AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

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TABLE OF CONTENTS
 
Page
 
Article I - Employment
1
Section 1.01. Term
1
Section 1.02. Position
1
Section 1.03. Duties

1
Article II - Compensation
2
Section 2.01. Basic Compensation
2
Section 2.02. Incentive Compensation
2
Section 2.03. Other Benefits

2
Article III - Termination of Employment
3
Section 3.01. Termination of Employment by Company
3
Section 3.02. Death
4
Section 3.03. Termination of Employment by the Executive
4
Section 3.04. Change of Control
5
Section 3.05. Definitions of Certain Terms

5
Article IV - Non-Competition; Confidential Information
6
Section 4.01. Non-Competition
6
Section 4.02. Non-Interference
7
Section 4.03. Trade Secrets
7
Section 4.04. Survival of Terms

7
Article V - Miscellaneous
 
7
Section 5.01. Services as Officer or Director
7
Section 5.02. Conflicts
8
Section 5.03. Right to Change Business
8
Section 5.04. Notices
8
Section 5.05. Assignment and Succession
8
Section 5.06. Headings
8
Section 5.07. Applicable Law
8
Section 5.08. Withholding Taxes
9
Section 5.09. Entire Agreement; Amendments
9
Section 5.10. Waivers
9
Section 5.11. Partial Invalidity
9
Section 5.12. Execution of Counterparts
9

 

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EMPLOYMENT AGREEMENT originally dated December 10, 1998, as extended by a letter
agreement on January 23, 2002 and January 25, 2005, and as amended and restated
as of the date hereof, by and among Arnold S. Lippa (the “Executive”) and DOV
Pharmaceutical, Inc., a Delaware corporation (the “Company”).
 
WHEREAS, the Company and the Executive desire to amend and restate this
Employment Agreement to assure the Company of the continued services of the
Executive and to set forth the duties and compensation of the Executive, all
upon the terms and conditions hereinafter set forth;
 
NOW, THEREFORE, in consideration of the agreements and covenants contained
herein, the Executive and the Company hereby agree as follows:
 
 
Article I - Employment
 
Section 1.01.  Term. The term of this Employment Agreement shall commence on the
date of the amendment and restatement of this Employment Agreement, and, unless
sooner terminated pursuant to Article III hereof, shall terminate on the date
that is two years thereafter (the “Employment Period”).
 
Section 1.02.  Position. The Company shall employ the Executive and the
Executive shall serve as Chief Executive Officer during the Employment Period.
 
Section 1.03.  Duties.
 
(a)  Subject to the powers, authorities and responsibilities vested in the Board
of Directors of the Company (the “Board”) under the General Corporation Law of
the State of Delaware, the Executive shall have such responsibilities and
authorities as are customarily possessed and exercisable by the Chief Executive
Officer of a corporation. The Executive shall also perform such other executive
and administrative duties (not inconsistent with the position of Chief Executive
Officer) as the Executive may reasonably be expected to be capable of performing
on behalf of the Company and any subsidiaries and affiliates of the Company as
may from time to time be authorized or directed by the Board.
 
(b)  During the Employment Period, the Executive shall perform faithfully the
duties assigned to him hereunder to the best of his abilities and devote his
full business time and attention to the Company’s business.
 
(c)  The Company shall provide and pay for a standard director’s and officer’s
insurance policy insuring the Executive against liability arising out of the
performance of his duties, and shall indemnify and hold the Executive harmless
from such liability.
 

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Article II - Compensation
 
Section 2.01.  Basic Compensation. As compensation for the Executive’s services
hereunder, the Company shall pay to the Executive an annual salary of $402,325
(as adjusted, the “Basic Compensation”), payable in bi-weekly installments. The
Basic Compensation shall be increased by no less than 10% per year during the
Employment Period.
 
Section 2.02.  Incentive Compensation. In addition to his Basic Compensation,
the Company shall pay to the Executive such performance bonuses as may be
determined in the discretion of the Compensation Committee of the Board
(“Incentive Compensation”).
 
Section 2.03.  Other Benefits.
 
(a)  During the Employment Period, the Company shall provide the Executive and
maintain on the Executive’s behalf, or reimburse the Executive for carrying,
comprehensive medical insurance, dental insurance, disability insurance and life
insurance on the life of the Executive. In addition, the Executive shall have
the right to participate in the Company’s other programs for the benefit of
employees in accordance with their terms and as the same may be amended from
time to time.
 
(b)  The Executive shall be eligible to participate in the Company’s Stock
Option Plan as may be in effect from time to time.
 
