Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made and effective August 19, 2011,

 

	
BETWEEN:
    	
 
    	
Fred Perner (the “Executive”), an   individual with his main address at: 205 Old Stone Drive, Highlands Ranch,   Colorado 80126.
    
	
 
    	
 
    	
 
    
	
AND:
    	
 
    	
Encision Inc. (the “Company”), an   entity organized and existing under the laws of Colorado, with its head   office located at: 6797 Winchester Circle, Boulder, CO 80301.
    

 

RECITALS

 

In consideration of the covenants and agreements herein contained and the moneys to be paid hereunder, the Company hereby employs the Executive and the Executive hereby agrees to perform services as an Executive of the Company, upon the following terms and conditions:

 

1.              TERM

 

Commencing September 19, 2011, (the “Start Date”) the Company employs Executive to serve as President and Chief Executive Officer and to serve in such additional position or positions as the Company may determine in its sole discretion. The term of employment shall be for a period of three (3) years (“Employment Period”) to commence on the Start Date, unless earlier terminated as set forth herein.

 

This Agreement shall continue in effect until the earliest of:

 

A.           The effective date of any subsequent employment agreement between the Company and the Executive;

 

B.             The effective date of any termination of employment as provided elsewhere herein; or

 

C.             Three years from the Start Date, provided, that this Employment Agreement shall automatically renew for successive periods of one year each unless either party gives written notice to the other that it does not wish to automatically renew this Agreement, which written notice must be received by the other party no less than ninety days prior to the expiration of the applicable term.

 

2.              DUTIES AND RESPONSIBILITIES

 

Within the limitations established by the By-laws of the Company, the Executive shall preside at all meetings of the shareholders and Board of Directors, shall have general supervision of the affairs of the Company, and such other or different duties on behalf of the Company, as may be assigned from time to time by the Board of Directors.

 

3.              LOCATION

 

The initial principal location at which Executive shall perform services for the Company shall initially be 6797 Winchester Circle, Boulder, CO 80301.  The Company may move its offices to another location in the Denver-Boulder metro area without being in violation of this Agreement.

 

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4.              ACCEPTANCE OF EMPLOYMENT

 

Executive accepts employment with the Company upon the terms set forth above and agrees to devote all Executive’s time, energy and ability to the interests of the Company, and to perform Executive’s duties in an efficient, trustworthy and business-like manner.

 

5.              DEVOTION OF TIME TO EMPLOYMENT

 

The Executive shall devote the Executive’s best efforts and substantially all of the Executive’s working time to performing the duties on behalf of the Company. The Executive shall provide services during the normal business hours of the Company as determined by the Company. Reasonable amounts of time may be allotted to personal or outside business, charitable and professional activities and shall not constitute a violation of this Agreement provided such activities do not materially interfere with the services required to be rendered hereunder or violate another provision of this Agreement.

 

6.              COMPENSATION

 

6.1.         Base Salary

 

Executive shall be paid a base salary (“Base Salary”) at the annual rate of $205,000, payable in bi-weekly installments consistent with Company’s payroll practices. In consideration of the services under this Agreement, Executive shall be paid the aggregate of basic compensation, bonus and benefits as hereinafter set forth.

 

6.2.         Payment

 

Payment of all compensation to Executive hereunder shall be made in accordance with the relevant Company policies in effect from time to time, including normal payroll practices.  However, severance payments are payable as provided below.

 

6.3.         Bonus

 

From time to time, the Company may pay to Executive a bonus.

 

Payment of any bonus compensation shall be at the sole discretion of the Board of Directors or the compensation committee of the Board of Directors and the Executive shall have no entitlement to such amount absent a decision by the Company as aforesaid to make such bonus compensation.

 

Executive shall also be entitled to a bonus determined as follows:

 

a.                   An annual bonus pool for each year starting with the fiscal year ending 3/31/12 and continuing through the Employment Period, will be established in an amount that is equal to 10% of the increase in pre-tax GAAP income in each fiscal year compared to the preceding fiscal year,

 

b.                  1/3 of the bonus pool (including the current year) will be allocated to non-executive officers at the discretion of the CEO,

 

c.                   2/3 of the bonus pool (including the current year) will be allocated to executive officers (presently defined to include 7 executive officers, including the CEO) in ratio to their base pay.

 

Eligibility for participation in the bonus pool for a year includes a requirement that the person must be employed during the 2 1⁄2 months following the end of such fiscal year.  A payment will not be made under the bonus pool if the Executive has been terminated for Cause before the payment is

 

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received.  The bonus pool rules and interpretation will favor the Company, as opposed to participants, and will be subject to interpretation and oversight by the Board of Directors.  A bonus will not be paid under this bonus pool in respect to any income resulting from a Corporate Transaction as defined in the Company’s 2007 Stock Option Plan. The term “pre-tax GAAP income” means GAAP net income before taxes and excluding extraordinary items as defined by GAAP. This bonus will be paid by June 15 of the following fiscal year.  There are no third party beneficiaries of this provision, and no non-executive officer or executive officer has a claim to a bonus payment due to this provision nor is the consent of any such person required to modify this bonus provision.

 

Acquisition bonus.  In the event that during the term of the Executive’s employment the Company is acquired within 5 years of the Start Date, at a net cash price of $10 per common share or more (net cash price means the net amount received by the selling shareholders either in cash or in stock which is of a class regularly traded on a U.S. exchange or U.S. trading system (including the OTCBB), or a combination thereof), then Executive will receive an acquisition bonus which is computed as the difference between the per share stock price of the Company on the Start Date and the price paid in the acquisition,  multiplied by 37,500. Per share stock price will be appropriately adjusted for stock splits, stock dividends, and the like, and cash dividends paid between the date of this Agreement and the date of closing of the acquisition will be counted towards that $10 per share price.   The Company is considered “acquired” if a Corporate Transaction, as defined in the Company’s 2007 Stock Option Plan, occurs. If any of the acquisition price is payable by an earn out or other contingent payment, then the Board shall in good faith determine the present fair market value of that earn out or contingent payment at the time of closing of the acquisition for purposes of determining whether a payment is owing hereunder and the amount of the payment.  If any of the acquisition price is payable in the form of stock which is of a class regularly traded on a U.S. exchange or U.S. trading system, but either it is not readily tradable under the securities laws or by contractual restriction, or if it is stock which is not as a practical matter immediately saleable into a liquid market, then the Board shall in good faith determine the present fair market value of that stock taking into account that limitation on the ability to immediately trade that stock,  at the time of closing of the acquisition for purposes of determining whether a payment is owing hereunder and the amount of the payment The acquisition bonus will be paid within thirty (30) days after closing of the acquisition.

 

6.4.         Benefits

 

The Company shall provide Executive with such benefits as are provided to other senior management of the Company, except where the benefit provided to other senior management would be of the same nature as a benefit already received by Executive. Benefits shall include at a minimum (i) paid vacation of twenty days per year of full employment, exclusive of legal holidays, as long as the scheduling of Executive’s vacation does not interfere with the Company’s normal business operations, (ii) medical and dental coverage, and life and disability insurance plans under the same terms as offered to other executives of the Company, (iii) retirement and profit sharing programs as offered to other executives of the Company, (iv) paid holidays as per the Company’s policies, and (v) such other benefits and perquisites as are approved by the Board of Directors. The Company has the right to modify conditions of participation, terminate any benefit, or change insurance plans and other providers of such benefits in its sole discretion.

