Employment Agreement - Pharmos Corp. and James A. Meer
EMPLOYMENT AGREEMENT
Employment Agreement dated as of July 12, 2004, between PHARMOS
CORPORATION, a Nevada corporation (with its successors and assigns, referred to
as the "Corporation") and JAMES A. MEER (hereinafter referred to as "MEER").
PRELIMINARY STATEMENT
The Corporation desires to employ MEER as Vice President, Chief Financial
Officer, Secretary and Treasurer of the Corporation, and MEER wishes to be
employed by the Corporation, upon the terms and subject to the conditions set
forth in this Agreement. The Corporation and MEER also wish to enter into the
other agreements set forth in this Agreement, all of which are related to MEER's
employment under this Agreement.
AGREEMENT
MEER and the Corporation therefore agree as follows:
1. Term of Employment. The Corporation hereby employs MEER and MEER 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 MEER's employment under this
Agreement, but, except as otherwise set forth herein, shall not terminate MEER's
or the Corporation's other agreements in this Agreement.
2. Position and Duties. Upon the commencement of the Initial Term, MEER
shall serve as Vice President, Chief Financial Officer, Secretary and Treasurer
of the Corporation. Unless this Agreement is terminated for the consideration
stated herein, MEER's will also assume the title and position of Senior Vice
President starting six months from the Commencement Date. MEER shall be
evaluated in 2005 for promotion to Executive Vice President subject to approval
by the Corporation's Board of Directors (the "Board"). MEER shall also hold such
additional positions and titles as the Chief Executive Officer of the
Corporation ("CEO") may determine from time to time. MEER shall report to the
CEO or the Chief Operating Officer. During the Term, MEER shall devote his full
time and attention to performing his duties as an employee of the Corporation,
which include matters relating to the Corporation's accounting practices,
internal controls, finance, administration and investor relations. MEER
understands will require from time to time travel to and from the Corporation's
offices in Israel.
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3. Compensation.
(a) Base Salary. The Corporation shall pay MEER a base salary,
beginning on the first day of the Initial Term and ending on the last day of the
Initial Term, of $235,000 per annum, payable semi-monthly on the Corporation's
regular pay cycle for professional employees. Following the Initial Term, the
Board shall in accordance with its customary review of executive management
compensation, review MEER's base salary and make adjustments the Board (or its
Compensation Committee) feels are appropriate, but in any event MEER's base
salary shall not be lower than $235,000.
(b) Other and Additional Compensation.
(i) Annual Bonus. During the Term, MEER shall receive an
annual bonus based upon the attainment of agreed upon goals and milestones as
determined by the CEO and approved by the Compensation and Stock Option
Committee of the Board. It is hereby agreed that for the Initial Term, the bonus
paid to MEER shall be not less than $50,000.
(ii) Stock Options. As soon as practicable following execution
of this Agreement and subject to the approval of the Board, MEER shall be
granted options for the purchase of up to 150,000 shares (the "Initial Option
Grant") of the Corporation's common stock under the Corporation's 2000 Amended
and Restated Stock Option Plan (the "Plan"). The terms of the grant, including
the vesting schedule and exercise price of the Initial Option Grant shall be as
set forth in a separate option agreement executed by and between the parties.
(iii) Additional Compensation. The foregoing establishes the
minimum compensation during the Term and shall not preclude the Board from
awarding MEER a higher salary or any additional bonuses or stock options in the
event of a successful financing or otherwise, and in any event, in the
discretion of the Board.
4. Employee Benefits.
(a) General. During the Term, MEER shall be entitled to the employee
Benefits generally made available to the Corporation's executive officers,
including four-weeks paid vacation, participation in the Corporation's 401(k)
plan, Employee Stock Purchase Plan (or other plans that may be made available
from time to time to the Corporation's executive officers), and current health
and/or dental insurance benefits made available by the Corporation to its
employees.
(b) Other Benefits. During the Term, MEER shall be entitled to an
annual payment in an amount not exceeding $8,500 which shall be applied towards
the costs of maintaining a whole life insurance policy in MEER's name for an
amount not less than $500,000. The Corporation shall, in addition, provide MEER
with a monthly car allowance of up to $400. As soon as reasonably practicable
following the date hereof, the Corporation shall arrange for and maintain
short-term and long-term disability policies for benefit of MEER in such amounts
generally customary for similarly situated executive employees in the industry.
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5. Expenses. During the Term, the Corporation shall reimburse MEER 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; Non-Renewal.
(a) General. The Term shall end immediately upon MEER's death, or
upon termination for Cause, Disability, Change of Control or Good Reason, each
as defined in Section 7. Upon termination of the Term due to MEER's death, all
compensation due MEER under this Agreement will cease. In all other cases, (i)
the Corporation may terminate this Agreement either upon sixty (60) days prior
written notice, if such termination shall be effective in the calendar year
2004, or otherwise upon ninety (90) days written notice and (ii) MEER may
terminate this Agreement upon sixty (60) days written notice. The parties agree
that the mere act to providing notice to the other party of termination shall
not in any event be deemed to provide such other party the right to immediately
terminate this Agreement.
