Exhibit 10.14

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT, effective as of January 29, 2004 (the “Commencement Date”)
by and between Aphton Corporation, a Delaware corporation and its successors or
assigns (the “Company”), and Patrick T. Mooney, M.D. (“Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of the Company (the “Board”) desires to employ
Executive and to assure Executive’s continued employment by the Company on the
terms and conditions of this Agreement, and Executive desires to be employed by
the Company on the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the promises and mutual covenants contained
herein and for other good and valuable consideration, the parties agree as
follows:

 

1. Term of Employment. Except for earlier termination as provided in Section 7
hereof, Executive’s employment under this Agreement shall be for a three-year
term (the “Employment Term”) commencing on the Commencement Date and ending
three (3) years thereafter. Subject to Section 7 hereof, the Employment Term
shall be automatically extended for additional terms of successive two (2) year
periods (each additional period, a “Renewal Term”) unless the Company or
Executive gives written notice to the other at least ninety (90) days prior to
the expiration of the Employment Term, or the respective Renewal Term, as the
case may be, of the termination of Executive’s employment hereunder at the end
of such current Employment Term or Renewal Term (“Notice of Nonextension”).

 

2. Positions.

 

(a) Executive shall serve as the President and Chief Executive Officer of the
Company. Executive shall also serve on the Board without additional compensation
and subject to any policy of the Compensation Committee of the Company’s Board
(the “Compensation Committee”) with regard to director’s fees.

 

(b) Executive shall have such duties and authority, consistent with the position
of a president and chief executive officer of a company as shall be assigned to
him from time to time by the Board. Executive shall report directly to the
Board, or a committee thereof, in performing his duties hereunder.

 

(c) During the Employment Term or any Renewal Term, Executive shall devote all
of his business time and efforts to the performance of his duties hereunder;
provided, however, that Executive shall be allowed, to the extent that such
activities do not materially interfere with the performance of his duties and
responsibilities hereunder, to manage his passive personal interests and,
subject to the next sentence, to serve on the board of directors, or on
committees of such board of directors (or any similar positions), of any
for-profit, charitable or

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civic entity. Executive may serve on such boards of directors or committees only
if approved in advance by the Board (which approval may be withdrawn for any
good reason, as determined by the Board in its sole discretion) and Executive
shall not serve on any board of directors if such service would be inconsistent
with his fiduciary responsibilities to the Company.

 

3. Base Salary. During the Employment Term or any Renewal Term, the Company
shall pay Executive a base salary at the annual rate of not less than $400,000.
Base salary shall be payable in accordance with the usual payroll practices of
the Company, but no less frequently than monthly. Executive’s base salary shall
be reviewed annually in December by the Compensation Committee during the period
of the Employment Term and may be increased, but not decreased, from time to
time by the Compensation Committee and shall constitute “Base Salary” for
purposes of this Agreement.

 

4. Incentive Compensation.

 

(a) Bonus. For each fiscal year after the Commencement Date and during the
Employment Term or any Renewal Term, the Compensation Committee may award the
Executive a bonus (the “Bonus”) in accordance with performance targets,
measurements and such other criteria as shall be established for such year by
the Compensation Committee on or before March 31st of such year. The Bonus shall
be earned and deemed accrued on the date the Compensation Committee approves the
award of the Bonus. If awarded, the Bonus shall be paid by March 31st of the
calendar year immediately following the calendar year for which the bonus was
awarded.

 

(b) Stock Options. Upon the Commencement Date, Executive was granted options
(the “Outstanding Option Grant”) to purchase four hundred thousand (400,000)
shares of the Company’s common stock subject to the terms set forth in the
Option Agreement between the Company and Executive dated as of January 29, 2004
(the “Option Agreement”). Executive shall be entitled to receive additional
stock options and such other long term compensation as may be determined by the
Compensation Committee from time to time in its discretion. In making any
determinations concerning the award of stock options to Executive, the
Compensation Committee will apply the same criteria as it applies in making
awards to the other named executive officers (as defined in Regulation S-K, Item
402(a)(3)) of the Company.

 

5. Employee Benefits and Vacation.

 

(a) Medical Insurance. During the Employment Term or any Renewal Term, the
Company shall provide Executive and his family with comprehensive major medical
and hospitalization coverage and to the extent offered to other senior executive
officers, dental and optical coverage (the “Medical Coverage”). The Company
shall pay all premiums with respect to such Medical Coverage. Such Medical
Coverage may be provided either through the Company’s group medical plans, by an
individual policy, or by a combination of both group and individual policies.

 

(b) Life Insurance. During the Employment Term or any Renewal Term, the Company
shall provide Executive with term life insurance with a death benefit equal to
the

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greater of (i) three times the then current Base Salary plus any Bonus paid in
the prior fiscal year or (ii) $3,000,000. The Company shall pay all premiums
with respect to such life insurance. Such life insurance may be provided either
through the Company’s group life insurance programs, by an individual policy, or
by a combination of both group and individual policies. Executive shall at all
times designate the beneficiary(ies) of such life insurance.

