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Employment Agreement - CytoTherapeutics Inc. and John S. McBride

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                                                     Two Richmond Square
                                                     Providence, RI  02906
                                                     401.272.3310
                                                     FAX 401.272.3485

CytoTherapeutics

April 17, 1997

John S. McBride
5 Olde Connecticut Path
Westborough, MA 01581

Dear John:

         This letter will confirm our understanding regarding your employment by
CytoTherapeutics, Inc. (the "Company") as Senior Vice President, Business
Operations and Chief Financial Officer.

         1. Joining the Company. You will begin your employment with the Company
on the Starting Date, which will be June 2,1997, unless we mutually agree on a
different Starting Date.

         2. Position and Duties. The Senior Vice President, Business Operations
and Chief Financial Officer, is a highly visible position which reports directly
to the Chief Executive Officer. As Senior Vice President, Business Operations,
you will be. responsible for developing and executing the business partnering
strategy, inlicensing new technology and financial stewardship of the Company
and such other duties and responsibilities as may be assigned to you from time
to time by the Company's Chief Executive Officer. In this role, you will
establish strategic alliances, lead the negotiation process and manage the
process of developing new alliances. As Chief Financial Officer, you will be
responsible for financial planning and accounting, SEC reporting, and financing
of the Company. As part of these responsibilities, Finance, Operations, and
Investor Relations/Public Relations will report directly to you.

         The Senior Vice President/CFO is a member of the Company's Operating
Committee and is critical to the Company maintaining a strong financial
structure.

         3. Salary and Bonuses.

                  a. Your base salary will be $7307.69 biweekly ($190,000 per
year), subject to review and adjustment from time to time by the Board, in its
sole discretion. Your base salary, as from time to time adjusted, is referred to
in this letter as your "Base Salary." In addition to

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Base Salary, you will be eligible to participate in the senior management bonus
plan, with a target bonus of 15% of your Base Salary. Your 1997 bonus will be
paid by the first payroll in January 1998 and will be 15% of your 1997
CytoTherapeutics' compensation. Bonus payments in future years will be based on
achievement of Company and individual goals and are determined from time to time
by the Board in its sole discretion.

         4. Relocation. CytoTherapeutics will assist you with your relocation
from Westborough to the Providence area, as per the attached Relocation
Agreement, with the following two exceptions: 1) Since your "new" commute from
your residence in Westborough does not meet the Federal IRS relocation rule for
qualifying relocations, your relocation expenses will qualify for tax adder
treatment as discussed in Paragraph 4 of the Relocation Agreement with a cap of
$10,000 and, 2) the move can occur within 24 months of the starting date instead
of within 12 months.

         In addition to the provisions of this policy, the Company will pay any
reasonable real estate commissions and closing costs incurred in connection with
the sale of your present home and loan origination fees and other reasonable
costs regarding the purchase of a new home (as specified in Addendum to the
Relocation Agreement). All expenses must be approved in advance by the Head of
Human Resources, and receipts must accompany the reimbursement request.

         5. Stock Options. Through the Company's Stock Option Plan (a copy of
which is attached), and subject to the terms and conditions of such Plan, you
will receive options to acquire 130,000 shares of common stock of the Company
(the "Option Shares"), subject to Board approval. We will issue as many of your
options as Incentive Stock Options (ISOs) as is permitted by the Internal
Revenue Code; the remaining options will be issued as Non-Qualified Options; in
each case at an exercise price equal to the closing sale price on the Starting
Date. Absent a change of control in the first two years of your employment,
vesting for stock options will be based on continued employment as follows: (i)
there will be no vesting during the first twelve months; (ii) options to acquire
32,500 Option Shares will vest on the first anniversary of your Starting Date;
and (iii) 1/48th of Option Shares will vest each month thereafter for the next
36 months.

