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Sample Business Contracts

Employment Agreement - Axiom Pharmaceutical Inc. and Peter W. Cunningham

Employment Forms

  • Employment Agreement. Employers can customize an employment agreement that states the salary, benefits, working hours and other important provisions for their new or existing employee.
  • Consulting Agreement. Answer simple questions to build a contract with a consultant. Specify the services rendered, when payment is due, as well as IP rights.
  • Commission Agreement. Employers who compensate their sales employees based on commissions can prepare an agreement to reduce misunderstandings by specifying the base salary and how commissions are calculated.
  • Executive Employment Agreement. Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.
  • Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.
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                              Employment Agreement


            AGREEMENT  dated as of the 1st day of  August,  2003  between  Axiom
Pharmaceutical,  Inc., a Delaware  corporation  having its  principal  executive
offices at 8324 Delgany Avenue Playa del Rey,  California 90293 (the "Company"),
and Peter W. Cunningham (the "Employee").

      WITNESSETH:

      WHEREAS, the Company and the Employee wish to enter into an Employment
Agreement in its entirety;

      NOW, THEREFORE,  the Company and the Employee hereby agree that, effective
as of August 1, 2003, the Employment Agreement is stated in its entirety to read
as follows:

      1. Employment.

The Company agrees to employ the Employee,  and the Employee agrees to remain in
the employ of the Company,  during the term of this  Agreement  and on the other
terms and conditions hereafter set forth.

      2. Term.

The term of this Agreement  shall commence on August 1, 2003 (the  "Commencement
Date") and shall terminate at the close of business on the first  anniversary of
the Commencement  Date unless sooner  terminated in accordance with the terms of
this   Agreement.   Notwithstanding   the  foregoing,   this   agreement   shall
automatically  renew  for  additional  one year  terms on the  second  and third
anniversaries  of the  Commencement  date,  unless either party provides written
notice not less than 60 days prior to the  renewal  date that it does not intend
to  renew  the  term  of the  Agreement.  In the  case  of any  such  notice  of
non-renewal,  this Agreement shall expire on the day prior to the anniversary of
the Commencement Date.

      3. Positions and Responsibilities; Place of Performance.

            (a) Throughout the term of this  Agreement,  the Employee  agrees to
remain in the  employ  of the  Company,  and the  Company  agrees to employ  the
Employee,  as the Chief  Operating  Officer  of the  Company,  reporting  to the
President, Chief Executive Officer and Board of Directors of the Company. As the
Chief Operating  Officer of the Company,  the Employee shall be a senior officer
of the Company  and its  subsidiaries,  shall have  effective  participation  in
supervision,  control and policy-making  authority over, and responsibility for,
the strategic  direction and general  leadership  and management of the business
and affairs of the Company and its  subsidiaries,  subject only to the authority
of the President,  CEO and Board,  and shall have all of the powers,  authority,
duties and  responsibilities  usually incident to the position and role of Chief
Operating Officer in public companies that are comparable in size, character and
performance to the Company. The Company agrees to use its best efforts to secure
the  employee's  election  as a  member  of the  Board  during  the term of this
Agreement,  and  the  Employee  agrees  to  serve  as  such  without  additional
compensation  beyond  that  provided  in  this  Agreement,   or  for  additional
compensation as may be proposed by the Board.

            (b) In connection  with his employment by the Company,  the Employee
shall be based at Orange County, California or at any other Company location, as
may be determined to be appropriate  for the  performance of Employee's  duties,
and Employee  agrees to travel,  to the extent  reasonably  necessary to perform




<PAGE>

Employee's  duties and obligations under this Agreement,  to Company  facilities
and other  destinations  elsewhere.  It is envisioned  that the Chief  Operating
Officer  shall spend a  significant  portion of his time in China,  managing the
Company's operations there

During the term of this agreement the employee shall serve the company and shall
devote  such  time  attention  as may be  reasonably  required  to  perform  the
responsibilities

            (c) During the term of this Agreement,  the Employee shall serve the
Company  as his  primary  responsibility  and shall  devote his  business  time,
attention,  skill  and  efforts  to  the  faithful  performance  of  his  duties
hereunder;  provided  that the  Employee  may  engage in  commercial  consulting
services in the healthcare  industries,  with the provision that if perceived or
potential conflicts arise, the Employee will notify the company in writing,  and
the Employee and the Company will  determine an effective way forward,  so as to
not interfere with the with the objects, operations and benefits of the Company.

           (d)It is envisioned that the commercial  consulting activities of the
Employee may  contribute  relationships  that will be beneficial to the Company.
Further,  the  Employee may serve as a member of the board of directors of other
companies  (and retain  remuneration  for such service) if such  activities  and
service  do not  materially  interfere  with the  performance  of his duties and
responsibilities hereunder.

