Exhibit 10.17

 

EMPLOYMENT AGREEMENT

 

This AGREEMENT dated September 1, 2004

 

BETWEEN

 

STRESSGEN BIOTECHNOLOGIES INC. (a Delaware corporation) and STRESSGEN
BIOTECHNOLOGIES CORPORATION (a Yukon corporation) having an office at 350 – 4243
Glanford Avenue, Victoria, British Columbia

 

(collectively, the “Employer”)

 

AND:

 

DAN KORPOLINSKI, residing at 935 Sarena, Waterford, Michigan, USA, 48327

 

(the “Executive”)

 

WITNESSES THAT WHEREAS:

 

A.                                                                                  
The Executive has been employed by the Employer pursuant to a contract of
employment dated March 8, 2000 and that Agreement, as amended, expires on
August 31, 2004;

 

B.                                                                                    
The Employer wishes to continue to employ the Executive; and

 

C.                                                                                    
The Executive has agreed to the terms and conditions of employment herein.

 

THEREFORE in consideration of the covenants and agreements herein, and for other
good and valuable consideration given by each party hereto to the other, the
receipt and sufficiency of which are hereby acknowledged by each of the parties,
the parties hereby agree as follows:

 

1.                                                                                     
EMPLOYMENT.

 

1.1                               Position.  StressGen Biotechnologies Inc.
(“StressGen U.S.”) agrees to employ the Executive as President and Chief
Executive Officer of its operations in the United States and of StressGen
Biotechnologies Corporation (“StressGen Corp.”).

 

1.2                               Director.  The Executive shall serve, subject
to ongoing shareholder approval, as a Director of StressGen Corp. upon the terms
and conditions set out herein.

 

1.3                               Service.  During the term the Executive shall:

 

(a)                                  well and faithfully serve the Employer and
use his best efforts to promote the best interests of the Employer;

 

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(b)                                  unless prevented by ill health or injury,
devote the whole of his working time and attention to the business of the
Employer; and

 

(c)                                  not, without the prior written consent of
the Employer, which consent may be withheld in the sole discretion of the
Employer, engage in any other business, profession or occupation, or become an
officer, director, employee, contractor for service, agent or representative of
any other corporation, partnership, firm, person, organization or enterprise.

 

1.4                               Term.  The term of this Agreement shall
commence on the date of this Agreement and shall continue until it and the
Executive’s employment are terminated in accordance with section 4 or 5 of this
Agreement.

 

1.5                               Location of Employment.  The Executive shall
be based in San Diego, CA., but shall be required to travel to the offices of
StressGen Corp. in Victoria, BC as needed to perform his duties and obligations
under this Agreement.  In the event that the Employer relocates its operations,
the Executive agrees to relocate as required by the Board of Directors of
StressGen Corp. to any location in the United States.

 

2.                                                                                     
COMPENSATION AND BENEFITS.  During the Executive’s employment with the Employer,
the Employer shall pay to the Executive the compensation and provide the
benefits as set out in Schedule A, which sets out completely the compensation
and benefits entitlement of the Executive.

 

3.                                                                                     
EXPENSES.  The Executive shall be reimbursed by the Employer for all reasonable
expenses incurred in connection with his employment, including business travel. 
The Executive’s expenses shall be reviewed and approved by the Chairperson of
the Audit Committee of the Board of Directors of StressGen Corp. at least once
per quarter.  In the event, StressGen Corp. or a successor relocates its offices
from Victoria, British Columbia, the Employer shall reimburse the Executive for
the reasonable costs of relocating to that new location.

 

4.                                                                                     
TERMINATION OF AGREEMENT AND EMPLOYMENT.

