EXHIBIT 10.2
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered as of
December 3, 2007 between Advanced Viral Research Corp., a Delaware corporation
(“Employer”), and Dallas E. Hughes, an individual (“Employee”).
R E C I T A L S
     WHEREAS, Employer and Employee desire to enter into this Agreement to
memorialize the employment relationship between Employer and Employee.
     NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto mutually agree as follows:
1. TERM. This Agreement shall be for an initial term of one (1) year, commencing
as of December 3, 2007 (the “Effective Date”) and ending on December 2, 2008,
unless terminated earlier as provided herein (the “Initial Term”), and
thereafter will govern Employee’s continued employment by Employer until that
employment ceases (such period of Employee’s employment is herein referred to as
the “Term”).
2. DUTIES.
     2.1. In General. Upon the terms and subject to the conditions of this
Agreement, Employer hereby employs Employee and Employee hereby accepts such
employment with Employer for the term of this Agreement as Vice President
Research of Employer. Employee shall have the following duties: (i) development
of Employer’s scientific and intellectual property assets, including the
chemical compounds identified as CTK000147, CTK000168 and AVR118, as well as
other similar projects in which Employer may have an interest from time to time;
and (ii) such other services commensurate with Employee’s position as the
President of Employer, in his discretion, shall reasonably request from time to
time in connection with the Employer’s business and communicated to Employee
(the “Duties”). During the term of this Agreement and subject to Section 2.3
below, Employee shall devote substantially all of his attention, skill and
efforts during normal business hours to the faithful performance of the Duties.
     2.2. Place of Performance. So long as Employer has offices/laboratory space
in Boston, Massachusetts, the Duties shall be performed in Boston,
Massachusetts, except for such travel in the ordinary course of Employer’s
business as may from time to time be reasonably required. If Employer does not
have offices/laboratory space in Boston, Massachusetts, the Duties shall be
performed in Yonkers, New York, except for such travel in the ordinary course of
Employer’s business as may from time to time be reasonably required.
     2.3. Other Activities. Employee shall not, without the approval of the
President of Employer, render services of a business nature to any other person
or entity, if such activities would interfere with the performance of Employee’s
Duties as required under this Agreement or otherwise prevent Employee from
devoting substantially all of his attention, skill and efforts during normal
business hours to the performance of Employee’s Duties as required under this
Agreement. Subject to the foregoing limitations, the following activities shall
be deemed to be permissible: (i) owning or managing real or personal property
owned by Employee or his family members; (ii) owning or managing any business
which does not compete, directly or indirectly, with the Business (as defined
below); and (iii) holding directorships or similar positions in any organization
which are approved by the Board of Directors of Employer (the “Board”).
“Business” shall mean any business that is developing, manufacturing and/or
distributing pharmaceutical products which exhibit substantially similar
biological mechanisms of action as Employer’s products in the clinical
indications pursued by Employer.