(c)  The Company shall pay to or on behalf of the Executive a monthly automobile
allowance of $1,600.
 
(d)  The Executive shall be entitled to six weeks of paid vacation in each
calendar year. The Executive shall also be entitled to the same standard paid
holidays given by the Company to senior executives generally, all as determined
from time to time by the Board or appropriate committee thereof. Vacation time
shall cumulate and carry forward from year to year provided that the Executive
shall not be entitled to more than 10 weeks of vacation in any one year without
the permission of the Compensation Committee and provided that the Executive
shall coordinate his vacation schedule with the President.
 
(e)  The Company shall reimburse the Executive for travel or other expenses or
disbursements reasonably incurred or made by him in connection with the
Company’s business during the Employment Period upon receipt of reasonable
documentation thereof.
 
(f)  The benefits set forth in this Section 2.03 shall be collectively referred
to as the “Benefits.”
 
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Article III - Termination of Employment
 
Section 3.01.  Termination of Employment by Company.
 
(a)  Except as otherwise provided in this Article III and in Article IV, upon
the occurrence of any of the following events, this Employment Agreement and the
rights and obligations of the parties hereunder shall terminate:
 
(i)  “Disability” (as defined in Section 3.05(a)) of the Executive; or
 
(ii)  Conduct by the Executive constituting “Cause” (as defined in Section
3.05(b)).
 
(b)  In the case of termination pursuant to Section 3.01(a)(i), the Company
shall be obligated to pay the Executive and the Executive shall be entitled to
receive, in complete and total satisfaction of the obligations of the Company
hereunder, an amount equal to his Basic Compensation, Incentive Compensation and
Benefits for the period commencing on the date of termination and ending on the
date that is nine months after the date of termination. Basic Compensation,
Incentive Compensation and Benefits shall be paid in the manner and at the
intervals provided in Article II.
 
(c)  In the case of termination pursuant to Section 3.01(a)(ii), the Company
shall be obligated to pay the Executive and the Executive shall be entitled to
receive, in complete and total satisfaction of the obligations of the Company
hereunder, an amount equal to his Basic Compensation, earned but unpaid
Incentive Compensation and Benefits through the date of such termination.
 
(d)  In the case of termination of the Executive by the Company other than
pursuant to Section 3.01(a)(i) or (ii) or Section 3.02, subject to the execution
of a release of employment claims in a form reasonably satisfactory to the
Company, the Company shall pay the Executive and the Executive shall be entitled
to receive, in complete and total satisfaction of the obligations of the Company
hereunder, an amount equal to the Executive’s Basic Compensation (at the rate in
effect on the date of termination) for the period commencing on the date of
termination and ending on the later of (i) the date that is one year after the
date of such termination and (ii) the date two years from the date of this
restated and amended Employment Agreement (the “Severance Period”). Such amount
shall be paid as salary continuation at the intervals provided in Article II;
provided, however, if such salary continuation is considered deferred
compensation within the meaning of Section 409A of the Internal Revenue Code of
1986 (“Section 409A”), salary continuation shall not commence until at least six
months after the Executive’s termination of employment and the initial payment
shall include a catch-up amount covering amounts that would otherwise have been
paid during the first six-month period. During the Severance Period, the
Executive shall make himself available to provide consulting services (other
than Board services) to the Company at such time as may be reasonably requested
by the Company, not to exceed two (2) days in each calendar month. In the event
the Executive shall be requested to serve as Chairman of the Board of Directors
of the Company, he shall not be entitled to receive any compensation other than
fees customarily payable to a director of the Company. During the Severance
Period, the Executive shall also have the right to receive the same medical and
dental health insurance coverage available to active employees of the Company,
subject to payment of any required employee premiums. In addition, if this
Employment Agreement is terminated pursuant to this paragraph, the Executive
shall immediately have the right to exercise all stock options contained in the
Stock Option Plan, including those options for which the period during which
such options may be exercised has not yet commenced.
 
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Section 3.02.  Death
 
In the event of the death of the Executive during the Employment Period, the
Employment Period shall terminate on the date of death and the Executive’s
designated beneficiary or, if none, his estate shall be entitled to receive, in
complete and total satisfaction of the Company’s obligations hereunder, any
accrued and unpaid Basic Compensation, Incentive Compensation and Benefits, as
appropriate, through such date of death and for a period of 90 days thereafter.
 
Section 3.03.  Termination of Employment by the Executive.
 
