Document:

exv10w17

 

Exhibit 10.17

OEM AGREEMENT

     THIS AGREEMENT is made as of the 24th day of May, 2005, by and between Compex Technologies,
Inc. (“Compex”), a Minnesota Corporation at 1811 Old Highway Eight, New Brighton, Minnesota, 55112,
and Bionicare Medical Technologies, Inc. (“Bionicare”) located at 47R Loveton Circle, Sparks,
Maryland, 21152.

     WHEREAS, Compex and Bionicare are parties to that certain OEM Agreement dated as of February
28, 2002 (the “Original Agreement”);

     WHEREAS, pursuant to the Original Agreement Bionicare provided to Compex a copy of Bionicare’s
patented wavelength technology and a schematic for an output circuit (collectively, the “Bionicare
Technology”) for a electrical stimulation device for clinical applications in regeneration of
cartilage of the knee;

     WHEREAS, Compex incorporated the Bionicare Technology into its proprietary design for a hand
held electrical stimulation device which includes Compex’s microprocessor, controls, patented open
lead detection systems, software controls relating to wave amplitude, user compliance software and
other features (the “Compex Technology”) in order to create a more compact version of the product;
and

     WHEREAS, pursuant to the original agreement, Compex manufactured and supplied to Bionicare,
for purchase, marketing, distribution and resale by Bionicare, the Products listed on the attached
Exhibit A (including the lead wire, battery and battery charger packaged and shipped therewith,
hereinafter referred to as the “Products”), incorporating the Bionicare Technology and the Compex
Technology;

     WHEREAS, the Original Agreement expired on March 20, 2004, and Compex and Bionicare desire to
renew the terms under which they operated in the Original Agreement.

     In consideration of the foregoing, and for other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties agree as follows:

	1.	 	Term. Subject to early termination in accordance with Section 10, this Agreement is
effective upon execution (the “Effective Date”) and for an initial period ending June 30, 2008
(the “Initial Term”), but shall be automatically renewed for successive one (1) year terms (a
“Renewal Term”) after the Initial Term unless either party provides notice to the other party
of its intent to cancel at least 180 days prior to expiration of the Initial Term or any
renewal term. Each one year period commencing on July 1 and ending June 30 during the Term of
this Agreement is herafter referred to as a “Contract Year.”
	 
	2.	 	Manufacture. Compex agrees to use its commercially reasonable efforts to manufacture
the Products and to sell the Products to Bionicare, and Bionicare shall use Compex as its sole
and exclusive manufacturer and source of supply for the Products, during the term of and in
accordance with the provisions of this Agreement. Compex acknowledges that the Products will
be manufactured with unique serial numbers and that it will maintain detailed production
records for seven (7) years. Subject to changes required to comply with QSR requirements,
Compex will not change the specifications for the Products without Bionicare’s prior written
consent. Bionicare shall pay all nonrecurring engineering charges associated any change
requested by Bionicare in Product specifications at the nominal labor rate for engineers of
sixty dollars ($60) per hour and the nominal labor rate for technicians of thirty dollars
($30) plus actual cost of required tooling.
	 
	3.	 	Purchase Orders and Delivery Schedule

	 	a)	 	Within 30 days of the Effective Date, Bionicare shall issue a purchase order to
Compex covering the total product requirements for Contract Year commencing July 1,
2005. Such purchase order shall contain (i) the type and quantity of the Products
ordered, including

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	 	 	 	whether such Product is to be in “Kitted” form or not in “Kitted” form, (ii) the
requested delivery date for such Products by each month in such Contract Year (the “PO
Delivery Schedule”), (iii) the requested location for delivery, (iv) the requested
method of delivery, and (v) such other information as may reasonably be required by
Compex. Any other terms in Bionicare’s purchase order are considered void and deleted.
Bionicare shall deliver an additional, revised Purchase Order covering each Contract
Year during the term of this Agreement by April 1 next preceding such Contract Year,
each of which shall contain a PO Delivery Schedule with respect to such Contract Year.
Each Purchase Order shall be subject to review and acceptance by Compex and shall, once
accepted, be binding as set forth herein. Each Purchase Order shall be binding and
non-cancelable with respect to the first three months of Product set forth in the PO
Delivery Schedule.
	 