 

(c) Vacation. During the Employment Term or any Renewal Term, Executive shall be
entitled to vacation each year in accordance with the Company’s policies in
effect from time to time. Executive shall also be entitled to such periods of
sick leave as is customarily provided by the Company to its senior executive
officers. In accordance with Company policies, Executive shall have the right to
carry forward unused vacation days for a calendar year to any future calendar
year.

 

(d) Other Benefits. During the Employment Term or any Renewal Term, Executive
shall be entitled to participate in all pension, long-term incentive
compensation, retirement, savings, welfare and other employee benefit plans and
arrangements, fringe benefits and perquisites, including a car allowance,
generally provided by the Company from time to time for the benefit of
comparable senior executive officers, in each case, in accordance with their
respective terms in effect from time to time (collectively with the benefits
provided pursuant to Section 5(b) above, “Additional Benefits”).

 

6. Business Expenses. The Company shall reimburse Executive for the travel,
entertainment and other business expenses incurred by Executive in the
performance of his duties hereunder, including without limitation, the cost of
conferences, seminars and other educational classes or meetings attended by
Executive, in accordance with the Company’s policies as in effect from time to
time.

 

7. Termination.

 

(a) Termination due to Death or Disability. (i) Notwithstanding any other
provision of this Agreement, prior to the expiration of the Employment Term or
any Renewal Term, the Company may terminate Executive’s employment: (1)
immediately upon the death of the Executive; or (2) at any time after providing
Executive thirty (30) days written notice due to Executive’s Disability. In
either circumstance, the Employment Term or the Renewal Term under this
Agreement shall terminate without further obligations to Executive or
Executive’s legal representatives; provided that the Company shall pay to the
Executive, or Executive’s estate in the event of the Executive’s death, in a
cash lump sum within thirty (30) days after the Termination Date (as defined
below) an amount equal to (i) one year of the then current Base Salary plus (ii)
any Base Salary accrued but unpaid, (iii) any Bonus accrued but unpaid, (iv) any
accrued but unused vacation pay payable pursuant to the Company’s policies in
effect at such time, and any unreimbursed business expenses payable pursuant to
Section 6 (collectively “Accrued Amounts”) and (v) any other amounts or benefits
owing to Executive under the then applicable employee benefit plans, long term
incentive plans or equity plans and programs of the Company which shall be paid
in accordance with such plans and programs (“Other Accrued Benefits”). For
purposes of this Agreement, the “Termination Date” shall mean (A) in the case of
the Executive’s termination due to death, the date of his death, (B) in the case
of Executive’s

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termination due to Disability, a Termination without Cause or a Termination for
Cause, the date specified in the written notice, or if no date is specified in
such notice, the date that is thirty (30) days after the date of the notice or
(C) in the case of Termination with Good Reason, the date specified by the
Executive in the written notice (which can be no more than forty-five (45) days
after the date of such notice), or if no date is specified in such notice, the
date that is thirty (30) days after the date of the notice.

 

(ii) For purposes of this Agreement, “Disability” shall mean by reason of the
same or related physical or mental illness or incapacity, Executive is unable to
carry out his material duties pursuant to this Agreement for more than six (6)
months in any twelve (12) month period; provided, however that a minimum of 90
consecutive days must comprise a portion of the six (6) month period. At any
time after the occurrence of a Disability, the Company may terminate Executive
after providing Executive thirty (30) days written notice. Such termination
shall not be effective if Executive returns to the full time performance of his
material duties within such thirty (30) day period.

 

(b) Termination Without Cause. (i) Notwithstanding any other provision of this
Agreement, prior to the expiration of the Employment Term or any Renewal Term,
the Company may terminate Executive’s employment at any time upon written notice
to the Executive, and the Employment Term or the Renewal Term under this
Agreement shall terminate without further obligations to Executive; provided
that the Company shall pay to the Executive, in a cash lump sum, within
forty-five (45) days after the Termination Date, an amount equal to: (A) (i) if
the Employment Term is terminated prior to January 29, 2005, the then current
Base Salary through January 29, 2007; or (ii) if the Employment Term or any
Renewal Term is terminated after January 29, 2005, an amount equal to two (2)
times the sum of the then current Base Salary plus the mean Bonus paid with
respect to the prior three fiscal years; (B) the sum of any Accrued Amounts and
Other Accrued Benefits; plus (C) premiums for Executive’s Medical Coverage as
specified in Section 5(a) above for the remainder of the three-year Employment
Term or the two-year Renewal Term. In addition, the Company will (i) permit
Executive to participate in the Additional Benefits, in accordance with their
respective terms and conditions, for a period of twelve (12) months following
the Termination Date or (ii) pay the cash equivalent of the Additional Benefits
in a cash lump sum within thirty (30) days after the Termination Date.

