Document:

Exhibit 10.1 R Medford Employment Agreement

    EXHIBIT
      10.1

     

    EMPLOYMENT
      AGREEMENT

     

    THIS
      AGREEMENT ("Agreement"), dated September 25, 2006 (the "Effective Date"), is
      made and entered into by and between AtheroGenics,
      Inc.,
      a
      Georgia corporation (hereinafter called the "Employer"), and Russell
      M. Medford, M.D.,
      a
      resident of the State of Georgia (hereinafter the "Executive").

     

    W
      I T N E S S E T H :

     

    WHEREAS,
      the
      Executive has been employed by Employer since 1993;

     

    WHEREAS,
      the
      Employer and Executive mutually desire that the Executive's employment be
      continued; and

     

    WHEREAS,
      the
      Employer and Executive mutually desire to enter into an employment contract
      which will supersede any prior contracts; 

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants and agreements herein
      contained, the parties hereto agree as follows:

     

    1.  Period
      of Employment.

     

    In
      exchange for the compensation, benefits and perquisites described in this
      Agreement, and upon such other terms and conditions hereinafter set forth,
      the
      Employer agrees to employ the Executive for the "Period of Employment" (as
      hereinafter defined). For purposes of this Agreement, the "Period of Employment"
      shall commence as of the Effective Date of this Agreement and, unless earlier
      terminated as provided in this Agreement, shall consist of an initial period
      of
      two (2) years (the "Initial Term"), and shall automatically be extended on
      an
      annual basis for an additional two (2) year term (each additional two (2) year
      term called a "Renewal Term") unless Employer or Executive shall notify the
      other not less than thirty (30) days prior to the end of each year that the
      Executive's employment will end at the expiration of the then existing Initial
      Term or Renewal Term.

     

    2.  Position
      and Responsibilities.

     

    During
      the Period of Employment, the Executive agrees to serve as the President and
      Chief Executive Officer of AtheroGenics, Inc. reporting directly to the Board
      of
      Directors of the Employer (hereinafter the "Board"), and to perform those
      functions and duties customarily assigned to individuals serving in the position
      in which the Executive serves hereunder. Without limiting the foregoing,
      Executive shall be considered an executive officer of Employer, and shall be
      the
      Chairman of Employer's management executive committee. In addition, Executive
      shall keep the Board of Directors of Employer fully apprised of all material
      developments occurring under Executive's supervision and responsibility.

     

    Except
      as
      may otherwise be approved in advance by the Board of Employer, the Executive
      shall devote his full working time throughout the Period of Employment to the
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        
services
        required of him hereunder. The Executive shall render his services exclusively
        to the Employer during the Period of Employment, and shall use his best efforts,
        judgment and energy to improve and advance the business and interests of
        the
        Employer in a manner consistent with the duties of his position.

    

     

    3.  Compensation,
      Benefits and Perquisites.

     

    (a)  Base
      Salary

     

    In
      exchange for the performance of his duties and responsibilities hereunder and
      all other services rendered by the Executive in any capacity to the Employer,
      the Employer agrees to pay base salary ("Base Salary") to the Executive for
      the
      Initial Term equal to $383,454 per year. For any Renewal Term thereafter during
      which this Agreement remains in effect, the Executive's Base Salary for each
      such Renewal Term shall be reviewed based upon an annual performance appraisal
      and competitive market conditions and may be increased from time to time by
      the
      Employer (at the sole discretion of Employer). Base Salary shall be payable
      according to the customary payroll practices of the Employer.

     

    (b)  Incentive
      Compensation

     

    In
      addition to Base Salary, the Executive shall be eligible to receive such
      incentive compensation ("Incentive Compensation") as shall be determined by
      the
      Board of Employer (or a committee of the Board). The amount of such Incentive
      Compensation to be earned in any year shall be based upon certain strategic
      and
      financial goals which shall be determined by the Executive and the Board of
      the
      Employer. Such strategic and financial goals and target Incentive Compensation
      shall be set forth in the Employer's annual budget during the term of this
      Agreement. For 2006, the target Incentive Compensation shall be $145,713.
      Incentive Compensation earned for a calendar year pursuant to this Agreement
      shall be payable no later than sixty (60) days following the expiration of
      the
      calendar year.

     

    (c)  Equity
      Compensation

     

    The
      Executive shall be eligible to participate in the Employer's Equity Ownership
      Plans and receive such awards of stock and/or options thereunder as shall be
      determined by the Board of Directors or a committee thereof. 

