Employment Agreement - Pharmos Corp. and Haim Aviv
EMPLOYMENT AGREEMENT
Employment Agreement dated as of April 2, 2001, between PHARMOS
CORPORATION, a Nevada corporation (with its successors and assigns, referred to
as the "Corporation"), and HAIM AVIV (hereinafter referred to as "AVIV").
PRELIMINARY STATEMENT
The Corporation desires to employ AVIV as Chairman of the Board and Chief
Executive Officer of the Corporation and as Chief Executive Officer and Chief
Scientist of the Corporation's Pharmos Ltd. subsidiary ("Limited"), and AVIV
wishes to be so employed by the Corporation and by Limited, upon the terms and
subject to the conditions set forth in this Agreement. The Corporation and AVIV
also wish to enter into the other agreements set forth in this Agreement, all of
which are related to AVIV's employment under this Agreement.
AGREEMENT
AVIV and the Corporation therefore agree as follows:
1. Term of Employment. The Corporation hereby employs AVIV and AVIV hereby
accepts employment with the Corporation for the period (the "Initial Term")
commencing on the date hereof (the "Commencement Date"), and ending on the first
anniversary of the date hereof or upon the earlier termination of the Initial
Term pursuant to Section 6. The Initial Term will be extended automatically for
additional one year periods (each, an "Additional Term"; together with the
Initial Term, the "Term"), subject to the rights of the parties generally to
terminate this Agreement in accordance with the provisions of Section 6(a). The
termination of the Term for any reason shall end AVIV's employment under this
Agreement, but, except as otherwise set forth herein, shall not terminate AVIV's
or the Corporation's other agreements in this Agreement.
2. Position and Duties. During the Term, AVIV shall serve as Chairman of
the Board and Chief Executive Officer of the Corporation and as Chief Executive
Officer and Chief Scientist of Limited. AVIV shall also hold such additional
positions and titles as the Board of Directors of the Corporation (the "Board")
may determine from time to time, including positions and titles with
subsidiaries of the Corporation. AVIV shall report to the Board. During the
Term, AVIV shall devote the majority of his business time and attention to
performing his duties hereunder; provided, however, that Aviv shall not be
precluded from spending time on other business and professional ventures and
activities. The services to be performed hereunder to the Corporation by AVIV
may be performed on his behalf as consulting services by HA Ventures, Inc. ("HA
Ventures"), an entity of which AVIV is the sole shareholder.
1
<PAGE>
3. Compensation.
(a) Base Salary. The Corporation and Limited together shall pay AVIV
compensation, beginning on the first day of the Initial Term and ending on the
last day of the Initial Term, of not less than an aggregate of $268,000 per
annum, payable monthly, to be allocated as salary to AVIV from Limited and
consulting fees to HA Ventures from the Corporation, to be allocated between
Limited and the Corporation in a manner agreed upon by AVIV and the Corporation.
(b) Other and Additional Compensation.
(i) Section 3(a) establishes the minimum compensation during
the Term and shall not preclude the Board from awarding
AVIV a higher salary or any bonuses or stock options in
the event of a successful financing or otherwise, and in
any event, in the discretion of the Board. It is the
practice of the Corporation to adjust compensation on
January 1st of each year.
(ii) During the Term, AVIV shall receive an annual cash bonus
based upon the attainment of agreed upon goals and
milestones as determined and approved by the
Compensation and Stock Option Committee of the Board.
4. Employee Benefits.
(a) General. During the Term, AVIV shall be entitled to the employee
benefits generally available to employees of Limited, including 3 weeks
vacation, and those other benefits described in this Section 4.
(b) Additional Benefit. The Corporation hereby agrees to provide
AVIV with a certain benefit relating to the Corporation's investment of amounts
equal to certain insurance premiums in lieu of its acquiring a "split dollar"
life insurance policy on his life (the "Benefit") more specifically described in
a separate agreement between AVIV and the Corporation (the "Benefit Document").
The Benefit shall be payable to AVIV or his estate, as applicable, upon his
retirement at the age of at least 62 or death or upon AVIV's termination for
"Disability"(as defined in Section 7).