 

4.1                               Termination by Executive. The Executive may
terminate his employment with the Employer by giving not less than 90 days
written notice of resignation to the Employer.  At the time the Executive
provides the Employer with notice of resignation, or at any time thereafter, the
Employer shall have the right to elect to terminate the Executive’s employment
at any time prior to the effective date of the Executive’s resignation, and upon
such election, shall provide to the Executive a lump sum equal to ninety days
Base Salary or to such proportion of the ninety days that remain outstanding at
the time of the election and shall continue to provide all medical and
healthcare benefits that the Employer is permitted or able to provide under the
applicable rules of the relevant plans for the lesser of ninety days or the
period of time that remains outstanding at the time of the Employer’s election. 
Upon such election being made by the Employer, the Executive shall not be
entitled to any further Annual Bonus, participation in the Executive Bonus Plan
or vesting of stock options. Upon the effective date of the Executive’s

 

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resignation, the Employer shall not be obligated to make any further payments
under this Agreement

 

4.2                               Termination by Employer.  The Employer may
terminate the employment of the Executive by providing the Executive with, in
lieu of reasonable notice, a severance package equivalent to 18 months Average
Salary, as that term is defined herein, payable in equal monthly installments
commencing on the 15th day of the month following the termination of employment
(the “Severance Period”).  The Employer shall continue to provide all medical
and health care benefits and all other benefits that it is permitted or able to
provide under the applicable rules of the relevant plans during the Severance
Period.  The Employer will also reimburse the Executive for any premiums paid by
the Executive (up to a maximum of US$6,600 per annum) for supplemental life
insurance during the Severance Period.  The Executive acknowledges that the
Employer will not continue any long term disability insurance during the
Severance Period.  The Executive also acknowledges that all vested stock options
granted to the Executive by the Employer must be exercised in accordance with
the terms of the StressGen Corp. stock option plan within 6 months from the date
of termination.  The Executive agrees that the compensation payable pursuant to
this section 4.2 shall be the maximum compensation to which the Executive is
entitled in lieu of reasonable notice, and the Employer will have no further
obligations to the Executive with respect to the termination of this Agreement
including, without limitation, further severance pay or damages.

 

4.3                               Average Salary.  For the purposes of
section 4.2 of this Agreement, the Executive’s Average Salary shall be the
amount of Base Salary set out in Schedule A to this Agreement plus an average of
the Annual Bonus, as set out in Schedule A to this Agreement, if any, for the
preceding three fiscal years, but shall not include the amount of any Special
Bonus payable under section 6 of this Agreement.

 

4.4                               Termination by Death or Permanent Incapacity. 
The Employer’s obligation to the Executive and the Executive’s obligations to
the Employer pursuant to this Agreement shall terminate upon the Executive’s
death or permanent incapacity.  For the purposes of this section 4.4, the
Executive shall be deemed to have suffered permanent incapacity when the
Executive suffers from any illness or injury that prevents him from performing
his usual employment duties for a period of 12 consecutive months.  Where the
employment of the Executive is terminated under this section 4.4, the Employer
shall be under no obligation to provide the Executive with any further notice of
termination or pay in lieu of notice or any other form of pay or damages. The
Executive acknowledges and agrees that given the nature of the Employer’s
business and the critical importance of his position to the operations of the
Employer, it would constitute an unreasonable accommodation on the part of the
Employer to operate without the services of the Executive for a period in excess
of 12 months.  Furthermore, the Executive acknowledges that it would be
impractical for the Employer to hire a replacement for the Executive, unless the
replacement is hired on a permanent basis.

 

4.5                               Termination by the Employer for Just Cause. 
Notwithstanding any other provision of this Agreement, the Employer may on
written notice to the Executive immediately terminate this Agreement and the
Executive’s employment with the Employer at any time for cause, without notice
or pay in lieu of notice or any other form of compensation, severance pay or
damages.

 

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4.6                               Directorship and Offices.  Upon the
termination of his employment with the Employer, the Executive shall immediately
resign any directorship or office held in the Employer or any parent, subsidiary
or affiliated companies of the Employer and, except as provided in this
Agreement, the Executive shall not be entitled to receive any written notice of
termination or payment in lieu of notice, or to receive any severance pay,
damages or compensation for loss of office or otherwise, by reason of the
resignation or resignations referred to in this section 4.6.  On termination of
employment with the Employer, the Executive shall immediately relinquish all
shares or stock and all equity interests which may be held by the Executive as a
nominee for or on behalf of the Employer or any parent, subsidiary or affiliated
companies of the Employer.

