exv10w19



 





Exhibit 10.19




EMPLOYMENT AGREEMENT




     The Employment Agreement (the “Agreement”) is made and entered into as of August 28,
2007 (the “Effective Date”) by and between RXi Pharmaceuticals Corporation, a Delaware
corporation (“RXi” or “Employer”), and Stephen J. DiPalma, an individual and
resident of the Commonwealth of Massachusetts (“Employee”).



     WHEREAS, Employer and Employee desire to enter into an employment agreement under which
Employee shall serve on a full-time basis as RXi’s Chief Financial Officer on the terms set forth
in the Agreement, with the term of the Agreement to commence on the Effective Date.



     NOW, THEREFORE, upon the above premises, and in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows.



     1. Engagement. Effective as of the Effective Date, Employer shall employ Employee, and
Employee shall serve, as RXi’s Chief Financial Officer. As a condition to the Employee’s
employment by the Employer, Employee shall execute the Employee Confidentiality, Non-Competition,
and Proprietary Information Agreement, attached hereto as Exhibit 1 (the “Confidentiality
Agreement”).



     2. Duties. Employee shall perform all duties assigned to him by the Employer
faithfully, diligently and to the best of his ability. Such duties include, but are not limited
to, the oversight of the financial matters of the Employer, timely filing of SEC documents,
maintaining timely compliance with SEC and other government rules and regulations (including SOX
compliance), maintaining accurate company accounting, general operations support, business
development and interaction with investors. Employee’s services hereunder shall be rendered
primarily at RXi’s office, except for travel when and as required in the performance of Employee’s
duties hereunder, and those occasions (on average less than one day per week) when the Employee, at
his discretion, works from an off-site location.



     3. Time and Efforts. Employee shall devote all of his business time, efforts,
attention and energies to Employer’s business and the discharge of his duties hereunder, except as
noted on Schedule A, which contains other potential activities of the Employee and disclosed
conflicts of interest.



     4. Compensation. As the total consideration for Employee’s services rendered under the
Agreement, Employer shall pay or provide Employee the following compensation and benefits:



          4.1. Salary. Commencing on the Effective Date, Employee shall be entitled to receive
an annual Base Salary of Two Hundred and Twenty Thousand Dollars ($220,000). Employee shall
receive an annual performance bonus for the achievement of certain company and Employee performance
goals, these goals will be established by the Compensation Committee of the Employer’s Board of
Directors. For 2007, the Employee shall receive a pro rated bonus, based upon the Effective Date.
The bonus for top performance against these goals shall be 30% of the annual Base Salary.



          4.2. Stock Options. At the first regularly scheduled meeting of the Board of
Directors of the Employer following the Effective Date the Employer shall grant Employee stock
options (“Options”) under the RXi Pharmaceuticals 2007 Incentive Plan (the “Plan”) to purchase
100,000 shares. The Options shall vest in quarterly installments over 4 years beginning on the
first quarterly anniversary of the Effective Date of the Agreement provided, in each case, that
Employee remains in the continuous employ of Employer through such quarterly anniversary date.
Each vested



 









 







Option shall (a) be exercisable at an exercise price equal to the fair market value at the time of
granting as determined by Employer’s Board of Directors, (b) have a term of ten years and be
exercisable by Employee at any time during such ten year period, and (c) be on such other terms as
shall be determined by Employer’s Board of Directors (or the Compensation Committee of the Board)
and set forth in a customary form of stock option agreement under the Plan evidencing the Options.
Upon the occurrence of a “Covered Transaction” (as defined in the Plan), the Options shall
thereupon vest in full and become exercisable as to all of the shares covered thereby in accordance
with the terms of the Plan.



          4.3. Expense Reimbursement. Employer shall reimburse Employee for reasonable and
necessary business expenses incurred by Employee in connection with the performance of Employee’s
duties in accordance with Employer’s usual practices and policies in effect from time to time.