 

6.5.         Withholding

 

All sums payable to Executive under this Agreement will be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.

 

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7.              OTHER EMPLOYMENT BENEFITS

 

7.1.         Business Expenses

 

Upon submission of itemized expense statements in the manner specified by the Company, Executive shall be entitled to reimbursement for reasonable travel and other reasonable business expenses duly incurred by Executive in the performance of his duties under this Agreement.

 

7.2.         Commuting and Cost of Living Expenses

 

Company will pay an allowance of $1,250 a month for a total of nine months after the Start Date for commuting and cost of living expenses. This amount will be included as compensation on Executive’s W-2 and be paid monthly.

 

7.3.         Stock Options

 

Executive shall be entitled to options to acquire shares of the Common Stock of the Company’s follows:

 

a.                   140,000 incentive stock options under the 2007 Stock Option Plan with normal vesting in accordance with Company’s standard option agreements (5 years, with 20% vesting after one year and the balance monthly thereafter); and,

 

b.                  60,000 stock options outside of the Company’s existing plan, with normal vesting in accordance with the Company’s standard option agreements (5 years with 20% vesting after one year and the balance monthly thereafter). Such options are to mirror the terms of the 2007 Stock Option Plan, except that the options will be non-qualified stock options (Executive recognizes that the options and shares issued upon exercise are issued pursuant to a private placement exemption from the registration requirements of the Securities Act of 1933 and will constitute restricted securities unless subsequently registered pursuant to the Securities Act of 1933).

 

The initial exercise price for the options shall be at the fair market value of the Company’s stock at the Start Date.

 

The Company will use reasonable diligence to register the shares underlying the options granted outside of the Company’s existing plan on Form S-8 on or before the date of exercise of those options, so long as such registration would not require the pre-mature disclosure of any Company information.

 

The vesting of all options will accelerate immediately prior to a Corporate Transaction (but not a Change in Control unless the Board of Directors elects to allow acceleration on a Change in Control), as defined in the Company’s 2007 Stock Option Plan.

 

The vested options shall be exercisable for thirty days after termination of Executive’s employment with the Company, or three months in the case of death or disability (as provided in the Company’s 2007 Stock Option Plan), unless termination is for Cause in which case the options will terminate at the time of termination of employment. No additional vesting of options shall occur after Executive’s death, disability, or cessation of employment with the Company for any reason or no reason.

 

Issuance of the options shall be in accordance with all applicable securities laws and the other terms and conditions of the Company’s 2007 Stock Option Plan and form of the Stock Option Agreement.

 

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8.              POLICIES AND PROCEDURES

 

The Company shall have the authority to establish from time to time the policies and procedures not inconsistent with this Agreement to be followed by the Executive in performing services for the Company. Executive shall abide by the provisions of any contract entered into by the Company under which the Executive provides services.

 

9.              TERMINATION OF EMPLOYMENT

 

9.1.         For Cause

 

Notwithstanding anything herein to the contrary, the Company may terminate Executive’s employment hereunder for cause for any one of the following reasons: 1) conviction of a felony, any crime involving moral turpitude, or a misdemeanor where imprisonment is imposed, 2) commission of any act of theft, fraud, dishonesty, or falsification of any employment or Company records, 3) improper disclosure of the Company’s confidential or proprietary information, 4) any action by the Executive which has a material detrimental effect on the Company’s reputation or business, 5) Executive’s failure or inability to perform any reasonable assigned duties after written notice from the Company of, and a reasonable opportunity to cure, such failure or inability, 6) any breach of this Agreement, which breach is not cured within thirty days following written notice of such breach,  or repeated breaches of a similar nature even if cured after notice, 7) a course of conduct amounting to gross incompetence, 8) chronic and unexcused absenteeism, 9) unlawful appropriation of a corporate opportunity, or 10) material misconduct in connection with the performance of any of Executive’s duties, including, without limitation, misappropriation of funds or property of the Company, securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company, misrepresentation to the Company, or any violation of law or regulations on Company premises or to which the Company is subject. Upon termination of Executive’s employment with the Company for cause or lack of financial performance (as defined below), the Company shall be under no further obligation to Executive, except to pay all accrued but unpaid base salary, accrued bonuses, and accrued vacation, to the date of termination thereof, and provide such benefits as Executive is entitled to as a matter of law.

 

9.2.         Without Cause

 

The Company may terminate Executive’s employment hereunder at any time without cause, provided, however, that Executive shall be entitled to severance pay, as discussed below, in addition to accrued but unpaid Base Salary, accrued bonuses, and accrued vacation, but if, and only if, Executive executes a valid and comprehensive release of any and all claims that the Executive may have against the Company, its officers, directors and employees,  in a form provided by the Company and Executive executes such form within ten days of tender or such longer period as the Company may specify.  Such release need not release (i) rights under directors and officers and insurance policies; (ii) rights to indemnification to Executive under the Company’s certificate of incorporation or bylaws;(iii) vested rights to purchase stock from the Company that are not contingent on the reason for termination of employment; and (iv) rights under this Agreement. No severance payments will be paid until such release is received from Executive and all rescission periods under the release have expired.  The severance payments are the sole rights to payment upon termination.

 

Severance for termination without cause will be in an amount equal to:

 

X × (60-Y) ÷ 60.

 

X is Base Salary

 

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Y is the number of whole months elapsed between the Start Date and the date of termination of employment.

 

So, for example, if the termination without cause occurred one month after the Start Date the payment would be 59/60th of $205,000 and if it was 25 months after the Start Date the payment would be 35/60th of $205,000.

 

The severance payments will be paid in equal installments over the twelve month period after termination, with each payment being on the first banking day of the month.  Notwithstanding the prior sentence, if termination is without cause and occurs upon the closing of a Corporate Transaction, as defined in the Company’s 2007 Stock Option Plan, then severance equal to one year’s Base Salary will be paid in one payment within twenty days after the later of the closing of the Corporate Transaction and such release is received from Executive and all rescission periods under the release have expired.

 

A failure to renew or extend the term of this Agreement is not a termination without cause.

 

Notwithstanding the other provisions of this Section 9.2, the Company may terminate Executive without any obligation hereunder that it would otherwise have for a termination without cause if the Company has a net loss for GAAP purposes (excluding extraordinary items as defined by GAAP) in any two (2) consecutive quarters after the quarter that begins after the first anniversary of the Start Date ( i.e. assuming the Start Date is in September 2011, the first quarter that is subject to this test is the quarter starting October 1, 2012). Termination under the situation described in the prior sentence is a termination for lack of financial performance.  This provision may be waived by a majority of the Board of Directors.  For the avoidance of doubt, a termination described in this paragraph is not a termination for “Cause” under the Company’s 2007 Stock Option Plan or for other purposes.