(a)  If during the Employment Period there should occur any of the following
events (each of the following being an event giving the Executive the right to
resign for “Good Reason”): (i) a change in the title and/or responsibilities of
the Executive, such that the Executive is no longer the Chief Executive Officer
of the Company and no longer has such responsibilities and authorities as are
customarily exercisable by the Chief Executive Officer of a corporation or (ii)
a failure by the Company to provide the Executive with the Basic Compensation,
Incentive Compensation or Benefits, other than a failure that is not in bad
faith and is remedied by the Company within 15 days after receipt of notice
thereof given by the Executive, or (iii) a breach by the Company of any of the
material terms of this Agreement that is not remedied by the Company within 15
days of notice thereof by the Executive, the Executive may elect to terminate
his employment by notice to the Company (subject to Article IV). If the
Executive exercises such election, the Employment Period shall terminate
effective upon the later to occur of: (x) the receipt of such notice by the
Company and (y) the expiration of the 15-day period referred to in Section
3.03(a)(ii) or (iii).
 
(b)  If the Executive exercises his election to terminate the rights and
obligations of the parties pursuant to Section 3.03(a), the Company shall be
obligated to pay the Executive and the Executive shall be entitled to receive in
complete and total satisfaction of the obligations of the Company hereunder, the
salary and benefits continuation set forth in Section 3.01(d), subject to the
conditions stated therein. In addition, if this Employment Agreement is
terminated pursuant to this paragraph, the Executive shall immediately have the
right to exercise all stock options contained in the Stock Option Plan,
including those options for which the period during which such options may be
exercised has not yet commenced.
 
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(c)  If the Executive terminates this Employment Agreement for any reason other
than those contained in Section 3.02 and Section 3.03(a), the rights and
obligations of the parties hereunder shall terminate immediately (except as
otherwise provided in Article IV) and the Employment Period shall terminate
immediately except that the Executive shall be entitled to receive, in complete
and total satisfaction of the obligations of the Company hereunder, his Basic
Compensation, Incentive Compensation and Benefits through the date of such
termination.
 
Section 3.04.  Change of Control
 
Notwithstanding anything to the contrary contained herein, in the event that the
Executive is terminated or the Executive terminates his employment pursuant to
Section 3.03(a) in connection with or within six months following the Change of
Control, then the Company shall be obligated to pay the Executive, and the
Executive shall be entitled to receive in complete and total satisfaction of the
obligations of the Company hereunder, an amount equal to the Executive’s Basic
Compensation for the period commencing on the date of termination and ending on
the date that is two years after the date of such termination. The Basic
Compensation due to the Executive pursuant to this Section 3.04 shall be paid in
full on the date of the termination of the Executive; provided, however, that in
the event it is necessary to avoid the imposition of additional taxes under
Section 409A, such payment shall not be made until at least six (6) months after
the Executive’s termination of employment. For two years after the termination
date, the Executive shall also have the right to receive the same medical and
dental health insurance coverage offered to active employees of the Company,
subject to payment of any required employee premiums. In addition, if this
Employment Agreement is terminated pursuant to this paragraph, the Executive
shall immediately have the right to exercise all stock options contained in the
Stock Option Plan, including those options for which the period during which
such options may be exercised has not yet commenced.
 
Section 3.05.  Definitions of Certain Terms.
 
(a)  “Disability” shall mean any physical or mental condition of the Executive
that renders the Executive incapable of performing any substantial portion of
the services contemplated hereby (as confirmed by competent medical evidence)
and that has continued for at least 90 consecutive business days in any 12 month
period or a total of six months during any 12-month period.
 
(b)  The following shall constitute conduct entitling the Company to terminate
the Executive’s employment for “Cause”: (i) the Executive’s willful refusal to
perform or substantial disregard of the Executive’s duties to the Company that
is not cured within 10 days of notice (specifying the failure) thereof from the
Board, (ii) the commission by the Executive of a willful and material breach of
Article IV or (iii) the conviction of any felony by the Executive (or the
equivalent thereof under the laws of any state). It shall be presumed that any
termination of the Executive by the Company is without Cause, and such
presumption may only be overcome by clear and convincing evidence that the
termination of Executive’s employment can properly be construed as for Cause. If
the issue of “Cause” is litigated in a proceeding in any court or through any
means of alternative dispute resolution and such issue is resolved in the
Executive’s favor, then the Company shall reimburse the Executive for all
reasonable attorney’s fees, costs and expenses incurred by the Executive in such
proceeding.
 