          4.4. Vacation. Employee will be entitled to 25 days of paid “time off” (vacation days
plus sick time/personal time) for each full calendar year in accordance with the Company’s policies
from time to time in effect, in addition to holidays observed by the Company (for partial calendar
years, the Employee’s paid “time off” will be pro-rated). Paid time off may be taken at such times
and intervals as the Employee shall determine, subject to the business needs of the Company, and
otherwise shall be subject to the policies of the Company, as in effect from time to time. The
number of paid “time off” days will accrue per pay period and will stop accruing once 20 days have
been reached.



          4.5. Employee Benefits. Employee shall be eligible to participate in any medical
insurance and other employee benefits made available by Employer to all of its employees under its
group plans and employment policies in effect during the term of employment. Employee acknowledges
and agrees that, any such plans or policies now or hereafter in effect may be modified or
terminated by Employer at any time in its discretion.



          4.6. Payroll Taxes. Employer shall have the right to deduct from the compensation and
benefits due to Employee hereunder any and all sums required for social security and withholding
taxes and for any other federal, state, or local tax or charge which may be in effect or hereafter
enacted or required as a charge on the compensation or benefits of Employee.



     5. Termination. The Agreement may be terminated as set forth in this Section 5.



          5.1. Termination by Employer for Cause or Voluntary Resignation. Employer may
terminate Employee’s employment hereunder for Cause upon notice to Employee and Employee may
voluntarily resign his employment hereunder upon notice to Employer. “Cause” for the
purpose of this Agreement shall mean any of the following:



               (a) Employee’s breach of any material term of the Agreement; provided that the first
occasion of any particular breach shall not constitute such Cause unless Employee has failed
to cure such breach within ten (10) days after receiving written notice from Employer
stating the nature of such breach;



               (b) Employee’s conviction of, or plea of guilty or nolo contendere to, any felony or
other crime of moral turpitude;



 









 





               (c) Employee’s act of fraud or dishonesty injurious to Employer or its reputation;



               (d) Employee’s continual failure or refusal to perform his material duties as required
under the Agreement after written notice from Employer stating the nature of such failure or
refusal and affording Employee at least ten days to correct the same;



               (e) Employee’s act or omission that, in the reasonable determination of Employer
indicates alcohol or drug abuse by Employee; or



               (f) Employee’s act or personal conduct that, in the judgment of Employer’s Board of
Directors (or a Committee of the Board), gives rise to a material risk of liability of
Employee or Employer under federal or applicable state law for discrimination, or sexual or
other forms of harassment, or other similar liabilities to subordinate employees.



               (g) Employee’s act or omission that, results in the Company being cited for material
weaknesses or deficiencies in internal controls, needing to restate financial statements
and/or becoming delisted from its then current stock exchange.



          Upon termination of Employee’s employment by Employer for Cause or by Employee due to a
voluntary resignation, all compensation and benefits to Employee hereunder shall cease and Employee
shall be entitled only to payment, not later than three days after the date of termination, of any
accrued but unpaid salary and unused vacation time (only as accrued during the then-current year of
employment), as of the date of such termination.



          5.2. Termination by Employer without Cause. Employer may also terminate Employee’s
employment without Cause upon notice to Employee. Upon termination of Employee’s employment by
Employer without Cause or termination by Employee with Good Reason during the term of employment,
all compensation and benefits to Employee hereunder shall cease and Employee shall be entitled to
payment of: (a) any accrued but unpaid salary and unused vacation time (only as accrued during the
term of employment) as of the date of such termination; (b) six (6) months’ of salary from the date
of termination (the “Severance Period”) in the form of salary continuation; and (c)
continued participation, at Employer’s cost and expense, during the Severance Period in any
Employer-sponsored group benefit plans in which Employee was participating as of the date of
termination.



          5.3. Termination by Employee for Good Reason. The Employee’s employment hereunder may be
terminated by the Employee for Good Reason. For purposes of this Agreement, “Good Reason” shall
mean (i) any material reduction by the Company of the Employee’s compensation or benefits payable
hereunder (it being understood that a reduction of benefits applicable to all employees of the
Company, including the Employee, shall not be deemed a material reduction of the Employee’s
compensation package for purposes of this definition) and/or (ii) any change in the Employee’s
position or title that is not agreeable to the Employee.