 

(ii) If Executive’s employment is terminated pursuant to this subsection (b) and
such termination occurs within thirteen (13) months after a Change in Control
(as defined below), in lieu of the foregoing, Executive shall receive a cash
lump sum within five (5) days of the Termination Date in an amount equal to: (i)
(A) if the Change in Control occurred prior to the accrual of a Bonus to the
Executive for fiscal year 2004, three (3) times the then current Base Salary or
(B) if the Change in Control occurred after the accrual of a Bonus to the
Executive for fiscal year 2004, two (2) times the sum of the then current Base
Salary plus the mean Bonus paid with respect to the prior three fiscal years;
(ii) the sum of any Accrued Amounts and Other Accrued Benefits; and (iii) the
aggregate amount of the premiums payable by the Company for Executive’s Medical
Coverage as specified in Section 5(a) above for three (3) years. In addition,
the Company will (i) permit Executive to participate in the Additional Benefits,
in accordance

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with their respective terms and conditions, for a period of twenty-four (24)
months following the Termination Date or (ii) pay the cash equivalent of the
Additional Benefits in a cash lump sum within thirty (30) days after the
Termination Date.

 

(c) Termination For Cause. (i) Notwithstanding any other provision of this
Agreement, prior to the expiration of the Employment Term or any Renewal Term,
the Company may terminate Executive’s employment for Cause (as defined below) at
any time after providing Executive thirty (30) days written notice by delivery
of a Notice of Termination for Cause (as defined below) to the Executive and the
Employment Term or the Renewal Term under this Agreement shall terminate without
further obligations to Executive; provided that the Company shall pay to the
Executive in a cash lump sum within thirty (30) days after the Termination Date
all Accrued Amounts and other Accrued Benefits.

 

(ii) For purposes of this Agreement, “A Notice of Termination for Cause” shall
mean a notice that shall indicate the specific termination provision relied upon
and shall set forth in reasonable detail the facts and circumstances which
provide a basis for Termination for Cause. The Termination Date for a
Termination for Cause shall be the date indicated in the Notice of Termination
for Cause or if no date is specified in such notice, the date that is thirty
(30) days after the date of the notice. Any purported Termination for Cause
which is held by a court not to have been based on the grounds set forth in this
Agreement or not to have followed the procedures set forth in this Agreement
shall be deemed a termination by the Company without Cause. A Termination for
Cause which is based on subparagraphs (iii)(A), (B), and/or (C) of this Section
shall not be effective unless the Termination for Cause: 1) is based on an act,
failure, or event constituting “Cause” under this Section which act, failure, or
event occurred within the ninety (90) day period immediately preceding the date
on the Notice of Termination for Cause; or 2) is based on a pattern or series of
conduct constituting “Cause” under this Section, of which the most recent act,
failure, or event occurred within the ninety (90) day period immediately
preceding the date on the Notice of Termination for Cause. If the purported
Termination for Cause is not based on such an act(s), failure(s), or event(s),
then the Termination for Cause shall be deemed a Termination Without Cause.

 

(iii) For purposes of this Agreement, the term “Cause” shall be limited to the
following:

 

(A) Executive’s willful refusal or willful failure to perform his duties;

 

(B) Executive’s willful misconduct or gross negligence with regard to the
Company or its affiliates or their business, assets or employees (including,
without limitation, Executive’s fraud, embezzlement or other act of dishonesty
with regard to the Company or its affiliates);

 

(C) Executive’s willful misconduct or omission which has a material adverse
economic impact on the Company or its affiliates;

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(D) Executive’s conviction of, or pleading nolo contendere to, any felony or any
crime involving fraud, dishonesty or moral turpitude;

 

(E) Executive’s willful refusal or willful failure to follow the lawful written
direction of the Board;

 

(F) Executive’s breach of a fiduciary duty owed to the Company or its
affiliates, including but not limited to Section 8 hereof; or

 

(G) any other breach by Executive of this Agreement that remains uncured for ten
(10) days after written notice thereof is given to Executive.

 

(d) Termination for Good Reason. (i) Notwithstanding any other provision of this
Agreement, prior to the expiration of the Employment Term or any Renewal Term,
Executive may terminate his employment for Good Reason (as defined below) at any
time after providing Company thirty (30) days written notice and the Employment
Term or the Renewal Term under this Agreement shall terminate without further
obligations to Executive; provided that the Company shall pay to the Executive,
in a cash lump sum, within forty-five (45) days after the Termination Date, an
amount equal to: (A) (i) if the Employment Term is terminated prior to January
29, 2005, the then current Base Salary through January 29, 2007; or (ii) if the
Employment Term or the Renewal Term is terminated after January 29, 2005, an
amount equal to two (2) times the sum of the then current Base Salary plus the
mean Bonus paid with respect to the prior three fiscal years; (B) the sum of any
Accrued Amounts and Other Accrued Benefits; plus (C) premiums for Executive’s
Medical Coverage as specified in Section 5(a) above for the remainder of the
three-year Employment Term or the two-year Renewal Term. In addition, the
Company will (i) permit Executive to participate in the Additional Benefits, in
accordance with their respective terms and conditions, for a period of twelve
(12) months following the Termination Date or (ii) pay the cash equivalent of
the Additional Benefits in a cash lump sum within thirty (30) days after the
Termination Date.