         6. Benefits. You will be entitled to participate in any or all employee
benefit plans, medical and dental insurance plans, life insurance, disability
income plans, savings plans and other benefit plans from time to time in effect
for senior management of the Company generally, except to the extent that such
plans are duplicative of benefits otherwise provided to you under this
Agreement. Such participation shall be subject to (i) the terms of the
applicable plan documents, (ii) generally applicable policies of the Company and
(iii) the discretion of the Board of Directors or any administrative or other
committee provided for in or contemplated by such plan.

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         7. Confidentiality and Restricted Activities. You agree that some
restrictions on your activities during and after employment are necessary to
protect the goodwill, Confidential Information (as defined below) and other
legitimate interests of the Company:

                  a. During your employment and thereafter, except as required
by applicable law or for the proper performance of your duties and
responsibilities hereunder, you shall not disclose to any person outside the
company, corporation or other entity, or use for your own benefit or gain or
otherwise, any Confidential Information. You understand that this restriction
shall continue to apply after your employment terminates, regardless of the
reason for such termination.

                  b. While you are employed by the Company and for a period of
one (1) year thereafter you shall not, directly or indirectly, engage in any
activity, whether as owner, partner, investor, consultant, employee, agent or
otherwise, that is competitive with the business of the Company.

                  c. You further agree that during your employment and for one
(1) year thereafter, you will not, directly or indirectly, attempt to hire any
employee of the Company, assist in such hiring by any other person, corporation
or entity, otherwise solicit, induce or encourage any employee of the Company to
terminate his or her relationship with the Company.

                  d. You agree that you will not, during your employment with
the Company, improperly use or disclose any proprietary information or trade
secrets of any former or concurrent employer, or other person or entity with
whom you have an agreement or duty to keep in confidence information acquired by
you in confidence, if any; and that you will not bring onto Company premises any
unpublished document or proprietary information belonging to any such employer,
person or entity, unless consented to in writing by such employer, person or
entity.

                  e. At the time of leaving the Company's employ, you will
deliver to the Company (and not keep in your possession or deliver to anyone
else) any and all devices, records, data, notes, reports, proposals, lists,
employee lists, organization charts, correspondence, specifications, drawings,
blueprints, sketches, materials, equipment, other documents or property, or
reproductions of any aforementioned items developed or obtained by you pursuant
to your employment with the Company, or otherwise belonging to the Company, its
successors or assigns, or containing or constituting Confidential Information.

         f. You agree that the Company shall, in addition to any other remedies
available to it, be entitled to preliminary and permanent injunctive relief
against any breach by you of the covenants contained in this Paragraph 7,
without having to post bond. In the event that any provisions of this Paragraph
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its being extended over too great a time, too large a geographic

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area or too great a range of activities, it shall be interpreted to extend only
over the maximum period of time, geographic area or range of activities as to
which it may be enforceable.

         g. For purposes of this Agreement:

                  i. A business shall be deemed to be competitive with the
Company if it engages or proposes to engage in any business activity (i)
utilizing or seeking to develop technology capable of utilizing the
transplantation of cells as a therapeutic agent for the diagnosis, prevention or
treatment of human disease, injury or condition or (ii) in any field the Company
is currently pursuing or has pursued within the previous two years.

                  ii. Confidential Information means any and all information of
whatever type (including, without limitation, data, results, inventions,
technology and all other information) of or relating to the Company including,
without limitation, information relating to (1) the development, research,
testing, production and marketing activities of the Company, (2) the Company's
employees, consultants and other agents, (3) the products and services of the
Company, (4) patients and clinical trials, (5) the costs, sources of supply and
strategic plans of the Company, (6) the identity and special needs of the
customers of the Company, (7) patents, trade secrets and other intellectual
property and (8) people and organizations with whom the Company has business
relationships and those relationships. Confidential Information also includes
comparable information that the Company has received or may receive in the
future of or relating to third parties where the Company has a duty to keep such
information confidential. Confidential Information does not, however, include
information that has become publicly known and generally available other than
through a wrongful act by you.