     

    (d)  General
      Benefits and Perquisites

     

    During
      the term of this Agreement, the Executive shall be entitled to participate,
      in
      accordance with the terms and conditions thereof, in all employee benefit plans
      or perquisite programs generally available to all executive management personnel
      of the Employer which may be in effect from time to time during the term of
      this
      Agreement; provided, however, that nothing contained herein shall require the
      Employer to establish, or maintain, any such plan. These benefits are provided
      in accordance with the provisions of each individual plan, which may be amended
      from time to time at the sole discretion of the Employer.

     

    
      
        
        

      

      
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    (e) Additional
      Disability Coverage

     

    In
      addition to the employee benefit plan coverage provided under Section 3(d)
      above, during the term of this Agreement the Executive will be provided with
      additional "Disability" (as hereinafter defined) benefits in an amount such
      that
      the total annual Disability benefit payable under this provision, together
      with
      payments under any short-term and/or long-term disability program or policy
      maintained by the Employer and from workers compensation with respect to the
      disabling condition, will be equal to 70% of the Executive's annualized Base
      Salary immediately prior to the Disability. The Disability benefit provided
      under this Section 3(e) will be paid from the date of the Disability in the
      same
      manner and at the same time that benefits are paid under the Employer’s
      short-term or long-term disability program or policy, as applicable, until
      the
      earliest of (i) the cessation of the Disability; (ii) the Executive's
      death; (iii) the Executive's attainment of age 65; (iv) the date when short-term
      disability benefits terminate if long-term disability benefits do not
      immediately commence thereafter pursuant to the terms of that policy; or (v)
      the
      date when long-term disability policy benefits terminate pursuant to the terms
      of that policy.

     

    For
      purposes of this Agreement, the term "Disability" or "Disabled" has the same
      meaning as provided in the long-term disability plan maintained by the Employer,
      not taking into account any exclusion or waiting period under such plan or,
      if
      the Employer determines that Code Section 409A is applicable, has the meaning
      set forth in Code Section 409A and the related tax regulations. In the event
      of
      a dispute, the determination of Disability or Disabled shall be made by the
      Board of Directors or its designee. In the event that the Executive shall
      dispute the determination of the Board of Directors or its designee as to the
      Disability of the Executive, the Executive may appeal the determination to
      a
      panel of three doctors, one to be selected by the Executive at his expense,
      one
      to be selected by the Board of Directors or its designee at its expense, and
      one
      to be selected by the doctors chosen by the Executive and the Board of Directors
      or its designee whose expense shall be shared equally between Executive and
      Employer. The decision of the panel of doctors shall be final. Any termination
      for Disability under this Agreement shall not affect the rights, if any, that
      the Executive may otherwise have under the long-term disability plan the
      Employer may have in effect at the date of such termination and in which the
      Executive is then participating. Employer shall have the right to review any
      determination of Disability no more frequently than bi-annually. 

     

    (f) Reimbursement
      of Business Expenses

     

    The
      Employer will reimburse the Executive for all reasonable and necessary business
      expenses (including, but not limited to, professional and service organization
      dues, journal subscriptions and educational seminars, conferences, symposiums
      and other meetings) and related travel expenses, incurred or expended in
      connection with the performance of his duties and responsibilities as Executive
      under this Agreement in accordance with the reimbursement policies of Employer.
      Any reimbursement payments made to Executive pursuant to the reimbursement
      policies of the Employer during the term of this Agreement shall be paid no
      later than March 15 of the calendar year immediately following the expiration
      of
      the calendar year in which the related expense was incurred.

     

    
      
        
        

      

      
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    (g) Change
      of
      Control

     

    In
      the
      event of a Change of Control, as defined in Section 4(g) hereof, 36 months
      of
      vesting for unvested stock options granted to the Executive pursuant to the
      Employer's Equity Ownership Plans (or any other or successor plans) shall be
      immediately accelerated (but the period during which Executive may exercise
      the
      stock options shall not be extended under this Agreement).

     

    4.  Termination
      of Agreement.

     

    (a)  General

     

    Upon
      termination of Executive for any reason, (i) the Employer shall pay the
      Executive any Base Salary that was earned through the effective date of his
      termination but which remained unpaid as of that date, and (ii) Executive shall
      be entitled to any benefits that have been accrued and vested under any of
      Employer's employee benefit plans in accordance with and to the extent provided
      in such benefit plans. Except as otherwise provided in this Agreement, Executive
      shall not be entitled to any other benefits or payments under this Agreement
      in
      the event of termination of Employment.