 

9.3.         Resignation

 

Upon termination of employment, Executive shall have automatically resigned from the Board of Directors of the Company and any subsidiary or parent, from all employment positions with the Company, a subsidiary or parent, and from each position as a trustee or administrator of any benefit plan of the Company or any subsidiary or parent.  Employee is not entitled to any severance if he resigns from the Company other than upon a resignation for Good Reason (as defined below).

 

9.4.         Resignation for Good Reason

 

If the Company has breached a material terms of this Agreement and has not cured such breach within thirty (30) days after written notice of the breach from Executive to the Chairman of the Board of Directors and the Chief Financial Officer, then Executive may resign his employment and such resignation will be deemed a resignation for “Good Reason”.  Upon a resignation for Good Reason Executive will be entitled to the payments and benefits he would receive upon a termination by the Company without cause, so long as Executive has complied with the provisions hereof regarding payments and benefits, including delivering the release provided for in Section 9.2, and subject to the right of the Company to terminate payments under Section 9.6..  If Executive does not comply with this Section 9.4 he is only entitled to the payments and benefits he is entitled to if he resigned without Good Reason and Executive has no further claim or right to damages against any person or entity for breach of this Agreement by the Company.

 

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9.5.         Cooperation

 

After notice of termination, Executive shall cooperate with the Company, as reasonably requested by the Company, to effect a transition of Executive’s responsibilities and to ensure that the Company is aware of all matters being handled by Executive.

 

9.6.         Compensation After Notice of Termination

 

After notice of termination has been given by either Company or Executive, as provided in this Article, Executive shall be entitled to receive the compensation provided for in this Agreement until the notice period has expired. It is understood that after the written notice is given by either Company or Executive, Executive shall continue to devote substantially all of the Executive’s time to the Executive’s normal services for the Company during the notice period.

 

9.7.         Effect of Breach

 

Without limiting any other rights of the Company, it has no obligation to make any further severance payments if Executive violates Articles 11, 12 or 13.

 

10.       DISABILITY OF EXECUTIVE

 

The Company may terminate this Agreement without liability if Executive shall be permanently prevented from properly performing his essential duties hereunder with reasonable accommodation by reason of illness or other physical or mental incapacity for a period of more than sixty consecutive days. Upon such termination, Executive shall be entitled to all accrued but unpaid Base Salary and vacation, such benefits as Executive is entitled to as a matter of law, and the other payments described in this Article 10.

 

10.1.                                             Definitions

 

For purposes of this Agreement, whenever used in this Article 10:

 

“Total disability” shall mean that the Executive is unable, mentally or physically, whether it be due to sickness, accident, age or other infirmity, to engage in more than fifty percent (50%) of any aspect of the Executive’s normal duties as set forth in this Agreement.

 

“Partial disability” shall mean that the Executive is not subject to total disability and is able to engage in more than fifty percent (50%) of every aspect of the Executive’s normal duties as set forth in this Agreement, but that the Executive is unable, mentally or physically, to devote the same amount of time and ability to such services as was devoted prior to the occurrence of such sickness or accident.

 

10.2.                                             Total Disability

 

During a single period of total disability of the Executive, the Executive shall be entitled to receive from the Company, the Executive’s Base Salary for the shorter of first three (3) months of disability or until any disability insurance policy available through the Executive’s employment begins to pay benefits. If the single period of disability should continue beyond three (3) months, the Executive shall receive only such amount as the Executive shall be entitled to receive under disability insurance coverage on the Executive, if any.

 

10.3.                                             Partial Disability

 

During a period of partial disability of the Executive, the Executive shall receive an amount of compensation computed as follows:

 

That portion of the Executive’s Base Salary which bears the same ratio to the Executive’s Base Salary as the amount of time which the Executive is able to devote to the usual performance of

 

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services on behalf of the Company during such period bears to the total time the Executive devoted to performing such services prior to the commencement date of the single period of partial disability, and

 

Such amount shall be calculated by multiplying the Executive’s Base Salary by a fraction, the numerator of which shall be the percentage of normal services that the Executive is able to perform and the denominator which shall be the total services that the Executive is able to perform absent the partial disability.

 

10.4.                                             Combination of Total and Partial Disability

 

If a single period of disability of the Executive consists of a combination of total disability and partial disability, the maximum total disability compensation to which the Executive shall be entitled from the Company under this disability provision shall not exceed an amount equal to one (1) times the Executive’s Base Salary.

 

10.5.                                             Broken Periods of Disability

 

A period of disability may be continuous or broken. If broken into partial periods of disability which are separated by intervening periods of work, there shall be aggregated together all of such successive partial periods of disability except any period prior to the time when any single period of work extends for six months or longer; and such aggregated periods of disability shall be treated as a single period in determining the amount of disability compensation to which Executive shall be entitled under any provision of this Section.

 

10.6.                                             Termination Due to Disability

 

If and when the period of total or partial disability of the Executive totals six months,  Executive’s employment with the Company shall automatically terminate. Upon such termination, Executive is entitled to all accrued but unpaid Base Salary, accrued bonuses, and accrued vacation, to the date of termination, and such benefits as the spouse or estate is entitled to as a matter of law.  Notwithstanding the foregoing, if the disabled Executive and the Company agree, the disabled Executive may thereafter be employed by the Company upon such terms as may be mutually agreeable.

 

10.7.                                             Commencement Date of Disability

 

The commencement date of a period of disability, whether it be a continuous period or the aggregate of successive partial periods, shall be the first day on which the Executive is disabled.

 

10.8.                                             Dispute Regarding Existence of Disability

 

Any dispute regarding the existence, extent or continuance of the disability shall be resolved by the determination of a majority of three (3) competent physicians, one (1) of whom shall be selected by the Company, one (1) of whom shall be selected by the Executive and the third (3rd) of whom shall be selected by the other two (2) physicians so selected.

 

10.9.                                             Death of Executive

 

In the event the Executive shall die during the term hereof, the Company shall pay to the Executive’s surviving spouse, or if the Executive shall leave no surviving spouse, then to the Executive’s estate, all accrued but unpaid Base Salary, accrued bonuses, and accrued vacation, to the date of termination thereof, and such benefits as the spouse or estate is entitled to as a matter of law .

 

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11.       CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENTS

 

Executive recognizes and acknowledges that all records and information with respect to clients, business associates, vendors, customer or referral lists, contracting parties and referral sources of the Company, and all personal, financial and business and proprietary information of the Company, its employees, officers, directors and shareholders obtained by the Executive during the term of this Agreement and not generally known in the public (the “Confidential Information”) are valuable, special, unique and proprietary assets of the Company. The Executive hereby agrees that during the term of this Agreement and following the termination of this Agreement, whether the termination shall be voluntary or involuntary, or with or without cause, or whether the termination is solely due to the expiration of the term of this Agreement, the Executive will not at any time, directly or indirectly, disclose any Confidential Information, in full or in part, in written or other form, to any person, firm, Company, association or other entity, or utilize the same for any reason or purpose whatsoever other than for the benefit of and pursuant to authorization granted by the Company. “Confidential Information” shall also include any information (including, but not limited to, technical or non-technical data, a formula, a pattern, a compilation, a program, a device, an idea, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers) that: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. In the case of Company’s business, Company’s Trade Secrets include (without limitation) information regarding names and addresses of any customers, sales personnel, account invoices, training and educational manuals, administrative manuals, prospective customer leads, in whatever form, whether or not computer or electronically accessible “on-line.”  For the avoidance of doubt, Confidential Information does not include the names and addresses of customers or any other information, if the fact the person is a customer or such other information is publically known in the public domain or already known to Executive prior to the signing of this Agreement unless the information was conveyed to Executive by the Company.