         8. Termination and Termination of Benefits. Your employment with the
Company is "at will," which means that either you or the
Company may terminate your employment at any time, with or without cause or good
reason.

                  a. The Company may terminate your employment other than for
"cause" at any time upon written notice to you and, in that event, (i) the
Company will continue to pay you your Base Salary for the Severance Period (as
defined below) or until you obtain other employment, whichever occurs first and
(ii) all options which would have become vested during such Severance Period
shall be treated as vested at the time of such termination. If, under these
circumstances, you obtain other employment within the Severance Period, the
Company will pay you the amount, if any, by which your prorated Base Salary
exceeds your total compensation from your new employment for the remainder of
the Severance Period. The Severance Period shall be nine months. Notwithstanding
any other provision of this Agreement, if the value of your Option Compensation
is greater than eight times your Base Salary, the Company shall have no
obligation to continue to pay your Base Salary following your termination.
Option Compensation shall mean an amount equal to the sum of the following
(determined, in each case, by reference to the last closing sale price of the
Company's Common Stock on the day prior to the date of your termination and
including

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options awarded to you by the Company pursuant to this Agreement or otherwise):
(i) the aggregate difference between the value and exercise price of your vested
but unexercised in-the-money stock options; (ii) the market value of any stock
of the Company obtained by you on exercise of your stock options and still held
by you, less the aggregate exercise price paid by you to obtain such stock; and
(iii) the proceeds realized by you on the sale of any stock obtained by you on
exercise of your stock options, less the aggregate exercise price paid by you to
obtain such stock. In the event that you purchase stock from the Company (other
than through the Company's Employee Stock Purchase Plan, the Company's 401(k)
plan or as part of and on the same terms as a public or private offering of
securities to investors) or are granted stock by the Company, Option
Compensation shall also include (i) an amount equal to the market value of any
such stock still owned by you, less the amount paid by you for such stock and
(ii) the amount realized by you on the sale of any such stock sold by you, less
the amount paid by you for such stock. Stock options will not continue to vest
after your termination in the event of a resignation without good reason or
termination with cause.

                  b. The Company may terminate your employment upon written
notice to you in the event that you become disabled during your employment
through any illness, injury, accident or condition of either physical or
psychological nature and, as a result, you are unable to perform substantially
all of your duties and responsibilities hereunder for ninety (90) days during
any period of three hundred and sixty-five calendar days. In that event, the
Company will continue to pay you your Base Salary until: (i) the end of a period
of nine (9) months following such termination; (ii) you obtain other employment;
or (iii) you become eligible for disability income under any disability income
plan provided by the Company, whichever of these events shall occur first.

                  c. The Company may terminate your employment hereunder for
cause at any time upon written notice to you setting forth in reasonable detail
the nature of such cause. The following as determined by the Company in its
reasonable judgment, shall constitute "cause" for termination:

                  (1) Your failure to perform, or material negligence in the
performance of, (i) your principal duties and responsibilities to the Company
(which, to the extent assigned to you, shall include those duties and
responsibilities described in Paragraph numbered 2) or (ii) any other of your
duties and responsibilities following written notice from the Company and a
10-business day opportunity to cure any curable failure or negligence;

                  (2) Any misconduct by you which is substantially injurious to
the business or interests of the Company;

                  (3) Your violation of any federal, state or local law,
regulation or other requirement applicable to the business of the Company;

                  (4) Your conviction or plea of "no contest" to, any felony; or


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                  (5) Any material breach by you of any provision of this
Agreement.

                  d. You may terminate your employment at any time, with or
without good reason, upon written notice to the Company. If you terminate your
employment with good reason, the Company will be obligated to you to the same
extent as if the Company had terminated your employment other than for cause,
and the Provisions of Paragraph 8 (a), including the acceleration of option
vesting and the limitations on the Company's obligations contained therein,
shall apply. The following shall constitute "good reason" for termination:
material breach by the Company of any provision of this Agreement which breach
continues for more than ten (10) business days following written notice from you
to the Company setting forth in reasonable detail the nature of such breach.

