Document:

Exhibit 10.4

 

EMPLOYMENT AGREEMENT OF LESLIE
JOHNSTON BROWNE

 

This employment agreement (the “Agreement”) was
originally made and entered into as of the 14th day of July, 2004 and is
amended and restated as of the 27th day of February, 2006, by and between
Pharmacopeia Drug Discovery, Inc., (hereinafter the “Company”), and Leslie
Johnston Browne, Ph.D. (hereinafter “Dr. Browne”).

 

RECITALS

 

WHEREAS, the Company desires to employ Dr. Browne
to render services in the capacity of President and Chief Executive Officer of
Pharmacopeia Drug Discovery, Inc. (“President and Chief Executive Officer”)
on the terms set forth in this Agreement;

 

WHEREAS, Dr. Browne desires to render services
during the term of this Agreement in the capacity of President and Chief Executive
Officer on the terms set forth in this Agreement;

 

NOW, THEREFORE, in consideration of their mutual
promises and intending to be legally bound, the parties agree as follows:

 

1.                                       Employment.

 

a.                                       The Company agrees to employ Dr. Browne
as President and Chief Executive Officer upon the terms and conditions set
forth in this Agreement.

 

b.                                      Dr. Browne’s duties, powers and
responsibilities as President and Chief Executive Officer shall be those which
are customary for such position, as may be determined from time to time by the
Board of Directors of the Company (the “Board”).  Dr. Browne agrees to perform and
discharge such duties well and faithfully and to be subject to the supervision
and direction of the Board.

 

c.                                       The position of President and Chief Executive
Officer is a full-time position.  Dr. Browne
agrees to devote his full time effort, attention, and energies to this
position.  Dr. Browne will not
render any professional services or engage in any activity which might be
competitive with, adverse to the best interest of, or create the appearance of
a conflict of interest with the Company. 
Prior to serving on any other board of directors, Dr. Browne shall
obtain the written permission of the Board, which shall not be unreasonably
withheld.  Dr. Browne agrees to
abide by the policies, and rules and regulations of the Company as they
may be amended from time to time.

 

2.                                       Term.

 

a.                                       The employment of Dr. Browne as
President and Chief Executive Officer under this Agreement is for an initial
term of one year beginning on Dr. Browne’s first date of employment by the
Company, August 9, 2004 (the “Start Date”).

 

 

b.                                      Unless earlier terminated under the
provisions of this Agreement, this Agreement will renew automatically for
successive one year periods at the conclusion of the initial term and any
succeeding renewal terms (collectively, the “Term”), unless either party
notifies the other in writing, at least one year in advance, of its intention
not to renew the Agreement at the expiration of the initial or renewal term.

 

3.                                       Compensation.

 

a.                                       For his services under this Agreement as
President and Chief Executive Officer, Dr. Browne will be paid by the
Company an initial base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year (“Base Salary”).  The
Base Salary will be paid in equal installments, less normally applicable
payroll deductions, in accordance with the Company’s regular payroll
schedule.  Dr. Browne’s compensation
will be reviewed on or before February 28 of each year to determine
whether his compensation level shall be adjusted in a manner commensurate with
his performance in the prior year of service.

 

b.                                      Dr. Browne shall be entitled to a
signing bonus of $100,000.  One half of
this bonus ($50,000), less normally applicable payroll deductions, shall be
paid as soon as practicable after the Start Date.  The remainder ($50,000), less normally
applicable payroll deductions, shall be paid six months after the Start Date.

 

c.                                       Beginning January 1, 2005, Dr. Browne
shall participate in the Company’s Bonus Program for Senior Management, which
shall provide an annual bonus target of fifty percent (50%) of Dr. Browne’s
Base Salary, as determined in accordance with the Company’s existing
compensation policy.  Such amounts
payable to Dr. Browne under the bonus program shall be referred to herein
as the “Incentive Bonus.”  Incentive
Bonuses will be paid on the March 1 following the completion of each
calendar year, provided Dr. Browne is employed or is receiving severance
payments on that date, or upon the expiration of the Term (as described in Section 4(g)).

 

d.                                      From time to time, Dr. Browne may be
granted the option to purchase Company stock under the terms of the Company’s
Stock Option Plan, or similar employee stock option plans in effect from time
to time.  Such stock option grants shall
be subject to the terms of the applicable stock option plan(s) then in effect.

 

e.                                       Dr. Browne shall be granted on the Start
Date three hundred thousand (300,000) options to purchase Company stock, priced
at the fair market value on the date of the grant.  The vesting schedule for these options
shall be as follows:  25% of these
options shall be vested after one year (from the date of the grant) and 1/48 of
the options shall vest on the first of each month thereafter.  These options are intended to be incentive
stock options as defined under section 422 of the Internal Revenue
Code of 1986 and any regulations promulgated thereunder.  However, to the extent the option grant fails
to satisfy any requirement of section 422(d) of the Code, the
affected options shall be treated as non-qualified stock options.

 

 

4.                                       Termination; Resignation; Permanent
Disability; Death.   Dr. Browne’s employment as President
and Chief Executive Officer may be terminated at any time by action of the
Board for any reason.  In the event of
termination of his employment, the Company shall have no liability to Dr. Browne
as President and Chief Executive Officer for compensation or benefits except as
specified in this Section 4 or as required by the Company’s benefits
policy.

 

a.                                       Involuntary Termination Without Cause.  If Dr. Browne’s
employment as President and Chief Executive Officer is terminated involuntarily
by the Board, without “Cause” (as defined below), during the Term, the Company
shall:

 

(1)                                  Pay Dr. Browne all compensation and
benefits accrued, but unpaid, up to the date of his termination.  Dr. Browne’s Incentive Bonus for the
calendar year in which his employment is terminated shall be paid on a
pro rata basis, based on the actual percentage of target bonuses
determined by the Company’s Board of Directors for the year in which the
termination occurs.

 

(2)                                  Pay Dr. Browne in a lump sum two (2) times
an amount equal to his annual Base Salary in effect as of the date of
termination.  The Company will maintain Dr. Browne’s
group medical coverage for a period of twenty-four (24) months after such
termination.

 

(3)                                  Allow all vested options to be exercisable
pursuant to the terms of the stock option agreement(s) under which the options
were granted.

 

(4)                                  If the termination occurs in the first year
of the Term, twenty-five percent (25%) of the initial option grant will
immediately vest on the termination date.

 

b.                                      Termination by Dr. Browne for Good
Reason.  In the event Dr. Browne terminates this
Agreement with at least ninety (90) days’ written notice and for “Good Reason,”
as defined below, during the Term, he shall be entitled to receive the benefits
provided in Section 4(a) above. 
For purposes of this Section 4(b), “Good Reason” shall be provided
by the occurrence of any of the following events:  i) Dr. Browne’s removal as President and
Chief Executive Officer of the Company or any other material adverse
change by the Company in Dr. Browne’s duties, authority or
responsibilities as President and Chief Executive Officer of the Company; ii) a reduction of more than twenty
percent (20%) of Dr. Browne’s base salary, unless made with Dr. Browne’s
express written consent; iii) a material reduction in the kind or level of
employee benefits such that Dr. Browne’s overall benefits package is
significantly reduced, unless made with Dr.

 

 

Browne’s express written consent; iv) if as a
result of a relocation of the Company to a facility more than fifty (50) miles
from the Company’s current location, Dr. Browne is required to relocate
his residence, unless made with Dr. Browne’s express written consent; v) a
material breach of this Agreement by the Company that has not been cured within
thirty (30) days after written notice thereof by Dr. Browne to the
Company; or vi) a change of
control (as defined in Section 4(c)) of the Company that materially
changes Dr. Browne’s duties, title or responsibility.

 

c.                                       Termination Without Cause in Connection with
Change of Control.  In the event that Dr. Browne’s
employment as President and Chief Executive Officer is terminated involuntarily
by the Board without Cause in connection with a “change of control” (as defined
below) of the Company: i) Dr. Browne shall be entitled to receive the
benefits provided in Section 4(a) above; ii) all stock options
granted to Dr. Browne that are then unvested shall immediately vest; and
iii) Dr. Browne shall receive pro rata Incentive Bonuses for the period
during which he is receiving payments under Section 4(a)(2), equal to the
average Incentive Bonus he received in each of the three years immediately
prior to the termination or, if less than three years’ of bonus history is
available, his target bonus for the year in which the termination occurs.