The Corporation may elect not to renew this Agreement by giving no less
than 60 days written notice prior the expiration of the Initial Term and no less
than 90 days written notice prior to the expiration of any subsequent Term. MEER
may elect not to renew this Agreement by giving not less than 60 days written
notice prior to the expiration of any Term. Upon the receipt of any notice of
non-renewal as provided in this Section 6(a), MEER shall continue to compensated
in the manner set forth in this Agreement until the expiration of the applicable
Term.
(b) Notice of Termination - Generally. Any termination by the
Corporation of MEER's employment hereunder shall be in writing and delivered to
MEER at the address set forth herein or at such address kept in the records of
the Corporation and shall specify the reasons for such termination.
(c) Termination by the Corporation for Cause. Any written notice of
termination by the Corporation of MEER for Cause shall, to the extent determined
by the CEO or the Board that the Cause is curable, allow MEER the opportunity to
cure, but in any event no more than ten (10) days. Such notice of termination
shall also state in reasonable detail the Board's understanding of the facts
leading to the determination of Cause. Upon the Corporation's final termination
of the Term for Cause, all compensation due to MEER under this Agreement will
cease. Moreover, any unexercised portions of the Initial Option Grant or other
stock option grants to MEER by 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 MEER within one (1)
year of a "Change of Control", as defined in Section 7(c), MEER shall receive
the following:
(i) an amount equal to eighteen (18) months of base salary for
the then current Term (which is in addition to the base salary paid to MEER
after the Corporation's delivery of notice of termination pursuant to Section 6
and the actual date of termination); and
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(ii) the full vesting of the Initial Option Grant and any
other stock option grants to MEER by the Corporation, and extended
exercisability thereof until their respective expiration dates; and
(iii) Other Compensation (as defined in Section 9).
For the avoidance of doubt, MEER shall be entitled to the foregoing
benefits once notice of termination is given by the Corporation pursuant to this
Section 6(d), regardless of his subsequent Death or Disability.
(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 MEER, including a non-renewal of this Agreement
by the Corporation effective upon the expiration of the Initial Term or a
subsequent Term but other than upon a Change of Control, Death, Disability or
Cause, MEER shall receive the following:
(i) if employment was terminated during the calendar year 2004
or if the Corporation elects not to renew the Agreement beyond the Initial Term,
an amount equal to six (6) months of base salary, or $117,500; if employment was
terminated commencing in the calendar year 2005 or if the Corporation elects not
to renew this Agreement following the Initial Term, an amount equal to twelve
(12) months of base salary for the then current Term;
(ii) if employment was terminated during the calendar year
2004 or if the Corporation elects not to renew the Agreement beyond the Initial
Term, 50% of the previously unvested portion of the Initial Option Grant shall
vest and such vested options shall be exercisable for a period of one (1) year
following termination of employment; if employment was terminated commencing in
the calendar year 2005 and thereafter or if the Corporation elects not to renew
this Agreement following the Initial Term, all stock options granted to MEER
(including without limitation the Initial Option Grant) shall immediately vest
and shall remain exercisable until their respective expiration dates; and
(iii) Other Compensation.
(f) Termination by MEER upon Good Reason or Change of Control. In
the event MEER 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, MEER shall receive the following:
(i) if the termination occurred during the calendar year 2004
for Good Reason, an amount equal to six (6) months of base salary, or $117,500;
if the termination occurred during the calendar year 2004 due to a Change of
Control, an amount equal to twelve (12) months of base salary, or $235,000; if
termination occurred during the calendar year 2005 or thereafter, an amount
equal to twelve (12) months of the then current base salary;
(ii) if termination occurred during the calendar year 2004,
50% of the previously unvested portion of the Initial Option Grant shall vest
and such vested options shall be
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exercisable for a period of one (1) year following termination of employment,
except that if termination is by MEER for Good Reason subsequent to a Change of
Control, then 100% of the any option grants to MEER (including, without
limitation, the Initial Option Grant) shall vest and shall remain exercisable
until its respective expiration dates; if employment was terminated commencing
in the calendar year 2005 and thereafter, all stock options granted to MEER
(including, without limitation, the Initial Option Grant) shall immediately vest
and shall remain exercisable until their respective expiration dates; and
(iii) Other Compensation.
MEER 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.