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3. COMPENSATION AND OTHER BENEFITS.
     3.1. Compensation and Employee Benefit Plans. For all services rendered by
Employee in any capacity during his employment under this Agreement (including
any renewals hereof), Employer shall pay to Employee as compensation the sum of
the amounts set forth in the following subparagraphs (a) and (b).
          (a) Base Salary. Commencing upon the Effective Date, Employee shall be
paid the sum of Two Hundred Thousand Dollars ($200,000) on an annualized basis
(the “Base Salary”), which amount shall be paid in accordance with Employer’s
customary payroll practices. The Base Salary shall be reviewed on an annual
basis by the Board and may be increased from time to time by the Board.
          (b) Benefit Plans. During the term of Employee’s employment with
Employer, Employee shall be entitled to participate in all cash and non-cash
incentive compensation, bonus, equity, savings and retirement plans, practices,
policies and programs applicable generally to other executives of Employer, and
Employee shall be eligible for participation in and shall receive all benefits
under, welfare benefit plans, practices, policies and programs applicable
generally to other executives of Employer, including but not limited to
comprehensive medical and dental coverage, disability and basic and supplemental
life insurance.
     3.2. Business Expenses. Employee shall be reimbursed for reasonable
expenses related to maintenance of professional licenses, membership in
professional societies, reasonable entertainment, travel, and similar items, in
each case, subject to Employer’s prior written approval in accordance with
Employer’s policies, practices and procedures.
     3.3. Vacation. Employee will be entitled to three (3) weeks paid vacation
annually or such other time as authorized by the Board of Directors during which
time his compensation shall be paid in full.
4. TERMINATION OF EMPLOYMENT.
     4.1. Termination by Employer for Cause. Employer may terminate Employee for
“Cause” at any time upon notice to Employee. As used herein, the term “Cause”
shall mean:
          (a) Employee’s material breach of any provision of this Agreement;
provided, however, that in the event Employer believes that this Agreement has
been breached, it shall provide Employee with written notice of such breach and
provide Employee with a thirty (30) day period in which to cure or remedy such
breach. For the avoidance of doubt, it shall constitute a material breach of
this Agreement if Employee fails to perform his Duties hereunder by way of
intentional neglect or chronic absenteeism (excluding Disability);
          (b) The commission by Employee of a crime, or an act of fraud or
dishonesty against Employer, its subsidiaries or affiliates; or
          (c) The use by Employee of an illegal substance, including, but not
limited to, marijuana, cocaine, heroin, and all other illegal substances, and/or
the dependence by Employee upon the use of alcohol, which, in any case, in the
opinion of both Employee’s family physician and a physician chosen by Employer,
materially impairs Employee’s ability to perform his Duties hereunder, which
dependence is not cured or rehabilitated, as determined by Employee’s physician,
within three (3) months of receipt of written notice from Employer to Employee.

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     4.2. Termination Upon Death or Disability. This Agreement shall terminate
upon the death or the Disability (as defined below) of Employee. Employee or his
heirs or estate (as the case may be) shall be entitled to the compensation
provided for with respect to a termination by death or Disability in this
Agreement. As used in this Agreement, the term “Disability” means (A) Employee’s
incapacity due to a permanent mental or physical illness that prevents Employee
from performing his duties hereunder for 26 consecutive weeks or (B) a physical
condition that renders the performance by Employee of his duties hereunder a
serious threat to the health and well being of Employee. Disability shall be
determined by a physician selected by Employee (or his legal representative) and
reasonably acceptable to Employer.
     4.3. Payments Upon Termination. If Employee’s employment is terminated
pursuant to Sections 4.1 or 4.2 hereof, then Employee shall be entitled to:
(1) the Base Salary pursuant to Section 3.1(a) earned through the date of
termination; and (2) all applicable reimbursements from Employer due under
Section 3.2 hereof.
     4.4. Termination without Cause or Resignation for Good Reason. If Employer
terminates Employee without Cause or Employee resigns for “Good Reason” (as
defined below) at any time, Employee shall be entitled to:
          (a) the Base Salary pursuant to Section 3.1(a) earned through the date
of termination or resignation;
          (b) payment for all unused vacation and personal days accrued through
the date of termination or resignation;
          (c) all applicable reimbursements from Employer due under Section 3.2
hereof;
          (d) monthly severance payments equal to one-twelfth of the Base Salary
as of the date of such termination or resignation through the scheduled
expiration of the Initial Term; and
          (e) waiver of the applicable premium otherwise payable for COBRA
continuation coverage for Employee (and, to the extent covered immediately prior
to the date of Employee’s termination, his spouse and dependents) the scheduled
expiration of the Initial Term.
“Good Reason” shall mean any of the following, without Employee’s prior consent:
(i) a material, adverse change in title, authority or duties (including the
assignment of duties materially inconsistent with the executive’s position),
(ii) a reduction in Base Salary, or (iii) a relocation of Employee’s principal
worksite more than 50 miles.
     4.5. Termination of Obligations. Upon the resignation of Employee or
termination of Employee’s employment in accordance with the provisions of this
Section 4, all obligations of Employee and Employer hereunder shall be
terminated except as otherwise provided herein.
     4.6. Resignation. Any termination of employment under this Agreement,
whether or not voluntary, will automatically constitute a resignation of
Employee as an officer of Employer and all subsidiaries of Employer, and if
requested to do so by Employer’s Board of Directors, Employee shall resign as a
member of the Board of Directors of Employer and all subsidiaries of Employer;
provided, however, that Employee shall execute such resignation documents as
Employer may reasonably request in order to evidence such resignation and this
provision shall survive the termination of this Agreement.