     

    (b)  Involuntary
      Termination

     

    Employer
      recognizes that the Executive would incur substantial damage to personal and
      professional reputation in the event of an Involuntary Termination.
      Consequently, should such Involuntary Termination occur during the Period of
      Employment, the Employer shall pay to the Executive, as liquidated damages,
      an
      amount (the "Severance Amount") equivalent to the sum of (i) two times
      Executive's then current annualized Base Salary and (ii) a percentage of the
      target Incentive Compensation otherwise stipulated for the benefit of Executive
      pursuant to Section 3(b) of this Agreement for the calendar year in which the
      Involuntary Termination occurs as follows: 

     

    
      
        
          	
                   Aggregate
                    Period of Employment

                   with
                    Employer

                	
                   Percentage
                    of Target Incentive

                  Compensation
                    Table

                
	
                   Under
                    one
                    year            

                	
                   None

                
	 One
                  year up to two years	
                   100%

                
	 Two
                  years and over	
                   200%

                

        

      

    

    

    The
      Severance Amount shall be paid in a lump sum in cash on Executive’s Delayed
      Payment Date (together with interest at the Prime Rate from the date of
      Executive’s termination of employment to the Executive’s Delayed Payment Date).
      Payment of the Severance Amount shall be contingent upon Executive signing
      (and
      not revoking) a general release of all claims, in a form attached hereto as
      Exhibit
      A.
      

     

    
      
        
        

      

      
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    Upon
      Executive's becoming ineligible to participate in the group health plan(s)
      sponsored by the Employer, Executive may elect continuation coverage
      ("Continuation Coverage") under such plan(s) as permitted by the Consolidated
      Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). During such
      COBRA coverage period, the Employer will pay the premiums for COBRA Continuation
      Coverage (excluding any medical flexible spending account coverage) until the
      first to occur of (i) the second anniversary of the Involuntary Termination,
      or
      (ii) the date on which the Executive commences employment with a new employer
      and is eligible to participate in a subsequent employer's medical and healthcare
      employee benefits program with respect to the Employer's insured group health
      plan, provided however that such payments shall not exceed the amount paid
      by
      Employer for the medical and healthcare coverage in effect for Executive and
      his
      dependents immediately prior to the COBRA coverage period. All other premiums
      shall be paid by Executive.

     

    If
      the
      Executive's employment terminates due to an Involuntary Termination, the
      Employer shall accelerate the vesting of its stock options previously granted
      to
      Executive pursuant to the Employer's Equity Ownership Plan (or any other or
      successor plans) as follows (but the period during which Executive may exercise
      the stock options shall not be extended under this Agreement):

     

    
      	
               

              Aggregate
                Period of

               Employment
                with Employer 

            	
               Options
                to Have Accelerated

               Vesting
                as of Date of

               Involuntary
                Termination

            
	Under
              one year	 None
	
              One
                year up to two years

               

               

            	
               Options
                otherwise vesting within 12

               months
                following Involuntary

               Termination

            
	
               Two
                years and over 

               

                 

            	
              Options
                otherwise vesting within 24 

              months
                following Involuntary

              Termination

            

    

     

    If
      the
      Involuntary Termination or a Constructive Discharge occurs within 24 months
      following a Change of Control, in lieu of the Severance Amount provided in
      the
      first paragraph of this Section 4(b) (but paid in the same manner as earlier
      provided), the Severance Amount shall be the aggregate of (i) three times
      annualized Base Salary and (ii) three times the target Incentive Compensation
      otherwise payable to him for the year in which the Involuntary Termination
      or
      Constructive Discharge occurs. In addition, vesting for all unvested stock
      options granted pursuant to the Employer's Equity Ownership Plan (or any other
      or successor plans) shall be immediately accelerated (but the period during
      which Executive may exercise the stock options shall not be extended under
      this
      Agreement). In order to reduce the impact of any possible excise tax,
      AtheroGenics agrees to provide a gross up payment equal to the sum of a) the
      excise tax under Code Section 4999 payable on the severance package and b)
      the
      federal, state, local, employment tax and excise tax on the gross up payment.
      

     

    
      
        
        

      

      
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    Except
      as
      provided under this Section 4(b), as of the effective date of an Involuntary
      Termination, all other obligations of the Employer to Executive under this
      Agreement shall cease.

