**Exhibit10.5**

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT madeas of the 17th day of November, 2003 between Maxim Pharmaceuticals, Inc.(“Company”) and Larry G. Stambaugh (“Executive”).

 

PreliminaryStatement

 

WHEREAS, the Companywishes to retain the Executive as Chairman of the Board of Directors, Presidentand Chief Executive Officer of the Company, and the Executive wishes tocontinue in such positions, all on the terms and conditions set forth in thisAgreement;

 

NOW, THEREFORE, inconsideration of the premises, and for other good and valuable consideration,the Company and the Executive agree as follows:

 

1.                                       Termof Agreement.  This Agreement shallcommence on October 1, 2003 and shall continue in effect until terminatedpursuant to Section 5 hereof.

 

2.                                       Positionand Duties.  Except as may otherwisebe agreed upon between the Company and the Executive, the Company agrees toemploy the Executive, and the Executive agrees to serve the Company, asChairman of the Board of Directors, President and Chief Executive Officer.  The Executive shall render such services tothe Company as are customary for such positions and perform all other servicesincident thereto.  At all times, the Executiveshall report directly to the Board of Directors of the Company.  The Executive shall devote substantially allof his working time and efforts to the business and affairs of the Company,except for time spent for service on the boards of directors of othercorporations, vacations as defined by Company policy and civic and charitableactivities, and shall represent the Company within its industry.

 

3.                                       Placeof Performance.  In connection withhis employment by the Company, the Executive shall, except as the Executive mayotherwise agree, perform his principal activities at the offices of the Companylocated in San Diego, California, subject to travel reasonably required for theCompany’s business.

 

4.                                       Compensationand Related Matters.

 

4.1                                 BaseSalary.  During the Term, theCompany shall pay to the Executive, in approximately equal installments notless often than twice per month, a base salary of not less than $450,000 peryear and such base salary shall

 

----

 

be subject to increase,but not reduction, from time to time based upon recommendations from theCompensation Committee to the Board of Directors.  All amounts payable to the Executive pursuant to this Agreementshall be paid subject to such reporting and withholding requirements, if any,as may be imposed by applicable law and applicable Company policy.

 

4.2           Incentive Plan.  The Executive shall be eligible to receivebonus payments pursuant to a plan to be prepared by the Company’s Board ofDirectors with the Executive’s participation (“Bonus Plan”).  The Bonus Plan shall provide that, assumingreasonable satisfaction of the performance criteria to be set forth in theBonus Plan, the Executive shall be eligible to earn an annual bonus withrespect to each of the Company’s fiscal years during the Term in an amount upto 35% of the Executive’s annualized base salary hereunder, such bonus to bepayable within ninety days after the end of each such fiscal year.  The bonus will be based upon the annualizedbase salary for the year in which the bonus applies.

 

4.3                                 BenefitPlans and Arrangement.  TheExecutive shall be entitled to participate in and receive benefits under theCompany’s employee benefit plans and arrangements in effect during theTerm.  The Company shall pay the entirecost of the Executive’s health, life and disability insurance coverage underthe Company’s plans and policies during the Term, notwithstanding anything tothe contrary in such plans and policies.

 

4.4                                 Perquisites.  During the Term, the Executive shall beentitled to receive fringe benefits ordinarily and customarily provided by theCompany to its senior officers.

 

4.5                                 Expenses.  The Company shall promptly reimburse theExecutive for all normal out-of-pocket expenses related to the Company’sbusiness actually paid or incurred by him in the performance of his servicesunder this Agreement.

 

5.                                       Termination.  The Executive’s employment hereunder may beterminated under the following circumstances (without impairing the Executive’srights under benefit plans and arrangements and the Company’s policies andprocedures):

 

5.1                                 TerminationUpon Death or Permanent Disability. The Term shall automatically terminate in the event of the death orpermanent disability of Executive.  Forpurposes of this Agreement, “permanent disability” shall mean the inability toperform services hereunder for a period of six consecutive months.

 

2

----

 

5.2                                 Terminationby Company for Cause.  The Companyshall have the option to terminate the Term (a) for cause in the event theExecutive engages in grossly negligent conduct or willful misconduct inconnection with the execution of his duties hereunder which materially andadversely affects the Company, after written notice by the Company to theExecutive of the specific acts that form the basis for the termination, and (b)for the Executive’s material nonperformance of his duties hereunder, providedthe nonperformance continues uncorrected for a period of thirty days afterwritten notice thereof by the Company to the Executive specifically identifyingthe manner in which the Company believes the Executive has not performed hisduties.  For purposes of thisSection 5.2, no act, or failure to act, on the Executive’s part shall beconsidered “willful” unless done, or omitted to be done, by him not in goodfaith and without reasonable belief that his act or omission was in the bestinterests of the Company.

 

5.3                                 Severance.  If the Company terminates Executive’semployment other than for cause pursuant to Section 5.2, Executive, inlieu of all other remedies and as liquidated damages, shall be entitled toreceive continuation of his then annual base salary plus health care insurancecoverage for a period of three (3) years from said date of termination, withsuch base salary continuation to be at the rate set forth in section 4.1or, if greater, the rate of the Executive’s current base salary at the date oftermination.