      4. Compensation.

For all services  rendered by the  Employee in any  capacity  during the term of
this  Agreement,   and  for  his  undertakings   with  respect  to  confidential
information,  non-solicitation  and disparaging  remarks set forth in sections 6
and 7 below, the Employee shall be entitled to the following:

            (a) a  salary,  payable  in  installments  not  less  frequent  than
monthly,  at the annual rate of one hundred twenty thousand dollars  (US$120,000
(in the lawful  currency of the United States of America)),  with such increases
in such rate,  if any, as the  Compensation  Committee  of the Board may approve
from time to time during the term of this  Agreement.  It is envisioned that the
increases will be based on  achievement  of targets agreed with the Board;  (the
annual  salary  rate as  increased  from  time to time  during  the term of this
Agreement being hereafter referred to as the "Base Salary", and the objective is
to bring the base salary in line with industry standards);

            (b)  participation in the Company's  annual  executive  incentive or
bonus plan as in effect from time to time,  with the  opportunity  to receive an
award in accordance  with the terms and conditions of such plan, for each fiscal
year of the  Company  that  commences  or  terminates  during  the  term of this
Agreement,  of up to 50% of the Base  Salary  earned  during  such year (or such
higher  percentage  as the Board or a committee of the Board may allow from time
to  time  during  the  term  of  this  Agreement,  the  objective  is  to  bring
compensation  in line with industry  standards),  it being  understood  that any
award for the fiscal  year of the  Company  in which the term of this  Agreement
terminates  pursuant to the terms hereof shall be prorated  based on the portion
of such fiscal year that  coincides with the term of this Agreement and shall be
made at the same time as  awards  (if any) are made to other  participants  with
respect to such fiscal year.  This award will be given solely at the  discretion
of the Board working in consultation with the compensation committee.

            (c)  participation  in the Company's  stock  incentive  plan / stock
grant plan as from time to time in effect,  subject to the terms and  conditions
of such plan.  The  Company  shall  provide a stock  grant for the  Employee  of
250,000 shares deliverable in six equal  installments,  the first installment of
41,667  shares  of stock  will be  delivered  on  August  1,  2003,  the  second
installment of 41,667 shares of the stock will be delivered on February 1, 2004,
third  installment  of 41,667 shares of the stock will be delivered on August 1,
2004,  the forth  installment of 41,667 shares of the stock will be delivered on
February 1, 2005,  the fifth  installment  of 41,667 shares of the stock will be
delivered on August 1, 2005, the sixth installment of 41,667 shares of the stock
will be delivered on February 1, 2006 The shares should become fully  registered
and  unrestricted  as soon as  practical.  Stock  incentives / grants / warrants



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<PAGE>

shall be awarded in  accordance  with the  Company's  stock  incentive / grant /
warrant plans applicable to senior officers in the Company.

            (d) for  business  use in  China  of an  automobile  and  housing  /
furnished  accommodation at Company expense will be provided. Such accommodation
and  transportation  shall be reasonable and in line with industry standards for
companies  similarly situated to the Company,  with respect to foreign employees
in China.

            (e)  participation  in all Company health plan, or  reimbursement of
health  insurance  expenses paid by the Employee.  Participation  in all Company
welfare,  savings and other employee benefit and fringe benefit plans (including
vacation pay plans or policies and life and disability insurance plans) in which
other  senior  officers  of the  Company  participate  during  the  term of this
Agreement, subject in all events to the terms and conditions of such plans as in
effect  from time to time.  Nothing in this  paragraph  (e) shall  preclude  the
Company  from  amending  or  terminating  any such plan at any  time.  The plans
covered by this  paragraph  (e) shall not include the annual  incentive or stock
incentive plans, which are covered by paragraphs (b) and (c) above.

      5. Termination of Employment.

            (a)  Termination  by the  Company  without  Good  Cause.  (i) If the
Employee's employment with the Company is terminated by the Company without Good
Cause the employee will be paid three month of his base salary, bonus accrued to
that time,  unrestricted  stock  deliverable as of the date of termination,  all
expenses due,  retirement benefits and other compensation and benefits earned up
to that time
            (b)  Termination  by the Company  for Good Cause or by the  Employee
without Good  Reason.  If,  during the term of this  Agreement,  the  Employee's
employment  by the Company is terminated by the Company for Good Cause or by the
Employee without Good Reason,  the Employee shall not be entitled to receive any
compensation  under section 4 above accruing after the date of such  termination
or any payment under  paragraph 5(a) above,  but he shall be entitled to receive
deliverable as of such date, expenses and relocation to Los Angeles, California,
USA. . However,  the Company's  obligations under sections 8, 9 and 10 shall not
be affected by such termination of employment.  The provisions of this paragraph
6(b) shall be in addition  to, and not in lieu of, any other rights and remedies
the  Company may have at law or in equity or under any other  provision  of this
Agreement in respect of such termination of employment.  However,  if during the
term of this Agreement the  Employee's  employment is terminated by the Employee
without  Good  Reason  and the  Employee  gives the  Company  at least 120 days'
advance  notice  of such  termination,  then  the  Employee  shall  not have any
obligation or liability to the Company  under this  Agreement in respect of such
termination  of  employment,  but his  obligations  under Section 6 and 7 hereof
shall not be affected by such termination of employment.
            (c) Good Cause Defined. For purposes of this Agreement,  the Company
shall have "Good Cause" to terminate the Employee's  employment  during the term
of this Agreement only if:
                  (i) the  Employee  fails to  substantially  perform his duties
hereunder  for any reason or fails to devote  substantially  all of his business
time to the affairs of the Company;
                  (ii) the Employee  commits an act of  dishonesty  resulting or
intended to result directly or indirectly in gain or personal  enrichment at the
expense of the Company;
                  (iii) the Employee is grossly  negligent or engages in willful
misconduct or insubordination in the performance of his duties hereunder; or
                  (iv) the Employee  materially  breaches his obligations  under
section 6 or paragraph  7(a) below,  relating to  confidential  information  and
non-solicitation.