          5.4 Death or Disability. Employee’s employment will terminate automatically in
the event of Employee’s death or upon notice from Employer in event of his permanent
disability. Employee’s “permanent disability” shall have the meaning ascribed to
such term in any policy of disability insurance maintained by Employer (or Employee, as the
case may be) with respect to Employee, or if no such policy is then in effect, shall mean
Employee’s inability to fully perform his duties hereunder for any period of at least 75
consecutive days or for a total of 90



 









 







days, whether or not consecutive. Upon termination of Employee’s employment as
aforesaid, all compensation and benefits to Employee hereunder shall cease and Employer
shall pay to the Employee’s heirs or personal representatives, not later than ten days after
the date of termination, any accrued but unpaid salary and unused vacation as of the date of
such termination as required by law.



     6. Equitable Remedies; Injunctive Relief. Employee hereby acknowledges and agrees that
monetary damages are inadequate to fully compensate Employer for the damages that would result from
a breach or threatened breach of the Confidentiality Agreement and, accordingly, that Employer
shall be entitled to equitable remedies, including, without limitation, specific performance,
temporary restraining orders, and preliminary injunctions and permanent injunctions, to enforce
such Section without the necessity of proving actual damages in connection therewith. The
provision shall not, however, diminish Employer’s right to claim and recover damages or enforce any
other of its legal or equitable rights or defenses.



     7. Severable Provisions. The provisions of the Agreement are severable and if any one
or more provisions is determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any partially unenforceable provisions to the extent enforceable, shall
nevertheless be binding and enforceable.



     8. Successors and Assigns. The Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns and Employee and his heirs and representatives;
provided, however, that neither party may assign the Agreement without the prior written consent of
the other party.



     9. Entire Agreement. The Agreement including Schedule A and Exhibit 1 contains the
entire agreement of the parties relating to the subject matter hereof, and the parties hereto have
made no agreements, representations or warranties relating to the subject matter of the Agreement
that are not set forth otherwise therein or herein. Except as expressly provided herein, the
Agreement supersedes any and all prior or contemporaneous agreements, written or oral, between
Employee and Employer relating to the subject matter hereof. Any such prior or contemporaneous
agreements are hereby terminated and of no further effect, and Employee, by the execution hereof,
agrees that any compensation provided for under any such agreements is specifically superseded and
replaced by the provisions of the Agreement.



     10. Amendment. No modification of the Agreement shall be valid unless made in
writing, approved by the Compensation Committee and signed by the parties hereto and unless such
writing is made by an executive officer of Employer (other than Employee). The parties hereto
agree that in no event shall an oral modification of the Agreement be enforceable or valid.



     11. Governing Law. The Agreement is and shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the choice-of-law rules
of Massachusetts.



     12. Notice. All notices and other communications under the Agreement shall be in
writing and mailed, telecopied (in case of notice to Employer only) or delivered by hand or by a
nationally recognized courier service guaranteeing overnight delivery to a party at the following
address (or to such other address as such party may have specified by notice given to the other
party pursuant to the provision):



 









 




If to Employer:



RXi Pharmaceuticals Corp.

One Innovation Drive

Worcester, MA 01605



If to Employee:





Though company e-mail or company regular mail box if employed by Company or if not employed:


Steve
DiPalma

12 Deer Path

Natick, MA 01760




     13. Survival. Sections 6 through 15 shall survive the expiration or termination of
the Agreement.



     14. Counterparts. The Agreement may be executed in counterparts, each of which shall
be deemed to be an original and all of which together shall be deemed to be one and the same
agreement.



     15. Attorney’s Fees. In any action or proceeding to construe or enforce any provision
of the Agreement the prevailing party shall be entitled to recover its or his reasonable attorneys’
fees and other costs of suit in addition to any other recoveries.



IN WITNESS WHEREOF, the Agreement is executed as of the day and year first above written.