                  e. If you resign other than for good reason or your employment
is terminated by the Company for cause, the Company shall have no further
obligation to you other than for Base Salary earned through the date of
termination. No severance pay or other benefits of any kind will be provided.

                  f. In the event of a change of control (as defined in the
Severance Practice; Change of Control Policy (10/94) (attached)) where
CytoTherapeutics is not the surviving entity and the change of control results
in a material change in job responsibility, compensation, or loss of job within
the first two years of your employment with the Company, your severance will be
the greater of the severance as defined in Paragraph 8(a) or the Severance
Policy dated (10/94). In addition, if such material change resulting from a
Change of Control occurs within the first two years of your employment, the
options for 130,000 Option Shares granted to you with this offer shall vest
fully upon such material change.

                  g. In the event we hire a new CEO, and that hiring results in
a material change in your job responsibility, compensation, or loss of your job
within the first two years of your employment with the Company, your severance
will be as defined in Paragraph 8(a). In addition, if such material change
resulting from a new CEO occurs within the first two years of your employment,
the options for 130,000 Option Shares granted to you with this offer shall vest
fully upon such material change.

         9. Withholding. All payments and reimbursements made by the Company
under this Agreement shall be reduced by any tax or other amounts required to be
withheld by the Company under applicable law.

         10. Assignment. This Agreement shall inure to the benefit of the
Company and any successor of the Company by reorganization, merger,
consolidation or liquidation and any assignee of all or substantially all of the
business or assets of the Company or any division or line of business of the
Company with which you are associated. The Company requires your personal
services and you may not assign this Agreement.

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         11. Waiver. Except as otherwise expressly provided in this Agreement,
no waiver of any provision hereof shall be effective unless made in writing and
signed by the waiving party. The failure of either party to require performance
of any term or obligation of this Agreement, or the waiver by either party of
any breach of this Agreement, shall not prevent any subsequent enforcement of
such term or obligation or be deemed a waiver of any subsequent breach.

         12. Severability. Should any provision of this Agreement, or portion
thereof, be found invalid in any circumstance, such invalidity shall not affect
any other provision or circumstance, and such provision shall be construed by
limiting it so as to be enforceable to the maximum extent compatible with
applicable law.

         13. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or five days after deposit in the United States mail,
postage prepaid, registered or certified, and addressed to you at your last
known address on the books of the Company or, in the case of the Company, at its
main office, attention of the Chief Executive Officer.

         14. Captions. The captions and headings in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

         15. Entire Agreement. This Agreement sets forth the entire agreement
and understanding between you and the Company and supersedes all prior
communications, agreements and understandings, written and oral, with respect to
the terms and conditions of your employment. This Agreement may not be changed
or modified except by an agreement in writing signed by you and the Chief
Executive Officer or other specifically authorized representative of the
Company.

         16. Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the laws of Rhode Island, without regard to
principles of conflicts of law.

         17. No Conflicting Agreements. You hereby represent to the Company that
neither your execution and delivery of this Agreement nor your acceptance of
employment with the Company nor your anticipated service as Senior Vice
President, Operations and Chief Financial Officer will conflict with or result
in a breach of any of the terms, conditions or provisions of any agreement to
which you are a party or any order, injunction, judgment or decree of any court
or governmental authority or any court or governmental authority or any
arbitration award applicable to you.