 

For purposes of this
Agreement, a “change of control” means that any of the following events has
occurred:

 

(i)                                     Any
person (as such term is used in Section 13(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”)), other than the Company, any
employee benefit plan of the Company or any entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan,
together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) becomes the beneficial owner or owners (as defined in Rule 13d-3
and 13d-5 promulgated under the Exchange Act), directly or indirectly (the “Control
Group”), of more than 50% of the outstanding equity securities of the Company,
or otherwise becomes entitled, directly or indirectly, to vote more than 50% of
the voting power entitled to be cast at elections for directors (“Voting Power”)
of the Company;

 

(ii)                                  A
consolidation or merger (in one transaction or a series of related
transactions) of the Company pursuant to which the holders of the Company’s equity
securities immediately prior to such transaction or series of related
transactions would not be the holders, directly or indirectly, immediately
after such transaction or series of related transactions of more than 50% of
the Voting Power of the entity surviving such transaction or series of related
transactions; or

 

(iii)                               The
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company.

 

d.                                      Termination for Cause.  If Dr. Browne’s
employment is terminated as President and Chief Executive Officer for “Cause”
as defined below during the Term, the Company shall pay Dr. Browne all
accrued, but unpaid, compensation and benefits which are then due and owing as
of the date of his termination.  He shall
not be entitled to receive a pro rata Incentive Bonus for the calendar year in
which the termination occurs, or any of the amounts specified in Section 4(a).  The Company shall have the right to setoff
any amounts due to Dr. Browne by any amounts owed by Dr.

 

 

Browne to the Company at the time Dr. Browne’s
employment terminates and he hereby authorizes the Company to make this setoff.

 

Dr. Browne’s employment may be terminated for “Cause”
at any time upon delivery of written notice to Dr. Browne.  “Cause” means the occurrence of any of the
following events:  i) any gross failure
on the part of Dr. Browne (other than by reason of disability as provided
in Section 4(f)) to faithfully and professionally carry out his duties or
to comply with any other material provision of this Agreement, which failure
continues after written notice thereof by the Board, provided that the Board
shall not be required to provide such notice in the event that such failure (A) is
not susceptible to remedy or (B) relates to the same type of acts or
omissions as to which such notice has been given on a prior occasion; ii) Dr. Browne’s
material dishonesty (which shall include without limitation any misuse or
misappropriation of the Company’s assets), or other willful misconduct which is
intended to injure or which injures or is likely to injure the business of
the Company; iii) Dr. Browne’s conviction for any felony or for any
other crime involving moral turpitude, whether or not relating to his employment;
iv) Dr. Browne’s insobriety or use of drugs, chemicals or controlled
substances either (A) in the course of performing his duties and
responsibilities under this Agreement, or (B) otherwise affecting the
ability of Dr. Browne to perform the same; v) Dr. Browne’s
failure to comply with a lawful, written direction of the Board, which is
consistent with Dr. Browne’s duties and responsibilities as President and
Chief Executive Officer with the Company; or vi) any wanton and willful
dereliction of duties by Dr. Browne. 
The existence of any of the foregoing events or conditions shall be
determined by the Board in the exercise of its reasonable judgment.

 

e.                                       Voluntary Resignation.  In
the event that Dr. Browne shall voluntarily resign as President and Chief Executive
Officer:

 

(1)                                  Dr. Browne shall provide the Company’s
Board of Directors with ninety (90) days’ advance written notice of his
intention to resign voluntarily.

 

(2)                                  Following the effective date of his
resignation, the Company shall be relieved of all other obligations to pay
compensation to Dr. Browne, except that the Company shall immediately pay Dr. Browne
all accrued, but unpaid, Base Salary and any other unpaid expenses or expense
reimbursement.

 

f.                                         Disability.  If Dr. Browne becomes
disabled for more than one hundred eighty (180) days in any twelve (12) month
period, the Company shall have the right to terminate his employment without
further liability upon written notice to Dr. Browne.  Dr. Browne shall be deemed disabled for
purposes of this Agreement either i) if he is deemed disabled for purposes of
any long-term disability insurance policy paid for by the Company and at the
time in effect, or ii) if a physician satisfactory to the Company and Dr. Browne
determines that due to accident, mental or physical illness, or any other
reason, he cannot perform his duties as President and Chief Executive
Officer.  In the

 

 

event the Company shall terminate Dr. Browne
due to disability, as described above, Dr. Browne shall be entitled to
receive the benefits set forth in Section 4(a), reduced by the amount of
any disability plan or insurance benefit paid to him.

 

g.                                      Non-renewal.  Following the expiration of
the Term by reason of timely notice of non-renewal by the Company in accordance
with Section 2(b), Dr. Browne shall be entitled to receive the
benefits set forth in Section 4(a) above, except that the severance
described in Section 4(a)(2) shall be for a period of twelve (12)
months following the expiration of the Term. 
Upon the expiration of the Term by reason of timely notice of
non-renewal by Dr. Browne, Dr. Browne will remain eligible to receive
a pro rata Incentive bonus for the year in which the Term expires.  In the event the Term expires by reason of
timely notice of non-renewal, the twenty-four (24) month time period set forth
in Section 12 of this Agreement shall be reduced to twelve (12) months
following the expiration of the Term.

 

h.                                      Death.  In the event of the death of Dr. Browne,
this Agreement shall automatically terminate and any obligation to continue to
pay compensation and benefits shall cease as of the date of his death.

 

i.                                          No Mitigation.  Dr. Browne
has no duty to mitigate any payment obligations of the Company under this Section 4.

 

j.                                          Certain Additional Payments.  If
any of the benefits or payments under this Agreement, or under any other
agreement with or plan of the Company (in the aggregate, the “Total Payments”),
will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of
the Internal Revenue Code, the Company shall pay Dr. Browne in cash an
additional amount (the “Gross-Up Payment”) such that the net amount retained by
Dr. Browne after deduction of any Excise Tax upon the Total Payments and
any federal, state and local income tax and Excise Tax upon the Gross-Up
Payment provided for by this Section 4(g) shall be equal to the Total
Payments.  Such payments shall be made by
the Company to Dr. Browne as soon as practical following a determination
that any of the Total Payments will be subject to the Excise Tax, but in no
event beyond thirty (30) days from such date.

 

All determinations required to be made under this Section 4(j),
including whether any of the Total Payments will be subject to the Excise Tax
and the amounts of such Excise Tax, shall be made by a nationally recognized
accounting firm (the “Accounting Firm”) mutually acceptable to the
parties.  The Accounting Firm shall
provide detailed supporting calculations both to the Company and to Dr. Browne
within 10 days after a request for such determinations are made by Dr. Browne
or the Company.  Any such determination
by the Accounting Firm shall be binding upon the Company and Dr. Browne.  For purposes of determining the amount of the
Gross-Up Payment, Dr. Browne shall be deemed to pay Federal, state and
local income taxes at the highest marginal rates applicable to Dr. Browne
as of the date of the determination.

 

 

5.                                       Board Membership.  As
President and Chief Executive Officer, Dr. Browne shall at all times be
nominated by the Board to serve on the Company’s Board of Directors, subject to
election by the stockholders.

 

6.                                       Vacation and Holiday.  Dr. Browne
shall be entitled to four weeks’ vacation each year and to those holidays
observed by the Company.  As an essential
employee of the Company, Dr. Browne shall schedule his vacation and
holiday observances so as not to unreasonably interfere with the performance of
his duties as President and Chief Executive Officer.

 

7.                                       Health Insurance; Life Insurance; Other
Fringe Benefits. Dr. Browne
shall be entitled to the benefit of such group medical, accident and long-term
disability insurance as the Company shall make available from time to time to
its executive employees.

