**Exhibit10.17**

 

**EMPLOYMENTAGREEMENT**

 

This AGREEMENT dated September 1, 2004

 

BETWEEN

 

**STRESSGEN BIOTECHNOLOGIES INC.**(aDelaware corporation) and **STRESSGEN BIOTECHNOLOGIESCORPORATION**(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.                                                                                   TheExecutive has been employed by the Employer pursuant to a contract ofemployment dated March 8, 2000 and that Agreement, as amended, expires on August 31,2004;

 

B.                                                                                     TheEmployer wishes to continue to employ the Executive; and

 

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

 

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

 

**1.****                                                                                      EMPLOYMENT.**

 

**1.1****                               Position. **StressGen Biotechnologies Inc. (“StressGenU.S.”) agrees to employ the Executive as President and Chief ExecutiveOfficer of its operations in the United States and of StressGen BiotechnologiesCorporation (“StressGen Corp.”).

 

**1.2****                               Director.**  The Executive shall serve, subject to ongoingshareholder approval, as a Director of StressGen Corp. upon the terms andconditions set out herein.

 

**1.3****                               Service.**  During the term the Executive shall:

 

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

 

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**(b)****                                 **unless prevented by ill health or injury, devote the wholeof 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 inany 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 onthe date of this Agreement and shall continue until it and the Executive’semployment are terminated in accordance with section 4 or 5 of thisAgreement.

 

**1.5****                               Locationof Employment. **The Executiveshall be based in San Diego, CA., but shall berequired to travel to the offices of StressGen Corp. in Victoria, BC as neededto perform his duties and obligations under this Agreement.  In the event that the Employer relocates itsoperations, the Executive agrees to relocate as required by the Board ofDirectors of StressGen Corp. to any location in the United States.

 

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

 

**3.****                                                                                      EXPENSES.** The Executive shall be reimbursed bythe Employer for all reasonable expenses incurred in connection with hisemployment, including business travel. The Executive’s expenses shall be reviewed and approved by theChairperson 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 thereasonable costs of relocating to that new location.

 

**4.****                                                                                      TERMINATIONOF AGREEMENT AND EMPLOYMENT.**

 

**4.1****                               Terminationby Executive.** The Executive may terminate his employment with theEmployer by giving not less than 90 days written notice of resignation to theEmployer.  At the time the Executiveprovides the Employer with notice of resignation, or at any time thereafter,the Employer shall have the right to elect to terminate the Executive’semployment at any time prior to the effective date of the Executive’sresignation, and upon such election, shall provide to the Executive a lump sumequal to ninety days Base Salary or to such proportion of the ninety days thatremain outstanding at the time of the election and shall continue to provideall medical and healthcare benefits that the Employer is permitted or able toprovide under the applicable rules of the relevant plans for the lesser ofninety days or the period of time that remains outstanding at the time of theEmployer’s election.  Upon such electionbeing made by the Employer, the Executive shall not be entitled to any furtherAnnual Bonus, participation in the Executive Bonus Plan or vesting of stockoptions. Upon the effective date of the Executive’s

 

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resignation, theEmployer shall not be obligated to make any further payments under thisAgreement

 

**4.2****                               Terminationby Employer.**  The Employer mayterminate the employment of the Executive by providing the Executive with, inlieu of reasonable notice, a severance package equivalent to 18 months AverageSalary, as that term is defined herein, payable in equal monthly installmentscommencing on the 15th day of the month following the termination of employment(the “Severance Period”).  The Employershall continue to provide all medical and health care benefits and all otherbenefits that it is permitted or able to provide under the applicable rules ofthe relevant plans during the Severance Period. The Employer will also reimburse the Executive for any premiums paid bythe Executive (up to a maximum of US$6,600 per annum) for supplemental lifeinsurance during the Severance Period. The Executive acknowledges that the Employer will not continue any longterm disability insurance during the Severance Period.  The Executive also acknowledges that allvested stock options granted to the Executive by the Employer must be exercisedin accordance with the terms of the StressGen Corp. stock option plan within 6months from the date of termination.  TheExecutive agrees that the compensation payable pursuant to this section 4.2shall be the maximum compensation to which the Executive is entitled in lieu ofreasonable notice, and the Employer will have no further obligations to theExecutive with respect to the termination of this Agreement including, withoutlimitation, further severance pay or damages.