(c) Managers Insurance. The Corporation shall pay directly or
indirectly the premium on AVIV's present "Managers Insurance Scheme" at salary
levels of no less than 100% of the portion of then current base salary paid by
Limited. Payment is to be made as required by the insurer. The Corporation's
contribution will be 8.33% for severance payment, 5% for pension and 7.5% for
education.
(d) Corporation Automobile. AVIV shall have the use of a Corporation
automobile. The Corporation shall reimburse AVIV for gasoline expenses and all
reasonable
2
<PAGE>
expenses related to the use and maintenance of such automobile on presentation
of appropriate documentation.
(e) Sick Leave. AVIV shall be entitled to a paid sick leave of up to
eighteen (18) days during each twelve (12) month period of his employment
hereunder, provided that any unused sick leave in respect of any year may be
carried forward only up to an aggregate of ninety (90) days.
(f) Telephone Expenses. AVIV shall be reimbursed for all home
telephone expenses incurred on a separate telephone line in furtherance of the
business of the Corporation provided that such line be used only for business
purposes and AVIV submits appropriate documentation for the expenses.
5. Expenses. During the Term, the Corporation shall reimburse AVIV for
actual out-of-pocket expenses incurred by him in the performance of his services
for the Corporation upon the receipt of appropriate documentation of such
expenses.
6. Termination.
(a) General. The Term shall end immediately upon AVIV's death, and
for Cause or Disability, as defined in Section 7. Upon termination of the Term
due to AVIV's death, all compensation due AVIV under this Agreement will cease,
except as set forth in Section 9. Upon the Corporation's termination of the Term
for Cause, AVIV shall have ten (10) days to cure said Cause, if curable. With
respect to the termination of AVIV pursuant to Section 6(e), the Corporation may
elect to terminate this Agreement at any time by giving 180 days' prior written
notice, during the Initial Term, and by giving 90 days' prior written notice
during the each Additional Term. With respect to termination by AVIV other than
pursuant to Section 6(f), AVIV may elect to terminate this Agreement at any time
by giving 60 days' prior written notice at any time during the Term, and, upon
such termination, all compensation due AVIV under this Agreement will cease,
except as set forth in Section 9.
(b) Notice of Termination. The Corporation shall notify AVIV in
writing of its termination of his employment hereunder. The Corporation's
failure to give notice under this Section 6(b) shall not, however, affect the
validity of the Corporation's termination of the Term.
(c) Termination by the Corporation for Cause. If terminated by the
Corporation for Cause, the Corporation shall describe to AVIV the grounds for
his termination. Upon the Corporation's termination of the Term for Cause, all
compensation due AVIV under this Agreement will cease, except as set forth in
Section 9. Moreover, all options and warrants to purchase Common Stock of the
Corporation shall expire upon such termination.
(d) Termination by the Corporation upon a Change of Control. In the
event that the Corporation terminates its relationship with AVIV within one (1)
year of a "Change of Control", as defined in Section 7, AVIV shall receive the
following:
3
<PAGE>
(i) an amount equal to eighteen (18) months of base salary
for the then current year (in addition to the base
salary paid to AVIV after the Corporation's delivery of
notice of termination pursuant to Section 6(a) and the
actual date of termination);
(ii) Other Compensation (as defined in Section 9); and
(iii) the full vesting of AVIV's stock options and warrants,
and extended exercisability thereof until their
respective expiration dates.
AVIV shall be entitled to the foregoing benefits once notice of termination is
given by the Corporation, regardless of his subsequent Death, Disability or
termination for Cause.
(e) Termination by the Corporation other than upon Change of
Control, Death, Disability or Cause. In the event that the Corporation
terminates its relationship with AVIV, including a termination by the
Corporation effective upon the expiration of the Initial Term or an Additional
Term but other than upon a Change of Control, Death, Disability or Cause, AVIV
shall receive the following:
(i) an amount equal to twelve (12) months of base salary for
the then current year (in addition to the base salary
paid to AVIV after the Corporation's delivery of notice
of termination pursuant to Section 6(a) and the actual
date of termination);
(ii) Other Compensation; and
(iii) the full vesting of AVIV's stock options and warrants,
and extended exercisability thereof until their
respective expiration dates.