Any foregoing provision of this paragraph 5(c) to the contrary  notwithstanding,
the Company shall not have "Good Cause" to terminate the  Employee's  employment
during the term of his employment  after a Change in Control or Potential Change
in  Control  (as such terms are  defined  in  section  11 below)  unless (A) the
Employee's act or omission is willful and has a material adverse effect upon the



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<PAGE>

Company,  (B) the Board of  Directors  gives the  Employee  (I)  written  notice
warning  of its  intention  to  terminate  the  Employee  for Good  Cause if the
specified act or omission  alleged to constitute Good Cause is not  discontinued
and, if curable,  cured, and (II) a reasonable opportunity after receipt of such
written notice,  but in no event less than eight weeks,  to discontinue  and, if
curable, cure the conduct alleged to constitute Good Cause, and (C) the Employee
fails to  discontinue  and,  if curable,  cure the act or omission in  question;
provided that clauses (B) and (C) of this sentence  shall not apply with respect
to  misconduct  on the part of the  Employee  that  constitutes  a felony in the
jurisdiction in which the Employee  engages in such  misconduct,  and,  provided
further,  that  this  sentence  shall  not  apply  to  conduct  involving  moral
turpitude. For all purposes of this Agreement, no act, or failure to act, on the
Employee's part shall be deemed "willful" unless done, or omitted to be done, by
him  intentionally  and in bad faith (i.e.,  without  reasonable belief that his
action or  omission  was in  furtherance  of the  interests  of the Company or a
subsidiary of the Company).
           (d) Good Reason Defined. For purposes of this Agreement, the Employee
shall have "Good  Reason" to terminate  his  employment  during the term of this
Agreement only if:

            (i) the Company  fails to pay or provide any amount or benefit  that
the Company is obligated to pay or provide under section 4 above or section 8, 9
or 10 below and the  failure is not  remedied  within 30 days after the  Company
receives written notice from the Employee of such failure; or
            (ii) the Company assigns the Employee  duties,  responsibilities  or
reporting relationships not contemplated by section 3 above without his consent,
or limits his duties or responsibilities  or power or authority  contemplated by
section 3 above in any respect materially detrimental to him, and in either case
the situation is not remedied within 30 days after the Company  receives written
notice from the Employee of the  situation;  or
            (iii) a Change in Control  occurs and as a result thereof either (A)
equity  securities  of the  Company  cease  to be  publicly-traded,  or (B)  the
Employee  is not  elected or  designated  to serve as the sole  Chief  Operating
Officer of the surviving company; or
            (vi) a Change in Control or Potential  Change in Control  occurs and
(A) the dollar value of the stock optioned to the Employee  annually  thereafter
is less than the average  annual  dollar value of the stock that was optioned to
the  Employee  during the one year  prior to the Change in Control or  Potential
Change in Control,  or (B) the material terms of such options (including without
limitation  vesting  schedules)  are less  favorable  to the  Employee  than the
material  terms of the options that were granted to the Employee  during the one
year  prior to the  Change in Control or  Potential  Change in  Control,  and in
either case (A) or (B) the  situation is not  remedied  within 30 days after the
Company receives written notice from the Employee of the situation.
In no event shall the Employee's continued employment after any of the foregoing
constitute  his consent to the act or omission in  question,  or a waiver of his
right to terminate his employment  for Good Reason  hereunder on account of such
act or omission.

      6. Confidential Information.

The Employee agrees not to disclose,  either while in the Company's employ or at
any time thereafter,  to any person not employed by the Company,  or not engaged
to render  services to the Company,  except with the prior written consent of an
authorized  officer  of the  Company  or as  necessary  or  appropriate  for the
performance of his duties hereunder,  any confidential  information  obtained by
him  while  in  the  employ  of  the  Company,  including,  without  limitation,
information  relating  to any of the  inventions,  processes,  formulae,  plans,
devices,  compilations  of  information,   research,  methods  of  distribution,
suppliers,  customers,  client  relationships,  marketing  strategies  or  trade



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<PAGE>

secrets of the Company or any subsidiary thereof;  provided,  however, that this
provision  shall not preclude the Employee from use or disclosure of information
known  generally  to the  public  or of  information  not  generally  considered
confidential  by persons  regularly  engaged in the  business  conducted  by the
Company or any subsidiary  thereof,  or from disclosure required by law or court
order.  The Employee also agrees that upon leaving the Company's  employ he will
not take with him, without the prior written consent of an authorized officer of
the Company,  and he will surrender to the Company,  any record,  list, drawing,
blueprint,  specification  or other  document  or property of the Company or any
subsidiary thereof,  together with any copy or reproduction thereof,  mechanical
or otherwise,  which is of a confidential  nature relating to the Company or any
subsidiary thereof,  or without limitation,  relating to its or their methods of
distribution,  suppliers, customers, client relationships,  marketing strategies
or any description of any formulae or secret processes, or which was obtained by
him or entrusted to him during the course of his employment with the Company.