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5. NON-COMPETITION.
     5.1. Definitions. For purposes of this Section 5:
          (a) “Employer” shall mean Advanced Viral Research Corp. and any of its
subsidiaries.
          (b) “Confidential Information” shall mean proprietary or confidential
information or knowledge of Employer, including without limitation, any
financial information, marketing plans, strategies, trade secrets, data,
know-how, processes, techniques and other proprietary information of Employer or
its subsidiaries. The term “Confidential Information” does not include
information (including office practices and procedures) that is obvious, or that
may readily be determined by any person reasonably knowledgeable in the industry
in which Employer operates by diligent review and examination of public sources,
or that becomes generally available to the public other than as a result of a
disclosure by Employee or any agent or other representative thereof.
          (c) “Inventions” shall mean any and all ideas, concepts, discoveries,
inventions, developments, improvements, trade secrets, technical data, know-how
or other materials conceived, devised, invented, developed or reduced to
practice or tangible medium by Employee: (i) during the term of this Agreement;
(ii) that are related to and used in connection with the business of Employer or
its affiliates; and (iii) that are a result of Duties assigned to Employee by
Employer.
          (d) “Restricted Period” shall mean the period commencing on the date
of Employee’s employment with Employer and ending two (2) years after the
termination thereof.
     5.2. Confidential Information. During and for a period of five (5) years
after the term of the Agreement, Employee shall not directly or indirectly,
divulge, furnish or make accessible to any party not authorized by Employer to
receive it, any of the Confidential Information, other than in the course of
performing his duties hereunder and in accordance with Employer’s policies and
regulations, as established from time to time, for the protection of the
Employer’s Confidential Information. Notwithstanding the foregoing, Employee
shall not have any obligation hereunder to keep confidential any Confidential
Information to the extent disclosure of any thereof is required by law, or
determined in good faith by Employee to be necessary or appropriate to comply
with any legal or regulatory order, regulation or requirement; provided,
however, that in the event disclosure is required by law, Employee shall provide
Employer with reasonable notice of such requirement so that Employer may seek an
appropriate protective order and Employee shall reasonably cooperate with
Employer’s efforts to seek such a protective order. Upon termination of
employment, all tangible evidence of such Confidential Information in the
possession of Employee shall be returned to Employer, and Employee shall not
make or retain any copies or excerpts thereof, except that Employee may retain
copies of all materials that may be of a personal nature to Employee. Employee
further agrees not to use any Confidential Information for the benefit of any
person or entity other than Employer or its subsidiaries.
     5.3. Non-Solicitation. During the Restricted Period, Employee shall not
influence or attempt to influence customers of Employer or any of its present or
future subsidiaries either directly or indirectly, to divert their business from
Employer to any individual, partnership, firm, corporation, or other entity that
is in competition with the business of Employer or any subsidiary of Employer at
any time during the Restricted Period. During the Restricted Period, Employee
shall not directly or indirectly solicit any of Employer’s employees or
independent contractors to work for (as an employee or independent contractor)
any business, individual, partnership, firm, corporation, or other entity in
competition with the business of Employer or any subsidiary of Employer at any
time during the Non-Solicitation Period.