 

(ii) If Executive’s employment is terminated pursuant to this subsection (d) and
such termination occurs within thirteen (13) months after a Change in Control,
in lieu of the foregoing, Executive shall receive a cash lump sum within five
(5) days of the Termination Date in an amount equal to: (i) (A) if the Change in
Control occurred prior to the accrual of a Bonus to the Executive for fiscal
year 2004, three (3) times the then current Base Salary, or (B) if the Change in
Control occurred after the accrual of a Bonus to the Executive for fiscal year
2004, two (2) times the sum of the then current Base Salary plus the mean Bonus
paid with respect to the prior three fiscal years; (ii) the sum of any Accrued
Amounts and Other Accrued Benefits; and (iii) the aggregate amount of the
premiums payable by the Company for Executive’s Medical Coverage as specified in
Section 5(a) above for three (3) years. In addition, the Company will (i) permit
Executive to participate in the Additional Benefits, in accordance with their
respective terms and conditions, for a period of twenty-four (24) months
following the Termination Date or (ii) pay the cash equivalent of the Additional
Benefits in a cash lump sum within thirty (30) days after the Termination Date.

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(iii) For purposes of this Agreement, “Good Reason” shall mean the occurrence,
without Executive’s express written consent in the case of (A), (B), (C) or (D),
of any of the following circumstances:

 

(A) A material reduction in Executive’s title or responsibilities as set forth
in Section 2, including, without limitation, the requirement to report to any
person other than the Board or a committee of the Board;

 

(B) Any reduction in Executive’s Base Salary;

 

(C) A diminution in the Executive’s eligibility to participate in bonus, stock
options, incentive awards and other compensation plans or a diminution in
Executive benefits;

 

(D) A change in the location of the Executive’s principal place of employment by
the Company of more than fifty (50) miles from the location at which he was
principally employed immediately prior to such change; or

 

(F) A material breach or violation by the Company of any provision of this
Agreement, including, without limitation, non-payment of any material amounts
owed by the Company when due.

 

(iv) Change in Control. For purposes of this Agreement, the term “Change in
Control” shall mean the occurrence of any of the following:

 

(A) any “person” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company,
any trustee or other fiduciary holding securities under any employee benefit
plan of the Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of Common Stock of the Company), is or becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing twenty-five percent (25%) or more of the combined
voting power of the Company’s then outstanding securities;

 

(B) during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board;

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(C) a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or

 

(D) the stockholders of the Company approve a plan of complete liquidation of
the Company or the consummation of the sale or disposition by the Company of all
or substantially all of the Company’s assets other than (x) the sale or
disposition of all or substantially all of the assets of the Company to a person
or persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of the Company at the time of the sale or (y) pursuant to a spin-off type
transaction, directly or indirectly, of such assets to the stockholders of the
Company.

 

(e) Vesting of Stock Options. Upon termination of Executive’s employment
pursuant to Section 7(a), (b) or (d) above, (i) each non-qualified stock option
granted the Executive shall be immediately vested and exercisable for a period
ending the earlier of 180 days after the Termination Date or the scheduled
expiration date of such option, (ii) each incentive stock option (“ISO”) granted
to Executive shall be immediately vested and exercisable in accordance with the
terms of the applicable ISO agreement and (iii) any restricted shares granted to
Executive shall become vested and shall be delivered to Executive free and clear
of any restrictions, other than pursuant to applicable securities laws.

 

(f) Voluntary Resignation without Good Reason, Retirement, Nonextension. If
Executive’s employment and the Employment Term or any Renewal Term are
terminated: (i) by Executive without Good Reason, (ii) due to the retirement of
Executive or (iii) by either the Company or the Executive as a result of a
Notice of Nonextension, the Employment Term or the Renewal Term shall terminate
without further obligations to Executive under this Agreement, provided that the
Company shall pay to the Executive, in a cash lump sum, within thirty (30) days
after the Termination Date all Accrued Amounts and Other Accrued Benefits.

 

(g) Medical Insurance Payments. Payments with respect to Medical Coverage
required to be made pursuant to this Section 7 may, at the discretion of the
Company, be made by continuing participation of Executive in the plan as a
terminee, by paying the applicable COBRA premium for Executive and his
dependents, or by covering Executive and his dependents under substitute
arrangements; provided, however, that any such substitute Medical Coverage shall
be materially equal to those provided to Executive during the Employment Term or
any Renewal Term.

 

(h) No Mitigation; No Set-Off. In the event of any termination of employment
under Section 7, Executive shall be under no obligation to seek other employment
and there shall be no offset against any amounts due Executive under this
Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain. Any

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amounts due under Section 7 are in the nature of severance payments and are not
in the nature of a penalty. Such amounts are inclusive of, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset from the amount due hereunder.

 

(i) Release. Executive agrees that, as a condition to receiving the payments and
benefits provided under Section 7 hereunder he will execute, deliver and not
revoke (within the time period permitted by applicable law) a release of all
claims of any kind whatsoever against the Company, its affiliates, officers,
directors, employees, agents and stockholders in the standard form then being
used by the Company for senior executive officers (but without release of the
right of indemnification hereunder or under the Company’s By-laws or rights
under benefit or equity plans that by their terms are intended to survive
termination of his employment).