 

8.                                       Relocation and Temporary Housing.  The
Company will pay for the reasonable, properly documented costs of relocating Dr. Browne’s
household goods to the Princeton, New Jersey area from San Francisco,
California, in accordance with Company policy. 
The Company will also provide Dr. Browne with a payment of $4,000
per month for nine months, to be used for temporary housing in the Princeton,
New Jersey area.  It is anticipated that Dr. Browne
will obtain permanent housing in the Princeton, New Jersey area prior to one
year after the Start Date.

 

In addition, the Company
will pay for up to nine (9) trips between the Princeton, NJ area and San
Francisco, CA for Dr. and/or Mrs. Browne, in connection with
house-hunting or the sale or rental of their San Francisco residence.

 

The Company will also
reimburse closing costs associated with the purchase of a residence in the
Princeton, New Jersey area along with associated reasonable and customary
expenses.  To the extent that the
relocation cost and closing cost reimbursements are taxable to Dr. Browne,
the Company will gross-up the payment such that the net amount received by Dr. Browne
equals the amount of the reimbursable expenses.

 

Upon the signing of a
contract to purchase, lease or rent a residence in Princeton, New Jersey, the
Company will pay Dr. Browne a relocation bonus of one hundred thousand
dollars ($100,000), which Dr. Browne agrees to return to the Company in
the event the closing on such residence is not consummated.  In the event Dr. Browne sells his
California residence within twelve (12) months of the Start Date, he will
receive an additional payment of fifty thousand dollars ($50,000) upon
verification of the closing of that sale.

 

Should Dr. Browne
voluntarily terminate his employment with the Company prior to one (1) year
from the date of this Agreement, Dr. Browne will repay to the Company one
half of all monies paid to him or on his behalf in association with his
relocation and temporary housing, not to exceed the net amount received by him
after taxes.  The Company may collect any
such mandatory repayments, in full or in part, by

 

 

deducting them from amounts otherwise due Dr. Browne
from the Company, and Dr. Browne hereby authorizes such deduction.

 

9.                                       Professional Expenses.  Dr. Browne
will be reimbursed in accordance with the Company’s policy and procedure for
the reasonable costs of properly documented professional and business related
travel expenses required in the course of his employment.  The Company
will also pay for appropriate professional dues and memberships, which must be
approved in advance by the Board.

 

10.                                 Legal Fees.  Dr. Browne shall be
entitled to reimbursement by the Company for any legal fees he may incur in
connection with the negotiation and execution of this Agreement, in an amount
not to exceed $10,000.

 

11.                                 Confidential Information. 
Except as reasonably necessary to perform his duties as President and
Chief Executive Officer, Dr. Browne agrees not to reveal to any other
person or entity or use for his own benefit any confidential information of or
about Company or its operations, both during and after his employment under
this Agreement, including without limitation marketing plans, financial
information, key personnel, employees’ salaries and benefits, customer lists,
pricing and cost structures, operation methods and any other information not
available to the public, without the Company’s prior written consent.

 

12.                                 Non-Competition.  Dr. Browne
shall not, during the course of his employment with the Company or for a period
of twenty-four (24) months thereafter, directly or indirectly:

 

a.                                       Be employed by, engaged in or participate in
the ownership, management, operation or control of, or act in any advisory or
other capacity for, any Competing Entity which conducts its business within the
Territory (as the terms Competing Entity and Territory are hereinafter defined);
provided, however, that notwithstanding the foregoing, Dr. Browne may make
solely passive investments in any Competing Entity the common stock of which is
“publicly held” and of which Dr. Browne shall not own or control, directly
or indirectly, in the aggregate securities which constitute 5% or more of the
voting rights or equity ownership thereof.

 

b.                                      solicit or divert any business or any
customer from the Company or assist any person, firm or corporation in doing so
or attempting to do so;

 

c.                                       cause or seek to cause any person, firm or
corporation to refrain from dealing or doing business with the Company or
assist any person, firm or corporation in doing so; or

 

d.                                      solicit for employment, or advise or
recommend to any other person that they employ or solicit for employment or
retention as an employee or consultant, any person who is an employee of, or
exclusive consultant to, the Company.

 

The Company’s obligation to make payments pursuant
to Section 4 above shall terminate in the event that, and at such time as,
Dr. Browne is in breach of his

 

 

obligation
not to compete as set forth in this Section 12.  For purposes of this Section, the term “Competing
Entity” shall mean any entity which is in possession of drugs substantially
similar to those of the Company that are in pre-clinical development or
clinical trials, or which is presently or hereafter engaged in the business of
providing to third parties chemistry products or services for pre-clinical drug
discovery or chemical development which i) include the outlicensing of small
molecule libraries, the undertaking of drug candidate screening, and/or related
drug optimization activities; or ii) utilize combinatorial chemistry or
high-throughput screening technologies in offering pre-clinical drug discovery
services.  The term “Territory” shall
mean North America, Europe and Japan. 
Notwithstanding anything in the above to the contrary, Dr. Browne
may engage in the activities set forth in Section 12(a) hereof with
the prior written consent of the Company, which consent shall not be
unreasonably withheld.  In determining
whether a specific activity by Dr. Browne for a Competing Entity shall be
permitted, the Company will consider, among other things, the nature and scope
of i) the duties to be performed by Dr. Browne, and ii) the
business activities of the Competing Entity at the time of Dr. Browne’s
proposed engagement by such entity.

 

Dr. Browne acknowledges and agrees that the
covenants set forth in this Section are reasonable and necessary in all
respects for the protection of the Company’s legitimate business interests
(including without limitation the Company’s confidential, proprietary
information and trade secrets and client good-will, which represents a
significant portion of the Company’s net worth and in which the Company has a
property interest).  Dr. Browne
acknowledges and agrees that, in the event that he breaches any of the
covenants set forth in this Section, the Company may be irreparably harmed and
may not have an adequate remedy at law; and, therefore, in the event of such a
breach, the Company shall be entitled to injunctive relief, in addition to (and
not exclusive of) any other remedies (including monetary damages) to which the
Company may be entitled under law.  If
any covenant set forth in this Section 12 is deemed invalid or
unenforceable for any reason, it is the Parties’ intention that such covenants
be equitably reformed or modified to the extent necessary (and only to such
extent to) render it valid and enforceable in all respects.  In the event that the time period and
geographic scope referenced above is deemed unreasonable, overbroad, or
otherwise invalid, it is the Parties’ intention that the enforcing court shall
reduce or modify the time period and/or geographic scope to the extent
necessary (and only to such extent necessary) to render such covenants
reasonable, valid, and enforceable in all respects.

 

13.                                 Arbitration.  Any and all disputes between
the parties (except actions to enforce the provisions of Section 12 of
this Agreement), arising under or relating to this Agreement or any other
dispute arising between the parties, including claims arising under any
employment discrimination laws, shall be adjudicated and resolved exclusively
through binding arbitration before the American Arbitration Association
pursuant to the American Arbitration Association’s then-in-effect National Rules for
the Resolution of Employment Disputes (hereafter “Rules”).  The initiation and conduct of any arbitration
hereunder shall be in accordance with the Rules and each side shall bear
its own costs and counsel fees in such arbitration.  Any arbitration hereunder shall be conducted
in Princeton, New Jersey, and any arbitration award shall be final and

 

 

binding on the Parties.  The arbitrator shall have no authority to
depart from, modify, or add to the written terms of this Agreement.  The arbitration provisions of this Section shall
be interpreted according to, and governed by, the Federal Arbitration Act, 9
U.S.C. § 1 et seq., and any action pursuant to such Act to enforce
any rights hereunder shall be brought exclusively in the United States District
Court for the District of New Jersey. 
The parties consent to the jurisdiction of (and the laying of venue in)
such court. 

 

14.                                 Waiver.  The waiver by either party of
any breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by the other party of any provision of the
Agreement.

 

15.                                 Severability.  In
the event that any section, paragraph or term of this Agreement shall be
determined to be invalid or unenforceable by any competent authority or
tribunal for any reason, the remainder of this Agreement shall be unaffected
thereby and shall remain in full force and effect, and any such section, paragraph,
or term shall be deemed modified to the extent to make it enforceable.