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     5.4. Patents/Assignment and Transfer of Inventions. Employee shall
disclose, assign and transfer to the Company any and all Inventions. Employee
shall assign any and all right, title, or interest that Employee may have in
such Inventions under patent law to the Employer and Employer will be entitled
to obtain and hold in its own name all patents with respect to such Inventions.
Employee also agrees to execute such documents and perform such activities as
the Employer may reasonably request to obtain such patents and to assist the
Employer, as reasonably requested by the Board in defending its patents.
     5.5. Remedies. In the event of an actual or threatened breach by the
Employee of this Section 5, including any subparagraph hereof, Employer shall be
entitled to an injunction restraining Employee from its prohibited conduct. If
the court should hold that the duration and/or scope (geographic or otherwise)
of the covenants contained herein are unreasonable, then, to the extent
permitted by law, the court may prescribe a duration and/or scope (geographic or
otherwise), that is reasonable and the parties agree to accept such
determination, subject to their rights of appeal. Nothing contained herein shall
be construed as prohibiting Employer or any third party from pursuing any of the
remedies available to it for such breach or threatened breach, including
recovery of damages from Employee. In any action or proceeding to enforce the
provisions of this Section 5, the prevailing party shall be reimbursed by the
other party for all costs incurred in such action or proceeding, including,
without limitation, all court costs and filing fees and all reasonable
attorneys’ fees, incurred either at the trial level or at the appellate level.
If Employee shall be in violation of any of the restrictive covenants contained
in this Agreement, then the time limitation otherwise applicable to such
restrictive covenant shall be extended for a period of time equal to the period
of time during which the Employee has acted in violation of such restrictive
covenants. The existence of any claim or cause of action by Employee against
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by Employer of the foregoing restrictive
covenant, but shall be litigated separately.
6. NOTICES. Any notice, request, demand, offer, payment or communication
required or permitted to be given by any provision of this Agreement shall be
deemed to have been delivered and given for all purposes if written and if
(a) delivered personally or by courier or delivery service, at the time of such
delivery; or (b) directed by registered or certified United States mail, postage
and charges prepaid, addressed to the intended recipient, at the address
specified below, at such time that the intended recipient or its agent signs or
executes the receipt:

         
 
  If to Employer:   Advanced Viral Research Corp.
 
      200 Corporate Boulevard South
 
      Yonkers, New York 10701
 
      Attn: Chairman of the Board
 
      Tel: 914-376-7383
 
       
 
  If to Employee:   Dallas E. Hughes
 
      22 Field Pond Road
 
      Milford, MA 01757
 
      Tel: 508-473-4842

Any party may change the address to which notices are to be mailed by giving
written notice as provided herein to the other party. Commencing immediately
after the receipt of such notice, such newly designated address shall be such
person’s address for purposes of all notices or other communications required or
permitted to be given pursuant to this Agreement.

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7. MISCELLANEOUS.
     7.1. Governing Law. This Agreement shall be construed pursuant to the laws
of the State of New York, and all of its provisions shall be administered
according to and its validity shall be determined under the laws of the State of
New York without regard to any conflict or choice of law issues.
     7.2. Gender and Number. Whenever appropriate, references in this Agreement
in any gender shall be construed to include all other genders, references in the
singular shall be construed to include the plural, and references in the plural
shall be construed to include the singular, unless the context clearly indicates
to the contrary.
     7.3. Certain Words. The words “hereof,” “herein,” “hereunder,” and other
similar compounds of the word “here” shall mean and refer to the entire
Agreement and not to any particular section, provision or paragraph unless so
required by the context.
     7.4. Captions. Paragraph titles or captions contained in this Agreement are
inserted only as a matter of convenience and/or reference, and they shall in no
way be construed as limiting, extending, defining or describing either the scope
or intent of this Agreement or of any provision hereof.
     7.5. Counterparts. This Agreement may be executed in one or more
counterparts, and any such counterpart shall, for all purposes, be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
     7.6. Severability. The invalidity or unenforceability of any provision
hereunder (or any portion of such a provision) shall not affect the validity or
enforceability of the remaining provisions (or remaining portions of such
provisions) of this Agreement.
     7.7. Entire Agreement. This Agreement (and all other documents executed
simultaneously herewith or pursuant hereto) constitutes the entire agreement
among the parties pertaining to the subject matter hereof, and supersedes and
revokes any and all prior or existing agreements, written or oral, relating to
the subject matter hereof, and this Agreement shall be solely determinative of
the subject matter hereof.
     7.8. Restrictive Covenant. In the event the non-solicitation clause or any
other restrictive covenant of this Agreement shall be deemed unenforceable,
invalid or overbroad in whole or in part for any reason, then any arbitration
panel or court of competent jurisdiction is hereby authorized, requested and
instructed to reform such provision(s) to provide for the maximum competitive
restraints upon Employee’s activities (in time and geographic area), which may
then be legal and valid.
     7.9. Waiver. Either Employer or Employee may, at any time or times, waive
(in whole or in part) any rights or privileges to which it or he may be entitled
hereunder. However, no waiver by any party of any condition or of the breach of
any term, covenant, representation or warranty contained in this Agreement, in
any one or more instances, shall be deemed to be or construed as a further
continuing waiver of any other condition or of any breach of any other terms,
covenants, representations or warranties contained in this Agreement, and no
waiver shall be effective unless it is in writing and signed by the waiving
party.