         18. Inventions. You hereby represent to the Company and agree that,
except as described on Exhibit A, you have no inventions, original works of
authorship, developments, improvements or trade secrets that were made by you
prior to your employment with the Company and which relate to the Company's
current or proposed business, products, or research and development. You will
promptly make full written disclosure to the Company,

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hold in trust for the Company's sole right and benefit, and hereby assign to the
Company or its designee, all of your right, title and interest in any and all
inventions, original works of authorship, developments, concepts, improvements
or trade secrets, whether or not patentable or registerable under copyright or
similar laws, that you may solely or jointly conceive, develop, reduce to
practice or cause to be conceived or developed, or reduced to practice, during
the period of time you are employed by the Company (collectively referred to as
the "Inventions"). You further acknowledge that all original works of authorship
made by you solely or jointly with others within the scope of your employment
and protectible by copyright are "works made for hire", as that term is defined
in the United States Copyright Act. You agree to keep and maintain adequate and
current records of all inventions made by you solely or jointly with others
during the term of your employment with the Company. Such records will be in the
form of notes, sketches, drawings or any other format that may be specified by
the Company. These records will be available through, and remain the sole
property of, the Company at all times. You agree to assist the Company or its
designee, at the Company's expense, in every proper way, to secure the Company's
rights in the Inventions and copyrights, including the disclosure to the Company
of all pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other instruments that
the Company shall deem necessary in order to apply for and obtain such rights,
and in order to assign and convey to the Company, its successors, designees and
nominees the sole and exclusive right, title, and interest in and to such
Inventions, and any copyrights, patents, or other intellectual property rights
relating thereto, both during your employment by the Company and thereafter. In
the event that the Company is unable for any reason to secure or to prosecute
any patent application with respect to such Invention (including, without
limitation, renewals, extensions, continuations, divisions or continuations in
part thereof), you hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents, as your agents and attorney-in-fact to act
for and in your behalf and instead of you, to execute and file any such
application and to do all other lawfully permitted acts to further the
prosecution and issuance of patents thereon with the same legal force and effect
as if executed by you. You agree that you will assist the Company in the
prosecution and enforcement of the Company's intellectual property after
termination of your employment, at the Company's expense.

         19. Physical Exam. This offer of employment is contingent upon
successful completion of a medical examination and a drug screen test which will
be paid for by CytoTherapeutics. You will begin employment only after
successfully passing both the medical exam and drug screen test. The results are
generally available within 72 hours and you will be notified of the results.

         20. Verification of Employment Eligibility. The Immigration Reform and
Control Act of 1986 requires employers to verify the identity/employment
eligibility of each employee hired after November 6, 1986. As a result, you will
be asked to complete the attached Employment Eligibility Verification (Form I-9)
on your first day of work. Section 2 of this form lists the documents you will
be required to present.

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         21. Compliance With Agreement. The Company's obligations under this
Agreement and its obligation to deliver stock under the terms of the stock
options granted pursuant to the terms of this Agreement (or otherwise granted to
you during the course of your employment) are conditioned on your compliance
with the terms and conditions of this Agreement and the accuracy of the
representations made to the Company by you herein.

         If the foregoing is acceptable to you, please sign the enclosed copy of
this letter in the space provided below and return it to me, whereupon this
letter and such copy will constitute a binding agreement between you and the
Company on the basis set forth above as of the date of the first above written.

                                                Sincerely yours,

                                                CYTOTHERAPEUTICS, INC.

                                                 By:/s/ Denise M. Peppard
                                                    ------------------------
                                                 Denise M. Peppard
                                                 Vice President, Human Resources

Accepted and agreed:


/s/ John McBride                                 Date: 4/28/97
-------------------                                   -----------------
John McBride


Enclosures:
                  Stock Option Plan Document/ Prospectus
                  Change of Control Policy
                  Relocation Policy and Addendum
                  Benefits Summary
                  Physical Exam form
                  Exhibit A - List of Prior Inventions
                  I-9 Form

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                                    EXHIBIT A

             LIST OF PRIOR INVENTIONS & ORIGINAL WORKS OF AUTHORSHIP




Title             Date            Identifying Number or       Brief Description
--------------------------------------------------------------------------------

                                                    
None























                                                /s/ John S. McBride
                                          --------------------------------
                                          Name of Employee (type or print)


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