 

16.                                 Successors and Assigns.  This
Agreement shall bind and inure to the benefit of the successors and assigns of
the Company, and the heirs, executors or personal representatives of Dr. Browne.  This Agreement may not be assigned by Dr. Browne.  This Agreement may be assigned to any
successor in interest to the Company and Dr. Browne hereby consents to
such assignment.

 

17.                                 Warranties and Representations.  Dr. Browne
hereby warrants and represents to the Company that he is not a party to any
other agreement or understanding with any other person or entity (including
without limitation any agreements containing restrictive covenants governing
post-employment competition, solicitation, the disclosure of confidential
information, and intellectual property rights, and the like) that would,
directly or indirectly, prevent him in any way from lawfully entering into this
Agreement, performing any of the duties required hereunder (or that might be
assigned to him in the future hereunder), or fully complying with and honoring
each and every term, covenant, and promise contained in this Agreement.

 

18.                                 Lawful Employment in United States.  This
Agreement is contingent upon Dr. Browne’s ability to be lawfully employed
in the United States indefinitely, without employer sponsorship.  Customary documentation establishing work
eligibility will be required in accordance with applicable law.

 

19.                                 Entire Agreement; Amendments.  This
Agreement, including the recitals (which are a part hereof), together with the
applicable bylaws and policies of the Company, constitutes the entire Agreement
between the parties hereto and there are no other understandings, agreements or
representations, expressed or implied. 
This Agreement may amended only in writing signed by both parties.

 

 

20.                                 Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey.

 

21.                                 General Release.  Notwithstanding anything in this Agreement to the contrary, no payments
shall be made or benefits provided by the Company under Section 4 prior to
the execution by Dr. Browne at the time of termination of a general
release in favor of the Company and its affiliates, and its and their respective
officers, employees and directors.  A
form of general release is attached hereto as Exhibit A.

 

 

	
  PHARMACOPEIA DRUG

  	
   

  	
   

  
	
  DISCOVERY, INC.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Joseph A. Mollica

  	
   

  	
   

  	
  /s/ Leslie J. Browne

  	
   

  
	
  Name:

  	
   Joseph A. Mollica, Ph.D.

  	
   

  	
  Leslie Johnston Browne, Ph.D.

  
	
  Title:

  	
   Chairman

  	
   

  	
   

  
							

 

 

EXHIBIT A

 

General Release

 

IN
CONSIDERATION OF the terms and conditions contained in the Employment
Agreement, dated as of the        th day of             ,
20       , (the “Severance Agreement”) by
and between                    
(“Employee”) and Pharmacopeia Drug Discovery, Inc. (the “Company”), and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, Employee on behalf of himself and his heirs, executors,
administrators, and assigns, releases and discharges the Company and its
subsidiaries, divisions, affiliates and parents, and their respective past,
current and future officers, directors, employees, agents, and/or owners, and
their respective successors, and assigns and any other person or entity claimed
to be jointly or severally liable with the Company or any of the aforementioned
persons or entities (collectively the “Released Parties”) from any and all
manner of actions and causes of action, suits, debts, dues, accounts, bonds,
covenants, contracts, agreements, judgments, charges, claims, and demands
whatsoever (“Claims “) which Employee and his heirs, executors, administrators,
and assigns have, had, or may hereafter have, against the Released Parties or
any of them arising out of or by reason of any cause, matter, or thing
whatsoever from the beginning of the world to the date hereof.  This General Release of Claims includes,
without limitation, any and all matters relating to Employee’s employment by
the Company and the cessation thereof, and any and all matters arising under
any federal, state, or local statute, rule, or regulation, or principle of
contract law or common law, including but not limited to, the Family and
Medical Leave Act of 1993, as  amended, 29 U.S.C. §§ 2601 et
seq., Title VII of the Civil Rights Act of 1964, as  amended,
42 U.S.C. §§ 2000 et  seq., the Age Discrimination in
Employment Act of 1967, as  amended, 29 U.S.C. §§ 621 et
seq. (the “ADEA”), the Americans with Disabilities Act of 1990, as
amended, 42 U.S.C. §§ 12101 et  seq., the Worker
Adjustment and Retraining Notification Act of 1988, as  amended,
29 U.S.C. §§2101 et  seq., Employee Retirement Income Security Act
of 1974, as  amended, 29 U.S.C. §§ 1001 et  seq.
(“ERISA”), the New Jersey Law

 

 

Against
Discrimination, N.J.S.A. 10:15-1, et seq., the New Jersey Conscientious
Executive Protection Act, N.J.S.A. 34:19-1 to 19-8, the New Jersey Wage and
Hour Act, N.J.S.A. 34-11-56a, et seq., and any other equivalent or similar
federal, state, or local statute; provided, however, that Employee does not
release or discharge the Released Parties from (i) any of the Company’s
obligations to him under the Severance Agreement, and (ii) any vested
benefits to which he may be entitled under any employee benefit plan or program
subject to ERISA.  It is understood that
nothing in this General Release is to be construed as an admission on behalf of
the Released Parties of any wrongdoing with respect to Employee, any such
wrongdoing being expressly denied.

 

Employee
represents and warrants that he fully understands the terms of this General
Release, that he is hereby advised to consult with legal counsel before
signing, and that he knowingly and voluntarily, of his own free will, without
any duress, being fully informed, and after due deliberation, accepts its terms
and signs below as his own free act. Except as otherwise provided herein,
Employee understands that as a result of executing this General Release, he
will not have the right to assert that the Company or any other of the Released
Parties unlawfully terminated his employment or violated any of his rights in
connection with his employment or otherwise.

 

Employee
further represents and warrants that he has not filed, and will not initiate,
or cause to be initiated on his behalf any complaint, charge, claim, or
proceeding against any of the Released Parties before any federal, state, or
local agency, court, or other body relating to any claims barred or released in
this General Release thereof, and will not voluntarily participate in such a
proceeding.  However, nothing in this
general release shall preclude or prevent Employee from filing a claim, which
challenges the validity of this general release solely with respect to Employee’s
waiver of any Losses arising under the ADEA. Employee shall not

 

 

accept
any relief obtained on his behalf by any government agency, private party,
class, or otherwise with respect to any claims covered by this General Release.

 

Employee
may take twenty-one (21) days to consider whether to execute this General
Release.  Upon Employee’s execution of
this General Release, Employee will have seven (7) days after such
execution in which he may revoke such execution. In the event of revocation,
Employee must present written notice of such revocation to the Company’s Chief
Executive Officer.  If seven (7) days
pass without receipt of such notice of revocation, this General Release shall
become binding and effective on the eighth (8th) day after the execution hereof
(the “Effective Date”).

 

 

INTENDING
TO BE LEGALLY BOUND, I hereby set my hand below:

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
				

 

NOTARIZATION

 

	
  State of

  	
   

  	
   

  	
  )

  	
   

  	
   

  
	
  County of

  	
   

  	
   

  	
  )

  	
   

  	
  ss.

  

 

On
this             day of                   
in the year            
before me, the undersigned, personally appeared                               ;
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is

 

 

subscribed
to the within instrument, and acknowledged to me that he executed the same in
his capacity as an individual, and that by his signature on the instrument he
executed such instrument, and that such individual made such appearance before
the undersigned.

 

 

	
   

  	
   

  
	
   

  	
  Notary PublicExhibit
10.1

 

EMPLOYMENT AGREEMENT

 

This
EMPLOYMENT AGREEMENT is entered into as of August 8, 2003 by and among
Riverwood International Corporation, a Delaware corporation (“Employer”),
Riverwood Holding, Inc., a Delaware corporation (“Holding”) and Robert M. Simko
(“Executive”).