	 	b)	 	By the 15th day of each month, commencing with July 15, 2005,
Bionicare shall provide to Compex a revised delivery schedule (a “Revised Delivery
Schedule” and together with the PO Delivery Schedule, a “Delivery Schedule”) with
respect to the four calendar months commencing with the first day of the first month
after such Delivery Schedule is due. Such Revised Delivery Schedule shall be binding
on, and noncancellable by, Bionicare with respect to the first three months of Product
scheduled for Delivery as set forth therein. To the extent that such Revised Delivery
Schedule sets forth increased scheduled delivery for Product during the first month
covered thereby (the “Overlap Month”), Compex will use its reasonable commercial
efforts to satisfy such scheduled deliveries, but shall not be obligated to deliver
more Product with respect to such Overlap Month than was scheduled in the next
preceding Delivery Schedule.
	 
	 	c)	 	Bionicare shall not be entitled to reschedule the delivery of any Product for
which the Purchase Order has become binding, including specifically the first three
months of deliveries under the PO Delivery Schedule, and the first three months of
deliveries under any revised Delivery Schedule. To the extent Compex shall ship
Product in accordance with such Delivery Schedule, Bionicare shall be fully liable for
payment in accordance with Section 6. No requested delivery delay on any order
previously accepted by Compex will be effective unless acknowledged in writing by
Compex. Compex shall have the right to cancel any order placed or delay shipment
thereof if Bionicare fails to make payment due Compex, or if actions or omissions on
the part of Bionicare caused a delay in Compex’ performance.
	 
	 	d)	 	Bionicare acknowledges that the Products incorporate Compex Technology and that
Compex has and will devote considerable resources to integrating the Products with the
Bionicare Technology. Accordingly, Bionicare agrees that Bionicare will purchase its
entire supply of Products, and any replacement products, from Compex. For such
purposes, “replacement products” means any product that replaces a Product that has
been discontinued, or that provides effectively the same functions as a Product and
which substantially diminishes sale of the Product after introduction.

4. Pricing

	 	a)	 	The prices for the Products initially shall be as set forth in Exhibit A for
the quantities specified in each Purchase Order, provided, however, that if at any time
during a Contract Year, Bionicare (i) submits a Delivery Schedule that causes the
scheduled deliveries of Product to total, on a cumulative basis from the first day of
such Contract year, less than the cumulative scheduled deliveries set forth in the PO
Delivery Schedule through that date in the Contract Year, or (ii) Bionicare fails to
timely pay any invoice in accordance with Section 6, then the prices for all Product
delivered from the beginning of such Contract Year shall be the price set forth in
Exhibit A assuming the Purchase Order related to the smallest quantity of Product set
forth in Exhibit A, and Bionicare shall immediately pay to Compex the difference
between the purchase price actually paid for Product invoiced during such Contact Year,
and the product of such revised purchase price and all such Product invoiced. For the
avoidance of doubt, if either of the events set forth in (i) or (ii) above occur, the
price of the Products shall change

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	 	 	 	retroactively for all Product shipped during the Contract Year. All prices are stated
and shall be paid in United States Dollars. Compex may increase the price of the
Products annually during the Initial Term, and prior to any Renewal Term, on 60 days
notice to Bionicare, but only to the extent its cost of manufacture of the Products has
increased. Any such notice shall be accompanied by information sufficient for Bionicare
to determine the reasons for such increase in cost of manufacture.
	 
	 	b.	 	Unless otherwise agreed to in writing by Compex, all prices are quoted
exclusive of transportation and insurance costs, and all taxes, duties and assessments
(except taxes levied against Compex’ income) including state and local use, sales,
property and similar taxes. Bionicare agrees to pay such taxes, unless Bionicare has
provided Compex with (i) an exemption resale certificate in the appropriate form for
the jurisdiction of Bionicare’s place of business and any jurisdiction to which Product
is to be directly shipped, or (ii) written evidence that such sale is otherwise exempt
from such taxes. In the event Compex is required to pay any tax or transportation
charges, Bionicare shall reimburse Compex. When applicable, such transportation and
taxes shall appear as separate items on Compex’ invoice.

	5.	 	Shipments

	 	(a)	 	Method. All shipments will be made F.O.B. Compex’ plant. Delivery will be
deemed complete and risk of loss or damage to the Products will pass to Bionicare upon
delivery to the carrier, the carrier acting exclusively as Bionicare’s agent. The
carrier will be selected by Compex in the absence of specific instructions by
Bionicare. In no event shall Compex be liable for any delay in delivery, or assume any
liability in connection with shipment. All claims for damages must be filed with the
carrier. Unless otherwise agreed in writing, all Products will be packaged, packed and
shipped in accordance with Compex’ normal practices.
	 