 

Executive agrees that all Intellectual Property (as hereinafter defined) conceived or made by him while he is employed by the Company belongs to the Company. Executive will promptly disclose all Intellectual Property to the other officers of the Company. Executive hereby assigns, and will further assign, Executive’s full right, title and interest to all Intellectual Property and will execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights (including without limitation the execution and delivery of instruments of further assurance or confirmation) reasonably requested by the Company to assign such Intellectual Property to the Company and to permit the Company to enforce any patents, copyrights and other proprietary rights to such Intellectual Property. All copyrightable works that Executive creates that constitute Intellectual Property shall be considered “work made for hire.” For purposes of this Agreement, “Intellectual Property” means inventions, innovations, improvements, discoveries, developments, methods, processes, compositions, works, concepts and ideas (whether or not patentable or copyrightable or constituting trade secrets) conceived, made, created, developed or reduced to practice by Executive (whether alone or with others, whether or not during normal business hours or on or off Company premises) during Executive’s employment with the Company that relate to any business, venture or activity being conducted or, to Executive’s knowledge, proposed to be conducted by the Company at any time during Executive’s employment with the Company.

 

Upon request, Executive will return any Company property to the Company.

 

The term “Company” in this Article includes any subsidiary of the Company.  This Article will survive termination of this Agreement.

 

12.       EXCLUSIVE EMPLOYMENT; NON-COMPETE

 

During employment with the Company, Executive will not do anything to compete with the Company’s present or contemplated business, nor will he or she plan or organize any competitive business activity. Executive will not enter into any agreement which conflicts with his duties or obligations to the Company. Executive will not during his employment or within one year after it ends, without the Company’s express written consent, directly or indirectly, solicit or encourage any employee, agent, independent contractor,

 

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supplier, customer, consultant or any other person or company to terminate or alter a relationship with the Company.

 

Should Executive wish to serve on other boards of directors or have other minor non-company activities, the Executive will supply a list of all such activities, and to update the list quarterly, including the amount of time spent on each. The Company requests that such activities be held to a reasonable minimum.

 

The term “Company” in this Article includes any subsidiary of the Company.  This Article will survive termination of this Agreement.

 

If, at the time of enforcement of Articles 12 or 13 of this Agreement, a court or arbitrator holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. By action of its Board the Company may also unilaterally reduce the duration, type of activity, geographic area, or other scope, of Articles 12 or 13.

 

13.       HIRING

 

The Executive agrees that during the Executive’s employment with the Company and for a period of one year following the termination of this Agreement, whether the termination shall be voluntary or involuntary, or with or without cause, or whether the termination is solely due to the expiration of the term of this Agreement, the Executive will not attempt to hire any employee or independent contractor of the Company or otherwise encourage or attempt to encourage any other Executive or independent contractor of the Company to leave the Company’s employ.

 

The term “Company” in this Article includes any subsidiary of the Company.  This Article will survive termination of this Agreement.

 

14.       ASSIGNMENT AND TRANSFER

 

Executive’s rights and obligations under this Agreement shall not be transferable by assignment or otherwise, and any purported assignment, transfer or delegation thereof shall be void. This Agreement may be assumed (but need not be) by any purchaser of substantially all of Company’s assets, any corporate successor to Company or any assignee thereof. The Company may assign its rights under Articles 12 and 13 of this Agreement in whole or in part to, a person or entity who buys the assets of the Company, a person or entity who buys the business of the Company related to Executive’s line of work with the Company, or a person or entity who buys or is licensed inventions or other proprietary work product with which Executive was involved.  Among other things, this means that Executive could be subject to Article 12 and 13 of this Agreement as to more than one person or entity.

 

15.       NO INCONSISTENT OBLIGATIONS

 

Executive is aware of no obligations, legal or otherwise, inconsistent with the terms of this Agreement or with his undertaking employment with the Company. Executive will not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others. Executive represents and warrants that he has returned all property and confidential information belonging to all prior employers.

 

16.       INJUNCTIVE RELIEF; ATTORNEYS’ FEES

 

The parties hereto agree that, in the event of breach or threatened breach of any covenants of Executive, the damage or imminent damage to the value and the goodwill of the Company’s business shall be inestimable, and that therefore any remedy at law or in damages shall be inadequate. Accordingly, the

 

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parties hereto agree that the Company shall be entitled to injunctive relief against Executive in the event of any breach or threatened breach of any of such provisions by Executive, in addition to any other relief (including damages) available to the Company under this Agreement or under law. The prevailing party in any action instituted pursuant to this Agreement shall be entitled to recover from the other party its reasonable attorneys’ fees and other expenses incurred in such action.

 

In the event that either party is required to engage the services of legal counsel to enforce the terms and conditions of this Agreement against the other party, regardless of whether such action results in litigation or arbitration, the prevailing party shall be entitled to reasonable attorneys’ fees, costs of legal assistants, and other costs from the other party, which shall include any fees or costs incurred at trial or in any appellate proceeding, and expenses and other costs, including any accounting expenses incurred.

 

17.       GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado without regard to conflict of law principles that would result in the application of another law.

 

18.       AMENDMENT

 

This Agreement may be amended only by a writing signed by Executive and by a duly authorized representative of the Company.

 

19.       SEVERABILITY

 

If any term, provision, covenant or condition of this Agreement, or the application thereof to any person, place or circumstance, shall be held to be invalid, unenforceable or void, the remainder of this Agreement and such term, provision, covenant or condition as applied to other persons, places and circumstances shall remain in full force and effect.

 

20.       CONSTRUCTION

 

The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing or interpreting this Agreement. The language in all parts of this Agreement shall be in all cases construed according to its fair meaning and not strictly for or against the Company or Executive.

 

21.       RIGHTS CUMULATIVE ; EXCLUSIVE RIGHTS TO PAYMENTS AND BENEFITS

 

The rights and remedies provided by this Agreement are cumulative, and the exercise of any right or remedy by either party hereto (or by its successor), whether pursuant to this Agreement, to any other agreement, or to law, shall not preclude or waive its right to exercise any or all other rights and remedies. The rights to payments and benefits herein are Executive’s exclusive rights to payment and benefits from the Company in the event of termination of this Agreement or employment except for amounts which the Company is required to pay under applicable law, and payments under insurance policies (if any) which are not duplicative of payments provided for herein.

 

22.       NONWAIVER

 

No failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance. All waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case of the Company, by an officer of the Company (other than Executive) or other person duly authorized by the Company.

 

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23.       NOTICES

 

Any and all notices or other communication provided for herein, shall be given by registered or certified mail, return receipt requested, in case of the Company to its principal office, and in the case of the Executive to the Executive’s residence address set forth on the first page of this Agreement or to such other address as may be designated by the Executive.