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(c)  “Change of Control” shall mean: (i) a merger or consolidation of the
Company with or into another corporation other than a transaction (A) in which
the Company is the surviving Corporation (except where such other merger or
consolidation party is controlled by or under common control with another
corporation) or (B) merging or consolidating the Company with any corporation
controlling, controlled by or under common control with the Company (in which
case the surviving corporation shall be deemed the “Company” for purposes of
this Employment Agreement), or (ii) the sale of all or substantially all the
assets of the Company to any corporation or entity, other than a sale to any
corporation or entity controlling, controlled by or under common control with
the Company prior to such transaction (in which case the surviving corporation
shall be deemed the “Company” for purposes of this Employment Agreement).
 
 
Article IV - Non-Competition; Confidential Information
 
Section 4.01.  Non-Competition.
 
(a)  Subject to Sections 4.01(b) and 4.01(c), the Executive shall not engage in
any activities, whether as employer, proprietor, partner, stockholder (other
than as the holder of less than 5% of the stock of a corporation listed on a
national securities exchange or in the National Association of Securities
Dealers, Inc. Automated Quotation System (such a corporation being hereinafter
referred to as a “Public Corporation”)), director, employee, consultant or
otherwise, of any company with substantially the same business as or competes
directly with the Company in the United States during the following periods:
 
(i)  the Employment Period; and
 
(ii)  during any period after the termination of this Employment Agreement
pursuant to Article 3 for which the Executive is being or has been paid.
 
(b)  The Executive shall not be deemed to be in breach of this Employment
Agreement by reason of services performed for a subsidiary or affiliate of the
Company.
 
(c)  Notwithstanding anything to the contrary contained herein, if the Company
finds that the Executive has violated any covenants contained in Section 4.01,
4.02 or 4.03, then the Company shall be obligated to pay any amounts due to the
Executive (“Escrow Amount”) to Goodwin Procter LLP, as escrow agent (“Escrow
Agent”) at 599 Lexington Avenue, New York, New York 10022. Escrow Agent shall
hold the Escrow Amount in escrow until a court or agency legally empowered to
enforce the covenants contained in Section 4.01, 4.02 and 4.03 reaches a final
determination whether the Executive has violated any such covenants or until
mutually instructed by the parties. Escrow Agent shall disburse the Escrow
Amount in accordance with such court or agency’s final determination or pursuant
to such party instructions.
 
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Section 4.02.  Non-Interference. During the Employment Period and the period of
non-competition as determined pursuant to Section 4.01(a), the Executive:
 
(a)  shall not publicly disparage any of the products, services or actions of
the Company or any of the Company’s subsidiaries or affiliates; and
 
(b)  shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization,
solicit, endeavor to entice away from the Company, or otherwise interfere with
the relationship of the Company with any person or entity who is, or was within
the then most recent 12-month period, a customer or client of the Company.
 
Section 4.03.  Trade Secrets. The Executive shall not, at any time during the
Employment Period or thereafter, use (except for the sole benefit of the
Company, the Company’s subsidiaries and affiliates) or, without the written
consent of the Board, divulge to any person (other than, during the Employment
Period, an executive of the Company or any of the Company’s subsidiaries or
other person to whom disclosure is reasonably necessary or appropriate or
legally required in connection with the Executive’s duties hereunder) any trade
secrets or other confidential information of the Company or any of its
subsidiaries or affiliates, except to the extent that (a) such information
becomes a matter of public record, or is published in a newspaper, magazine or
other periodical available to the general public, in each case, through no
violation of this Employment Agreement by the Executive or (b) such disclosure
is required by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process provided that
the Executive shall immediately notify the Company of the existence, terms and
circumstances surrounding such a request so that it may seek an appropriate
protective order. When the Executive ceases to be employed by the Company, the
Executive shall surrender to the Company all records and documents in any form
obtained by him or entrusted to him during the course of his employment
hereunder (together with all copies thereof) that pertain to the business of the
Company or its subsidiaries or affiliates or that were paid for by the Company
or any of the Company’s subsidiaries or affiliates provided that the Executive
may retain copies of such documents as may be necessary for the Executive’s
personal records for federal income tax purposes or, with the approval of the
Board, for other purposes relating to the Executive’s legal affairs, which
approval shall not be unreasonably withheld.
 
Section 4.04.  Survival of Terms. The covenants contained in Sections 4.01, 4.02
and 4.03 shall survive the termination of the Executive’s employment.
 
 
Article V - Miscellaneous
 
Section 5.01.  Services as Officer or Director. During the Employment Period,
the Executive shall, if elected or appointed, serve as a director of the Company
and as an officer and/or director of all current and future subsidiaries and
affiliates of the Company without any additional compensation for such services
provided that the Executive shall be provided with reasonable and customary
directors’ and officers’ insurance if any such corporation is or becomes
publicly held and further provided that the Company shall cause any such
subsidiary and affiliate to save the Executive harmless from any and all
liability arising out of the performance of the Executive’s duties as director
and officer.
 