 

(j) Termination of Other Positions. Upon any termination of employment,
Executive hereby resigns as an officer and director of the Company, any
subsidiary and any affiliate and as a fiduciary of any benefit plan of any of
the foregoing. Executive shall promptly execute any further documentation
thereof as requested by the Company and, if the Executive is to receive any
payments from the Company, execution of such further documentation shall be a
condition thereof.

 

8. Confidential Information, Non-Competition and Non-Solicitation of the
Company.

 

(a) Agreement Not to Disclose Confidential Information. (i) Executive
acknowledges he has read and understands the Company’s Statement of Policy
Regarding Confidential Information (“Confidentiality Policy”) and that the
Confidentiality Policy is incorporated by reference as part of this Agreement.
Executive agrees to hold confidential or proprietary information and trade
secrets (“Confidential Information,” as that term is defined by the
Confidentiality Policy) in trust and confidence. In this regard, Executive
agrees that during and subsequent to Executive’s employment with Company,
Executive agrees that he will abide by the Confidentiality Policy. Executive
shall use Confidential Information only for the contemplated purposes for the
sole benefit of the Company; shall not use Confidential Information for any
other purpose; and shall not disclose or cause to be disclosed Confidential
Information to any Executive, consultant, or third party, except as required in
the course and scope of Executive’s employment by the Company and only if the
Executive, consultant, or third party has executed an Agreement Not to Disclose
Confidential Information. Executive further acknowledges that the
Confidentiality Policy may be amended from time to time, and Executive agrees
that this paragraph survives and applies to all such amendments. The Company
agrees that so long as Executive does not breach this Agreement Not to Disclose
Confidential Information at any time during or subsequent to his employment with
the Company, the Company will not, after the expiration of the two (2) year term
provided in the Agreement Not to Compete, subparagraph (c) of this Section, use
the “Inevitable Disclosure” doctrine as a basis to preclude Executive from
directly or indirectly (on his own behalf or on behalf of any other person or
entity) engaging in any business that is of the type and character or that is
competitive with any business conducted by the Company.

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(ii) The parties agree that the failure of any Confidential Information to be
marked or otherwise labeled as confidential or proprietary information shall not
affect its status as Confidential Information.

 

(iii) Executive agrees that all Confidential Information and other materials
relating in any way to any Confidential Information shall be and remain the
Company’s sole property during and after Executive’s employment.

 

(iv) Executive agrees that he will not duplicate any Confidential Information or
other materials relating in any way to any Confidential Information, other than
as necessary to fulfill his obligations as an officer of the Company, without
the express written consent of the Company.

 

(v) Executive agrees to take all reasonable steps needed or requested by the
Company to ensure that all Confidential Information is kept confidential.

 

(vi) Executive agrees that upon demand by the Company, he will return all
Confidential Information, including any notes, to the Company and will represent
to the Company in writing at such time that he has complied with the provisions
of this subparagraph.

 

(b) Agreement to Comply with Company Policy Regarding Inventions and Ideas.
Executive acknowledges he has read and understands the Company’s Policy
Regarding Inventions and Ideas (“Inventions Policy”) and that the Inventions
Policy is incorporated by reference into this Agreement. Executive agrees that
during and subsequent to Executive’s employment with the Company, he will abide
by the Inventions Policy. Executive further acknowledges that the Inventions
Policy may be amended from time to time, and Executive agrees that this
paragraph survives and applies to all such amendments.

 

(c) Agreement Not to Compete. Executive agrees that, both during employment and
for a period of two (2) years following separation from employment for any
reason (the “Non-Compete Period”), Executive will not directly or indirectly (on
his own behalf or on behalf of any other person or entity) engage in any
business (or own an interest in an individual proprietorship, partnership,
corporation, joint venture, trust or other form of business entity, whether as
an individual proprietor, partner, shareholder, joint venturer, officer,
director, consultant, broker, employee, sales person, trustee, independent
contractor, or in any manner whatsoever (except for an ownership interest not
exceeding five percent (5%) of a publicly traded entity), that is of the type
and character or that is competitive with any business conducted by the Company
at any time during the Employee’s employment with the Company. The parties
hereby agree that the Company is currently engaged in the business of developing
products using immunotherapy technology for neutralizing hormones that
participate in gastrointestinal system and reproductive system cancer and
non-cancer diseases and is also engaged in the business of research and
development in the area of biotechnology, including but not limited to,
hybridoma, monoclonal antibodies, and recombinant DNA.

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(d) Agreement Not to Recruit the Company’s Employees. Executive agrees that,
both during employment and for a period of two (2) years following separation
from employment for any reason (the “Non-Solicit Period”), Executive will not
directly or indirectly (on his own behalf or on behalf of any other person or
entity) recruit, solicit or otherwise induce any Company employee or consultant
to enter into an employment or a consulting relationship with any other business
entity that competes with the Company.