 

24.       ASSISTANCE IN LITIGATION

 

Executive shall, during and after termination of employment, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its parent, subsidiaries or affiliates is, or may become a party; provided, however, that such assistance following termination shall be furnished at mutually agreeable times and for mutually agreeable compensation. This Article will survive termination of this Agreement.

 

25.       ARBITRATION

 

Any controversy, claim or dispute arising out of or relating to this Agreement or the employment relationship, either during the existence of the employment relationship or afterwards, between the parties hereto, their assignees, their affiliates, their attorneys, or agents, shall be resolved by arbitration in Boulder or Denver, Colorado, such site to be determined by the Company. Such arbitration shall be conducted by the Judicial Arbiters Group (JAG) in accordance with the rules of the American Arbitration Association for commercial arbitration.  The following provisions will govern the arbitration. (a) one arbitrator shall be chosen; (b) each party to the arbitration will pay its pro rata share of the expenses and fees of the arbitrator(s), together with other expenses of the arbitration incurred or approved by the arbitrator(s); and (c) arbitration may proceed in the absence of any party if written notice of the proceedings has been given to such party. The parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be binding, final and conclusive and may be entered in any court having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided however, that nothing in this subsection shall be construed as precluding the Company from bringing an action for injunctive relief or other equitable relief or relief under the confidentiality, return of property, no hire ,non-solicitation, and invention assignment provisions.. The arbitrator shall not have the right to award punitive damages, consequential damages, or speculative damages to either party, but may award lost profits even if they are consequential damages. The parties shall keep confidential the existence of the claim, controversy or disputes from third parties (other than the arbitrator), and the determination thereof, unless otherwise required by law or necessary for the business of the Company. The arbitrator(s) shall be required to follow applicable law.

 

IF FOR ANY REASON THIS ARBITRATION CLAUSE BECOMES NOT APPLICABLE, AND AS TO ANY MATTER FOR WHICH LITIGATION IS PERMITTED HEREUNDER, THEN EACH PARTY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO, AND SUBMITS TO THE VENUE AND JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN DENVER AND BOULDER COUNTY COLORADO.

 

26.       COVENANTS INDEPENDENT

 

Each restrictive covenant on the part of the Executive set forth in this Agreement shall be construed as a covenant independent of any other covenant or provisions of this Agreement or any other agreement which the Company and the Executive may have, fully performed and not executory, and the existence of any claim or cause of action by the Executive against the Company whether predicated upon another covenant or provision of this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any other covenant.

 

12

 

27.       INJUNCTIVE AND EQUITABLE RELIEF

 

Executive and Company recognize and expressly agree that the extent of damages to Company in the event of a breach by Executive of any restrictive covenant set forth herein would be difficult to ascertain, that the irreparable harm arising out of any breach shall be irrefutably presumed, and that the remedy at law for any breach may be inadequate to compensate the Company. Consequently, the Executive agrees that in the event of a breach of any such covenant, in addition to any other relief to which Company may be entitled, Company shall be entitled to enforce the covenant by injunctive or other equitable relief ordered by a court of competent jurisdiction.

 

28.       INDEMNIFICATION

 

The Executive hereby agrees to indemnify and hold the Company and its officers, directors, shareholders and Executives harmless from and against any loss, claim, damage or expense, and/or all costs of prosecution or defense of their rights hereunder, whether in judicial proceedings, including appellate proceedings, or whether out of court, including without limiting the generality of the foregoing, attorneys’ fees, and all costs and expenses of litigation, arising from or growing out of the Executive’s breach or threatened breach of any representation, warranty or covenant contained herein.

 

The Company hereby agrees to indemnify and hold Executive harmless from and against any loss, claim, damage or expense, and/or all costs of prosecution or defense of his rights hereunder, whether in judicial proceedings, including appellate proceedings, or whether out of court, including without limiting the generality of the foregoing, attorneys’ fees, and all costs and expenses of litigation, arising from or growing out of the Company’s breach or threatened breach of any representation, warranty or covenant contained herein.

 

29.       ACKNOWLEDGMENT

 

The Executive acknowledges that when this Agreement is concluded, the Executive will be able to earn a living without violating the foregoing restrictions and that the Executive’s recognition and representation of this fact is a material inducement to the execution of this Agreement and to Executive’s continued relationship with the Company.

 

30.       SURVIVAL OF COVENANTS

 

All restrictive covenants contained in this Agreement shall survive the termination of this Agreement.

 

31.       REPRESENTATION AND WARRANTY OF EXECUTIVE

 

The Executive acknowledges and understands that the Company has extended employment opportunities to Executive based upon Executive’s representation and warranty that Executive is able to perform the work contemplated by this Agreement for the term hereof.

 

32.       INVALID PROVISION; SEVERABILITY

 

The invalidity or unenforceability of a particular provision of this Agreement shall not affect the other provisions hereof, and the Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.

 

33.       MODIFICATION

 

No change or modification of this Agreement shall be valid unless the same be in writing and signed by the parties hereto.

 

13

 

34.       409A

 

This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and shall be construed accordingly. It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax or interest imposed pursuant to Section 409A. To the extent such potential payments or benefits are or could become subject to Section 409A, the parties shall amend this Agreement with the goal of giving Executive the economic benefits described herein in a manner that does not result in such tax or interest being imposed, so long as such amendment does not adversely affect the Company. Executive shall, at the request of the Company, take any reasonable action (or refrain from taking any action), required to comply with any correction procedure promulgated pursuant to Section 409A.

 

If a payment that could be made under this Agreement would be subject to additional taxes and interest under Section 409A, the Company in its sole discretion may accelerate some or all of a payment otherwise payable under the Agreement to the time at which such amount is includible in the income of Executive, provided that such acceleration shall only be permitted to the extent permitted under Treasury Regulation § 1.409A-3(j)(4)(vii) and the amount of such acceleration does not exceed the amount permitted under Treasury Regulation § 1.409A-3(j)(vii).

 

No payment to be made under this Agreement shall be made at a time earlier than that provided for in this Agreement unless such payment is (i) an acceleration of payment permitted to be made under Treasury Regulation § 1.409A-3(j)(4) or (ii) a payment that would otherwise not be subject to additional taxes and interest under Section 409A.

 

The right to each payment described in this Agreement shall be treated as a right to a series of separate payments and a separately identifiable payment for purposes of Section 409A.

 

The definition of Good Reason is intended to constitute “good reason” as such term is used in Treas. Reg. §1.409A-1(n)(2) and shall be interpreted and construed accordingly, and to the maximum extent permitted by Section 409A and guidance thereunder, a termination for Good Reason shall be an “involuntary separation from service” as such term is used in Treas. Reg. §1.409A-1(n).

 

For purposes of Article 9 of this Agreement, “termination” (or any similar term) when used in reference to Executive’s employment shall mean “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder, and Executive shall be considered to have terminated employment with the Company when, and only when, Executive incurs a “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.

 

35.       ENTIRE AGREEMENT

 

This Agreement and the related option agreements contain the entire agreement and supersede all prior agreements and understandings, oral or written, with respect to the subject matter hereof. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification, or discharge is sought.