(f) Termination by AVIV upon Good Reason or Change of Control. In
the event AVIV terminates his relationship with the Corporation for "Good
Reason" as defined in Section 7, within one (1) year of the occurrence of the
event which established the "Good Reason", or within one (1) year of a Change of
Control, AVIV shall receive the following:
(i) an amount equal to twelve (12) months of base salary for
the then current year (in addition to the base salary
paid to AVIV after his delivery of notice of termination
pursuant to Section 6(a) and the actual date of
termination);
(ii) Other Compensation; and
(iii) the full vesting of AVIV's stock options and warrants,
and extended exercisability thereof until their
respective expiration dates.
AVIV shall provide prior written notice to the Corporation of his
termination pursuant to this Section 6(f), and such notice shall describe the
particular "Good Reason(s)" at issue.
7. Definitions.
4
<PAGE>
(a) "Cause" Defined. "Cause" means (i) willful malfeasance or
willful misconduct by AVIV in connection with his employment; (ii) AVIV's gross
negligence in performing any of his duties under this Agreement; (iii) AVIV's
conviction of, or entry of a plea of guilty to, or entry of a plea of nolo
contendere with respect to, any felony; (iv) AVIV's habitual drunkenness or
excessive absenteeism not related to illness; (iv) AVIV's material breach of any
written policy applicable to all employees adopted by the Corporation; or (vi)
material breach by AVIV of any of his agreements in this Agreement.
(b) "Disability" Defined. "Disability" shall mean AVIV's incapacity
due to physical or mental illness that results in his being unable to
substantially perform his duties hereunder for six consecutive months (or for
six months out of any nine-month period). During a period of Disability, AVIV
shall continue to receive his base salary hereunder, provided that if the
Corporation provides AVIV with disability insurance coverage, payments of AVIV's
base salary shall be reduced by the amount of any disability insurance payments
received by AVIV due to such coverage. Upon termination, after the end of the
period of Disability, all compensation due AVIV under this Agreement shall
cease, except as set forth in Section 9.
(c) "Change of Control" Defined. "Change of Control" shall mean the
occurrence of any one or more of the following events:
(i) An acquisition (whether directly from the Corporation or
otherwise) of any voting securities of the Corporation (the "Voting
Securities") by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as
amended (the "1934 Act")), immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of fifty percent (50 %) or more of the combined voting power
of the Corporation's then outstanding Voting Securities.
(ii) The individuals who, as of the date hereof, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute
at least fifty-one percent (51%) of the Board;; or
(iii) Approval by the Board or stockholders of the Corporation
of, or execution by the Corporation of any agreement with respect to, or
the consummation of:
(A) A merger, consolidation or reorganization involving
the Corporation, where either or both of the events described in
Section 7(c)(i) or 7(c)(ii) would be the result;
(B) A liquidation or dissolution of or appointment of a
receiver, rehabilitator, conservator or similar person for, the
Corporation; or
5
<PAGE>
(C) An agreement for the sale or other disposition of
all or substantially all of the assets of the Corporation to any
Person (other than a transfer to a subsidiary of the Corporation).
Notwithstanding anything contained in this Agreement to the contrary, if
AVIV's employment is terminated prior to a Change in Control and AVIV reasonably
demonstrates that such termination (i) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated to effect a
Change in Control and who effectuates a Change in Control (a "Third Party") or
(ii) otherwise occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then for all purposes of this Agreement, the date
of a Change in Control with respect to AVIV shall mean the date immediately
prior to the date of such termination of AVIV's employment.