 

Nothing herein shallderogate from the Executive’s rights under employee benefit plans, programs andarrangements or under applicable law.

 

5.4                                 ConstructiveDischarge.  Any significant reductionor adverse change in the nature or scope of the Executive’s authority, duties,status or position contemplated by Section 2 hereof, including aninvoluntary relocation, or a reduction the base salary and/or benefits of theExecutive from those provided for in Section 4 hereof as they may fromtime to time be in effect, will be the basis for the Executive’s termination ofthis Agreement by giving at least 30 days prior notice to the Company and insuch event the termination will be treated as a termination by the Companywithout cause under Section 5.3.

 

5.5                                 BenefitsUpon Termination for Cause or Voluntary Termination by Executive.  In the event the Company properly terminatesExecutive’s employment under this Agreement for cause pursuant to Section 5.2or Executive voluntary resigns from his employment during the Term:

 

3

----

 

a.                                       allsalary shall be prorated as of the date of termination and such prorated amountshall be paid to Executive;

 

b.                                      allstock options or stock appreciation rights granted to Executive shall begoverned by the instruments granting such rights; and

 

c.                                       theCompany shall (i) make such other and further payment to Executive, hisdesignated beneficiaries and his dependents as may be provided pursuant to theterms of any employee benefit plan and other compensation plans, programs andstructures, or fringe benefit programs in which Executive is a participant atthe time of the termination of his employment with the Company and (ii) promptlyreimburse the Executive for any then unreimbursed out-of-pocket expensespursuant to Section 4.6.

 

6.                                       AttorneysFees.  If litigation shall beinstituted to enforce or interpret any provision hereof the prevailing partywill reimburse the other part for his reasonable attorneys’ fees anddisbursements incurred in such proceeding and will pay prejudgment interest atthe legal rate then in effect on any money judgment or award obtained in suchproceeding.

 

7.                                       Notice.  For the purposes of this Agreement, notices,demands and all other communications provided for in the Agreement shall be inwriting and shall be deemed to have been duly given when delivered or mailed byUnited States registered mail, return receipt requested, postage prepaid,addressed as follows:

 

 

If to the Executive:

 

Larry G. Stambaugh

Maxim Pharmaceuticals

8899 University CenterLane, Suite 400

San Diego, California92122

 

If to the Company:

 

Maxim Pharmaceuticals,Inc.

8899 University CenterLane, Suite 400

San Diego, California92122

Attn:  Corporate Secretary

 

4

----

 

or to such other addressas either party may have furnished to the other in writing in accordanceherewith, except that notices of change in address shall be effective only uponreceipt.

 

8.                                       Miscellaneous.  No provisions of this Agreement may bemodified, waived or discharged unless such waiver, modification or discharge isagreed to in writing signed by the Executive and the Company.  No waiver by either party hereto at any timeof any breach by the other party hereto of, or compliance with, any conditionprovision of this Agreement to be performed by such other party shall be deemeda waiver of similar or dissimilar provision or conditions at the same or at anyproper or subsequent time.  Noagreements or representations, oral otherwise, expressed or implied, withrespect to the subject matter hereof have been made by either party which arenot set forth expressly or referred to in this Agreement.  The validity, interpretation, constructionand performance of this Agreement shall be governed by the laws of the State ofCalifornia relating to contracts to be performed entirely therein.

 

9.                                       Validity.  The invalidity or unenforceability of anyprovision or provisions of this Agreement shall not affect the validity orenforceability of any other provision of this Agreement, which shall remain infull force and effect.

 

10.                                 Headings.  The headings of the paragraphs herein arefor convenience only and shall have no significance in the interpretation ofthis Agreement.

 

11.                                 Bindand Inure.  This Agreement shall bebinding upon and inure to the benefit of the parties hereto and their heirs,personal representatives and successors, including any successor of the Companyby reason of any dissolution, merger, consolidation, sale of assets or otherreorganization of the Company.

 

12.                                 Counterparts.  This Agreement may be executed in one ormore counterparts, each of which shall be deemed to be an original but all ofwhich together will constitute one and the same instrument.

 

5

----

 

IN WITNESS WHEREOF, theCompany has caused this Agreement to be executed and its seal to be affixedhereunto by its officer thereunto duly authorized, and Executive has signedthis Agreement, as of the day and year first above written.

 

MAXIM PHARMACEUTICALS,INC.

 

 
| By:                                | /s/ Anthony E. Altig |   |
|------------------------------------|----------------------|--------|
| Anthony E. Altig                   |
| Vice President,  Finance,          |
| Chief Financial Officer  and       |
| Corporate Secretary                |
|                               |
|                               |
| Date:  November 17, 2003 |
|                               |
|                               |
|                               |
| /s/ Larry G. Stambaugh             |                 |
| Executive                          |
|                                    |                      |        |  |

 

6

----