or if Employee's employment otherwise terminates,
Employee shall have the right to purchase all life insurance policies maintained
by the Company on the life of Employee at a cost of One Dollar ($1.00), plus any
administrative charges required by the insurance company to assign the
policy(ies) to Employee. If any of such policies have a cash surrender value,
such cash surrender value existing ninety (90) days prior to the termination
shall be transferred with the policy to Employee.
▇. ▇▇▇▇▇-Up. Notwithstanding anything in this Agreement to the
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contrary, if any amounts due to the Employee under this Agreement and any other
plan or program of the Company (collectively, the "Total Payments") will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall pay the
Employee an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Employee, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income tax and Excise Tax upon the
payment provided for by this subsection, shall be equal to the Total Payments.
For purposes of determining the amount of the Gross-Up Payment, the Employee
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Employee's residence on the date of
termination, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of the Employee's employment, the
Employee shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the
Gross-Up Payment being repaid by the Employee if such repayment results in a
reduction in Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of the Employee's employment (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that the
amount of such excess is finally determined. The determinations to be made with
respect to this Section 6i shall be made by an accounting firm jointly selected
by the Company and the Employee and paid by the Company, and which may be the
Company's independent auditors.
7. Confidentiality.
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a. Employee acknowledges that the Company's business and future
success depends on the preservation of the trade secrets and other confidential
information of the Company and its affiliates, suppliers and customers (the
"Secrets"). The Secrets include existing, to-be-developed or acquired products,
processes, techniques, methods, computer programs, know-how, trade secrets,
customers, suppliers, developments, patents, equipment, or business information
made, sold, used developed or practiced by the Company in its business or
proprietary to the Company or its affiliates, suppliers or customers. "Secrets"
do not include any of the above information or medium generally known to the
industry or which comes to the attention of Employee through sources other than
the Company. It is anticipated that all employees of the Company, including
Employee, will ▇▇▇▇ all items containing Secrets with prominent confidentiality
notices in accordance with policies to be adopted by the Company. Employee
agrees to protect and to preserve as confidential during and after the term of
his employment all of the Secrets at any time known to Employee or in his
possession or control (whether wholly or partially developed by Employee or
provided to Employee, and whether embodied in a tangible medium or merely
remembered).
b. Employee shall neither use nor intentionally allow any other
person to use any of the Secrets in any way, except for the benefit of the
Company. All tangible items embodying or disclosing any portion of the Secrets
shall be and remain the property of the Company and shall be returned to the
Company upon the termination of Employee's employment. At such time, Employee
shall also assemble all tangible items of work in progress, notes, plans, and
other materials related in any way to Employee's employment, and will promptly
deliver such items to the Company. The failure to ▇▇▇▇ any item with
confidentiality notice(s) shall not ipso facto, cause such item to be excluded
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from classification as a Secret for purposes of this Section 7.
c. Employee's covenants in this paragraph shall supplement, and shall
not supplant, any other rights or remedies the Company may have under applicable
law for the protection of its properties and trade secrets.
8. Inventions.
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a. "Invention(s)" shall mean discoveries, designs, programs,
improvements, developments, new concepts, methods, agents materials, and ideas
whether patentable or not, and products, processes and know-how related to the
use or production thereof.
b. Employee agrees that any Invention which Employee has made or may
make during the term of this Agreement shall be treated as part of the Company's
Secrets and shall be the sole and exclusive property of the Company, whether or
not (i) patent applications or copyright registrations are filed thereon,
(ii) the Invention is utilized by the Company, or (iii) the Invention is
conceived or developed by Employee individually or jointly with others.
However, Employee has no obligation to assign to the Company any Invention for
which no Company Secrets and no equipment, supplies, or facilities of the
Company were used and which was developed entirely on Employee's own time,
unless:
(i) the Invention relates directly to the business of the Company,
(ii) the Invention relates to actual or demonstrably anticipated
research or development work of the Company,or
(iii) the Invention directly results from any work performed by
Employee for the Company.
c. Whenever requested by the Company, Employee agrees to assist and
cooperate with the Company, at the Company's expense, in the obtaining,
maintaining and enforcing of United States and foreign patents and copyright
registrations for any Invention which is to be the property of the Company as
provided above. This assistance and cooperation shall include, but is not
limited to:
(i) making application for United States foreign patents or
copyright registrations on any Invention if so requested by the Company;
(ii) assigning all of Employee's right, title and interest in and to
such Invention and any patent applications or copyright registrations
thereon to the company or its designee; and
(iii) executing all documents and rendering all assistance as may be
reasonably necessary to protect the rights of the Company or its designee
and to vest in the Company or its designee all rights to any such
Invention, patent application, patent copyright, or copyright registration.
d. Attached hereto as Exhibit A is a list of all issued patents,
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pending patent applications, registered copyrights, and other inventions which
Employee has owned or has developed prior to being retained by the Company. Any
copyright, patent, pending application, or prospective patent application thus
listed and not otherwise expressly assigned
in writing by Employee to the Company will be excluded from the terms of this
Agreement.
9. Covenant Not to Compete.
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a. Applicability. This Section 9 shall apply following the
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termination of Employee's employment only in the event such termination is
(i) by Employer for cause as defined in Section 6a above, or (ii) by Employee
without cause as defined in Section 6c above.
b. Covenant. For a period beginning on the date of this Agreement
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and ending two years following the date of termination of Employee's employment.