	 	 	 	 	 
	 	EMPLOYER





RXi Pharmaceuticals Corporation

 	 
	 	By:  	/s/ Tod Woolf 	 
	 	 	Tod Woolf 	 
	 	 	Chief Executive Officer
RXi Pharmaceuticals Corporation 	 
	 





	 	 	 	 	 
	EMPLOYEE

 	 	 
	/s/ Stephen DiPalma	 	 
	Stephen DiPalma, MBA	 	 
	 	 	 
	 







 









 








Schedule A





	I.	 	Potential consulting activities. As of the Effective Date, the Employee is
providing professional services to another company, whose business is unrelated to the
Employer’s business and which presents no conflict of interest for the Employee, and the
Employee may desire to continue this relationship on a part-time basis. The Employer
acknowledges this pre-existing relationship and agrees that the Employee may continue to
provide professional services to this company, on a part-time basis and provided this
activity does not materially interfere with the performance of the Employee’s duties
hereunder.






	II.	 	Potential participation on the Board of Directors of other companies. The
Employee has had significant involvement with Boards in the past, including as a Director
or Trustee, and may desire to seek appointment to an outside Board in the future. If so,
the Employee will inform the Employer that he is contemplating an outside Board position
and request approval to pursue such an opportunity, and the Employer agrees to give
consider this request in good faith.




 









 





Exhibit 1




RXi Pharmaceuticals Corporation




EMPLOYEE CONFIDENTIALITY, NON-COMPETITION, AND

PROPRIETARY INFORMATION AGREEMENT




     AGREEMENT, effective as of August 28, 2007, between RXi Pharmaceuticals Corporation, a
Delaware corporation (the “Company”), and Steve DiPalma (the “Employee”).


1. Employee will make full and prompt disclosure to the Company of all inventions, improvements,
modifications, discoveries, methods, technologies, biological materials, and developments, and all
other materials, items, techniques, and ideas related directly or indirectly to the business of the
Company (all of which are collectively termed “Intellectual Property” hereinafter), whether
patentable or not, made or conceived by Employee or under Employee’s direction during Employee’s
employment with the Company, whether or not made or conceived during normal working hours, or on
the premises of the Company.



2. Employee agrees that all Intellectual Property, as defined above, shall be the sole property of
the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents
and other rights in connection therewith. Employee hereby assigns to the Company any rights
Employee may have or acquire in all Intellectual Property and all related patents, copyrights,
trademarks, trade names, and other industrial and intellectual property rights and applications
therefore, in the United States and elsewhere. Employee further agrees that with regard to all
future developments of Intellectual Property, Employee will assist the Company in every way that
may be reasonably required by the Company (and at the Company’s expense) to obtain and, from time
to time, enforce patents on Intellectual Property in any and all countries that the Company may
require, and to that end, Employee will execute all documents for use in applying for and obtaining
such patents thereon and enforcing the same, as the Company may desire, together with any
assignment thereof to the Company or persons designated by the Company, and Employee hereby
appoints the Company as Employee’s attorney to execute and deliver any such documents or
assignments requested by the Company. Employee’s obligation to assist the Company in obtaining and
enforcing patents for Intellectual Property in any and all countries shall continue beyond the
termination of Employee’s employment with the Company, but the Company shall compensate Employee at
a reasonable, standard hourly rate following such termination for time directly spent by Employee
at the Company’s request for such assistance.



3. Employee hereby represents that Employee has no continuing obligation to assign to any former
employer or any other person, corporation, institution, or firm any Intellectual Property as
described above. Employee represents that Employee’s performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any agreement to keep in
confidence proprietary information acquired by Employee, in confidence or in trust, prior to
Employee’s employment by the Company. Employee has not entered into, and Employee agrees not to
enter into, any agreement (either written or oral), which would put Employee in conflict with this
Agreement.




 









 







4. Employee agrees to assign to the Company any and all copyrights and reproduction rights to any
material prepared by Employee in connection with this Agreement and/or developed during the term of
Employee’s employment with the Company.



5. Employee understands and agrees that a condition of Employee’s employment and continued
employment with the Company is that Employee has not brought and will not bring to the Company or
use in the performance of Employee’s duties at the Company any materials or documents rightfully
belonging to a former employer which are not generally available to the public.