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     7.10. Attorneys’ Fees. In the event that either party shall be required to
retain the services of an attorney to enforce any of his or its rights
hereunder, the prevailing party in any arbitration or court action shall be
entitled to receive from the other party all costs and expenses including (but
not limited to) court costs and attorneys’ fees (whether in the arbitration or
in a court of original jurisdiction or one or more courts of appellate
jurisdiction) incurred by him or it in connection therewith. The parties hereby
expressly confer on the arbitrator the right to award costs and attorneys’ fees
in the arbitration.
     7.11. Dispute Resolution. Except for any dispute or controversy in which
Employer is seeking injunctive relief pursuant to Section 5, Employee and
Employer shall settle by arbitration any dispute or controversy arising in
connection with this Agreement, whether or not such dispute involves a plan
subject to the Employee Retirement Income Security Act of 1974, as amended. Such
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association before a panel of three arbitrators sitting in New York
City, New York or such other location as shall be mutually agreed by the
parties. The award of the arbitrators shall be final and nonappealable, and
judgment may be entered on the award of the arbitrators in any court having
proper jurisdiction. The arbitrators shall have authority to award all remedies
available under law. The arbitrators shall assess arbitration fees and expenses
against the parties in their discretion. EMPLOYEE ACKNOWLEDGES THAT BY SIGNING
THIS AGREEMENT, EMPLOYEE IS WAIVING ANY RIGHT THAT EMPLOYEE MAY HAVE TO A JURY
TRIAL OR, OTHER THAN AS PROVIDED BY SECTION 5, A TRIAL BEFORE A JUDGE IN
CONNECTION WITH, OR RELATING TO, A CLAIM.
     7.12. Venue. Any litigation arising hereunder shall be instituted only in
New York City, New York, the place where this Agreement was executed, and all
parties hereto agree that venue shall be proper in said county for all such
legal or equitable proceedings.
     7.13. Assignment. The rights and obligations of the parties under this
Agreement shall inure to the benefit of and shall be binding upon their
successors, assigns, and/or other legal representatives. Additionally, covenants
in this Agreement which are for the benefit of Employer also shall run in favor
of Employer’s subsidiaries. This Agreement shall not be assignable by Employer
or Employee. The services of Employee are personal and his obligations may not
be delegated by his except as otherwise provided herein.
     7.14. Amendment. This Agreement may not be amended, modified, superseded,
canceled, or terminated, and any of the matters, covenants, representations,
warranties or conditions hereof may not be waived, except by a written
instrument executed by Employer and Employee or, in the case of a waiver, by the
party to be charged with such waiver.
     7.15. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person,
other than Employer and Employee and their respective successors and permitted
assigns, any rights or remedies under or by reason of this Agreement.
     7.16. Indemnification. To the fullest extent permitted by law and
Employer’s certificate of incorporation and by-laws, Employer shall promptly
indemnify Employee for all amounts (including, without limitation, judgments,
fines, settlement payments, losses, damages, costs and expenses (including
reasonable attorneys’ fees)) incurred or paid by the Employee in connection with
any action, proceeding, suit or investigation arising out of or relating to the
performance by Employee of services for (or acting as a fiduciary of any
Employee benefit plans, programs or arrangements of) Employer or any of its
subsidiaries or affiliates, including as a director, officer or employee of
Employer or any such subsidiary or affiliate. Employer also agrees to maintain a
directors’ and officers’ liability insurance policy covering Employee to the
extent Employer provides such coverage for its other executive officers.

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     7.17. Tax Withholding. All payments to the Employee under this Agreement
will be subject to the withholding of all applicable employment and income
taxes.
[Signatures on next page]

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     IN WITNESS WHEREOF, Employer and Employee have caused this Agreement to be
executed on the day and year first above written.

            EMPLOYER:

ADVANCED VIRAL RESEARCH CORP.
      By:   /s/ Stephen M. Elliston         Name:   Stephen M. Elliston       
Title:   President     

            EMPLOYEE:
      /s/ Dallas E. Hughes                  

[Signature Page to Hughes Employment Agreement]

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