 

W I T N E S S E T H :

 

WHEREAS,
Employer desires to employ Executive as its Vice President Supply Chain
Management on the terms and conditions set forth herein;

 

WHEREAS,
Executive desires to accept such employment on the terms and conditions set
forth herein;

 

WHEREAS,
each of Employer, Holding and Executive agrees that Executive will have
a prominent role in the management of the business, and the development of
the goodwill, of Employer and its Affiliates (as defined below) and will
establish and develop relations and contacts with the principal customers and
suppliers of Employer and its Affiliates in the United States and the rest of
the world, all of which constitute valuable goodwill of, and could be used by
Executive to compete unfairly with, Employer and its Affiliates;

 

WHEREAS,
(i) in the course of his employment with Employer, Executive will
obtain confidential and proprietary information and trade secrets concerning
the business and operations of Employer and its Affiliates in the United States
and the rest of the world that could be used to compete unfairly with Employer
and its Affiliates; (ii) the covenants and restrictions contained
in Sections 8 through 13, inclusive, are intended to protect the
legitimate interests of Employer and its Affiliates in their respective
goodwill, trade secrets and other confidential and proprietary information; and
(iii) Executive desires to be bound by such covenants and
restrictions;

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein and for other good and valuable consideration,
Employer, Holding and Executive hereby agree as follows:

 

1                                          Agreement
to Employ. Upon the terms and subject to the conditions of this Agreement,
Employer hereby employs Executive, and Executive hereby accepts employment by
Employer.

 

2                                          Term; Position and Responsibilities.

 

(a)                                  Term
of Employment. Unless Executive’s employment shall sooner terminate
pursuant to Section 7, Employer shall employ Executive for a term 

 

 

commencing on the
date hereof and ending on the second anniversary of the date hereof (the “Initial
Term”). Effective upon the expiration of the Initial Term and of each
Additional Term (as defined below), Executive’s employment hereunder shall be
deemed to be automatically extended, upon the same terms and conditions, for an
additional period of one year (each, an “Additional Term”), in each such
case, commencing upon the expiration of the Initial Term or the then current
Additional Term, as the case may be, unless Employer, at least 180 days prior
to the expiration of the Initial Term or such Additional Term, shall give
written notice (a ”Non-Extension Notice”) to Executive of its intention
not to extend the Employment Period (as defined below) hereunder, provided
that a Non-Extension Notice shall not constitute a notice to
Executive of the termination of his employment by Employer unless such notice
specifically provides for such termination of employment and the specific date
thereof. The period during which Executive is employed pursuant to this
Agreement, including any extension thereof in accordance with the preceding
sentence, shall be referred to as the “Employment Period”.

 

(b)                                 Position
and Responsibilities. During the Employment Period, Executive shall serve
as Vice President Supply Chain Management of Employer and have such duties and
responsibilities as are customarily assigned to individuals serving in such
position and such other duties consistent with Executive’s title and position
as the Board of Directors of Employer (“Employer’s Board”) specifies from time
to time. Executive shall report to the Company’s President and Chief Executive
Officer. Executive shall devote all of his skill, knowledge and working time
(except for (i) vacation time as set forth in Section 6(c) and
absence for sickness or similar disability and (ii) to the extent
that it does not interfere with the performance of Executive’s duties
hereunder, (A) such reasonable time as may be devoted to service on
boards of directors of other corporations and entities, subject to the
provisions of Section 9, and the fulfillment of civic responsibilities and
(B) such reasonable time as may be necessary from time to time for
personal financial matters) to the conscientious performance of the duties and
responsibilities of such position. If so elected or designated by the
respective shareholders thereof, Executive shall serve as a member of the
Boards of Directors of Holding, Employer and their respective Affiliates during
the Employment Period without additional compensation.

 

3                                          Base
Salary. As compensation for the services to be performed by Executive
during the Employment Period, Employer shall pay Executive a base salary
at an annualized rate of $230,000, payable in installments on Employer’s
regular payroll dates, and, in the event that Executive’s employment hereunder
is terminated by death, for the remainder of the pay period in which death
occurs and for one month thereafter. Employer’s Board shall review Executive’s
base salary annually during the period of his employment hereunder and, in its
sole discretion, Employer’s Board may increase (but may not decrease) such base
salary from time to time based upon the performance of Executive, the financial
condition of Employer, prevailing industry salary levels and such other factors
as Employer’s Board shall consider relevant. (The annual base salary

 

2

 

payable to
Executive under this Section 3, as the same may be increased from time to
time and without regard to any reduction therefrom in accordance with the next
sentence, shall hereinafter be referred to as the “Base Salary”.)  The Base Salary payable under this
Section 3 shall be reduced to the extent that Executive elects to defer
such Base Salary under the terms of any deferred compensation, savings plan or
other voluntary deferral arrangement that may be maintained or established by
Employer.

 

4                                          Incentive Compensation Arrangements. During the Employment Period,
Executive shall participate in Employer’s incentive compensation programs for
its senior executives existing from time to time, at a level commensurate
with his position and duties with Employer and based on such performance
targets as may be established from time to time by Employer’s Board or
a committee thereof.

 

5                                          Employee
Benefits. During the Employment Period, employee benefits, including life,
medical, dental, accidental death and dismemberment, business travel accident,
prescription drug and disability insurance, shall be provided to Executive in
accordance with the programs of Employer then available to its senior
executives, as the same may be amended and in effect from time to time. Executive
shall also be entitled to participate in all of Employer’s profit sharing,
pension, retirement, deferred compensation and savings plans, as the same may
be amended and in effect from time to time, applicable to senior executives of
Employer. The benefits referred to in this Section 5 shall be provided to
Executive on a basis that is commensurate with Executive’s position and
duties with Employer hereunder and that is no less favorable than that of
similarly situated employees of Employer.

 

6                                          Perquisites and Expenses.

 

(a)                                  General.
During the Employment Period, Executive shall be entitled to the perquisites
set forth on Schedule I hereto.

 

(b)                                 Business
Travel, Lodging, etc. Employer shall reimburse Executive for reasonable
travel, lodging, meal and other reasonable expenses incurred by him in
connection with his performance of services hereunder upon submission of
evidence, satisfactory to Employer, of the incurrence and purpose of each such
expense and otherwise in accordance with Employer’s business travel
reimbursement policy applicable to its senior executives as in effect from time
to time.

 

(c)                                  Vacation.
During the Employment Period, Executive shall be entitled to a number of
weeks of paid vacation on an annualized basis, without carryover accumulation,
equal to the greater of (i) four weeks and (ii) the
number of weeks of paid vacation per year applicable to senior executives of
Employer in accordance with its vacation policy as in effect from time to time.

 

3

 

7                                          Termination
of Employment.

 

(a)                                  Termination
Due to Death or Disability. In the event that Executive’s employment
hereunder terminates due to death or is terminated by Employer due to Executive’s
Disability (as defined below), no termination benefits shall be payable to or
in respect of Executive except as provided in Section 7(f)(ii). For
purposes of this Agreement, “Disability” shall mean a physical or mental
disability that prevents or would prevent the performance by Executive of his
duties hereunder for a continuous period of six months or longer. The
determination of Executive’s Disability shall (i) be made by an
independent physician who is reasonably acceptable to Employer and Executive
(or his representative), (ii) be final and binding on the parties
hereto and (iii) be based on such competent medical evidence as shall
be presented to such independent physician by Executive and/or Employer or by
any physician or group of physicians or other competent medical experts
employed by Executive and/or Employer to advise such independent physician.

 

(b)                                 Termination
by Employer for Cause. Executive may be terminated for Cause (as defined
below) by Employer, provided that Executive shall be permitted to attend
a meeting of Employer’s Board within 30 days after delivery to him of
a Notice of Termination (as defined below) pursuant to this
Section 7(b) to explain why he should not be terminated for Cause and, if
following any such explanation by Executive, Employer’s Board determines that
Employer does not have Cause to terminate Executive’s employment, any such
prior Notice of Termination delivered to Executive shall thereupon be withdrawn
and of no further force or effect. “Cause” shall mean (i) the
willful failure of Executive substantially to perform his duties hereunder
(other than any such failure due to Executive’s physical or mental illness) or
other willful and material breach by Executive of any of his obligations
hereunder or under any option agreement or other incentive award agreement,
after a written demand for substantial performance has been delivered, and
a reasonable opportunity to cure has been given, to Executive by Employer’s
Board, which demand identifies in reasonable detail the manner in which
Employer’s Board believes that Executive has not substantially performed his
duties or has breached his obligations, (ii) Executive’s engaging
in willful and serious misconduct that has caused or is reasonably expected to
result in material injury to Employer or any of its Affiliates or (iii) Executive’s
conviction of, or entering a plea of guilty or nolo  contendere
to, a crime that constitutes a felony.