      7. Restrictive Covenants

            (a) Non-Solicitation. Employee covenants and agrees that, during his
employment by the Company and during the one year period  immediately  following
the  termination of his employment  with the Company for any reason  (including,
without limitation, a termination of employment by the Company without cause and
a voluntary termination of employment by the Employee with Good Reason), he will
not solicit or attempt to persuade any employee of the Company, its subsidiaries
or  affiliates  (except the  Employee's  personal  secretary  or  administrative
assistant),  or any other  person who performs  services  for the  Company,  its
subsidiaries or affiliates at the time the Employee's  employment  terminates or
at any time within one year  thereafter,  to terminate or reduce or refrain from
engaging  in his or her  employment  or  other  service  relationship  with  the
Company, its subsidiaries or affiliates;  provided,  however, that responding to
inquiries from any such employees or other persons that are not initiated by the
Employee,  and subsequently hiring such employees or other persons following the
termination  of  their  employment  with  the  Company,   its  subsidiaries  and
affiliates shall be permitted.

            (b) Specific  Enforcement.  Employee  recognizes and agrees that, by
reason of his  knowledge,  experience,  skill and  abilities,  his  services are
extraordinary  and  unique,  that the breach or  attempted  breach of any of the
restrictions  set forth  above in this  section 7 will result in  immediate  and
irreparable  injury for which the Company  will not have an  adequate  remedy at
law, and that the Company shall be entitled to a decree of specific  performance
of those restrictions and to a temporary and permanent  injunction enjoining the
breach thereof,  and to seek any and all other remedies to which the Company may
be entitled,  including,  without limitation,  monetary damages, without posting
bond or furnishing security of any kind.

            (c)  Restrictions  Reasonable.  Employee  specifically and expressly
represents  and warrants that (i) he has reviewed and agreed to the  restrictive
covenants  contained in this section 7 and their  contemplated  operation  after
receiving  the  advice of  counsel  of his  choosing;  (ii) he  believes,  after
receiving such advice,  that the  restrictive  covenants and their  contemplated
operation are fair and reasonable;  (iii) he will not seek or attempt to seek to
have the restrictive covenants declared invalid, and, after receiving the advice
of counsel, expressly waives any right to do so; and (iv) if the full breadth of
any restrictive covenant and/or its contemplated  operation shall be held in any
fashion to be too broad,  such covenant or its  contemplated  operation,  as the
case  may be,  shall  be  interpreted  in a manner  as  broadly  in favor of the
beneficiary of such covenant as is legally permissible.  Employee recognizes and
agrees that the  restrictions on his activities  contained in this section 7 are
required for the reasonable  protection of the Company and its investments;  and
that the  restriction  on his  activities  set forth in paragraph  7(a) will not
deprive the Employee of the ability to earn a livelihood.

            (d)  Non-Disparagement.  Employee  covenants and agrees that, during
the one year period immediately following the termination of his employment with
the Company for any reason  (including,  without  limitation,  a termination  of
employment  by  the  Company  without  cause  and  a  voluntary  termination  of
employment  by the  Employee  with Good  Reason),  he will not make  disparaging




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<PAGE>

remarks  about the  Company,  its  subsidiaries  or  affiliates  or any of their
officers, directors or employees, unless required by law or reasonably necessary
to assert or defend  his  position  in a bona  fide  dispute  arising  out of or
relating to this Agreement or the breach thereof.

            (e) Effect on  Termination  Payments.  The Employee  recognizes  and
agrees that the Company shall not be obligated to make any payments provided for
in paragraph 5(a) above if the Employee  violates the provisions of section 6 or
paragraph  7(a) or 7(d) above during the one year period  immediately  following
the termination for any reason of his employment with the Company.  In addition,
the  Employee  recognizes  and  agrees  that,  if  the  Employee  violates  such
provisions, the Company may recoup any payments the Company may have theretofore
made  pursuant  to  paragraph  5(a)  above  and any  payments  the  Company  may
thereafter make under paragraph 5(a). The foregoing provisions of this paragraph
7(e) shall be in addition to and not by way of  limitation  of any other  rights
and remedies the Company may have in respect of the violation in question.