 

5.                                                                                     
CHANGE OF CONTROL.

 

5.1                               Termination By Employer.  Provided that this
Agreement has not been terminated pursuant to section 4 of this Agreement, in
the event that within the 12-month period immediately following a Change of
Control (as defined in section 5.2 of this Agreement), any of the following
occur:

 

(a)                                  the Executive is placed in a position of
lesser stature than that of President and Chief Executive Officer; is assigned
duties inconsistent with such position or duties which, if performed, would
result in a significant change in the nature or scope of powers, authority,
functions or duties inherent in such position immediately prior to the Change of
Control; is assigned performance requirements or working conditions which are at
variance with the performance requirements and working conditions in effect
immediately preceding the Change of Control; or is accorded treatment on a
general basis that is in derogation of his status as President and Chief
Executive Officer; or

 

(b)                                  any requirement of the Company that the
location at which the Executive performs his principal duties be outside a
radius of 100 miles from the location at which the Executive performs such
duties immediately before the Change of Control;

 

then, at the Executive’s election, of which the Executive shall advise the
Employer, by notice in writing within 12 months of the Change of Control, this
Agreement shall be deemed to have been terminated by the Employer and the
Employer will, immediately upon such termination, pay to the Executive an amount
equal to his Average Salary (as that term is defined in section 4.3 of this
Agreement) for 18 months.  In addition, all Options held by the Executive shall
vest immediately and the Executive shall have six months to exercise the
Options. The Employer shall continue to provide all medical and health care
benefits and all other benefits that it is permitted or able to provide under
the applicable rules of the relevant plans for a period of 18 months from the
date of the Executive’s election following a Change of Control.  The Employer
will also reimburse the Executive the premium (up to a maximum of US$6,600 per
annum) for supplementary life insurance for a period of 18 months following the
date of the Executive’s election following the Change of Control. The Executive
acknowledges that the Employer will not continue long term disability insurance
following his election to terminate his employment

 

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pursuant to this section 5.1. The Executive further agrees that compensation
payable pursuant to this section 5.1 is in lieu of the severance package payable
under section 4.2 of this Agreement and shall be the maximum compensation to
which the Executive is entitled to receive in lieu of reasonable notice, and the
Employer will have no further obligations to the Executive with respect to the
termination of this Agreement or his employment, including, without limitation,
further severance pay or damages.

 

5.2                               Change of Control.  For the purposes of this
agreement, a “Change of Control” shall be deemed to have occurred upon the
acquisition, directly or indirectly, of more than 50% of the issued voting
shares of the Employer by a purchaser or a group of purchasers related to or
acting jointly or in concert with each other (within the meaning of the
Securities Act of British Columbia).

 

6.                                                                                     
SPECIAL BONUS.

 

6.1                               Special Bonus.  Upon the acquisition, directly
or indirectly of more than 50% of the issued voting shares of StressGen Corp. by
a purchaser or a group of purchasers related to and acting jointly or in concert
with each other (within the meaning of the Securities Act (British Columbia) or
upon the Employer obtaining certain financing milestones, the Employer may pay
to the Executive a special bonus, as agreed between the Employer and the
Executive.

 

7.                                                                                     
CONFIDENTIALITY.

 

7.1                               Non-Disclosure of Information of the
Employer.  During the term of this Agreement and thereafter the Executive shall
keep confidential all information of a confidential or proprietary nature
concerning the Employer, its subsidiaries and affiliates and their respective
operations, assets, finances, businesses and affairs and shall not use that
information for the Executive’s personal advantage or the advantage of any third
party, provided that nothing herein shall prevent disclosure of information
which is publicly available or which is required to be disclosed under
applicable law or legal process (“Confidential Information”).  For greater
certainty, Confidential Information shall include, but not be limited to, all
documents and records, whether original, duplicated, computerized, memorized,
handwritten or in any other form, and all information contained therein relating
to the business, intellectual property, technology and know how of the Employer.