 

(c)                                  Termination
Without Cause. A termination “Without Cause” shall mean
a termination of employment by Employer other than due to Disability as
described in Section 7(a) or for Cause as described in Section 7(b).

 

(d)                                 Termination
by Executive. Executive may terminate his employment for any reason. A termination
of employment by Executive for “Good Reason” shall mean a termination by
Executive of his employment with Employer within 30 days following 

 

4

 

the occurrence,
without Executive’s consent, of any of the following events: (i) the
assignment to Executive of duties that are significantly different from, and
that result in a substantial diminution of, the duties that he is to
assume on the date hereof, (ii) the failure of Employer to obtain
the assumption of this Agreement by any Successor (as defined below) to
Employer as contemplated by Section 14, (iii) a reduction in
the rate of Executive’s Base Salary, (iv) a material breach by
Employer of any of its obligations hereunder or by Holding of any of its
obligations under any option agreement or other incentive award agreement or (v) delivery
to Executive of a Non-Extension Notice, provided that, in the case
of any of clauses (i), (iii) or (iv), within 30 days following
the occurrence of any of the events set forth therein, Executive shall have
delivered written notice to Employer of his intention to terminate his
employment for Good Reason, which notice specifies in reasonable detail the
circumstances claimed to give rise to Executive’s right to terminate his
employment for Good Reason, and Employer or Holding, as the case may be, shall
not have cured such circumstances to the reasonable satisfaction of Executive.

 

(e)                                  Notice
of Termination. Any termination by Employer pursuant to Section 7(a),
7(b) or 7(c), or by Executive pursuant to Section 7(d), shall be
communicated by a written Notice of Termination addressed to the other
parties to this Agreement. A ”Notice of Termination” shall mean
a notice stating that Executive’s employment with Employer has been or
will be terminated.

 

(f)                                    Payments Upon Certain Terminations.

 

(i)                                     In
the event of a termination of Executive’s employment by Employer Without
Cause or a termination by Executive of his employment for Good Reason
during the Employment Period, Employer shall pay to Executive (or, following
his death, to Executive’s beneficiaries):

 

(A)                              his
Base Salary, which shall be payable in installments on Employer’s regular
payroll dates, for the period (the “Severance Period”) beginning on the Date of
Termination (as defined below) and ending on the first anniversary of the Date
of Termination, and

 

(B)                                the product of (1) the amount of
incentive compensation that would have been payable to Executive for the
calendar year in which the Date of Termination occurs if Executive had remained
employed for the entire calendar year and assuming that all applicable
performance targets had been achieved, multiplied by (2) a fraction,
the numerator of which is equal to the number of days in such calendar year
that precede the Date of Termination and the denominator of which is equal
to 365 (such product, the “Pro Rata Bonus”), less

 

5

 

(C)                                the
amount, if any, paid or payable to Executive under the terms of any severance
plan, policy, program or practice of Holding, Employer or any of their
respective Affiliates applicable to Executive, as in effect on the Date of
Termination;

 

provided
that Employer may, at any time, pay to Executive, in a single lump sum and
in satisfaction of Employer’s obligations under clauses (A) and (B)
of this Section 7(f)(i), an amount equal to (x) the
installments of the Base Salary then remaining to be paid to Executive pursuant
to clause (A) above, and the amount, if any, then remaining to be paid to
Executive pursuant to clause (B) above, less (y) the
amount, if any, remaining to be paid to Executive pursuant to any plan, policy,
program or practice identified under clause (C) above.

 

If
Executive’s employment shall terminate and he is entitled to receive continued
payments of his Base Salary under clause (A) of this Section 7(f)(i),
Employer shall (x) continue to provide to Executive during the
Severance Period the life, medical, dental and prescription drug benefits
referred to in Section 5 (the “Continued Benefits”) and (y) reimburse
Executive for expenses incurred by him for outplacement and career counseling
services provided to Executive for an aggregate amount not in excess of the
lesser of (i) $25,000 and (ii) 20% of Executive’s Base Salary.

 

Executive
shall not have a duty to mitigate the costs to Employer under this
Section 7(f)(i), except that Continued Benefits shall be reduced or
canceled to the extent of any comparable benefit coverage earned by (whether or
not paid currently) or offered to Executive during the Severance Period by
a subsequent employer or other Person (as defined below) for which
Executive performs services, including but not limited to consulting services.

 

(ii)                                  If
Executive’s employment shall terminate upon his death or Disability or if
Employer shall terminate Executive’s employment for Cause or Executive shall
terminate his employment without Good Reason during the Employment Period,
Employer shall pay Executive his full Base Salary through the Date of
Termination; plus, in the case of termination upon Executive’s death or
Disability, if, as of the Date of Termination, Employer has achieved the pro
rated performance objectives for such calendar year (determined as provided in
Section 7(f)(i)), the Pro Rata Bonus for the portion of the calendar year
preceding Executive’s Date of Termination (exclusive of any time between the
onset of a physical or mental disability that prevents the performance by
Executive of his duties hereunder and the resulting Date of Termination); plus,
in the case of termination upon Executive’s death, his full Base Salary for the
remainder of the pay period in which death occurs and for one month thereafter,
as provided in Section 3.

 

(iii)                               Except
as specifically set forth in this Section 7(f), no benefits payable to
Executive under any otherwise applicable plan, policy, program or practice of
Employer 

 

6

 

shall be limited by this
Section 7(f), provided that (x) Executive shall not be
entitled to receive any payments or benefits under any such plan, policy,
program or practice providing any bonus or incentive compensation (and the
provisions of this Section 7(f) shall supersede the provisions of any such
plan, policy, program or practice), and (y) the amount, if any,
paid or payable to Executive under the terms of any such plan, policy, program
or practice relating to severance shall reduce the amounts payable under
Section 7(f)(i) as provided in clause (C) thereof.

 

(g)                                 Date
of Termination. As used in this Agreement, the term “Date of Termination”
shall mean (i) if Executive’s employment is terminated by his
death, the date of his death, (ii) if Executive’s employment is
terminated by Employer for Cause, the date on which Notice of Termination is
given as contemplated by Section 7(e) or, if later, the date of
termination specified in such Notice, and (iii) if Executive’s
employment is terminated by Employer Without Cause, due to Executive’s
Disability or by Executive for any reason, the date that is 30 days after
the date on which Notice of Termination is given as contemplated by
Section 7(e) or, if no such Notice is given, 30 days after the date
of termination of employment.

 

(h)                                 Resignation
upon Termination. Effective as of any Date of Termination under this
Section 7 or otherwise as of the date of Executive’s termination of
employment with Employer, Executive shall resign, in writing, from all Board
memberships and other positions then held by him with Holding, Employer and
their respective Affiliates.

 

8                                          Unauthorized
Disclosure. During the period of Executive’s employment with Employer and
the ten-year period following any termination of such employment, without the
prior written consent of Employer’s Board or its authorized representative,
except to the extent required by an order of a court having jurisdiction
or under subpoena from an appropriate government agency, in which event,
Executive shall use his best efforts to consult with Employer’s Board prior to
responding to any such order or subpoena, and except as required in the
performance of his duties hereunder, Executive shall not disclose any
confidential or proprietary trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including but not
limited to data and other information relating to members of the Board of
Directors of Holding, Employer or any of their respective Affiliates or to
management of Holding, Employer or any of their respective Affiliates),
operating policies or manuals, business plans, financial records, packaging
design or other financial, commercial, business or technical information (a) relating
to Holding, Employer or any of their respective Affiliates or (b) that
Holding, Employer or any of their respective Affiliates may receive belonging
to suppliers, customers or others who do business with Holding, Employer or any
of their respective Affiliates (collectively, “Confidential Information”) to
any third person unless such Confidential Information has been previously
disclosed to the public or is in the public domain (other than by reason of
Executive’s breach of this Section 8).