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Section 5.02.  Conflicts. The Executive hereby warrants and represents that he
is not under any legal or contractual obligation that would conflict in any
manner with the obligations and duties he is undertaking herein, and that his
execution of this Employment Agreement shall not breach any agreement to which
he is now a party. The Executive further agrees to reimburse and hold the
Company harmless for any costs, damages or fees sustained or expended by the
Company as a result of this untruth of the representations or breach of
warranties contained in this Section 5.03.
 
Section 5.03.  Right to Change Business. This Employment Agreement and any
rights or privileges granted to the Executive hereunder shall not prevent the
Company or any of the Company’s subsidiaries from exercising its corporate
powers to modify the business operations or activities of such entity.
 
Section 5.04.  Notices. Any notice or request required or permitted to be given
under this Employment Agreement shall be sufficient if in writing and delivered
personally or sent by registered mail, return receipt requested, to the
addresses set forth below or to any other address designated by either party by
notice similarly given. Such notice shall be deemed to have been given upon the
personal delivery thereof or three days after the date of such mailing thereof,
as the case may be.
 
If to the Executive, to:     345 Crest Road
                  Ridgewood, New Jersey 07450
 
If to the Company, to:     DOV Pharmaceutical, Inc.
                  433 Hackensack Avenue
                  Hackensack, New Jersey 07601
                  Attention: General Counsel
 
With a copy to:        Goodwin Procter LLP
                  599 Lexington Avenue
                  New York, New York 10022
                  Attention: Joseph R. Siegelbaum
 
Section 5.05.  Assignment and Succession. The Executive acknowledges that the
services to be rendered by him hereunder are unique and personal. Accordingly,
the Executive may not assign any of his rights or delegate any of his duties or
obligations under this Employment Agreement. The rights and obligations of the
Company under this Employment Agreement shall inure to the benefit of and be
binding upon its successors and assigns.
 
Section 5.06.  Headings. The headings contained in this Employment Agreement are
for convenience of reference only and shall not define or limit the provisions
hereof.
 
Section 5.07.  Applicable Law. This Employment Agreement shall be interpreted in
accordance with the laws of the State of New Jersey, without regard to conflict
of law rules. Each party hereby irrevocably consents and submits to the in
personam jurisdiction of any court of general jurisdiction in the State of New
Jersey which shall serve as the sole and exclusive forum in any suit, action or
proceeding arising out of or in connection with this Employment Agreement.
 
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Section 5.08.  Withholding Taxes. The Company may withhold from any amounts
payable under this Employment Agreement such federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or regulations.
 
Section 5.09.  Entire Agreement; Amendments. This Employment Agreement contains
the entire understanding of the parties hereto with regard to the subject matter
contained herein, and supersedes all prior agreements or understandings between
the parties hereto or any related parties. This Employment Agreement may be
amended only pursuant to a writing signed by both parties hereto.
 
Section 5.10.  Waivers. Any term or provisions of this Employment Agreement may
be waived, or the time for its performance may be extended, by the party or
parties entitled to the benefits thereof but only to the extent evidenced by a
writing executed by such party. The failure of any party hereto to enforce at
any time any provision of this Employment Agreement shall not be construed to be
a waiver of such provision, nor in any way to affect the validity of this
Employment Agreement or any part hereof or the right of any party thereafter to
enforce each and every such provision. No waiver of any breach of this
Employment Agreement shall be held to constitute a waiver of any other or
subsequent breach.
 
Section 5.11.  Partial Invalidity. Each provision hereof shall be interpreted in
such manner as to be effective and valid under applicable law, but in case any
one or more of the provisions contained herein is, for any reason, held to be
unenforceable in any respect, such unenforceability shall not affect any other
provisions of this Employment Agreement, and this Employment Agreement shall be
construed as if such unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause the remaining terms hereof to be
unreasonable.
 
Section 5.12.  Execution of Counterparts. This Employment Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties and delivered to the other.
 
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IN WITNESS WHEREOF, the Company has caused this Employment Agreement as amended
and restated, to be signed by its duly authorized officer and the Executive has
signed this Employment Agreement, as amended and restated, as of the 23rd day of
May, 2005.
 

        DOV PHARMACEUTICAL, INC.  
   
   
  By:   /s/ Zola Horovitz  

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Zola Horovitz
Chair, Compensation Committee
        /s/ Arnold S. Lippa

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Arnold S. Lippa        

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