 

7.2                               Return of Records and Employer Property.  The
Executive shall at any time upon request by the Employer, or upon the
termination of his employment with the Employer, irrespective of the time,
manner or cause of the termination of the Executive’s employment by the
Employer, promptly return to the Employer all records, files, lists, drawings,
documents, models, equipment, software, intellectual property, know how and any
other property belonging to the Employer or relating to the Employer’s business.

 

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8.                                                                                     
RESTRICTED ACTIVITIES.  During the term of this Agreement and for a period of 12
months after the termination thereof irrespective of the time, manner or cause
of the termination of the Executive’s employment by the Employer, the Executive
shall not, directly or indirectly:

 

(1)                                 solicit, divert, or take away from the
Employer any client or account of the Employer or assist any other person,
corporation or partnership to do so;

 

(2)                                 solicit or encourage any employee of the
Employer to terminate his employment with the Employer or assist any other
person, corporation or partnership to do so; or

 

(3)                                 offer employment to any employee of the
Employer.

 

9.                                                                                     
EXECUTIVE COOPERATION AND ASSISTANCE.  The Executive agrees that he shall, both
during the term of this Agreement and thereafter, fully co-operate with and
assist the Employer in the resolution of complaints, claims or disputes against
the Employer, including without limitation civil, criminal or regulatory
proceedings.

 

10.                                                                              
ENFORCEMENT.  The Executive acknowledges and agrees that the covenants and
obligations under this Agreement are reasonable, necessary and fundamental to
the protection of the Employer’s business interests, and the Executive
acknowledges and agrees that any breach of this Agreement by the Executive would
result in irreparable harm to the Employer and loss and damage to the Employer
for which the Employer could not be adequately compensated by an award of
monetary damages.  Accordingly, the Executive acknowledges and agrees that in
the event of any breach or threatened breach of any provision of this Agreement
by the Executive, the Employer shall, in addition to any and all remedies
available to the Employer at law or in equity, be entitled as a matter of right
to judicial relief by way of a restraining order, interim, interlocutory or
permanent injunction or an order for specific performance as may be necessary to
ensure that the Executive complies with and performs his obligations under this
Agreement.

 

11.                                                                              
SEVERABILITY.  Should any part of this Agreement be declared or held to be
invalid for any reason, the invalidity shall not affect the validity of the
remainder of this Agreement which shall continue in full force and effect and be
construed as if this Agreement had been executed without the invalid portion,
and it is hereby declared the intention of the parties that this Agreement would
have been executed without reference to any portion that may, for any reason, be
hereafter declared or held invalid.

 

12.                                                                              
SURVIVAL.  The Employer and the Executive expressly acknowledge and agree that
the provisions of this Agreement, which by their express or implied terms extend
beyond the termination of the Executive’s employment hereunder, or beyond the
termination of this Agreement, shall continue in full force and effect
notwithstanding the termination of the Executive’s employment or the termination
of this Agreement for any reason.

 

13.                                                                              
ENTIRE AGREEMENT AND AMENDMENTS.  The provisions herein constitute the entire
agreement between the parties and supersede all previous communications,
representations and agreements, whether oral or written, between the parties
with respect to the

 

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subject matter hereof.  This Agreement may not be amended or modified except by
written instrument signed by the Employer and the Executive.

 

14.                                                                              
GOVERNING LAW.  This Agreement shall be governed by and interpreted exclusively
in accordance with the laws of British Columbia, and the courts of British
Columbia shall have the exclusive jurisdiction over this Agreement and any claim
or dispute arising under it.

 

15.                                                                              
ENUREMENT.  This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, personal representatives and permitted assigns.

 

16.                                                                              
ASSIGNMENT OF RIGHTS.  The Employer shall have the right to assign this
Agreement to another party.  The Executive shall not assign his rights under
this Agreement or delegate to others any of his functions and duties under this
Agreement without the express written consent of the Employer which may be
withheld in its sole discretion.