      8. Indemnification

To the fullest extent  permitted by applicable law, the Company shall indemnify,
defend and hold  harmless  the  Employee  from and  against  any and all claims,
demands, actions, causes of action, liabilities, losses, judgments, fines, costs
and expenses  (including  reasonable  attorneys'  fees and settlement  expenses)
arising  from or  relating  to his  service or status as an  officer,  director,
employee,  agent or  representative  of the  Company  or any  subsidiary  of the
Company or in any other  capacity in which the Employee  serves or has served at
the request of, or for the  benefit  of, the  Company or its  subsidiaries.  The
Company's  obligations  under this section 8 shall be in addition to, and not in
derogation  of, any other  rights the  Employee  may have against the Company to
indemnification  or  advancement  of expenses,  whether by statute,  contract or
otherwise.  Director's insurance shall be provided by the company and Errors and
Omissions insurance shall be provided by the company.

      9.  Certain  Additional  Payments  by  the  Company,  Excise  Tax  and  or
Additional Income Tax or Other

            (a) Anything in this  Agreement  (other than the second  sentence of
this paragraph 9(a)) to the contrary  notwithstanding,  in the event it shall be
determined that any payment or distribution by the Company to or for the benefit
of the  Employee  (whether  paid or  payable  or  distributed  or  distributable
pursuant to the terms of this  Agreement or otherwise,  but  determined  without
regard to any additional  payments required under this section 9) (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the United  States
Internal  Revenue Code (the  "Code") or any other such tax in any  jurisdiction,
including  additional  income tax, and interest or penalties are incurred by the
Employee  with  respect to such excise tax (such excise tax,  together  with any
such interest and penalties,  are  hereinafter  collectively  referred to as the
"Excise  Tax"),  or any other such tax in any  jurisdiction,  then the  Employee
shall be entitled to receive an additional payment (an "Gross-Up Payment") in an
amount such that after  payment by the  Employee  of all taxes and any  benefits
that result from the deductibility by the Employee of such taxes (including,  in
each case,  any  interest or  penalties  imposed  with  respect to such  taxes),
including,  without limitation, any income taxes (and any interest and penalties
imposed with  respect  thereto)  and Excise Tax,  Additional  Income Tax, or any
other such tax imposed upon the Gross-Up Payment, the Employee retains an amount
of the Gross-Up Payment equal to the Excise Tax or Additional Income Tas imposed
upon the Payments.  However, if it shall be determined that none of the Payments
would be subject to the Excise  Tax if the total  Payments  were  reduced in the
aggregate  by $50,000 or less,  then in that event the total  Payments  shall be
reduced by the smallest  amount (in no event to exceed $50,000 in the aggregate)
necessary to ensure that none of the Payments will be subject to the Excise Tax.
The  decision  as to which  Payments  shall be so  reduced  shall be made by the
Employee.

            (b) Subject to the provisions of paragraph 9(a) above and 9(c)below,
all  determinations  required to be made under this section 9, including whether
and when a Gross-Up  Payment is required and the amount of such Gross-Up Payment
and the  assumptions  to be  utilized in  arriving  at such  determination,  and
whether  Payments are to be reduced pursuant to the second sentence of paragraph




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<PAGE>

9(a) above,  shall be made by Deloitte & Touche or such other  certified  public
accounting  firm as may be designated by the Employee  (the  "Accounting  Firm")
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee that
there has been a Payment,  or such  earlier time as is requested by the Company.
In the event that the  Accounting  Firm is serving as  accountant or auditor for
the individual,  entity or group effecting the "change in ownership or effective
control" or "change in the ownership of a substantial portion of assets" (within
the meaning of Code section 280G(b)(2)(A)) that gives rise to the Excise Tax, or
Additional Income Tax, the Employee shall appoint another nationally  recognized
accounting firm to make the determinations  required hereunder (which accounting
firm shall then be referred to as the Accounting Firm  hereunder).  All fees and
expenses  of the  Accounting  Firm  shall be borne  solely by the  Company.  Any
Gross-Up Payment, as determined pursuant to this section 9, shall be paid by the
Company to the Employee within five days of the receipt of the Accounting Firm's
determination.  Any  determination  by the Accounting Firm shall be binding upon
the Company and the Employee.  As a result of the uncertainty in the application
of  Section  4999 of the Code at the time of the  initial  determination  by the
Accounting Firm hereunder,  it is possible that Gross-Up Payments which will not
have  been  made by the  Company  should  have  been  made (an  "Underpayment"),
consistent with the  calculations  required to be made  hereunder.  In the event
that the  Company  exhausts  its  remedies  pursuant to  paragraph  9(c) and the
Employee  thereafter  is  required  to make a  payment  of any  Excise  Tax,  or
Additional  Income Tax, the  Accounting  Firm shall  determine the amount of the
Underpayment that has occurred and any such Underpayment, along with any penalty
and interest imposed with respect to such  Underpayment,  shall be promptly paid
by the Company to or for the benefit of the Employee.