(a) "Cause" Defined. "Cause" means (i) willful malfeasance or
willful misconduct by MEER in connection with his employment; (ii) MEER's gross
negligence in performing any of his duties under this Agreement; (iii) MEER'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) MEER's habitual drunkenness or
excessive absenteeism not related to illness; (iv) MEER's material breach of any
written policy applicable to all employees adopted by the Corporation; or (vi)
material breach by MEER of any of his agreements in this Agreement.
(b) "Disability" Defined. "Disability" shall mean MEER'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, MEER
shall continue to receive his base salary hereunder, provided that if the
Corporation provides MEER with disability insurance coverage, payments of MEER's
base salary shall be reduced by the amount of any disability insurance payments
received by MEER due to such coverage. Upon termination, after the end of the
period of Disability, all compensation due MEER under this Agreement shall
cease.
(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
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(iii) Approval by the Board and, if required, stockholders of
the Corporation of, or execution by the Corporation of any agreement with
respect to, or the consummation of (it being understood that the mere execution
of a term sheet, memorandum of understanding or other non-binding document shall
not constitute a Change of Control):
(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
(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
MEER's employment is terminated prior to a Change in Control and MEER 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 MEER shall mean the date immediately
prior to the date of such termination of MEER'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 MEER'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 MEER 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 MEER from or failure to reappoint or reelect him to any of such offices or
positions (except in those cases where such failures to reappoint or reelect are
either at the request of MEER, in connection with a general corporate
restructuring of officer responsibilities or a result of the promotion of MEER);
(ii) the Corporation's requiring MEER to be based at any place
outside a 50-mile radius from Iselin, New Jersey except for required travel
relating to the Corporation's business (including travel to Israel);
(iii) 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 MEER was participating at any
time prior to such failure, or (b) provide MEER with compensation and benefits,
in the aggregate, at least equal (in terms of benefit levels and/or
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reward opportunities) to those provided for under each other employee benefit
plan, program and practice in which MEER was participating at any time prior to
such failure; or
(iv) 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; or
(v) any failure to award MEER bonus payments and/or increases
in base salary in a manner consistent with the practice of the Corporation prior
to such failure.
8. Payment Terms. Payment of any amounts to which MEER shall be entitled
pursuant to the provisions of Sections 6 and 7 shall be made no later than sixty
(60) days following receipt of 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. Post-Termination Benefits.
The benefits hereunder shall be deemed the "Other Compensation" referenced
in Section 6(d), 6(e) and 6(f) hereof. Except if MEER resigns without Good
Reason (other than retirement on or after the age of 62), in the event MEER's
employment with the Corporation is terminated for any reason prior to the end of
the Term, MEER and his dependents, if any, will continue to participate in any
group health plan sponsored by the Corporation in which MEER was participating
on the date of such termination, at a cost to MEER 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, MEER and his dependents, if any, shall be entitled
to elect to continue such health coverage, at a cost to MEER 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 MEER may be
entitled upon termination of his Employment pursuant to any provision of this
Agreement, MEER shall be entitled to any benefits under any pension,
supplemental pension, savings, or other employee benefit plan (other than life
insurance) in which MEER was participating on the date of any such termination
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).
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(b) Confidentiality. MEER 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 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. MEER 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 MEER
is requested in a judicial, administrative or governmental proceeding to
disclose any of the Corporation Information, MEER 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, MEER may furnish the material so
required to be furnished, but MEER will furnish only that portion of the
Corporation Information that legally is required.
11. Successors and Assigns.
(a) The Employee. This Agreement is a personal contract, and the
rights and interests that the Agreement accords to MEER may not be sold,
transferred, assigned, pledged, encumbered, or hypothecated by him. All rights
and benefits of MEER shall be for the sole personal benefit of MEER, 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 MEER. Except as so provided, this Agreement shall inure to
the benefit of and be binding upon MEER 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 its successors and
assigns.
(c) In the event of any dispute between MEER and the Corporation
relating to this Agreement which follows a Change of Control, the Corporation
will pay all reasonable legal expenses incurred by MEER in connection with such
dispute unless an arbitrator or a court of competent jurisdiction determines
that the facts surrounding such dispute originates from events that occurred
prior to the Change of Control.
12. Entire Agreement. This Agreement, together with the Initial Option
Grant, represents the entire agreement between the parties concerning MEER's
employment with the Corporation and supersedes all prior negotiations,
discussions, understandings and agreements, whether written or oral, between
MEER and the Corporation relating to the subject matter of this Agreement.
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 MEER 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
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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:
If to MEER: James A. Meer
c/o Pharmos Corporation
99 Wood Avenue South, Suite 301
Iselin, NJ 08630Attention: James A. Meer
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
MEER 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.
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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.
18. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to MEER 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 MEER 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 MEER hereby submits to the exclusive jurisdiction of
such courts for the purpose of any such suit, action, proceeding or judgment.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
________________________________________
JAMES A. MEER
PHARMOS CORPORATION
By: ____________________________________
HAIM AVIV, CEO
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