 

17.                                                                              
AFFILIATED CORPORATIONS.  The Executive acknowledges and agrees that all of the
Executive’s covenants and obligations to the Employer, as well as the rights of
the Employer under this Agreement, shall run in favour of and shall be
enforceable by the parent, subsidiary and affiliated companies of the Employer.
The Executive acknowledges that notwithstanding references in this Agreement to
the parent, subsidiary and affiliated companies of the Employer, this Agreement
is between the Executive and the Employer and there are no other parties to the
Agreement. The Executive shall have no right to enforce this Agreement against
any party other than the Employer unless this Agreement is assigned to any
entity in accordance with section 14 of this Agreement.

 

18.                                                                              
EMPLOYMENT STANDARDS.  In the event that the minimum standards in the Employment
Standards Act, R.S.B.C. 1996, c. 113, or any other employment standards
legislation that may be applicable, are more favourable to the Executive in any
respect, including but not limited to the provisions herein in respect to notice
of termination or vacation entitlement, the provisions of the Employment
Standards Act, or such other applicable employment standards legislation, shall
apply.

 

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19.                                                                              
LEGAL ADVICE.  The Executive acknowledges that it was recommended to him by the
Employer that he obtain independent legal advice before executing this Agreement
and that by executing this Agreement the Executive represents that he did obtain
independent legal advice.

 

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

 

STRESSGEN BIOTECHNOLOGIES INC.

 

STRESSGEN BIOTECHNOLOGIES CORP.

 

 

 

Per:

 

Per:

 

 

 

 

 

 

(signed Gregory M. McKee)

 

(signed Ian Lennox, Chairman of the Board)

 

 

 

 

 

 

 

 

 

Executed by Dan Korpolinski in the)

)

 

presence of:)

)

 

 

)

 

 

)

 

(signed Gregory M. McKee))

)

 (signed Daniel L. Korpolinski)

 

Witness)

) DAN KORPOLINSKI

 

)

 

 

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SCHEDULE A

 

Salary

 

The Employer shall pay to the Executive an annual salary of U.S.$395,000 (the
“Base Salary”), less applicable statutory deductions, paid in equal semi-monthly
increments.

 

The Executive shall also be eligible to receive additional incentive
compensation of up to 40% of the Base Salary in respect of any 12 month period
if he meets individual objectives on targets to be established by the Employer
in consultation with the Executive (the “Annual Bonus”).

 

Benefits

 

A.                                   Fringe Benefits

 

The Executive shall be eligible to participate in the Executive Benefit Plan of
StressGen U.S.  The benefits provided to the Executive may be subject to change
from time to time at the sole discretion of the Employer.

 

The Employer shall also provide the Executive with appropriate long term
disability insurance and the opportunity to participate in a 401K plan of
StressGen U.S.

 

The Employer shall reimburse the Executive up to U.S.$6,600 for additional
supplemental life insurance obtained by the Executive.

 

B.                                     Stock Options

 

The Employer may from time to time grant to the Executive options to purchase
common shares of StressGen Corp. (the “Options”).  The number of Options and the
terms under which those Options shall vest shall be determined by the sole
discretion of the Board of Directors of StressGen Corp.  The terms by which the
Executive may be granted Options, including without limitation, the exercise
price of those Options, are subject to the approval of all applicable regulatory
authorities, including the Toronto Stock Exchange, and are subject to the terms
and conditions of StressGen Corp.’s stock option plan.

 

C.                                     Tax Compensation

 

The Employer shall indemnify the Executive for the difference between the amount
of tax charged on all amounts payable under this Agreement or the exercise of
any stock options by the governments of Canada and the Province of British
Columbia and the applicable taxation rates that would have been charged on those
payments or the exercise of those stock options by the governments of the United
States of America or the State of California, provided that such difference has
been determined after consultation with the Employer’s auditors or another tax
advisor acceptable to both the Executive and the Employer and the Canadian and
British Columbian tax is payable as a result of the Executive’s performance of
his duties hereunder in the normal course.

 

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