            (c) The Employee shall notify the Company in writing of any claim by
the Internal  Revenue  Service that,  if  successful,  would require  either the
payment by the  Company of the  Gross-Up  Payment or the  reduction  of Payments
pursuant to the second sentence of paragraph 9(a) above. Such notification shall
be given as soon as  practicable  but no later than ten business  days after the
Employee is  informed in writing of such claim and shall  apprise the Company of
the nature of such claim and the date on which  such  claim is  requested  to be
paid.  The  Employee  shall not pay such claim  prior to the  expiration  of the
30-day  period  following  the date on which it gives such notice to the Company
(or such  shorter  period  ending on the date  that any  payment  of taxes  with
respect to such claim is due).  If the Company  notifies the Employee in writing
prior to the  expiration  of such period that it desires to contest  such claim,
the Employee shall:

                  (i) give the Company any information  reasonably  requested by
the Company relating to such claim,

                  (ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
                  (iii)  cooperate  with  the  Company  in good  faith  in order
effectively to contest such claim, and
                  (iv)  permit the  Company to  participate  in any  proceedings
relating to such claim;  provided,  however, that the Company shall bear and pay
directly all costs and expenses  (including  additional  interest and penalties)
incurred  in  connection  with such  contest  and shall  indemnify  and hold the
Employee  harmless,  on an  after-tax  basis,  for any  Excise Tax or income tax
(including  interest and penalties with respect  thereto) imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing  provisions  of this  paragraph  9(c),  the Company  shall control all
proceedings  taken in connection with such contest and, at its sole option,  may
pursue or forgo any and all administrative  appeals,  proceedings,  hearings and
conferences  with the taxing  authority in respect of such claim and may, at its
sole  option,  either  direct the  Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible  manner,  and the Employee agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial  jurisdiction and in one or more appellate  courts, as the
Company shall  determine,  provided,  however,  that if the Company  directs the
Employee to pay such claim and sue for a refund,  the Company  shall advance the



                                       7
<PAGE>

amount of such  payment to the  Employee,  on an  interest-free  basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to such  advance;  and further  provided  that any extension of the
statute of limitations  relating to payment of taxes for the taxable year of the
Employee  with  respect to which such  contested  amount is claimed to be due is
limited solely to such contested amount.  Furthermore,  the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up  Payment
would be payable  hereunder  and the  Employee  shall be  entitled  to settle or
contest,  as the case may be, any other  issue  raised by the  Internal  Revenue
Service or any other taxing authority.

            (d) If, after the receipt by the  Employee of an amount  advanced by
the Company pursuant to paragraph 9(a) or 9(c), the Employee becomes entitled to
receive any refund with respect to such claim,  the Employee  shall  (subject to
the Company's complying with the requirements of paragraph 9(c)) promptly pay to
the  Company  the amount of such  refund  (together  with any  interest  paid or
credited thereon after taxes applicable  thereto).  If, after the receipt by the
Employee of an amount  advanced by the Company  pursuant to  paragraph  9(c),  a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the  expiration  of 30 days
after such  determination,  then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

      10. Certain Enforcement Matters

            (a) If, after a Change in Control or Potential Change in Control,  a
dispute arises (i) with respect to this Agreement or the breach thereof, or (ii)
with respect to the Employee's or the Company's rights or obligations under this
Agreement,  including  but not limited to any such dispute  between the Employee
and the  Company,  the  Company  shall pay or  reimburse  the  Employee  for all
reasonable  costs and expenses  (including  court costs,  arbitrators'  fees and
reasonable  attorneys' fees and disbursements) the Employee incurs in connection
with such dispute,  including without limitation costs and expenses he incurs to
obtain  payment or  otherwise  enforce his rights  under this  Agreement,  or to
obtain  payment  of costs  and  expenses  due under  this  paragraph  10(a).  In
addition,  the Company shall pay the Employee such  additional  amount (a "Gross
Up") as will be  sufficient,  after the  Employee  pays his tax  liability  with
respect to the Gross Up from the Gross Up, to pay all of his federal,  state and
local tax liability  with respect to any costs and expenses that are paid by the
Company  pursuant to this  paragraph  10(a).  The Company shall  promptly pay or
reimburse  the Employee for all such costs and expenses as he incurs them,  upon
presentation of reasonable  documentation of such costs and expenses,  and shall
promptly pay the related  Gross Up as and when it pays or  reimburses  costs and
expenses.  The Employee shall not be obligated to repay any such costs, expenses
or  Gross  Up  unless  it is  finally  determined  by the  trier  of  fact  in a
non-appealable  judicial or arbitral decision or ruling (as applicable) that the
Employee's  principal  positions  with  respect to the  principal  matter(s)  in
dispute were unreasonable and pursued in bad faith.
            (b) Any payments to which the  Employee  may be entitled  under this
Agreement,  including,  without limitation,  under section 5, 8, 9 or 10 hereof,
shall be made forthwith on the applicable  date(s) for payment specified in this
Agreement.  If for any  reason  the amount of any  payment  due to the  Employee
cannot be finally  determined on that date,  such amount shall be estimated on a
good faith basis by the Company and the estimated  amount shall be paid no later
than  within 10 days after such date.  As soon as  practicable  thereafter,  the
final determination of the amount due shall be made and any adjustment requiring
a payment to or from the Employee shall be made as promptly as practicable.
            (c) Any  controversy or claim arising,  after a Change in Control or
Potential  Change in Control,  out of or related to this Agreement or the breach
thereof,  shall be settled by binding arbitration in the City of Los Angeles, in
accordance  with  the  employment  dispute  arbitration  rules  of the  American
Arbitration  Association then in effect, and the arbitrator's  decision shall be
binding and final and  judgment  upon the award  rendered  may be entered in any
court having  jurisdiction  thereof,  except that the Employee may elect to have
any such  controversy  or claim  settled by  judicial  determination  in lieu of




                                       8
<PAGE>

arbitration by bringing a court action,  if he is the plaintiff or, if he is not
the plaintiff,  demanding such judicial  determination within the time to answer
any complaint in any arbitration action that may be commenced.