 

IN WITNESS HEREOF, each party to this Agreement has caused it to be executed on August 19, 2011.

 

	
EXECUTIVE
    	
 
    	
COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Fred Perner
    	
 
    	
By:
    	
/s/ Roger C. Odell
    
	
 
    	
 
    	
 
    	
 
    
	
Fred Perner
    	
 
    	
 
    	
Roger C. Odell, Chairman
    
	
Print Name
    	
 
    	
 
    	
Print Name and Title
    

 

14Unassociated Document

Exhibit 10.17

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”), is entered into as of the Commencement Date (defined below) by and between Ventrus BioSciences, Inc., a Delaware corporation with principal executive offices at 99 Hudson Street, 5th Floor, New York, NY 10013 (the “Company”), and Thomas Rowland residing at 2090 Avery Way, Castle Rock, Colorado 80109 (the “Executive”) and supersedes any prior employment or consulting agreement between the parties.

1.         Employment.

 

(a) Services.  The Executive will be employed by the Company as its Chief Business Officer. The Executive will report to the Chief Executive Officer and shall perform such duties as are assigned to him (the “Services”). The Executive agrees to perform such duties faithfully, to devote substantially all of his working time, attention and energies to the business of the Company, and while he remains employed and subject to the terms of this Agreement, not to engage in any other business activity that is in conflict with his duties and obligations to the Company.  

 

(b)Acceptance.  Executive hereby accepts such employment and agrees to render the Services.

 

2.         Term. The Executive's employment under this Agreement (the "Initial Term") shall be deemed to commence on September 1, 2011 (the “Commencement Date”), and shall continue until December 31, 2013, unless sooner terminated pursuant to Section 9 of this Agreement.  Notwithstanding anything to the contrary contained herein, the provisions of this Agreement governing protection of Confidential Information shall continue in effect as specified in Section 6 hereof and survive the expiration or termination hereof.  This Agreement may be extended for additional one (1) year periods (each an “Additional Term” and, together with the Initial Term, the “Term”) if the Company and the Executive agree in writing on the terms of such renewal.

 

3.         Best Efforts; Place of Performance.

 

(a) The Executive shall devote substantially all of his business time, attention and energies to the business and affairs of the Company and shall use his best efforts to advance the best interests of the Company and shall not during the Term be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, that will interfere with the performance by the Executive of his duties hereunder or the Executive’s availability to perform such duties or that will adversely affect, or negatively reflect upon, the Company.

 

(b) The duties to be performed by the Executive hereunder shall be performed at the principal executive offices of the Company during the Term. 

 

4.         Compensation.  As full compensation for the performance by the Executive of his duties under this Agreement, the Company shall pay the Executive as follows:

   

  

  

 

 

(a)  Base Salary.  Throughout the Term, the Company shall pay Executive an annual salary (the “Base Salary”) equal to two hundred and fifty thousand dollars ($250,000) per year. Payment shall be made in accordance with the Company’s normal payroll practices.  The Base Salary will be reviewed by the Chief Executive Officer and the Company’s Compensation Committee no less frequently than annually, and may be increased (but not decreased).

   

(b)  Incentive Bonus.  The Executive will be eligible for an incentive bonus in the discretion of the Compensation Committee of up to twenty percent (20%) of the Base Salary per annum.

 

(c)  Withholding.  The Company shall withhold all applicable federal, state and local taxes and social security and such other amounts as may be required by law from all amounts payable to the Executive under this Section 5.

 

(d)  Expenses.  The Company shall provide Executive with a corporate credit card for business use, and shall reimburse the Executive for all normal, usual and necessary expenses incurred by the Executive in furtherance of the business and affairs of the Company, including reasonable travel and entertainment, upon timely receipt by the Company of appropriate vouchers or other proof of the Executive’s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by the Company.

 

(e)  Other Benefits.  The Executive shall be entitled to all rights and benefits for which he shall be eligible under any benefit or other plans (including, without limitation, dental, medical, medical reimbursement and hospital plans, pension plans, employee stock purchase plans, profit sharing plans, bonus plans and other so-called "Fringe Benefits”) as the Company shall make available to its senior executives from time to time.

 

(f)  Vacation.  The Executive shall, during the Term, be entitled to a vacation of three (3) nonconsecutive weeks per annum, in addition to holidays observed by the Company.  The Executive shall not be entitled to carry any vacation forward to the next year of employment without the written consent of the Chief Executive Officer and shall not receive any compensation for unused vacation days.

  

  

  

 

 

6.         Confidential Information and Inventions.

 

(a)           The Executive recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information owned by the Company or third parties with whom the Company has an obligation of confidentiality.  Accordingly, during and after the Term, the Executive agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company.  “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company.  The Executive expressly acknowledges the trade secret status of the Confidential and Proprietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company.  The Executive agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not to take any Company Confidential and Proprietary Information (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) from the Company’s offices at any time during his employment by the Company, except as required in the execution of the Executive’s duties to the Company.  The Executive agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof in his possession to the Company upon request,  upon termination of employment.

 

(b)           Except with prior written authorization by the Company, the Executive agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, scientific, technical or business information of any other party to whom the Company owes an obligation of confidence, at any time during or after his employment with the Company.

 

(c)           The Executive agrees that all inventions, discoveries, improvements and patentable or copyrightable works (“Inventions”) initiated, conceived or made by him, either alone or in conjunction with others, during the Term shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101).  The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith.  The Executive hereby assigns to the Company all right, title and interest he may have or acquire in all such Inventions; provided, however, that the Board may in its sole discretion agree to waive the Company’s rights pursuant to this Section 6(c) with respect to any Invention that is not directly or indirectly related to the Company’s business.  The Executive further agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights or other rights on such Inventions in any and all countries, and to that end the Executive will execute all documents necessary:

 

(i)          to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and

(ii)          to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection.

  

  

  

 

(d)           The Executive acknowledges that, while performing the services under this Agreement the Executive may locate, identify and/or evaluate patented or patentable inventions having commercial potential in the fields of pharmacy, pharmaceutical, biotechnology, healthcare, technology and other fields which may be of potential interest to the Company (the “Third Party Inventions”).  The Executive understands, acknowledges and agrees that all rights to, interests in or opportunities regarding, all Third-Party Inventions identified by the Company or either of the foregoing persons’ officers, directors, employees (including the Executive), agents or consultants during the Employment Term shall be and remain the sole and exclusive property of the Company or such affiliate and the Executive shall have no rights whatsoever to such Third-Party Inventions and will not pursue for himself or for others any transaction relating to the Third-Party Inventions which is not on behalf of the Company.

 

(e)           The provisions of this Section 6 shall survive any termination of this Agreement.