 

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

 

**4.4****                               Terminationby Death or Permanent Incapacity.** The Employer’s obligation to the Executive and the Executive’sobligations to the Employer pursuant to this Agreement shall terminate upon theExecutive’s death or permanent incapacity. For the purposes of this section 4.4, the Executive shall be deemedto have suffered permanent incapacity when the Executive suffers from anyillness or injury that prevents him from performing his usual employment dutiesfor 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 anyfurther notice of termination or pay in lieu of notice or any other form of payor damages. The Executive acknowledges and agrees that given the nature of theEmployer’s business and the critical importance of his position to theoperations of the Employer, it would constitute an unreasonable accommodationon the part of the Employer to operate without the services of the Executivefor a period in excess of 12 months. Furthermore, the Executive acknowledges that it would be impractical forthe Employer to hire a replacement for the Executive, unless the replacement ishired on a permanent basis.

 

**4.5****                               Terminationby the Employer for Just Cause.** Notwithstanding any other provision of this Agreement, the Employer mayon written notice to the Executive immediately terminate this Agreement and theExecutive’s employment with the Employer at any time for cause, without noticeor pay in lieu of notice or any other form of compensation, severance pay ordamages.

 

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**4.6****                               Directorshipand Offices.**  Upon thetermination of his employment with the Employer, the Executive shallimmediately resign any directorship or office held in the Employer or anyparent, subsidiary or affiliated companies of the Employer and, except asprovided in this Agreement, the Executive shall not be entitled to receive anywritten notice of termination or payment in lieu of notice, or to receive anyseverance pay, damages or compensation for loss of office or otherwise, byreason of the resignation or resignations referred to in this section 4.6.  On termination of employment with theEmployer, the Executive shall immediately relinquish all shares or stock andall equity interests which may be held by the Executive as a nominee for or onbehalf of the Employer or any parent, subsidiary or affiliated companies of theEmployer.

 

**5.****                                                                                      CHANGEOF CONTROL.**

 

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

 

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

 

**(b)****                                 **anyrequirement of the Company that the location at which the Executive performshis principal duties be outside a radius of 100 miles from the location at whichthe Executive performs such duties immediately before the Change of Control;

 

then, at the Executive’s election, of which the Executive shall advisethe 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 theEmployer will, immediately upon such termination, pay to the Executive anamount equal to his Average Salary (as that term is defined in section 4.3of this Agreement) for 18 months.  Inaddition, all Options held by the Executive shall vest immediately and theExecutive shall have six months to exercise the Options. The Employer shallcontinue to provide all medical and health care benefits and all other benefitsthat it is permitted or able to provide under the applicable rules of therelevant plans for a period of 18 months from the date of the Executive’selection following a Change of Control. The Employer will also reimburse the Executive the premium (up to amaximum of US$6,600 per annum) for supplementary life insurance for a period of18 months following the date of the Executive’s election following the Changeof Control. The Executive acknowledges that the Employer will not continue longterm 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 5.1is in lieu of the severance package payable under section 4.2 of thisAgreement and shall be the maximum compensation to which the Executive isentitled to receive in lieu of reasonable notice, and the Employer will have nofurther obligations to the Executive with respect to the termination of thisAgreement or his employment, including, without limitation, further severancepay or damages.

 

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

 

**6.****                                                                                      SPECIALBONUS.**

 

**6.1****                               SpecialBonus. **Upon the acquisition,directly or indirectly of more than 50% of the issued voting shares ofStressGen Corp. by a purchaser or a group of purchasers related to and actingjointly or in concert with each other (within the meaning of the *Securities Act* (British Columbia) or upon the Employerobtaining certain financing milestones, the Employer may pay to the Executive aspecial bonus, as agreed between the Employer and the Executive.

 

**7.****                                                                                      CONFIDENTIALITY.**

 

**7.1****                               Non-Disclosureof Information of the Employer.** During the term of this Agreement and thereafter the Executive shallkeep confidential all information of a confidential or proprietary natureconcerning the Employer, its subsidiaries and affiliates and their respectiveoperations, assets, finances, businesses and affairs and shall not use thatinformation for the Executive’s personal advantage or the advantage of anythird party, provided that nothing herein shall prevent disclosure ofinformation which is publicly available or which is required to be disclosedunder applicable law or legal process (“Confidential Information”).  For greater certainty, ConfidentialInformation shall include, but not be limited to, all documents and records,whether original, duplicated, computerized, memorized, handwritten or in anyother form, and all information contained therein relating to the business,intellectual property, technology and know how of the Employer.

 

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

 

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**8.****                                                                                      RESTRICTEDACTIVITIES.**  During the term ofthis Agreement and for a period of 12 months after the termination thereofirrespective of the time, manner or cause of the termination of the Executive’semployment by the Employer, the Executive shall not, directly or indirectly:

 

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

 

**(2)****                                **solicit or encourage any employee of the Employer toterminate 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.****                                                                                      EXECUTIVECOOPERATION AND ASSISTANCE.**  TheExecutive agrees that he shall, both during the term of this Agreement andthereafter, fully co-operate with and assist the Employer in the resolution ofcomplaints, claims or disputes against the Employer, including withoutlimitation civil, criminal or regulatory proceedings.