 

(e) Agreement Not to Solicit the Company’s Clients/Customers. Executive agrees
that, both during employment and until the end of the Non-Solicit Period,
Executive will not directly or indirectly (on his own behalf or on behalf of any
other person or entity), solicit any business involving or similar to any
products or services produced or being developed by the Company from any
Clients/Customers of the Company, or divert or attempt to divert from the
Company any business relationship which existed between the Company and any
Clients/Customers. For purposes of this Agreement, Clients/Customers shall
include any person or entity: 1) that was a client of the Company with which
Executive had contact in the course of his business responsibilities during the
twelve (12) month period immediately preceding the end of Executive’s
employment; and 2) about which Executive gained confidential or proprietary
information belonging to the client or Company. Customer shall also mean
specifically Aventis Pasteur, GlaxoSmithKline, and Schering Plough.

 

(f) Reasonableness of this Section 8. Executive agrees that the provisions of
this Section 8 are reasonable and necessary for protection of the Company’s
Confidential Information; its Clients/Customers’ Confidential Information; its
business relationships with its Clients/Customers; and its undisrupted
workplace.

 

(g) Notice to New Employer. Executive agrees that, prior to the commencement of
any new employment or consultation with a person or entity in any business in
which the Company operated during Executive’s employment, he will advise the
person or entity of the terms of Section 8 of this Agreement. The Executive also
agrees that the Company may advise any new or prospective employer of the
existence and terms of this Agreement and may furnish said employer or
consultant with a copy of the relevant provisions of this Agreement.

 

(h) Absence of Geographic Description; Savings Clause. Executive acknowledges
that there are no geographic restrictions contained in this Section 8 because
the Company’s business is international and not limited to any one geographic
area. Notwithstanding, if a court of competent jurisdiction finds any or all of
the foregoing paragraphs invalid for lack of a specific geographic restriction,
Executive agrees that the applicable geographical restriction is the United
States or such lesser or greater geographic area in which Executive worked or
solicited Clients/Customers at any time during his employment.

 

(i) No Conflict With Obligations. Executive promises and represents that his
employment with the Company is not in conflict with any obligations he owes to
any other person or entity. Executive will notify the Company in writing before
performing or causing to be performed any work for or on behalf of the Company
which appears to be in conflict with: (a) rights of any nature owned or claimed
by Executive in any Invention or Idea or Confidential Information, as defined in
the appropriate Company Policies, conceived by him prior to

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beginning work with the Company; (b) rights arising out of obligations incurred
by Executive prior to beginning work for the Company; or (c) Executive’s
obligations to the Company under this Agreement. In the event of Executive’s
failure to give notice of any such conflict, the Company may conclude that no
such conflict exists, and Executive agrees, in such event, to make no claim
against the Company with respect to the use of any such Invention or Idea or
Confidential Information by the Company.

 

(j) Remedies for Breaches of Section 8. In the event of a breach or potential
breach of this Section 8, Executive acknowledges that the Company and its
affiliates will be caused irreparable injury and that money damages may not be
an adequate remedy and agree that the Company and its affiliates shall be
entitled to injunctive relief (in addition to its other remedies at law) to have
the provisions of this Section 8 enforced. It is hereby acknowledged that the
provisions of this Section 8 are for the benefit of the Company and all of the
affiliates of the Company and each such entity may enforce the provisions of
this Section 8 and only the applicable entity can waive the rights hereunder
with respect to its confidential information and Executives. Furthermore, in the
event of a breach of this Section 8 by Executive while amounts under Section 7
hereof are due and owing, Executive shall not be entitled to receive any future
amounts owed under Section 7 hereof, other than payment of Accrued Amounts and
Other Accrued Benefits, but the Company shall remain entitled to injunctive
relief in addition to any other remedies at law. In the event that the Company
has breached any of its obligations to make payments to Executive under Section
7 hereof, and such breach is not remedied within 30 days of written notice, then
Executive shall be relieved of his obligations under Sections 8(c), (d) and (e)
hereof; provided however, that from the date that the Company shall have
remedied such breach, and paid all amounts owed under Section 7, the Executive
shall not take any future steps that would be in violation of Section 8(c), (d)
or (e) until the end of the Non-Compete Period or the Non-Solicit Period, as the
case may be; provided further, however, that in event that prior to the
Company’s remedy of the breach, Executive becomes engaged in activities that
would violate Sections 8(c), (d) or (e), except for this Section 8(j), then,
upon the Company’s remedy of such breach, Executive shall be permitted to
continue to engage in such activities, to the extent of such prior activity,
subsequent to the Company’s remedy.

 

9. Indemnification. The Company shall indemnify and hold harmless Executive to
the extent provided in the Certificate of Incorporation and By-Laws of the
Company for any action or inaction of Executive while serving as an officer and
director of the Company or, at the Company’s request, as an officer or director
of any other subsidiary or affiliate of the Company or as a fiduciary of any
benefit plan. The Company shall cover Executive under directors and officers’
liability insurance both during and, while potential liability exists, after the
Employment Term or any Renewal Term in the same amount and to the same extent as
the Company covers its other officers and directors.