	 	(b)	 	Delivery. All shipping dates are estimates only. Shipments may be made in
installments. Compex shall be excused from performance, in whole or in part, caused by
the occurrence of any contingency beyond Compex’ reasonable control, including but not
limited to, war, judicial action, labor dispute, accident, default of suppliers, fire,
act of God, shortage of labor fuel, raw material or machinery or technical or yield
failures, where Compex has exercised commercially diligent efforts in the prevention
thereof.

	6.	 	Terms of Payment

	 	a.	 	Separate Transactions. Compex shall invoice each shipment separately as of the
date of shipment and shipment shall constitute a separate and individual contract. All
invoices are due and payable thirty (30) days from date of invoice. Any invoice not
paid within thirty (30) days from the date of invoice shall bear interest at the lesser
of one and one-half percent (1.5%) per month or the highest rate permissible under
applicable law.
	 
	 	b.	 	Approval. Shipments, deliveries, and performance of work shall at all times be
subject to the approval of Compex’ credit department and Compex may at any time decline
to make any shipments or deliveries or perform any work except upon receipt of payment,
or upon terms and conditions or security satisfactory to Compex. If shipments are
delayed by Bionicare, payment shall become due, at Compex’ option, thirty (30) days
after the date Compex is prepared to make shipment. Compex reserves the right to
establish and/or change credit and payment terms extended to Bionicare when, in Compex’
sole opinion, Bionicare’s financial condition or previous payment record warrants such
action.
	 
	 	c.	 	Security Interest. Bionicare hereby grants and Compex retains a purchase money
security interest in each Product furnished under any purchase order accepted under
this Agreement, and any proceeds thereof, until the full purchase price thereof has
been paid in full. Bionicare agrees that Compex may perfect such security interest and
that Bionicare will promptly execute any documents necessary to perfect such security
interest, upon Compex’ request.

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	 	d.	 	Inspection. Unless otherwise specified and agreed in writing, the Products
shall be subject to Bionicare’s standard inspection at the place of manufacture. If by
mutual agreement Bionicare is to inspect at the place of manufacture, such inspection
shall be conducted so as not unreasonably to interfere with Compex’ operations, and
Bionicare’s conclusive approval or rejection shall be made before shipment.
	 
	 	e.	 	Acceptance. Bionicare may, at Bionicare’s sole option and expense, conduct
incoming inspection and acceptance tests. The Product shall be deemed accepted by
Bionicare unless Compex receives written notice of defect as to any Product within
thirty (30) days of shipment. In the event the Products appear not to conform,
Bionicare shall immediately notify Compex and afford Compex a reasonable opportunity to
inspect the material at Bionicare’s plant. No Products shall be returned without
Compex’ prior written consent.

	7.	 	Confidentiality/ Ownership of Intellectual Property.

	 	a)	 	Compex hereby acknowledges that the Bionicare Technology is the sole and
exclusive property of Bionicare and Bionicare acknowledges that the Compex Technology
is the sole and exclusive property of Compex. Bionicare hereby provides to Compex a
nonexclusive license during the term of this Agreement to manufacture for sale to
Bionicare, the Products using the Bionicare Technology. Compex hereby provides to
Bionicare during the term of this Agreement, a nonexclusive license under the Compex
Technology to distribute, market and resell the Products.
	 
	 	b)	 	Any invention or trade secret hereafter developed by Bionicare or its personnel
shall be the sole and exclusive property of Bionicare. Bionicare will pay all expenses
relating to the securing and maintaining of appropriate intellectual property
protection with respect to such inventions. Any invention or trade secret hereafter
developed by Compex or its personnel shall be the sole and exclusive property of
Compex. Compex will pay all expenses relating to the securing and maintaining of
appropriate intellectual property protection with respect to such inventions.
	 
	 	c)	 	In the event that personnel of Compex and Bionicare jointly participate in an
invention or trade secret, such invention or trade secret, and the intellectual
property related thereto shall be owned jointly by the Parties. Determination of
inventorship shall be made in accordance with U.S. patent laws. The Parties shall
jointly share in the expenses of obtaining intellectual property protection of any
joint invention.
	 