(d) "Good Reason" Defined. "Good Reason" shall mean the occurrence,
whether or not after a Change in Control, of any of the events or conditions
described below:
(i) a change in AVIV's status, title, position or
responsibilities (including reporting responsibilities) which represents
an adverse change from his status, title, position or responsibilities as
in effect immediately prior to such change; the assignment to AVIV of any
duties or responsibilities which are inconsistent with his status, title,
position or responsibilities as in effect immediately prior to such
change; or any removal of AVIV from or failure to reappoint or reelect him
to any of such offices or positions;
(ii) any failure to award AVIV bonus payments and/or increases
in base salary in a manner consistent with the practice of the Corporation
prior to such failure;
(iii) the Corporation's requiring AVIV to be based at any
place outside the State of Israel, except for reasonably required travel
on the Corporation's business which is not materially greater than such
travel requirements prior to such time;
(iv) the failure by the Corporation to (a) continue in effect
(without reduction in benefit level, and/or reward opportunities) any
material compensation or employee benefit plan in which AVIV was
participating at any time prior to such failure, or (b) provide AVIV with
compensation and benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under
each other employee benefit plan, program and practice in which AVIV was
participating at any time prior to such failure; or
(v) any material breach by the Corporation of any provision of
this Agreement which is not cured within ten (10) days after the receipt
of written notice by the Corporation of a description of the breach.
8. Payment Terms. Payment of any amounts to which AVIV shall be entitled
pursuant to the provisions of Sections 6 and 7 shall be made no later than sixty
(60) days following receipt of
6
<PAGE>
notice of termination or the event giving rise to such termination. Any amounts
payable pursuant to Sections 6 and 7 which are not made within the period
specified in this Section 8 shall bear interest at a rate equal to the lesser of
(i) the maximum interest rate allowable pursuant to applicable law or (ii) five
points above the "prime rate" of interest as published from time-to-time in the
Eastern Edition of the Wall Street Journal.
9. Benefits.
(a) General. Except if AVIV resigns without Good Reason (other than
retirement on or after the age of 62), in the event AVIV's employment with the
Corporation is terminated for any reason prior to the end of the Term, AVIV and
his dependents, if any, will continue to participate in any group health plan
sponsored by the Corporation in which AVIV was participating on the date of such
termination, at a cost to AVIV and his dependents equal to the amount charged by
the Corporation to similarly situated employees while employed by the
Corporation, for the remainder of the Initial Term or, if termination occurs
within an Additional Term, for the remainder of such Additional Term.
Thereafter, AVIV and his dependents, if any, shall be entitled to elect to
continue such health coverage, at a cost to AVIV and his dependents equal to the
amount charged by the Corporation to similarly situated employees while employed
by the Corporation, for the longest period of time permitted by the agents of
the Corporation who arrange for such health coverage, with such period to last
at least twelve (12) months from the date of termination. Upon termination for
any reason, in addition to any payments to which AVIV may be entitled upon
termination of his Employment pursuant to any provision of this Agreement, AVIV
shall be entitled to any benefits under any pension, supplemental pension,
savings, or other employee benefit plan (other than life insurance) in which
AVIV was participating on the date of any such termination.
(b) Other Benefits. In addition to the rights provided in Section
9(a), in the event of a termination of AVIV's employment for any reason, AVIV
shall retain his rights under the "Managers Insurance Scheme" pursuant to
Section 4(c) and shall retain his use of the Company automobile provided under
Section 4(d) for the remainder of its lease term. Such benefits, together with
the benefits provided in Section 9(a), shall be referred to herein,
collectively, as "Other Compensation".
10. Confidentiality.
(a) "Corporation Information" Defined. "Corporation Information"
means all information, knowledge or data of or pertaining to (i) the
Corporation, its employees and all work undertaken on behalf of the Corporation,
and (ii) any other person, firm, corporation or business organization with which
the Corporation may do business during the Term, that is not in the public
domain (and whether relating to methods, processes, techniques, discoveries,
pricing, marketing or any other matters).