 

10. Gross-Up Payment.

 

(a) Amount. If any payment or benefit provided to Executive by the Company (a
“Base Payment”) is subject to the tax (the “Excise Tax”) imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the “Code”) (or any other
similar tax that may hereafter be imposed), the Company shall pay to Executive
the “Gross-Up Payment” determined

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as follows. The “Gross-Up Payment” shall be equal to the sum of (i) the Excise
Tax imposed with respect to the Base Payment, plus (ii) the Excise Tax imposed
with respect to the Gross-Up Payment, plus (iii) all other taxes imposed on
Executive with respect to the Gross-Up Payment, including income taxes and
Executive’s share of FICA, FUTA and other payroll taxes. The Gross-Up Payment
shall not include the payment of any tax on the Base Payment other than the
Excise Tax. The Gross-Up Payment is intended to place Executive in the same
economic position Executive would have been in if the Excise Tax did not apply,
and shall be calculated in accordance with such intent.

 

(b) Tax Rates and Assumptions. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay Federal income taxes at the
highest marginal rate of Federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executive’s
residence on the date of termination, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state and local
taxes.

 

(c) Payment and Calculation Procedures. The Gross-Up Payment attributable to a
Base Payment shall be paid to Executive in cash and at such times as such Base
Payment is paid or provided pursuant to this Agreement. Simultaneously with or
prior to the Company’s payment of a Base Payment, the Company shall deliver to
Executive a written statement specifying the total amount of the Base Payment
and the Excise Tax and Gross-Up Payment relating to the Base Payment, if any,
together with all supporting calculations and conclusions. If Executive
disagrees with the Company’s determination of the Excise Tax or Gross-Up
Payment, Executive shall submit to the Company, no later than thirty (30) days
after receipt of the Company’s written statement, a written notice advising the
Company of the disagreement and setting forth Executive’s calculation of said
amounts. Executive’s failure to submit such notice within such period shall be
conclusively deemed to be an agreement by Executive as to the amount of the
Excise Tax and Gross-Up Payment, if any. If the Company agrees with Executive’s
calculations, it shall pay any shortfall in the Gross-Up Payment to Executive
within twenty (20) days after receipt of such a notice from Executive. If the
Company does not agree with Executive’s calculations, it shall provide Executive
with a written notice within twenty (20) days after the receipt of Executive’s
calculations advising Executive that the disagreement is to be referred to an
independent accounting firm for resolution. Such disagreement shall be referred
to an independent accounting firm which is not the regular accounting firm of
the Company and which is designated by the Company. The Company shall be
required to designate such accounting firm within ten (10) days after issuance
of the Company’s notice of disagreement. The accounting firm shall review all
information provided to it by the parties and submit a written report to the
parties setting forth its calculation of the Excise Tax and the Gross-Up Payment
within fifteen (15) days after submission of the matter to it, and such decision
shall be final and binding on all of the parties. The fees and expenses charged
by said accounting firm shall be paid by the Company. If the amount of the
Gross-Up Payment actually paid by the Company was less than the amount
calculated by the accounting firm, the Company shall pay the shortfall to
Executive within five (5) days after the accounting firm submits its written
report. If the amount of the Gross-Up Payment actually paid by the Company was
greater than the amount calculated by the accounting firm, Executive shall pay
the excess to the Company within fifteen (15) days after the accounting firm
submits its written report.

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(d) Subsequent Recalculation. In the event the Internal Revenue Service or other
applicable governmental authority imposes an Excise Tax with respect to a Base
Payment that is greater than the amount of the Excise Tax determined pursuant to
the immediately preceding paragraph, the Company shall reimburse Executive for
the full amount of such additional Excise Tax plus any interest and penalties
which may be imposed in connection therewith, and pay to Executive a Gross-up
Payment sufficient to make Executive whole and reimburse Executive for any
Excise Tax, income tax and other taxes imposed on the reimbursement of such
additional Excise Tax and interest and penalties, in accordance with the
principles set forth above.

 

11. Miscellaneous.

 

(a) Arbitration. (i) All disputes arising out of or relating to this Agreement,
other than those arising out of the Company’s enforcement of Section 8 hereof,
that cannot be settled by the parties shall be settled by arbitration in
Philadelphia, Pennsylvania, pursuant to the rules and regulations then obtaining
of the American Arbitration Association. The decision of the arbitrators shall
be final and binding upon the parties, and judgment upon such decision may be
entered in any court of competent jurisdiction.

 

(ii) Discovery shall be allowed pursuant to the intendment of the United States
Federal Rules of Civil Procedure and as the arbitrators determine appropriate
under the circumstances.

 

(iii) The arbitration tribunal shall be formed of three arbitrators, one to be
appointed by each party and the third to be appointed by the first two
arbitrators. Such arbitrators shall be required to apply the contractual
provisions hereof in deciding any matter submitted to them.