      11. Change in Control

          (a) The term  "Change in  Control" as used in this  Agreement  means a
              change  of  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(e) of Schedule  14A of  Regulation
              14A  promulgated  under the  Securities  Exchange Act of 1934,  as
              amended (the "Exchange  Act"),  whether or not the Company is then
              subject to such reporting  requirement;  provided that, whether or
              not any of the  following  events  would  constitute  a change  of
              control of such a nature,  a Change in Control  shall be deemed to
              occur  for  purposes  of this  Agreement  if and  when  any of the
              following events occur:

                  (i) any  "person"  (as such term is used in Sections 13(d) and
14(d)(2) of the  Exchange  Act), other than--
                     (A) the Company,
                     (B) a Subsidiary,
                     (C) a trustee or other fiduciary  holding  securities under
an employee benefit plan of the
Company or a Subsidiary, or
                     (D) an underwriter engaged  in a  distribution  of  Company
stock to the public with the Company's  written consent,  becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of Voting  Securities  that meet two tests:  (I) they represent more than thirty
percent (30%) (this seems low to me, how about 40%) of the combined voting power
of the then  outstanding  Voting  Securities,  and (II) they also represent more
than the percentage of the combined voting power of the then outstanding  Voting
Securities  beneficially owned, directly or indirectly,  at that time by Douglas
MacLellan and his  associates  (as defined in Rule 12b-2 under the Exchange Act)
(this  definition is not very broad and would not include  Madame Wang,  That or
TriPoint).  However, the second test stated in clause (II) above shall not apply
if the  "person" in  question is Douglas  MacLellan  and/or his  associates  (as
defined in Rule 12b-2 under the Exchange  Act). In addition,  if the "person" in
question is an institutional  investor whose investment in Voting  Securities is
purely  passive  when  such  person  becomes  the  beneficial  owner  of  Voting
Securities that meet the tests set forth in clause (I) and, if applicable,  (II)
above,  then such event (i.e.,  such person's  becoming the beneficial  owner of
such Voting  Securities)  shall not be deemed to  constitute a Change in Control
under this  subparagraph  11(a)(i) for so long as (and only for so long as) such
person's investment in Voting Securities remains purely passive;

                  (ii)  the  stockholders  of  the  Company  approve  a  merger,
consolidation,   recapitalization   or   reorganization  of  the  Company  or  a
Subsidiary,  reverse split of any class of Voting Securities,  or an acquisition
of securities or assets by the Company or a Subsidiary,  or  consummation of any
such  transaction  if stockholder  approval is not obtained,  other than (A) any
such  transaction  in  which  the  holders  of  outstanding   Voting  Securities
immediately  prior to the  transaction  receive,  with  respect  to such  Voting
Securities  (or,  in the case of a  transaction  in  which  the  Company  is the
surviving corporation or a transaction involving a Subsidiary,  retain),  voting
securities of the surviving or transferee  entity  representing  more than fifty
percent  (50%) of the total  voting  power  outstanding  immediately  after such
transaction,  with the voting power of each such  continuing  holder relative to
other such continuing holders not substantially  altered in the transaction,  or
(B) any such  transaction  which would  result in a Related  Party  beneficially
owning more than 50 percent of the voting  securities  of the  surviving  entity
outstanding immediately after such transaction;

                 (iii)  the  stockholders  of the  Company  approve  a  plan  of
complete  liquidation of the Company or an agreement for the sale or disposition




                                       9
<PAGE>

by the Company of all or  substantially  all of the Company's  assets other than
any such  transaction  which would result in a Related Party owning or acquiring
more than 50 percent of the assets owned by the Company immediately prior to the
transaction; or

                  (iv) the persons who were members of the Board of Directors of
the Company  immediately  before a tender or exchange offer for shares of Common
Stock by any person  other  than the  Company  or a Related  Party,  or before a
merger or consolidation of the Company or a Subsidiary, or contested election of
the Board of  Directors  of the  Company,  or  before  any  combination  of such
transactions,  cease to  constitute  a majority of the Board of Directors of the
Company as a result of such transaction or transactions.