 

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

 

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

 

**12.****                                                                               SURVIVAL.**  The Employer and the Executive expresslyacknowledge and agree that the provisions of this Agreement, which by theirexpress or implied terms extend beyond the termination of the Executive’semployment hereunder, or beyond the termination of this Agreement, shallcontinue in full force and effect notwithstanding the termination of theExecutive’s employment or the termination of this Agreement for any reason.

 

**13.****                                                                               ENTIREAGREEMENT AND AMENDMENTS.**  Theprovisions herein constitute the entire agreement between the parties andsupersede all previous communications, representations and agreements, whetheroral or written, between the parties with respect to the

 

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subjectmatter hereof.  This Agreement may not beamended or modified except by written instrument signed by the Employer and theExecutive.

 

**14.****                                                                               GOVERNINGLAW.**  This Agreement shall begoverned by and interpreted exclusively in accordance with the laws of BritishColumbia, and the courts of British Columbia shall have the exclusivejurisdiction over this Agreement and any claim or dispute arising under it.

 

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

 

**16.****                                                                               ASSIGNMENTOF RIGHTS.**  The Employer shallhave the right to assign this Agreement to another party.  The Executive shall not assign his rightsunder this Agreement or delegate to others any of his functions and dutiesunder this Agreement without the express written consent of the Employer whichmay be withheld in its sole discretion.

 

**17.****                                                                               AFFILIATEDCORPORATIONS.**  The Executiveacknowledges and agrees that all of the Executive’s covenants and obligationsto the Employer, as well as the rights of the Employer under this Agreement, shall run in favour of and shall be enforceableby the parent, subsidiary and affiliated companies of the Employer. TheExecutive acknowledges that notwithstanding references in this Agreement to theparent, subsidiary and affiliated companies of the Employer, this Agreement isbetween the Executive and the Employer and there are no other parties to theAgreement. The Executive shall have no right to enforce this Agreement againstany party other than the Employer unless this Agreement is assigned to any entityin accordance with section 14 of this Agreement.

 

**18.****                                                                               EMPLOYMENTSTANDARDS.**  In the event that theminimum standards in the *Employment Standards Act*,R.S.B.C. 1996, c. 113, or any other employment standards legislation that maybe applicable, are more favourable to the Executive in any respect, includingbut not limited to the provisions herein in respect to notice of termination orvacation entitlement, the provisions of the *Employment Standards Act*,or such other applicable employment standards legislation, shall apply.

 

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**19.****                                                                               LEGALADVICE.**  The Executiveacknowledges that it was recommended to him by the Employer that he obtain independent legal advice before executing thisAgreement and that by executing this Agreement the Executive represents that hedid obtain independent legal advice.

 

IN WITNESS WHEREOF theparties have hereto have duly executed this agreement as of the day and yearfirst 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 shallpay to the Executive an annual salary of U.S.$395,000(the “Base Salary”), less applicable statutory deductions, paid in equalsemi-monthly increments.

 

The Executiveshall also be eligible to receive additional incentive compensation of up to40% of the Base Salary in respect of any 12 month period if he meets individualobjectives on targets to be established by the Employer in consultation withthe Executive (the “Annual Bonus”).

 

**Benefits**

 

A.                                   FringeBenefits

 

The Executiveshall be eligible to participate in the Executive Benefit Plan of StressGenU.S.  The benefits provided to theExecutive may be subject to change from time to time at the sole discretion ofthe Employer.

 

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

 

The Employer shallreimburse the Executive up to U.S.$6,600 foradditional supplemental life insurance obtained by the Executive.

 

B.                                     StockOptions

 

The Employer mayfrom time to time grant to the Executive options to purchase common shares ofStressGen Corp. (the “Options”).  Thenumber of Options and the terms under which those Options shall vest shall bedetermined by the sole discretion of the Board of Directors of StressGenCorp.  The terms by which the Executivemay be granted Options, including without limitation, the exercise price ofthose Options, are subject to the approval of all applicable regulatoryauthorities, including the Toronto Stock Exchange, and are subject to the termsand conditions of StressGen Corp.’s stock option plan.

 

C.                                     TaxCompensation

 

The Employer shallindemnify the Executive for the difference between the amount of tax charged onall amounts payable under this Agreement or the exercise of any stock optionsby the governments of Canada and the Province of British Columbia and theapplicable taxation rates that would have been charged on those payments or theexercise of those stock options by the governments of the United States ofAmerica or the State of California, provided that such difference has beendetermined after consultation with the Employer’s auditors or another taxadvisor acceptable to both the Executive and the Employer and the Canadian andBritish Columbian tax is payable as a result of the Executive’s performance ofhis duties hereunder in the normal course.

 

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