 

(iv) The costs and expenses of such arbitration shall be borne by the Company.
The Company shall pay or reimburse Executive for all reasonable attorneys’ fees
and costs incurred by Executive in prosecuting or defending any claim under this
Agreement and any such arbitration proceeding, unless the arbitrator(s) shall
determine in their award that Executive has not prevailed with respect to at
least one material claim or issue in such dispute in which case Executive shall
repay any amounts paid or advanced to Executive in connection with such dispute.

 

(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without reference to principles
of conflict of laws.

 

(c) Entire Agreement/Amendments. This Agreement and the instruments contemplated
herein, contain the entire understanding of the parties with respect to the
employment of Executive by the Company from and after the Commencement Date and
supersedes any prior agreements between the Company and Executive with respect
thereto, (but not the terms of, or rights under any equity or benefit plans or
grants existing on the date hereof).

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There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties with respect to the subject matter herein other
than those expressly set forth herein and therein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties
hereto.

 

(d) No Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver of such
party’s rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement. Any such
waiver must be in writing and signed by Executive or an authorized officer of
the Company, as the case may be.

 

(e) Legal and Other Fees and Expenses. Any reasonable costs or expenses arising
out of the execution, interpretation or application of this Agreement or any
term or condition of this Agreement, irrespective of which party incurred such
expense, other than with respect to Section 8 hereof or as covered by Section 11
hereof, shall be the responsibility of the Company; provided, however that
Executive shall repay any amounts paid or advanced to Executive in connection
with a dispute or any litigation if Executive is not the prevailing party with
respect to at least one material claim or issue in such dispute or litigation.
Any reasonable costs or expenses of Executive arising out of a dispute or
litigation regarding the interpretation or application of Section 8 hereof shall
be the responsibility of Executive; provided, however that Company shall
reimburse Executive any amounts paid by Executive in connection with such
dispute or litigation if the Company is not the prevailing party of such dispute
or litigation. The provisions of this subsection shall survive the expiration or
termination of the Agreement and Executive’s employment hereunder.

 

(f) Assignment. This Agreement shall not be assignable by Executive. This
Agreement shall be assignable by the Company only to an entity which is owned,
directly or indirectly, in whole or in part by the Company or by any successor
to the Company or an acquirer of all or substantially all of the assets of the
Company or all or substantially all of the assets of a group of subsidiaries and
divisions of the Company, provided such entity or acquirer promptly assumes all
of the obligations hereunder of the Company in a writing delivered to Executive
and otherwise complies with the provisions hereof with regard to such
assumption. Upon such assignment and assumption, all references to the Company
herein shall be to the assignee entity or acquirer, as the case may be.

 

(g) Successors; Binding Agreement; Third Party Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees legatees and permitted assignees of the parties hereto. In the event of
the Executive’s death while receiving amounts payable pursuant to Section 7(a)
hereof, any remaining amounts shall be paid to Executive’s estate.

 

(h) Communications. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly received (i) on the same business day when faxed or
delivered, personally or by confirmed facsimile transmission prior to 5:00 p.m.
Philadelphia time, (ii) three (3) business days

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after being mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or (iii) one (1) business day after being sent by a
reputable overnight courier, addressed to the respective addresses set forth
below, provided that all notices to the Company shall be directed to the
attention of the person below or to such other address as any party may have
furnished to the other in writing in accordance herewith. Notice of change of
address shall be effective only upon receipt. Notices and all other
communications shall be addressed to each party at its address or facsimile
number set forth below:

 

if to Executive:    Patrick T. Mooney, M.D.      625 Clinton Avenue     
Haddonfield, NJ 08033      Facsimile: with a copy to:    Eckert Seamans Cherin &
Mellott, LLC      1515 Market Street, 9th Floor      Philadelphia, PA 19102     
Attention: John M. McCafferty, Esquire      Facsimile: (215) 851-8383
if to the Company:    Aphton Corporation      80 S.W. 8th Street      Miami, FL
33130      Attention: Chairman of the Board      Facsimile: with a copy to:   
Akerman Senterfitt      One Southeast Third Avenue, 28th Floor      Miami, FL
33131      Attention: Kara L. MacCullough      Facsimile: (305) 374-5095

 

(h) Withholding Taxes. The Company may withhold from any and all amounts payable
under this Agreement such Federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.

 

(i) Survivorship. The respective rights and obligations of the parties
hereunder, including without limitation Section 10 hereof, shall survive any
termination of Executive’s employment to the extent necessary to the agreed
preservation of such rights and obligations.

 

(j) Counterparts. This Agreement may be signed in counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.

 

(k) Headings. The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

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(l) Executive’s Representation. Executive represents and warrants to the Company
that there is no legal impediment to him entering into, or performing his
obligations under this Agreement and neither entering into this Agreement nor
performing his contemplated service hereunder will violate any agreement to
which he is a party or any other legal restriction. Executive further represents
and warrants that in performing his duties hereunder he will not use or disclose
any confidential information of any prior employer or other person or entity.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

APHTON CORPORATION

By:

 

/s/ Robert Basso

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Name:

  Robert Basso

Title:

  Director

 

EXECUTIVE

/s/ Patrick T. Mooney

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Patrick T. Mooney, M.D