6. Employee recognizes that the services to be performed by Employee hereunder are special, unique,
and extraordinary and that, by reason of Employee’s employment with the Company, Employee may
acquire Confidential Information (as hereinafter defined) concerning the operation of the Company,
the use or disclosure of which would cause the Company substantial loss and damage which could not
be readily calculated and for which no remedy at law would be adequate. Accordingly, Employee
agrees that Employee will not (directly or indirectly) at any time, whether during or after
Employee’s employment with the Company:





(i) knowingly use for personal benefit or for any other reason not authorized by the
Company any Confidential Information that Employee may acquire or has acquired by
reason of Employee’s employment with the Company, or;




(ii) disclose any such Confidential Information to any person or entity except (A) in the
performance of Employee obligations to the Company hereunder, (B) as required by a court of
competent jurisdiction, (C) in connection with the enforcement of Employee rights under this
Agreement, or (D) with the prior consent of the Board of Directors of the Company.



     As used herein, “Confidential Information” includes information with respect to the facilities
and methods of the Company, reagents, chemical compounds, cell lines or subcellular constituents,
organisms, or other biological materials, trade secrets, and other Intellectual Property, systems,
patents and patent applications, procedures, manuals, confidential reports, financial information,
business plans, prospects, or opportunities, personnel information, or lists of customers and
suppliers; provided, however, that Confidential Information shall not include any information that
is known or becomes generally known or available publicly other than as a result of disclosure by
Employee which is not permitted as described in clause (ii) above, or the Company discloses same to
others without obtaining an agreement of confidentiality.



     Employee confirms that all Confidential Information is the exclusive property of the Company.
All business records, papers, documents and electronic materials kept or made by Employee relating
to the business of the Company which comprise Confidential Information shall be and remain the
property of the Company during the Employee’s employment and at all times thereafter. Upon the
termination, for any reason, of Employee’s employment with the Company, or upon the request of the
Company at any time, Employee shall deliver to the Company, and shall retain no copies of any
written or electronic materials, records and



 









 







documents made by Employee or coming into Employee’s possession concerning the business or affairs
of the Company and which comprise Confidential Information.


7. During the term of Employee’s employment with the Company (the “Restricted Period”), the
Employee shall not directly or indirectly, for Employee’s own account or for the account of others,
as an officer, director, stockholder (other than as the holder of less than 1% of the outstanding
stock of any publicly traded company), owner, partner, employee, promoter, consultant, manager or
otherwise participate in the promotion, financing, ownership, operation, or management of, or
assist in or carry on through proprietorship, a corporation, partnership, or other form of business
entity which is in competition with the Company within the United States or any other country in
which the Company is conducting or is actively seeking or planning to conduct business as of the
date of such termination.




     During the Restricted Period, the Employee shall not, whether for Employee’s own account or
for the account of any other person (excluding the Company):




	 	(i)	 	solicit or contact in an effort to do business with any person who was or is a
customer of the Company during the term of this Agreement or after its termination, or
any affiliate of any such person, if such solicitation or contact is for the purpose of
competition with the Company; or
	 
	 	(ii)	 	solicit or induce any of the Company’s employees to leave their employment with
the Company or accept employment with anyone else, or hire any such employees or
persons who were employed by the Company during the preceding twelve (12) months.





     Nothing herein shall prohibit or preclude the Employee from performing any other types of
services that are not precluded by this Section 7 for any other person.



     Employee has carefully read and considered the provisions of this Section 7 (including the
Restricted Period, scope of activity to be restrained, and the restriction’s geographical scope)
and concluded them to be fair, appropriate and reasonably required for the protection of the
legitimate business interests of the Company, its officers, directors, employees, creditors, and
shareholders. Employee understands that the restrictions contained in this Section may limit
Employee’s ability to engage in a business similar to the Company’s business, but acknowledges that
Employee will receive adequate and affluent remuneration and other benefits from the Company
hereunder to justify such restrictions.



     The Employee shall give prompt notice to the Company of the Employee’s acceptance of
employment or other fees for services relationship during the Restricted Period, which notice shall
include the name of, the business of, and the position that Employee shall hold with such other
employer.