 

7

 

9                                          Non-Competition.
During the period of Executive’s employment with Employer and, following any
termination thereof, the period ending on the later of (a) the
first anniversary of the Date of Termination and (b) the last day
of the Severance Period, Executive shall not, directly or indirectly, become
employed in a similar executive capacity by, engage in business with, serve as
an agent or consultant to, or become a partner, member, principal or stockholder
(other than a holder of less than 1% of the outstanding voting shares of
any publicly held company) of, The Mead Corporation, any of its subsidiaries or
any other current or future direct competitor (or any of such direct competitor’s
subsidiaries or affiliates) in the paperboard and paperboard packaging business
of Holding, Employer or any of their respective subsidiaries, as determined in
good faith by Employer’s Board. For purposes of this Section 9, the phrase
employment “in a similar executive capacity” shall mean employment in any
position in connection with which Executive has or reasonably would be viewed
as having powers and authorities with respect to any other Person or any part
of the business thereof that are substantially similar, with respect thereto,
to the powers and authorities assigned to the Vice President, Supply Chain
Management or any superior executive officer of Employer in the By-Laws of
Employer as in effect on the date hereof, a copy of the relevant portions
of which has been delivered to Executive on or before the date hereof, and
which Executive hereby confirms that he has reviewed.

 

10                                    Non-Solicitation
of Employees. During the period of Executive’s employment with Employer
and, following any termination thereof, the period ending on the last day of
the Severance Period (such periods collectively, the “Restriction Period”),
Executive shall not, directly or indirectly, for his own account or for the
account of any other Person anywhere in the United States or Europe, (i) solicit
for employment, employ or otherwise interfere with the relationship of Holding,
Employer or any of their respective subsidiaries with, any person who at any
time during the six months preceding such solicitation, employment or
interference is or was employed by or otherwise engaged to perform services for
Holding, Employer or any of their respective subsidiaries, other than any such
solicitation or employment during Executive’s employment with Holding and
Employer on behalf of Holding, and Employer, or (ii) induce any
employee of Holding, Employer or any of their respective Affiliates who is
a member of management to engage in any activity which Executive is
prohibited from engaging in under any of Sections 8, 9, 10 or 11 or
to terminate his employment with Employer.

 

11                                    Non-Solicitation
of Customers. During the Restriction Period, Executive shall not, directly
or indirectly, for his own account or for the account of any other Person
anywhere in the United States or Europe, solicit or otherwise attempt to establish
any business relationship of a nature that is competitive with the
paperboard and paperboard packaging business of Holding, Employer or any of
their respective subsidiaries, as determined in good faith by Employer’s Board
with any Person who is or was a customer, client or distributor of
Holding, Employer or any of their respective Affiliates 

 

8

 

at any time during
which Executive was employed by Employer (in the case of any such activity
during such time) or during the twelve-month period preceding the Date of
Termination (in the case of any such activity after the Date of Termination),
other than any such solicitation on behalf of Holding, Employer or any of their
respective Affiliates during Executive’s employment with Employer.

 

12                                    Return
of Documents. In the event of the termination of Executive’s employment for
any reason, Executive shall deliver to Employer all of (a) the
property of each of Holding, Employer and their respective Affiliates and (b) the
non-personal documents and data of any nature and in whatever medium of each of
Holding, Employer and their respective Affiliates, and he shall not take with
him any such property, documents or data or any reproduction thereof, or any
documents containing or pertaining to any Confidential Information. Whether
documents or data are “personal” or “non-personal” shall be determined as
follows:  Executive shall present any
documents or data that he wishes to take with him to the chief legal officer of
Employer for his review. The chief legal officer shall make an initial
determination whether any such documents or data are personal or non-personal,
and with respect to such documents or data that he determines to be
non-personal, shall notify Executive either that such documents or data must be
retained by Employer or that Employer must make and retain a copy thereof
before Executive may take such documents or data with him. Any disputes as to
the personal or non-personal nature of any such documents or data shall first
be presented to the Chairman of Employer’s Board or to another representative
designated by Employer’s Board, and if such disputes are not promptly resolved
by Executive and the Chairman or such representative, such disputes shall be
resolved through arbitration pursuant to Section 17(b).

 

13                                    Injunctive
Relief with Respect to Covenants; Forum, Venue and Jurisdiction. Executive
acknowledges and agrees that the covenants, obligations and agreements of
Executive contained in Sections 8, 9, 10, 11, 12 and 13 relate to
special, unique and extraordinary matters and that a violation of any of
the terms of such covenants, obligations or agreements will cause Employer
irreparable injury for which adequate remedies are not available at law. Therefore,
Executive agrees that Employer shall be entitled to an injunction, restraining
order or such other equitable relief (without the requirement to post bond) as
a court of competent jurisdiction may deem necessary or appropriate to
restrain Executive from committing any violation of such covenants, obligations
or agreements. These injunctive remedies are cumulative and in addition to any
other rights and remedies Employer may have. Employer, Holding and Executive
hereby irrevocably submit to the exclusive jurisdiction of the courts of the
State of New York and the Federal courts of the United States of America,
in each case located in New York City, in respect of the injunctive
remedies set forth in this Section 13 and the interpretation and enforcement
of Sections 8, 9, 10, 11, 12 and 13 insofar as such interpretation
and enforcement relate to any request or application for injunctive relief in
accordance with the provisions of this Section 13, and the parties hereto
hereby 

 

9

 

irrevocably agree
that (a) the sole and exclusive appropriate venue for any suit or
proceeding relating solely to such injunctive relief shall be in such
a court, (b) all claims with respect to any request or
application for such injunctive relief shall be heard and determined
exclusively in such a court, (c) any such court shall have
exclusive jurisdiction over the person of such parties and over the subject
matter of any dispute relating to any request or application for such
injunctive relief, and (d) each hereby waives any and all
objections and defenses based on forum, venue or personal or subject matter
jurisdiction as they may relate to an application for such injunctive relief in
a suit or proceeding brought before such a court in accordance with
the provisions of this Section 13. All disputes not relating to any
request or application for injunctive relief in accordance with this
Section 13 shall be resolved by arbitration in accordance with
Section 17(b).

 

14                                    Assumption
of Agreement. Employer shall require any Successor thereto, by agreement in
form and substance reasonably satisfactory to Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that Employer would be required to perform it if no such succession had taken
place. Failure of Employer to obtain such agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and shall
entitle Executive to compensation from Employer in the same amount and on the
same terms as Executive would be entitled hereunder if Employer had terminated
Executive’s employment Without Cause as described in Section 7, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.

 

15                                    Entire
Agreement. This Agreement (including the Exhibit hereto) constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof. All prior correspondence and proposals (including but not limited to
summaries of proposed terms) and all prior promises, representations,
understandings, arrangements and agreements relating to such subject matter
(including but not limited to those made to or with Executive by any other
Person and those contained in any prior employment, consulting or similar
agreement entered into by Executive and Employer or any predecessor thereto or
Affiliate thereof) are merged herein and superseded hereby.

 

16                                    Indemnification.
Employer hereby agrees that it shall indemnify and hold harmless Executive to
the fullest extent permitted by Delaware law from and against any and all
liabilities, costs, claims and expenses, including all costs and expenses
incurred in defense of litigation (including attorneys’ fees), arising out of
the employment of Executive hereunder, except to the extent arising out of or
based upon the gross negligence or willful misconduct of Executive. Costs and
expenses incurred by Executive in defense of such litigation (including
attorneys’ fees) shall be paid by Employer in advance of the final disposition
of such litigation upon receipt by Employer of (a) a written
request for payment, (b) appropriate documentation evidencing the 

 

10

 

incurrence, amount
and nature of the costs and expenses for which payment is being sought, and (c) an
undertaking adequate under Delaware law made by or on behalf of Executive to
repay the amounts so paid if it shall ultimately be determined that Executive
is not entitled to be indemnified by Employer under this Agreement, including
but not limited to as a result of such exception.