Employee hereby agrees that he will not, directly or indirectly, enter into the
employment of, render services to or acquire any interest whatsoever in (whether
for his own account as an individual proprietor, or as a partner, associate,
shareholder, officer, director, consultant, trustee or otherwise), any person or
entity engaged in any operations in competition in any area of the world with
any aspect of the business of the Company as presently conducted and as said
business may evolve in the ordinary course of business between the date of this
Agreement and the termination of Employee's employment hereunder (including
products under active development at such time); provided, however, that nothing
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herein shall prevent the purchase or ownership by Employee of shares of stock in
a nominal amount by way of investment in any publicly-held corporation or
prevent the employment of or the rendering of services by Employee where he does
not contribute to the development or sale of products which compete with
products of the Company with whose development or sale the Employee was directly
involved. In addition, nothing herein shall prevent Employee from practicing
and carrying on research as a physician. Employee agrees that he will, during
the term of his employment with the Company, promptly and fully disclose to the
Company any business opportunity coming to Employee's attention, or conceived or
developed in whole or in part by Employee, which relates to the Company's
business or demonstrably anticipated business. Employee will not at any time
exploit such business opportunities for his own gain or that of any person or
entity other than the Company.
10. Remedies. Employee acknowledges that damages for breach of his
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covenants under Sections 7, 8 and 9 above will be difficult to determine and
inadequate to remedy the harm which may be caused thereby, and therefore agrees
that the Company may petition or seek to enjoin a putative violation by
temporary or permanent injunction. Any available injunctive relief shall be in
addition to and not in place of any other remedies available at law or equity.
Employee believes that the provisions of this Agreement are reasonable and that
Employee is capable of gainful employment without breaching this Agreement.
However, should any court or tribunal decline to enforce any provision of
Section 9 or 10 of this Agreement as written, the parties hereby agree that this
Agreement shall, to the extent applicable to that circumstance before such
court, be deemed to be modified to restrict Employee's competition with the
Company to the maximum extent of time, scope and geography which the court shall
find enforceable, and such provisions shall be so enforced.
11. Entire Agreement; Modification. The provisions contained herein
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constitute the entire Agreement between the parties and supersede any prior
agreement between the parties with respect to the subject matter hereof and any
waiver, alteration or modification of any provisions of this Agreement, or the
replacement of this Agreement, shall not be valid unless in writing and signed
by all the parties signing hereunder.
12. Governing Law. This Agreement shall be governed and construed in
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accordance with the laws of the State of Washington.
13. Agreement Not Assignable. Employee may not assign any of his rights
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or delegate any of his duties hereunder. Subject to Section 6c, the Company may
assign this Agreement to any of its Affiliates at any time owned by, owning or
under common ownership with the Company. In the event of such an assignment by
the Company, such affiliates shall be deemed substituted for the Company at each
place where "the Company" appears herein; provided, however, the Company shall
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not be released from its obligations hereunder. Furthermore, the assignment of
this Agreement by the Company shall not enlarge the business activities
considered to be conducted by the Company for purposes of Sections 7, 8, and 9
hereof. Subject to the foregoing, this Agreement shall bind the parties and
their respective heirs, successors, assigns and personal representatives.
14. Change in Ownership. Upon (a) the sale or transfer of all or
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substantially all of the assets of the Company or of more than fifty percent
(or, following a Public Offering, forty percent) of the outstanding stock of any
voting class of the Company's stock to any single person or entity (in any one
or more of a series of related transactions), or (b) the merger (such sale,
transfer or merger being, a "Change in Ownership") of the Company with or into
any other entity (except a wholly owned subsidiary or a parent owning all of the
outstanding stock of the Company) (such single person or entity being, a
"Successor"), then all stock or stock options of Employee in the Company shall
immediately become vested.
15. Attorneys' Fees. In any action to enforce his rights hereunder in the
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event of the termination of the Employee's employment by the Company without
cause or by the Employee for cause, the Employee shall be reimbursed by the
Company for his costs of enforcement, including, without limitation, reasonable
attorneys' fees.
16. Jurisdiction and Venue. The parties each irrevocably consents and
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submits to the personal jurisdiction of the State and Federal courts sitting in
King County, Washington, and agrees that any action, suit or proceeding in
connection with this Agreement shall be brought in such courts to the exclusion
of all other courts, other than actions to enforce judgments or orders entered
in such courts sitting in King County.
17. Notices. All notices required or permitted hereunder shall be given in
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writing and delivered in person, transmitted by facsimile, or sent by registered
or certified mail, postage prepaid, or reliable courier service to the parties
at the respective addresses set forth on the signature page hereof, or such
other address as a party may specify by notice for all subsequent notices to
it hereunder. Notices will be effective upon the earlier of receipt or
the second business day after mailing.
18. No Waiver. No waiver or modification of any of the terms of provisions
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hereof shall be valid unless in writing signed by the party against which the
enforcement of such waiver or modification is sought, nor shall any waiver or
failure to enforce any right hereunder be deemed to be a waiver of the same or
any other right in any other instance.
Signed by the parties as of the date first written above.
CELL THERAPEUTICS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Its:
EMPLOYEE
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Signature: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT A
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Issued Patents, Pending Patent
Applications, Registered Copyrights, Etc.
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