 

7.         Non-Competition, Non-Solicitation and Non-Disparagement.

 

(a)           The Executive understands and recognizes that his services to the Company are special and unique and that in the course of performing such services the Executive will have access to and knowledge of Confidential and Proprietary Information (as defined in Section 6). As a result of such access, the Executive agrees that during the Term and for a period of 6 months thereafter (the “Restricted Period”), he shall not in any manner, directly or indirectly, on behalf of himself or any person, firm, partnership, joint venture, corporation or other business entity (“Person”), enter into or engage in any business that is directly competitive with the Business of the Company, either as an individual for his own account, or as a partner, joint venturer, owner, executive, employee, independent contractor, principal, agent, consultant, salesperson, officer, director or shareholder of a Person in a business competitive with the Company within the geographic area of the Company’s Business (each, a “Restricted Activity”), which is deemed by the parties hereto to be in the United States and European Union; provided however that if the Executive’s employment hereunder is terminated by the Executive without Good Reason (defined below), the Restricted Period shall be extended by an additional 6 months. The Executive acknowledges that, due to the unique nature of the Company’s business, the loss of any of its clients or business flow or the improper use of its Confidential and Proprietary Information could create significant instability and cause substantial damage to the Company and therefore the Company has a strong legitimate business interest in protecting the continuity of its business interests and the restriction herein agreed to by the Executive narrowly and fairly serves such an important and critical business interest of the Company.  For purposes of this Agreement, the “Business” of the Company and its affiliates shall mean the following:  the development of novel prescription drugs for the specific disease treatment of hemorrhoids, anal fissures, and fecal incontinence.  Notwithstanding the foregoing, nothing contained in this Section 7(a) shall be deemed to prohibit the Executive from (i) acquiring or holding, solely for investment, publicly traded securities of any corporation, some or all of the activities of which are competitive with the business of the Company so long as such securities do not, in the aggregate, constitute more than five percent (5%) of any class or series of outstanding securities of such corporation, or (ii) engaging in a Restricted Activity for or with respect to any subsidiary, division or affiliate or unit (each, a “Unit”) of a Person if that Unit is not engaged in business which is directly competitive with the Business of the Company, irrespective of whether some other Unit of such Person engages in such competition (as long as the Executive does not engage in a Restricted Activity for such other Unit).

  

  

  

 

  

(b)           During the Restricted Period, the Executive shall not, directly or indirectly, without the prior written consent of the Company:

 

(i)           solicit or induce any employee of the Company to leave the employ of the Company or any such affiliate; or hire for any purpose any employee of the Company or any affiliate, or any employee who has left the employment of the Company or any affiliate, within one year of the termination of such employee’s employment with the Company or any such affiliate or at any time if to hire such person would be in violation of such employee’s non-competition agreement with the Company or any such affiliate; or

 

(ii)           solicit or accept employment or be retained by any Person who, at any time during the term of this Agreement, was an agent, client or customer of the Company or any of its affiliates where Executive’s position will be competitive with or adverse to the business of the Company or any such affiliate or solicit or accept the business of any client or customer of the Company with respect to products, services or investments competitive with those provided by the Company. 

(c)           The Company and the Executive each agree that both during the Term and at all times thereafter, neither party shall directly or indirectly disparage, whether or not true, the name or reputation of the other party, including but not limited to, any officer, director, employee or shareholder of the Company.

 

(d)           In the event that the Executive breaches any provisions of Section 6 or this Section 7 or there is a threatened breach, then, in addition to any other rights which the Company may have, the Company shall (i) be entitled, without the posting of bond or other security, to seek injunctive relief to enforce the restrictions contained in such Sections and (ii) have the right to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments and other benefits (collectively “Benefits”) derived or received by the Executive as a result of any transaction constituting a breach of any of the provisions of Sections 6 or 7.

 

(e)            Each of the rights and remedies enumerated in Section 7(d) shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to the Company at law or in equity.  The Employee hereby acknowledges and agrees that the covenant against competition provided for pursuant to Section 7(a) is reasonable with respect to it duration, geographic area and scope. If, at the time of enforcement of this Section 7, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the Parties hereto agree that the maximum duration, scope or geographic area legally permissible under such circumstances will be substituted for the duration, scope or area state herein. If any of the covenants contained in this Section 7, or any part of any of them, is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies which shall be given full effect without regard to the invalid portions. No such holding of invalidity or unenforceability in one jurisdiction shall bar or in any way affect the Company’s right to the relief provided in this Section 7 or otherwise in the courts of any other state or jurisdiction within the geographical scope of such covenants as to breaches of such covenants in such other respective states or jurisdictions, such covenants being, for this purpose, severable into diverse and independent covenants.

  

  

  

 

  

(f)            In the event that an actual proceeding is brought in equity to enforce the provisions of Section 6 or this Section 7, the Executive shall not urge as a defense that there is an adequate remedy at law nor shall the Company be prevented from seeking any other remedies which may be available.  The Executive agrees that he shall not raise in any proceeding brought to enforce the provisions of Section 6 or this Section 7 that the covenants contained in such Sections limit his ability to earn a living.

 

(g)           The provisions of this Section 7 shall survive any termination of this Agreement.

8.        Representations and Warranties.

 

(a)           The Executive hereby represents and warrants to the Company as follows:

 

(i)          Neither the execution or delivery of this Agreement nor the performance by the Executive of his duties and other obligations hereunder violate or will violate any statute, law, determination or award, or conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which the Executive is a party or by which he is bound.

 

(ii)          The Executive has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder.  This Agreement constitutes the legal, valid and binding obligation of the Executive enforceable against him in accordance with its terms.  No approvals or consents of any persons or entities are required for the Executive to execute and deliver this Agreement or perform his duties and other obligations hereunder.

 

(b)           The Company hereby represents and warrants to the Executive that this Agreement, the employment of the Executive hereunder and the grant of the Options have been duly authorized by and on behalf of the Company, including, without limitation, by all required action by the Board.

 

9.         Termination.  The Executive’s employment hereunder shall be terminated upon the Executive’s death and may be otherwise terminated as follows:

 

(a)           The Executive’s employment hereunder may be terminated by the Company for Cause.  Any of the following actions by the Executive shall constitute “Cause”:

 

(i)          The willful failure, disregard or continuing refusal by the Executive to perform his duties hereunder;

  

  

 

  

(ii)         Any act of willful or intentional misconduct, or a grossly negligent act by the Executive having the effect of injuring, in a material way (as determined in good-faith by the Company), the business or reputation of the Company, including but not limited to, any officer, director, or executive of the Company;

 

(iii)        Willful misconduct by the Executive in carrying out his duties or obligations under this Agreement, including, without limitation, insubordination with respect to lawful directions received by the Executive from Chief Executive Officer or from the Board;

 

(iv)        The Executive’s indictment of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea);

 

(v)         The determination by the Company, based upon clear and convincing evidence, after a reasonable and good-faith investigation by the Company following a written allegation by another employee of the Company, that the Executive engaged in some form of harassment prohibited by law (including, without limitation, age, sex or race discrimination), unless the Executive’s actions were specifically directed by the Board;

 

(vi)         Any intentional misappropriation of the property of the Company, or embezzlement of its funds or assets (whether or not a misdemeanor or felony);

 

(vii)        Breach by the Executive of any of the provisions of Sections 6, 7 or 8 of this Agreement; and

(viii)       Breach by the Executive of any provision of this Agreement other than those contained in Sections 6, 7 or 8 which is not cured by the Executive within thirty (30) business days after notice thereof is given to the Executive by the Company.