     

    (c)  Voluntary
      Resignation

     

    Except
      in
      the case of a voluntary resignation which results from a Constructive Discharge,
      if the Executive voluntarily resigns from the positions described in Section
      2
      during the period in which this Agreement is in effect, then the Employer shall
      pay the Executive the benefits provided in Section 4(a) of this Agreement.
      No
      Incentive Compensation will be paid to the Executive following the date of
      a
      voluntary resignation. The respective terms and provisions of any other employee
      benefit or perquisite program shall control in the case of a voluntary
      resignation.

     

    Unless
      otherwise specifically stated in this Agreement, as of the effective date of
      a
      voluntary resignation, all obligations of the Employer to Executive under this
      Agreement shall cease.

     

    The
      Executive must notify the Board of Directors in writing of his intent to
      voluntarily terminate employment at least thirty (30) days prior to the
      effective date of such voluntary resignation.

     

    (d)  Termination
      for Cause

     

    Notwithstanding
      any other provision contained in this Agreement, the Employer has the right,
      at
      any time, to effect a "Termination for Cause" (as defined in Section 4(g)),
      of
      Executive's employment under this Agreement. Upon the date of such Termination
      for Cause, the Employer shall pay the Executive the benefits provided in Section
      4(a) of this Agreement. No Incentive Compensation will be paid to the Executive
      following the date of a Termination for Cause. The respective terms and
      provisions of any other employee benefit or perquisite program shall control
      in
      the case of a Termination for Cause.

     

    Unless
      otherwise specifically stated in this Agreement, as of the effective date of
      a
      Termination for Cause, all obligations of the Employer to Executive under this
      Agreement shall cease.

     

    (e)  Disability

     

    In
      the
      event the Executive becomes Disabled at any time during the term of this
      Agreement, the Employer shall make payments to the Executive in amounts equal
      solely to those specified in Section 3(e) and for the time period specified
      in
      Section 3(e). Such payments shall be paid in the same manner and at the same
      time that Base Salary would have been paid had this Agreement continued.
      Notwithstanding the foregoing, the Executive shall also be entitled to a pro
      rata portion of his target Incentive Compensation otherwise stipulated for
      the
      benefit of Executive for the calendar year in which he became Disabled, provided
      Executive is Disabled as of the end of such calendar year. Such pro rata portion
      shall be determined by multiplying (i) the total target Incentive Compensation
      that the Executive was projected to receive in respect of the 

     

    
      
        
        

      

      
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year
        of
        his Disability by (ii) the quotient of the number of days in such year prior
        to
        his Disability, divided by 365. Such pro rata Incentive Compensation will
        be
        payable at the same time that the full Incentive Compensation would have
        been
        payable to the Executive as provided in Section 3(b) hereof.

    

     

    Except
      as
      provided under this Section 4(e) and Section 3(e), as of the effective date
      of
      the Disability, all other obligations of the Employer to Executive under this
      Agreement shall cease.

     

    (f)  Death

     

    In
      the
      event of the death of Executive during the term of this Agreement, the heirs,
      personal representatives or beneficiaries designated in writing by Executive,
      as
      required by applicable law, shall receive (i) the benefits and payments
      described in Section 4(a) of this Agreement; (ii) a pro rata portion of the
      target Incentive Compensation otherwise stipulated for the benefit of Executive
      for the calendar year in which Executive dies (such pro rata portion determined
      by multiplying (x) the total target Incentive Compensation that the Executive
      was projected to receive in respect of the year of his death by (y) the quotient
      of the number of days in such year prior to his death, divided by 365); and
      (iii) accelerated vesting of stock options previously granted to Executive
      that
      otherwise would have vested within 12 months following Executive's death. Such
      pro rata Incentive Compensation will be payable at the same time that the full
      Incentive Compensation would have been payable to the Executive as provided
      in
      Section 3(b) hereof. 