(b) Confidentiality. AVIV hereby recognizes that the value of all
trade secrets and other proprietary data and all other information of the
Corporation not in the public domain
7
<PAGE>
disclosed by the Corporation in the course of his employment with the
Corporation is attributable substantially to the fact that such confidential
information is maintained by the Corporation in strict confidentiality and
secrecy and would be unavailable to others without the expenditure of
substantial time, effort or money. AVIV therefore, except as provided in the
next two sentences, covenants and agrees that all Corporation Information shall
be kept secret and confidential at all times during and after the end of the
Term and shall not be used or divulged by him outside the scope of his
employment as contemplated by this Agreement, except as the Corporation may
otherwise expressly authorize by action of the Board. In the event that AVIV is
requested in a judicial, administrative or governmental proceeding to disclose
any of the Corporation Information, AVIV will promptly so notify the Corporation
so that the Corporation may seek a protective order or other appropriate remedy
and/or waive compliance with this Agreement. If disclosure of any of the
Corporation Information is required, AVIV may furnish the material so required
to be furnished, but AVIV will furnish only that portion of the Corporation
Information that legally is required.
11. Successors and Assigns.
(a) AVIV. This Agreement is a personal contract, and the rights and
interests that the Agreement accords to AVIV may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him. All rights and benefits
of AVIV shall be for the sole personal benefit of AVIV, and no other person
shall acquire any right, title or interest under this Agreement by reason of any
sale, assignment, transfer, claim or judgment or bankruptcy proceedings against
AVIV. Except as so provided, this Agreement shall inure to the benefit of and be
binding upon AVIV and his personal representatives, distributees and legatees.
(b) The Corporation. This Agreement shall be binding upon the
Corporation and inure to the benefit of the Corporation and of its successors
and assigns.
12. Entire Agreement. This Agreement represents the entire agreement
between the parties concerning AVIV's employment with the Corporation and
supersedes all prior negotiations, discussions, understandings and agreements,
whether written or oral, between AVIV and the Corporation relating to the
subject matter of this Agreement. Notwithstanding the foregoing, the Benefit
Document shall not be superseded.
13. Amendment or Modification; Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in writing
signed by AVIV and by a duly authorized officer of the Corporation. No waiver by
any party to this Agreement of any breach by another party of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same time, any
prior time or any subsequent time.
14. Notices. Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
8
<PAGE>
If to AVIV: Haim Aviv
9 Habrosh Street
Rehovot 76326 Israel
If to the Corporation: Pharmos Corporation
99 Wood Avenue South, Suite 301
Iselin, NJ 08630
Attention: President
with a copy to: Ehrenreich Eilenberg & Krause LLP
11 East 44th Street
New York, NY 10017
Attention: Adam D. Eilenberg, Esq.
Any notice delivered personally or by overnight courier shall be deemed
given on the date delivered and any notice sent by registered or certified mail,
postage prepaid, return receipt requested, shall be deemed given on the date
mailed.
15. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law. If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
AVIV that, to the extent that the provision is or would be valid or enforceable
under applicable law, any court of competent jurisdiction shall construe and
interpret or reform this Agreement to provide for a restriction having the
maximum enforceable area, time period and such other constraints or conditions
(although not greater than those contained currently contained in this
Agreement) as shall be valid and enforceable under the applicable law.
16. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
17. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
9
<PAGE>
18. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to AVIV under this Agreement shall be subject to all applicable payroll
and withholding taxes and deductions required by any law, rule or regulation of
and federal, state or local authority.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and same instrument.
20. Applicable Law; Jurisdiction. The laws of the State of New York shall
govern the interpretation, validity and performance of the terms of this
Agreement, without reference to rules relating to conflicts of law. Any suit,
action or proceeding against AVIV with respect to this Agreement, or any
judgment entered by any court in respect thereof, may be brought in any court of
competent jurisdiction in the State of New York, as the Corporation may elect in
its sole discretion, and AVIV hereby submits to the exclusive jurisdiction of
such courts for the purpose of any such suit, action, proceeding or judgment.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
/s/ HAIM AVIV
----------------------------------
HAIM AVIV
PHARMOS CORPORATION
By: /s/ Gad Riesenfeld
-----------------------------
Gad Riesenfeld
President and Chief Operating Officer
11