	 	d)	 	Each party to this Agreement acknowledges and agrees that they have, prior to
the date of this Agreement, and will, after the Effective Time, disclose to the other
party confidential and trade secret information relating to product design, software
code and other matters (collectively, “Confidential Information”). Each Party shall
take the same reasonable measures as it uses to protect its own confidential
information from the unauthorized disclosure or misuse to protect the other Party’s
Confidential Information from unauthorized disclosure or misuse, including without
limitation, any disclosure by its employees, agents, contractors, permitted
sublicensees, or consultants of the other Party’s Confidential Information. As used
herein, the term reasonable measures shall mean at least those measures a Party applies
to the protection of its own Confidential Information and the term misuse shall mean
use for any purpose other than as permitted or required hereunder. The terms of this
Agreement itself shall be deemed to be Confidential Information. In the event that a
Party is required to disclose the content of this Agreement pursuant SEC requirements
or requirements of any securities exchange on which a Party’s share are listed and
traded, such Party shall use its reasonable efforts to obtain confidential treatment of
at least the following portions of the Agreement: (i) financial terms (such as all
dollar amounts and price terms), (ii) quantities and (iii) time periods.

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	 	e)	 	Notwithstanding any other provision in this Section 7, Bionicare and Compex
jointly acknowledge that they both function in the market for the use of electrical
stimulation for medical therapy or rehabilitation and that nothing in this Agreement
shall create any presumption that any development of Bionicare has been made or is
based on the Compex Technology or that any development of Compex has been made or is
based on the Bionicare Technology.

	8.	 	Warranty, Repair And Indemnification

	 	a)	 	Generally. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED,
STATUTORY, OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON COMPEX’S PART.
THIS WARRANTY IS FOR THE SOLE BENEFIT OF BIONICARE, AND NEITHER ASSUMES NOR AUTHORIZES
ANY OTHER PERSON TO ASSUME FOR COMPEX ANY OTHER LIABILITIES IN CONNECTION WITH THE SALE
OF THE PRODUCTS. Compex warrants to Bionicare only that the Products delivered under
this Agreement will be free from defects in material and workmanship under normal use
and service for a period of three (3) years from the date of shipment.
	 
	 	b)	 	Limitation. Compex’s entire obligation under this Warranty and Bionicare’s
exclusive remedy is limited, at Compex’s option, to replacing, repairing or giving
credit for, any non-conforming Product. In order to qualify for Warranty protection,
all defective Products must be returned to Compex’s factory of origin, transportation
charges prepaid, and, after examination, be disclosed, to Compex’s sole satisfaction,
to be thus defective and within this Warranty. Bionicare has no authority to extend
this Warranty to any other person or entity. This Warranty shall not apply to any
Products which have been (i) repaired or altered, except by Compex, (ii) subjected to
misuse, negligence, or accident, or (iii) not handled or maintained in conformance with
Compex’s handling, installation or operating instructions.
	 
	 	c)	 	Repair. Any work or rework on Products which fall outside the Warranty set
forth above, including repairs and remanufacture or service rental return, shall be
performed in accordance with this subsection (c). During the Term, Compex shall
provide remanufacturing services for Bio1000 devices, but not any accessories or
peripherals, that are delivered to its manufacturing plant in New Brighton, Minnesota.
Such remanufacturing services shall consist of:

	 	•	 	An electronic test of the Product;
	 
	 	•	 	A visual inspection of the Product;
	 
	 	•	 	A cleaning of the product and , if provided, its carrying case;
	 
	 	•	 	Labeling the Product and, if provided, its carrying case with a new serial number;
	 
	 	•	 	Recordation of the serial number in Compex’s electronic database.

	 	 	 	Such remanufactured product shall be specifically labeled as remanufactured and shall be
re-delivered to Bionicare for the charges set forth in the attached Exhibit B.
	 
	 	 	 	Compex shall ship remanufactured Product that it has received and for which it has
performed remanufacturing services in accordance with this subsection (c) to Bionicare
FOB Compex’s manufacturing plan, with invoice at time of shipment for the
remanufacturing costs in accordance with Exhibit B. Compex may, at its election,
include in Product originally shipped to Bionicare a prepaid return mailer for Product
returned for remanufacture, and to the extent a customer has used such prepaid mailer,
Compex shall include the cost of postage for such prepaid mailer in the invoice to
Bionicare and Bionicare shall reimburse Compex for such postage. Bionicare shall pay
for such remanufactured Product in accordance with Section 6.