 

17                                    Miscellaneous.

 

(a)                                  Binding
Effect; Assignment. This Agreement shall be binding on and inure to the
benefit of Employer, Holding and their respective successors and permitted
assigns. This Agreement shall also be binding on and inure to the benefit of
Executive and his heirs, executors, administrators and legal representatives. This
Agreement shall not be assignable by any party hereto without the prior written
consent of the other parties hereto, except as provided pursuant to this
Section 17(a). Each of Holding and Employer may effect such an assignment
without prior written approval of Executive upon the transfer of all or
substantially all of its business and/or assets (by whatever means), provided
that the Successor to Employer shall expressly assume and agree to perform this
Agreement in accordance with the provisions of Section 14.

 

(b)                                 Arbitration.
Any dispute or controversy arising under or in connection with this Agreement
(except in connection with any request or application for injunctive relief in
accordance with Section 13) shall be resolved by binding arbitration. The
arbitration shall be held in the city of Atlanta, Georgia and except to the
extent inconsistent with this Agreement, shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then
in effect at the time of the arbitration, and otherwise in accordance with principles
which would be applied by a court of law or equity. The arbitrator shall be
acceptable to both Employer and Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel of three
arbitrators, one appointed by Employer, one appointed by Executive, and the
third appointed by the other two arbitrators. All expenses of arbitration shall
be borne by the party who incurs the expense, or, in the case of joint
expenses, by both parties in equal portions, except that, in the event
Executive prevails on the principal issues of such dispute or controversy, all
such expenses shall be borne by Employer.

 

(c)                                  Governing
Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without reference to principles of conflicts
of laws, provided that the indemnification provisions contained in
Section 16 shall be governed by and construed in accordance with the laws
of the State of Delaware.

 

(d)                                 Taxes.
Employer may withhold from any payments made under this Agreement all
applicable taxes, including but not limited to income, employment and social
insurance taxes, as shall be required by law.

 

11

 

(e)                                  Amendments.
No provision of this Agreement may be modified, waived or discharged unless
such modification, waiver or discharge is approved by Employer’s Board or
a Person authorized thereby and is agreed to in writing by Executive and,
in the case of any such modification, waiver or discharge affecting the rights
or obligations of Holding, is approved by the Board of Directors of Holding or
a Person authorized thereby. No waiver by any party hereto at any time of
any breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No waiver of any provision of this Agreement
shall be implied from any course of dealing between or among the parties hereto
or from any failure by any party hereto to assert its rights hereunder on any
occasion or series of occasions.

 

(f)                                    Severability.
In the event that any one or more of the provisions of this Agreement shall be
or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.

 

(g)                                 Notices.
Any notice or other communication required or permitted to be delivered under
this Agreement shall be (i) in writing, (ii) delivered
personally, by courier service or by certified or registered mail, first-class
postage prepaid and return receipt requested, (iii) deemed to have
been received on the date of delivery or, if so mailed, on the third business
day after the mailing thereof, and (iv) addressed as follows (or to
such other address as the party entitled to notice shall hereafter designate in
accordance with the terms hereof):

 

(A)                              If
to Employer, to it at:

 

Riverwood International Corporation

814 Livingston Court

Marietta, Georgia 
30067

Attention:  General Counsel

 

(B)                                if
to Holding, to it at:

 

c/o Riverwood International Corporation

814 Livingston Court

Marietta, Georgia 
30067

Attention:  General Counsel

 

(C)                                if
to Executive, to him at his residential address as currently on file with
Employer.

 

12

 

Copies of any
notices or other communications given under this Agreement shall also be given
to:

 

Clayton, Dubilier & Rice, Inc.

375 Park Avenue

New York, New York 
10152

Attention:  Mr. Kevin J. Conway

 

and

 

Debevoise & Plimpton

875 Third Avenue

New York, New York 
10022

Attention:  Franci J. Blassberg, Esq.

 

(h)                                 Voluntary
Agreement; No Conflicts. Executive, Employer and Holding each represent
that they are entering into this Agreement voluntarily and that Executive’s
employment hereunder and each party’s compliance with the terms and conditions
of this Agreement will not conflict with or result in the breach by such party
of any agreement to which he or it is a party or by which he or it or his
or its properties or assets may be bound.

 

(i)                                     Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
instrument.

 

(j)                                     Headings.
The section and other headings contained in this Agreement are for the
convenience of the parties only and are not intended to be a part hereof
or to affect the meaning or interpretation hereof.

 

(k)                                  Certain Definitions.

 

“Affiliate”:  with respect to any Person, means
any other Person that, directly or indirectly through one or more
intermediaries, Controls, is Controlled by, or is under common Control with the
first Person, including but not limited to a Subsidiary of the first
Person, a Person of which the first Person is a Subsidiary, or
another Subsidiary of a Person of which the first Person is also
a Subsidiary.

 

“Control”:  with respect to any Person, means the
possession, directly or indirectly, severally or jointly, of the power to
direct or cause the direction of the management policies of such Person,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise.

 

13

 

“Person”:  any natural person, firm, partnership,
limited liability company, association, corporation, company, trust, business
trust, governmental authority or other entity.

 

“Subsidiary”: 
with respect to any Person, each corporation or other Person in which
the first Person owns or Controls, directly or indirectly, capital stock or
other ownership interests representing 50% or more of the combined voting
power of the outstanding voting stock or other ownership interests of such
corporation or other Person.

 

“Successor”: 
of a Person means a Person that succeeds to the first Person’s
assets and liabilities by merger, liquidation, dissolution or otherwise by
operation of law, or a Person to which all or substantially all the assets
and/or business of the first Person are transferred.

 

14

 

IN WITNESS WHEREOF, Employer and Holding have duly
executed this Agreement by their authorized representatives, and Executive has
hereunto set his hand, in each case effective as of the date first above
written.

 

 

	
   

  	
  RIVERWOOD INTERNATIONAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen M. Humphrey 

  	
   

  
	
   

  	
   

  	
  Name: Stephen M. Humphrey

  
	
   

  	
   

  	
  Title: President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RIVERWOOD HOLDING, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen M. Humphrey 

  	
   

  
	
   

  	
   

  	
  Name: Stephen M. Humphrey

  
	
   

  	
   

  	
  Title: President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Executive:

  
	
   

  	
   

  
	
   

  	
  /s/ Robert M. Simko 

  	
   

  
						

 

15

 

Schedule I

 

Perquisites

 

1                                          Annual
executive physical.

 

2                                          Reimbursement
up to $1,000 annually for expenses relating to income tax preparation plus
additional fees if incurred on account of job-related circumstances and the
cost of representation by return preparer during any audit.

 

3                                          Reimbursement
for expenses incurred for financial and estate planning services of up to
$5,000 for expenses incurred in the first calendar year services are utilized
and up to $2,500 for expenses incurred in calendar years thereafter.

 

4                                          Subject
to the advance approval of the CEO, reimbursement for initiation fees (“grossed
up” for federal and state income taxes) and dues for one country club and one
luncheon or city club.

 

16

 

AMENDMENT
TO

EMPLOYMENT
AGREEMENT

 

THIS AMENDMENT (the “Amendment”), effective as of
February 1, 2006, by and between Graphic Packaging International, Inc. f/k/a
Riverwood International Corporation (“Employer”), Graphic Packaging Corporation
f/k/a Riverwood Holding, Inc. (“Holding”) and Robert M. Simko (“Executive”),
amends that certain Employment Agreement, dated as of August 8, 2003, by and
between Employer, Holding and Executive, as follows:

 

1.               Section
2(b) of the Employment Agreement is amended by substituting “Vice President
Supply Chain Management” with “Senior Vice President, Paperboard Operations.”

 

2.               Section
3 of the Employment Agreement is amended by substituting “$230,000” with
“$310,000.”

 

IN WITNESS WHEREOF, Employer and Holding have duly
executed this Amendment by the authorized representatives, and Executive has hereunto
set his hand, in each case effective as of the date first above written.

 

	
   

  	
  GRAPHIC PACKAGING
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stephen M. Humphrey 

  	
  2/21/2006

  
	
   

  	
   

  	
  Stephen
  M. Humphrey 

  	
   

  
	
   

  	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  GRAPHIC PACKAGING
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stephen M. Humphrey 

  	
  2/21/2006

  
	
   

  	
   

  	
  Stephen M. Humphrey

  
	
   

  	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert M. Simko 

  	
  2/21/2006

  
	
   

  	
  Robert M. Simko

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