  

(b)           The Executive’s employment hereunder may be terminated by the Board due to the Executive’s Disability.  For purposes of this Agreement, a termination for “Disability” shall occur (i) when the Board has provided a written termination notice to the Executive supported by a written statement from a reputable independent physician mutually selected by the Company and the Executive, or the Executive’s legal representatives in the event he is unable to make such selection due to mental incapacity, to the effect that the Executive shall have become so physically or mentally incapacitated as to be unable to resume, even with reasonable accommodation as may be required under the Americans With Disabilities Act, within the ensuing twelve (12) months, his employment hereunder by reason of physical or mental illness or injury, or (ii) upon rendering of a written termination notice by the Company after the Executive has been unable to substantially perform his duties hereunder, even with reasonable accommodation as may be required under the Americans With Disabilities Act, for 120 or more consecutive days, or more than 180 days in any consecutive twelve month period, by reason of any physical or mental illness or injury.  For purposes of this Section 9(b), the Executive agrees to make himself available and to cooperate in any reasonable examination by a reputable independent physician mutually selected by the Company and the Executive, and paid for by the Company.  The Company shall provide salary continuation (through insurance or otherwise) at the rate of 100% of salary and continuation of Fringe Benefits set forth in this Agreement during the first six months Executive is unable to perform his duties by reason of disability.  The Company shall reimburse Executive for his actual cost of maintaining a supplementary long-term disability insurance policy during the Term up to a maximum reimbursement of $10,000 per year.

  

  

  

 

  

(c)           The Executive’s employment hereunder may be terminated by the Company (or its successor) by written notice to the Executive upon the occurrence of a Change of Control.  For purposes of this Agreement, “Change of Control” means (i) the acquisition, directly or indirectly, following the date hereof by any person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), in one transaction or a series of related transactions, of securities of the Company representing in excess of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities if such person or his or its affiliate(s) do not own in excess of 50% of such voting power on the date of this Agreement, or (ii) the future disposition by the Company (whether direct or indirect, by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets in one transaction or series of related transactions other than a merger (1) effected exclusively for the purpose of changing the domicile of the Company or (2) effected for the purpose of obtaining a public listing and/or publicly traded securities.

 

(d)           The Executive’s employment hereunder may be terminated by the Executive for Good Reason.  For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) any material reduction by the Corporation of the Executive's duties, responsibilities, or authority which causes his position with the Company to become of less responsibility or authority than his position as of immediately following the Effective Date; (ii) any reduction by the Corporation of the Executive's compensation or benefits payable hereunder (it being understood that a reduction of benefits applicable to all employees of the Corporation, including the Executive, shall not be deemed a reduction of the Executive's compensation package for purposes of this definition); (iii) a material breach by the Company of Section 7(c) or 8(b) of this Agreement which is not cured by the Company within 30 days after written notice thereof is given to the Company by the Executive, or (iv) a change in the lines of reporting such that the Executive no longer reports directly to the Chief Executive Officer.

 

(e)           The Executive’s employment may be terminated by the Company without Cause by delivery of written notice to the Executive effective the date of delivery of such notice.

 

(f)           The Executive’s employment may be terminated by the Executive in the absence of Good Reason by delivery of written notice to the Company effective fifteen (15) days after the date of delivery of such notice.

 

10.       Compensation upon Termination.

   

(a)           If the Executive’s employment is terminated as a result of his death or Disability or upon a Change of Control, the Company shall pay to the Executive or to the Executive’s estate, as applicable, his Base Salary for a period of six (6) months following the date of termination and any accrued but unpaid Bonus and expense reimbursement amounts through the date of his Death or Disability.  All Stock Options that are scheduled to vest on the next succeeding anniversary of the Commencement Date shall be accelerated and deemed to have vested as of the termination date.  All Stock Options that have not vested (or been deemed pursuant to the immediately preceding sentence to have vested) as of the date of termination shall be forfeited to the Company as of such date.  Stock Options that have vested as of the Executive’s termination shall remain exercisable for 360 days following such termination.  

  

  

 

 

(b)           If the Executive’s employment is terminated either (i) by the Company for Cause, or (ii) by the Executive in the absence of Good Reason, then the Company shall promptly pay to the Executive his Base Salary through the date of his termination and any expense reimbursement amounts owed through the date of termination.  The Executive shall have no further entitlement to any other compensation or benefits from the Company.  All Stock Options that have not vested as of the date of termination shall be forfeited to the Company as of such date.  Stock Options that have vested as of the Executive’s termination shall remain exercisable for 90 days following such termination.

   

(c)           If the Executive’s employment is terminated by the Company other than as a result of the Executive’s death or Disability and other than for reasons specified in Section 10(b) then the Company shall (i) continue to pay to the Executive his Base Salary and all Fringe Benefits for a period of six (6) months following such termination, (ii) pay any expense reimbursement amounts owed through the date of termination, (iii) pay any accrued but unpaid Bonus and (iv) all Stock Options that are scheduled to vest during the Term shall be accelerated and deemed to have vested as of the termination date.  Any Stock Options that have vested as of the date of the Executive’s termination shall remain exercisable for a period of 360 days.

 

(d)           This Section 10 sets forth the only obligations of the Company with respect to the termination of the Executive’s employment with the Company, and the Executive acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not explicitly provided in Section 10.

 

(e)           The provisions of this Section 10 shall survive any termination of this Agreement.

 

11.       Miscellaneous.

 

(a)           This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without giving effect to its principles of conflicts of laws.

 

(b)           In the event of any dispute arising out of, or relating to, this Agreement or the breach thereof (other than Sections 6 or 7 hereof), or regarding the interpretation thereof, the parties agree to submit any differences to nonbinding mediation prior to pursuing resolution through the courts.  The parties hereby submit to the exclusive jurisdiction of the Courts of the County of New York, or the United States District Court for the Southern District of New York, and agree that service of process in such court proceedings shall be satisfactorily made upon each other if sent by registered mail addressed to the recipient at the address referred to in Section 11(g) below.

 

(c)           This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and permitted assigns.

   

  

  

 

   

(d)           This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive.  The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, including any successors or assigns in connection with any sale, transfer or other disposition of all or substantially all of its business or assets.

 

(e)           This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.

 

(f)            The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect.  No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.

 

(g)           All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be in writing and shall be delivered personally or by an overnight courier service or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at the addresses set forth on the first page of this Agreement, and shall be deemed given when so delivered personally or by overnight courier, or, if mailed, five days after the date of deposit in the United States mails.  Either party may designate another address, for receipt of notices hereunder by giving notice to the other party in accordance with this Section 11 (g).

 

(h)           This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof.  No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

 

(i)             As used in this Agreement, “affiliate” of a specified person or entity shall mean and include any person or entity controlling, controlled by or under common control with the specified person or entity.

 

(j)             The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

(k)            This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank – Signature Page Follows]

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and intend it to be effective as of the Commencement Date by proper person thereunto duly authorized.

	  	
VENTRUS BIOSCIENCES, INC.

	  	  
	  	
By:     

	
/s/ Russell H. Ellison

	  	
Name: Russell H. Ellison, MD

	  	
Title: Chief Executive Officer

	  	  
	  	
/s/ Thomas Rowland

	  	
Thomas Rowland

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