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	 	 	 	Compex warrants remanufactured Product to the same extent as original Product as set
forth in subsections (a) and subject to the limitations contained in subsection (b) of
this Section 8 but only until the expiration of three years from the initial shipment
of such Product to Bionicare as a new product (and not the shipment as remanufactured),
or until 90 days after shipment as remanufactured product , which ever is greater, and
not for a period of three years after the date of shipment of such remanufactured
Products.
	 
	 	d)	 	Indemnification. Bionicare agrees to indemnify, defend and hold harmless
Compex and its officers, directors and employees from and against any and all damages,
liabilities, claims, costs, charges, judgments and expenses (including interest,
penalties and reasonable attorneys’ fees) (collectively “Damages”) incurred by such
party that arise out of or result from the design, sale, or use, or misuse of the
Products, excepting only Damages arising directly from a claim of design defect of the
Product that relate to the Product’s microprocessor as it relates to the control of the
specific functions of open lead detection, function key operation, user compliance
software, and liquid crystal display operation and the circuitry related to those
specific microprocessor functions (such excepted Damages, the “Compex Defects” ) .
Compex agrees to indemnify, defend and hold harmless Bionicare and its officers,
directors and employees from and against Damages arising from a claim of design defect
of the Product that is found, by final judgment, to be primarily attributable to the
Compex Defects.
	 
	 	e)	 	Each of Compex and Bionicare shall maintain comprehensive product liability
insurance policy with respect to the product in an amount of not less than $3,000,000
per occurrence. Each party shall name the other party as an additional insured under
such policy.

	9.	 	Regulation

	 	a)	 	Regulatory Approvals. Bionicare shall be responsible for all regulatory
approvals relating to the distribution, marketing and sale of the Products. Bionicare
represents and warrants to Compex that it currently has all such regulatory approvals,
including, without limitation that it has received letters under Section 510(k) of the
United States Food, Drug and Cosmetics Act indicating that the Products may be marketed
and sold in the United States. Bionicare shall be solely responsible for labeling the
products, all in compliance with Sections 201(k) and 201(m) respectively of the U.S.
Federal Food, Drug and Cosmetics Act.
	 
	 	b)	 	Manufacturing. Compex represents that its manufacturing facilities have been
inspected under the FDA’s QSR regulations, and that its manufacturing practices and
facilities currently comply with the QSR regulations and it maintains documents in the
manner required by such regulations with respect to manufacturing, testing and control
activities.
	 
	 	c)	 	Recalls. Bionicare shall be responsible for initiating and reporting, and
shall bear all costs and expenses of any recall of any Products and shall reimburse
Compex for the reasonable, out-of-pocket costs incurred by Compex as a result of such
recall, including the replacement cost of any Products affected thereby.

	10.	 	Termination

	 	a)	 	This Agreement may be terminated prior to the expiration of the term set forth
in Section 1:

(i) By either party for a material breach of this Agreement that has not been
cured within 30 days of notice;

(ii) By Compex if Bionicare fails to purchase the Products ordered pursuant to
any Purchase Order;

(iii) To the extent permitted by U.S. bankruptcy law, immediately upon written
notice in the event of the bankruptcy or insolvency of the other Party.

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	 	 	 	Notwithstanding the foregoing, either Compex or Bionicare may cancel any obligation to
provide remanufacturing services in accordance with Section 8(c) at any time upon 90
days notice; provided that Bionicare shall remain liable to Compex for any product
remanufactured prior to such cancellation and for reimbursement of any postage on
prepaid mailers charged after such cancellation.
	 
	 	b)	 	Upon termination or expiration of this Agreement :

(i) the licenses granted in this Agreement will immediately terminate, excepting
only a license to Bionicare to sell Products purchased from Compex prior to such
termination or expiration;

(ii) Each party will immediately cease use of the other party’s Technology;

(iii) Bionicare shall purchase, at Compex’s cost, all inventory parts and/or
Product, which is in Compex’s possession or Compex has agreed to purchase,
documented by purchase orders, from suppliers to meet Bionicare’s ‘delivery
forecast’;

(iv) each Party’s obligations under Section 7, and any unfulfilled obligations
under Section 6, shall survive termination or expiration.

	11.	 	Relationship of the Parties
	 
	 	 	The relationship between Compex and Bionicare is that of seller and buyer.
	 
	12.	 	Governing Law
	 
	 	 	This Agreement between Compex and Bionicare is to be governed by, construed and interpreted
in accordance with the laws of the state of Minnesota USA. All claims, cause of action,
lawsuits or other legal proceedings involving this Agreement shall be in a court of
competent jurisdiction or the Sate of Minnesota, USA. Bionicare waives any objection to such
venue.
	 
	13.	 	Notices
	 
	 	 	Any notices relating to this Agreement shall be in writing and shall be deemed given when
mailed to the other party at its address set forth above or such other address as such party
shall have designated in writing.
	 