 









 




8. In the event that Employee’s employment is transferred by the Company to a subsidiary,
affiliated company, or acquiring company (as the case may be), Employee’s employment by such
company will, for the purpose of this Agreement, be considered as continued employment with the
Company, unless Employee executes an agreement, substantially similar in substance to this
Agreement, and until the effective date of said agreement in any such company for which Employee
becomes employed. It is further agreed that changes in Employee’s position or title unless
expressly agreed to in writing will operate to terminate this Agreement without Cause .



9. Upon termination of Employee’s employment for any reason, unless such employment is transferred
to a subsidiary, affiliated or acquiring company of the Company, Employee agrees to leave with, or
return to, the Company all records, drawings, notebooks, and other documents pertaining to the
Company’s Confidential Information, whether prepared by Employee or others, as well as any
equipment, tools or other devices owned by the Company, that are then in Employee’s possession,
however such items were obtained, and Employee agrees not to reproduce or otherwise retain any
document or data relating thereto.



10. Employee obligations under this Agreement shall survive the termination of Employee’s
employment with the Company regardless of the manner of, and reason for, such termination, and
shall be binding upon Employee’s heirs, executors, and administrators.



11. Prior to entering the employ of the Company, Employee has lawfully terminated employment with
all previous employers. Subject to paragraph 6 of the Employment Agreement, Employee acknowledges
that this Agreement does not constitute a contract of employment for a term and does not otherwise
imply that the Company will continue his or her employment for any period of time. Employee
further understands and agrees that no license to any of the Company’s trademarks, patents,
copyrights or other proprietary rights is either granted or implied by Employee’s access to and
utilization of the Confidential Information or Intellectual Property.



12. No delay or omission by the Company in exercising any right under this Agreement will operate
as a waiver of that or any other right. A waiver or consent given by the Company on any one
occasion is effective only in that instance and will not be construed as a bar to or waiver of any
right on any other occasion.



13. Employee agrees that in addition to any other rights and remedies available to the Company for
any breach or threatened breach by Employee of Employee’s obligations hereunder, the Company shall
be entitled to enforcement of Employee’s obligations hereunder by whatever means are at the
Company’s disposal, including court injunction.



14. The Company may assign this Agreement to any other corporation or entity which acquires
(whether by purchase, merger, consolidation or otherwise) all or substantially all of the business
and/or assets of the Company. Employee shall have no rights of assignment.




 









 







15. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable, then
such provision shall be enforceable to the extent that a court deems it reasonable to enforce such
provision. If such provision shall be unreasonable to enforce to any extent, such provision shall
be severed and all remaining provisions shall continue in full force and effect.



16. This Agreement shall be effective as of the date first written above.



17. This Agreement shall be governed in all respects by the laws of the Commonwealth of
Massachusetts. Each of the Company and Employee (a) hereby irrevocably submits to the exclusive
jurisdiction of the state courts of The Commonwealth of Massachusetts or the United States District
Court located in The Commonwealth of Massachusetts for the purpose of any action between the
Company and Employee arising in whole or in part under or in connection with this Agreement, (b)
hereby waives, to the extent not prohibited by applicable law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that its property is exempt or immune from
attachment or execution, that any such action brought in one of the above-named courts should be
dismissed on grounds of forum non conveniens, should be transferred or removed to any court other
than one of the above-named courts, or should be stayed by reason of the pendency of some other
proceeding in any other court other than one of the above-named courts, or that this Agreement or
the subject matter hereof may not be enforced in or by such court, and (c) hereby agrees not to
commence any such action other than before one of the above-named courts. Notwithstanding the
previous sentence, the Company or Employee may commence any action in a court other than the
above-named courts solely for the purpose of enforcing an order or judgment issued by one of the
above-named courts.



IN WITNESS WHEREOF, Employee has executed this Agreement under seal as of the date set forth above:




	 	 	 	 	 
	BY: 

	 	/s/ Steve DiPalma
 

	 	 





Name of Employee: Steve DiPalma




ACCEPTED AND AGREED TO:



RXi Pharmaceuticals Corporation




	 	 	 	 	 
	BY: 

	 	/s/ Tod Woolf
 

	 	 






Name: Tod Woolf




Title: President and CEO