            (b) For purposes of paragraph 11(a) above:

                  (i) the term "Related Party" shall mean (A) a Subsidiary,  (B)
an  employee  or group of  employees  of the  Company or any  Subsidiary,  (C) a
trustee or other fiduciary holding  securities under an employee benefit plan of
the Company or any  Subsidiary,  or (D) a corporation  or other form of business
entity  owned  directly  or  indirectly  by the  stockholders  of the Company in
substantially the same proportion as their ownership of Voting Securities;

                  (ii) the term "Subsidiary means a corporation or other form of
business  association of which shares (or other ownership interests) having more
than 50% of the voting power are, or in the future become,  owned or controlled,
directly or indirectly, by the Company; and

                  (iii) the term "Voting  Securities"  shall mean any securities
of the  Company  which  carry the right to vote  generally  in the  election  of
directors.
            (c) For purposes of this Agreement,  a "Potential Change in Control"
means that (i) the Company enters into an agreement,  the  consummation of which
would result in the occurrence of a Change of Control;  or (ii) the Board adopts
a resolution  to the effect that,  for purposes of this  Agreement,  a potential
change in control of the Company has occurred.

      12. Severability; Survival

           (a)    In the event that  any provision  of  this Agreement  shall be
determined  to be  invalid  or  unenforceable  for  any  reason,  the  remaining
provisions of this Agreement not so invalid or unenforceable shall be unaffected
thereby  and  shall  remain  in full  force and  effect  to the  fullest  extent
permitted by law; and

           (b)    Any provision of this Agreement which  may for  any  reason be
invalid  or  unenforceable  in any  jurisdiction  shall  remain in effect and be
enforceable  in any  jurisdiction  in which  such  provision  shall be valid and
enforceable.

           (c)    The  provisions  of  sections  6,  7,  8,  9 and  10  of  this
Agreement, and any other provision of this Agreement which is intended to apply,
operate or have effect after the  expiration or  termination of the term of this
Agreement,  or at a time when the term of this  Agreement  may have  expired  or
terminated,  shall  survive the  expiration or  termination  of the term of this
Agreement for any reason.

      13. General Provisions

           (a)  No right or interest to or in any  payments to be  made under
this Agreement shall be subject to anticipation,  alienation, sale, encumbrance,
pledge,  charge or  hypothecation or to execution,  attachment,  levy or similar
process,  or  assignment  by  operation  of law.  All payments to be made by the
Company hereunder shall be subject to the withholding of such amounts as the



                                       10
<PAGE>

Company may determine it is required to withhold  under the laws or  regulations
of any governmental authority, whether foreign, federal, state or local.

           (b)  The Employee has  the right  to assign  payments at  his sole
discretion in part or in full to his personal retirement account, as the company
has  not  established  a  retirement  or  pension  plan.  The  tax  benefits  or
liabilities of these assigned payments if any will accrue to the Employee.

           (c)  To the  extent  that the  Employee  acquires  a right to receive
payments from the Company under this  Agreement,  such right shall be no greater
than the right of an unsecured general creditor of the Company.  All payments to
be made  hereunder  shall be paid from the  general  funds of the Company and no
special or separate fund shall be  established  to assure  payment of any amount
hereunder.

           (d)  This Agreement  shall be governed by and construed and enforced
in accordance with the laws of the State of California, without giving effect to
the principles of conflicts of laws of that State.

           (e)  This Agreement shall be binding upon and inure to the benefit of
the Company, its successors and assigns, and the Employee,  his heirs, devisees,
distributees and legal representatives.

           (f)  Any notice or other communication to the Company pursuant to any
provision of this Agreement shall be given in writing and will be deemed to have
been delivered:
                  (i) when  delivered  in person to the  Corporate  Secretary or
General Counsel of the Company; or

                  (ii)  one week  after it is  deposited  in the  United  States
certified or  registered  mail,  postage  prepaid,  addressed  to the  Corporate
Secretary of the Company at 8324 Delgany Avenue Playa del Rey,  California 90293
or at such  other  address of which the  Company  may from time to time give the
Employee written notice in accordance with paragraph 13(g) below.

           (g)  Any notice or other  communication  to the Employee  pursuant to
any provision of the  Agreement  shall be given in writing and will be deemed to
have been delivered:

                  (i) when delivered to the Employee in person, or

                  (ii)  one week  after it is  deposited  in the  United  States
certified or registered mail, postage prepaid,  addressed to the Employee at his
address as it appears on the records of the Company or at such other  address of
which the  Employee  may from time to time give the  Company  written  notice in
accordance with paragraph 13(e) above.

            (h) No  provision  of this  Agreement  may be  amended,  modified or
waived  unless such  amendment,  modification  or waiver shall be agreed to in a
writing signed by the Employee and an authorized officer of the Company.

            (i) This  instrument  contains  the entire  agreement of the parties
relating to the subject matter of this Agreement and supersedes and replaces all
prior agreements and understandings with respect to such subject matter, and the
parties have made no agreements,  representations or warranties  relating to the
subject matter of this Agreement which are not set forth herein.

      IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                           AXIOM PHARMACEUTICALS, INC.


                           By:  /s/ That Ngo
                                -------------
                                    That Ngo,
                                    President


                                /s/ Peter Cunningham
                                --------------------
                                    Employee





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