	14.	 	Assignability
	 
	 	 	This Agreement may not be transferred or assigned by Bionicare without the prior written
consent of Compex.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first
written above.

Agreed to:

	 	 	 	 	 	 	 	 	 
	Compex Technologies, Inc.	 	 	 	Bionicare Medical Technologies, Inc.
	1811 Old Highway 8	 	 	 	47R Loveton Circle
	New Brighton, MN 55112	 	 	 	Sparks, MD 21152
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	Name (type or print)	 	 	 	Name (type or print)
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	Title

	 	 	 	 	 	Title	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 

8AGREEMENT
(the "Agreement") dated as of September 13,
2005 (the "Effective Date") by and between
Vion Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), with offices at 4 Science Park,
New Haven, CT 06511, and Howard Johnson, (the
"Executive").

WI T N E S SE T H :

WHEREAS, the Board of
Directors of the Company (the "Board")
recognizes the importance of the past and current efforts of the
Executive to the growth and success of the Company; and

WHEREAS,
the Board wishes to provide the Executive with certain protections in
the event that the Executive's employment is terminated (under
certain circumstances) after Alan Kessman's retirement,
resignation or termination as Chief Executive Officer
("CEO") of the Company, in order to induce
the continued efforts of the Executive on behalf of the Company.

NOW THEREFORE, in consideration of the foregoing and of the premises
set forth herein, the parties hereto agree as follows:

1.  Definitions.

1.1    Cause. For purposes of this Agreement,
termination by the Company of the Executive's employment for
"Cause" shall mean termination (a) upon the
willful and continued failure by the Executive to substantially perform
his duties with the Company, after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his duties, (b) the willful
engaging by the Executive in an act or acts of dishonesty constituting
a felony under the laws of the United States or any state thereof and
resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company, or the
Executive's conviction of a felony under the laws of the United
States or any state thereof, or (c) the willful engaging by the
Executive in conduct which is demonstrably and materially injurious to
the Company, monetarily or otherwise. For purposes of this Subsection,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to
be done, by the Executive not in good faith and without reasonable
belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of the
entire membership of the Board at a meeting of the Board (after
reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth above in this Subsection and specifying the
particulars thereof in detail.

2.    Termination
Without Cause. If, at any time within one year after the earlier
of (i) the date of a public announcement by the Company of the hiring
of a new CEO and (ii) the date of hiring of such new CEO as set forth
in such public announcement (the "CEO Hiring
Date") the Executive is terminated by the Company without
Cause, as described in Section 1.1, the Executive shall be entitled to
the benefits provided in Section 3 unless such termination is because
of the Executive's death.

3.    Compensation Upon Termination. If the
Executive qualifies for benefits pursuant to Section 2 hereof, then the
Executive shall be entitled to the benefits provided below:

(a)    the Company shall pay to the Executive
his full base salary through the date of termination of employment, at
the rate as in effect at the time notice of termination is given, no
later than the fifth day following the date of termination of
employment, plus accrued vacation pay through the date of termination
of employment;

(b)    all other amounts to
which the Executive is entitled under any compensation plan of the
Company through the date of termination of employment shall be paid on
the dates such amounts are due under such plans;

(c)    provided that the Executive has
executed a general release in favor of the Company effective as of the
date of termination of employment in the form attached hereto as
Exhibit A (the "Release"), not later
than the fifth day following the termination of the 

Revocation Period (as defined in the Release)
without the revocation of the Release, (i) the Company shall pay to the
Executive, a lump sum severance payment equal to the sum of: (1) twelve
months of the Executive's monthly base salary at the rate as in
effect as of the date of termination of employment or immediately prior
to such termination, whichever is greater; and (2) the average of the
last two cash bonus payments made to the Executive prior to the
termination of the Executive's employment; and (ii) until the
earlier of (1) 12 months after such termination of employment or (2)
the date the Executive has obtained new full-time employment and has
become eligible for health insurance benefits, the Company shall make
all payments due under COBRA to provide the Executive with group health
insurance benefits substantially similar to those which the Executive
was receiving immediately prior to the date of termination; provided
that the Executive has elected continuation coverage in accordance with
COBRA.

4.    Transition Period. If the
Executive voluntarily resigns from his position as President and Chief
Financial Officer of the Company within the first 90 days following the
CEO Hiring Date, the Executive shall be entitled to the benefits
provided below:

(a)    no later than the
fifth day following the date of resignation, the Company shall pay to
the Executive his full base salary through the date of resignation at
the rate as in effect at the time notice of resignation is given, plus
accrued vacation pay through the date of resignation;

(b)    all other amounts to which the
Executive is entitled under any compensation plan of the Company at the
time of such resignation shall be paid on the dates such amounts are
due under such plans;

(c)    provided that
the Executive has executed the Release and the Revocation Period has
ended without the Release being revoked, (i) the Company shall continue
to pay to the Executive his full base salary, at the rate as in effect
at the date of resignation, at such time as such payments would have
been due pursuant to the Executive's previous salary arrangement,
until the earlier of (1) 12 months after the date of such resignation
or (2) the date Executive has obtained new full-time employment (the
"Transition Period"), provided that the
Executive advises and consults by telephone, in writing or, at a
mutually agreeable time, in person regarding the affairs of the Company
with the officers and directors of the Company upon requests for such
services by such officers and directors during the Transition Period;
and (ii) until the earlier of (1) 12 months after such resignation or
(2) the date the Executive has obtained new full-time employment and
became eligible for health insurance benefits, the Company shall make
all payments due under COBRA to provide the Executive with group health
insurance benefits substantially similar to those which the Executive
was receiving immediately prior to the date of termination; provided
that the Executive has elected continuation coverage in accordance with
COBRA.

5.    No Mitigation. Except as
provided in Sections 3(c) and 4(c), the Executive shall not be required
to mitigate the amount of any payment provided for in Sections 3 or 4
by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in Sections 3 or 4 be reduced by any
compensation earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.

6.    No Disparagement. In the event that the
Executive shall receive the benefits as provided in Section 3 or
Section 4 hereto, the Executive agrees to not make any statements,
either directly or through other persons or entities, which are
disparaging to the Company or any of its affiliates, management,
officers, directors, services, products, operations, prospects or other
matters relating to the Company's business, nor shall the
Company, or its officers and directors make any statements, either
directly or through other persons or entities, which are disparaging to
the Executive. The parties agree that a breach of the provisions of
this Section 6 shall constitute a material breach of this
Agreement.

2

7.    No Offer of Continued
Employment. This Agreement shall not constitute an offer of
continued employment to the Executive and shall not alter the at-will
nature of the Executive's employment with the Company. Further,
nothing herein shall require the Company to offer the Executive the
position of CEO.

8.    Termination.
Reference is made to the Severance Agreement, dated [October 15,
1998], by and between the Company and the Executive (the
"Prior Agreement"). It is the intent of the
parties that the Executive not be entitled to payments under both this
Agreement and the Prior Agreement but, instead, if the Executive
qualifies for payments of any kind under one agreement, that he not be
entitled to payments of any kind under the other agreement.
Accordingly, this Agreement shall terminate and have no effect upon the
earliest of (i) the date, if any, upon which the Executive is offered
the position of CEO, (ii) the Executive's termination of
employment for any reason prior to the CEO Hiring Date, (iii) a change
of control of the Company (as defined in the Prior Agreement) and (iv)
two years after the date hereof (the "Termination
Date"). Notwithstanding the foregoing sentence, (a) if the
Termination Date occurs because of a change in control of the Company
under clause (iii) of the preceding sentence, then (A) only Sections 2
and 3 hereof shall terminate immediately and the remainder of this
Agreement shall survive until the earlier of (x) the next applicable
Termination Date and (y) the termination of the Executive's
employment (by either the Company or the Executive) in a manner which
makes him eligible for payments under the Prior Agreement, and (b) if
the Executive becomes entitled to, and commences to receive, benefits
pursuant to Section 3 or 4 hereto prior to the Termination Date, such
benefits shall continue in accordance with the terms hereof.

9.    Assignments and Successors. No party may
assign any of its rights under this Agreement without the prior consent
of the other party. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the
benefit of the heirs, executors, administrators, successors and
permitted assigns of the parties. Nothing expressed or referred to in
this Agreement will be construed to give any person other than the
parties to this Agreement any legal or equitable right, remedy, or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and
their heirs, executors, administrators, successors and assigns.

10.    Governing Law. The validity,
construction, and performance of this Agreement shall be governed by
and interpreted in accordance with the laws of the State of
Connecticut, without giving effect to its conflicts of laws
principles.

11.    Entire Agreement. This
Agreement constitutes the entire agreement among the parties and
supersedes any prior agreements among the parties, whether written or
oral, relating to the subject matter hereof. Notwithstanding the
foregoing, this Agreement shall not supersede or alter in any manner
the Prior Agreement.

12.    Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and all of which shall constitute
one and the same instrument.

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first above
written.

											
	VION
PHARMACEUTICALS,
INC.		 
	By:		/s/ Alan
Kessman                                    		        /s/   Howard
Johnson                                    
	 		Name:
Alan Kessman
 Title: Chief Executive Officer		Howard
Johnson
	

3

Exhibit A

[Company Letterhead]

  [Date]

Howard Johnson
 [Address]

Dear Howard:

This will confirm that your
employment with Vion Pharmaceuticals, Inc. (the
"Company") has been terminated as of
                    . In exchange for your general release,
which is set forth below, the Company will pay you an amount of
severance as set forth in the Agreement, dated September 13, 2005, by
and between you and the Company (the
"Agreement").

The foregoing payment is
given in return for your agreement, for yourself and for the executors
and administrators of your estate, your heirs, successors and assigns,
to the release and discharge forever of the Company and its officers,
directors, employees and stockholders and the respective executors,
administrators, heirs, successors and assigns of the foregoing, from
any and all claims, actions, causes of action, suits, sums of money,
debts, dues, accounts, reckonings, bonds, bills, covenants, contracts,
controversies, agreements, promises, demands or damages of any nature
whatsoever or by reason of any matter, cause or thing regardless of
whether known or unknown at present, which against the Company or any
of its officers, directors, employees or stockholders you ever had, now
have or hereafter can, shall or may have for, upon, or by reason of,
any matter, cause or thing whatsoever from the beginning of the world
to the date hereof including, but not limited to, any matter relating
to or arising out of your employment or termination thereof under any
contract, tort, federal, state or local fair employment practices or
civil rights law, including, but not limited to, Title VII of the Civil
Rights Act of 1964, as amended, the Americans with Disabilities Act,
the Age Discrimination in Employment Act, the Older Workers Benefits
Protection Act, the Connecticut Fair Employment Practices Act, the
federal Family and Medical Leave Act, the Connecticut Family and
Medical Leave Act, or any claim for physical or emotional distress or
injuries, or any other duty or obligation of any kind or description,
including any implied covenant of good faith and fair dealing, implied
contract of permanent employment or the tortious or willful discharge
of employment. You and the Company also agree that proposed release
will not either affect the rights and responsibilities of the Equal
Employment Opportunity Commission to enforce the Age Discrimination in
Employment Act, or justify interfering with the protected right of an
employee to file a charge or participate in an investigation or
proceeding conducted by the Equal Employment Opportunity Commission
under the Age Discrimination in Employment Act. In the event the Equal
Employment Opportunity Commission commences a proceeding against the
Company in which you are a named party, you will agree to waive and
forego any monetary claims which may be alleged by the Equal Employment
Opportunity Commission to be owed to you.

The Company has
advised you to consult with an attorney prior to executing this
agreement and the Agreement. By executing this agreement, you
acknowledge that (a) you have been provided an opportunity to consult
with an attorney or other advisor of his choice regarding the terms of
this agreement and the Agreement, (b) this is a final offer and you
have been given twenty-one (21) days in which to consider whether you
wish to enter into this agreement, (c) you have elected to enter this
agreement and the Agreement knowingly and voluntarily and (d) if you do
so within fewer than 21 days from receipt of the final document you
have knowingly and voluntarily waived the remaining time. The Company
reserves the right to change or revoke this agreement prior to your
execution hereof. This agreement shall be fully effective and binding
upon all parties hereto immediately upon execution of this agreement
except as to rights or claims arising under the Age Discrimination in
Employment Act, in 

4

which case you have seven (7) days following
execution of this agreement to change your mind (the
"Revocation Period"). You further covenant
not to contest the validity of this release subsequent to the
Revocation Period and agree that if you nonetheless should pursue
litigation against the Company involving any matter covered and
released hereby, you agree that you first shall restore to the Company
the full value of all consideration you have received or to which you
are entitled under this agreement and the Agreement and shall be liable
for the Company's costs and attorneys' fees incidental to
defending such legal action.

If this is in accordance with our
agreement, please sign and return to us the enclosed copy of this
letter, which shall then be a binding agreement between us.

											
	 		Very
truly yours,
	 		Vion Pharmaceuticals,
Inc.
	 		By:		                                                        
	 		Name:

Title:
	

Agreed and Accepted:

	
		
	

  Howard
Johnson

5

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