     

    (g)  Certain
      Definitions

     

    "Change
      of Control"
      shall be
      deemed to have occurred if (i) a tender offer shall be made and consummated
      for
      the ownership of 50% or more of the outstanding voting securities of the
      Employer, (ii) the Employer shall be merged or consolidated with another
      corporation and as a result of such merger or consolidation less than 50% of
      the
      outstanding voting securities of the surviving or resulting corporation shall
      be
      owned in the aggregate by the former shareholders of the Employer, (iii) the
      Employer shall sell all or substantially all of its assets to another
      corporation which corporation is not wholly owned by the Employer, (iv) a
      person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in
      effect on the date hereof) of the Securities Exchange Act of 1934, as amended
      ("Exchange Act"), or other legal entity shall acquire 50% or more of the
      outstanding voting securities of the Employer (whether directly, indirectly,
      beneficially or of record), or (v) individuals who, as of the date hereof,
      together with those directors (x) for whose election proxies shall have been
      solicited by the board and (y) who are then serving as directors appointed
      by
      the board to fill pre-existing vacancies on the board or vacancies caused by
      death or resignation, but not by either removal or to fill newly created
      directorships, constitute the Board of Directors of the Employer (the “Incumbent
      Board”) cease to constitute at least a majority of the Board as a result of an
      actual or threatened election contest with respect to the election or removal
      of
      directors or other actual or threatened solicitation of proxies or consents
      by
      or on behalf of a person other than the Incumbent Board. For purposes hereof,
      ownership of voting securities shall take into account and shall include
      ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) (as
      in
      effect on the date hereof) pursuant to the Exchange Act. 

     

    
      
        
        

      

      
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    “Code”
      means
      the
      Internal Revenue Code of 1986, as amended. 

     

    "Constructive
      Discharge"
      means
      the termination of the Executive's employment by the Executive on account of
      (i)
      any reduction in the Executive's then-current Base Salary without the consent
      of
      the Executive, (ii) any material reduction in the level or scope of the job
      responsibility or status of the Executive occurring without the consent of
      the
      Executive (including not reporting directly to the Chief Executive Officer
      of
      the Company or its successor; not retaining “Officer” status, such as Chief
      Medical Officer, Chief Financial Officer or Chief Scientific Officer of the
      Company or its successor; or ceasing to have responsibility for a significant
      department or function), or (iii) any relocation to any Employer location which
      is more than 50 miles from its current location and to which the Executive
      has
      not agreed; provided, however, that no termination by Executive shall be
      considered a Constructive Discharge unless Executive has first provided written
      notice to the Chief Executive Officer of Employer of the factual circumstances
      forming the basis for the claim of constructive discharge and of Executive’s
      intent to treat those circumstances as a Constructive Discharge under this
      Agreement, and has further provided the Employer with a period of at least
      fifteen (15) days in which to cure such alleged breach.

     

    “Delayed
      Payment Date”
      means
      the date that is six (6) months and one (1) day after the date of Executive’s
      termination of employment.

     

    "Involuntary
      Termination"
      means
      the Executive's (i) involuntary separation from service with the Employer,
      other
      than as a result of his death, Disability, mandatory retirement pursuant to
      a
      retirement policy of Employer or Termination for Cause, or (ii) receipt of
      notice of the Employer's intent not to extend the Period of Employment as
      specified in Section 1. Involuntary Termination also means Executive's voluntary
      resignation of employment within 90 days following events constituting a
      Constructive Discharge. Any other type of voluntary termination of employment
      shall not be deemed an Involuntary Termination. 

     

    “Prime
      Rate”
      means
      the “Prime Rate” of interest as reported in “Interest Rates & Bonds” in the
      Wall Street Journal, compounded daily.

     

    "Termination
      for Cause"
      means
      the termination of the Executive's employment as a result of conduct by the
      Executive amounting to (i) fraud or dishonesty against the Employer,
      (ii) willful misconduct, or repeated refusal to follow the reasonable
      directions of the Board of Directors or chief executive officer of the Employer,
      (iii) knowing violation of law in the course of performance of the duties of
      Executive's employment with the Employer, (iv) any violation of the Employer’s
      formal policies regarding nondiscrimination and equal employment opportunity,
      sexual harassment and other forms of unlawful workplace harassment, or insider
      trading of Employer’s securities (whether directly or indirectly),
      (v) repeated and frequent absences from work without a reasonable excuse,
      (vi) intoxication with alcohol or drugs while on the Employer's premises
      during regular business hours, (vii) a conviction or plea of guilty or
nolo contendere
      to a
      felony or other crime of moral turpitude in the course of his employment (e.g.,
      fraud, theft, embezzlement and the like), (viii) gross negligence in the
      performance of Executive’s duties; or (ix) a breach or violation of the terms of
      this Agreement. With respect to (ii) above, Termination for Cause shall not
      be
      permitted until after the Executive has been given written notice of his alleged
      actions described in clause (ii), listing in reasonable specificity such

     

    
      
        
        

      

      
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alleged
        actions, and after the Executive shall have failed to improve such performance
        within the time period (which shall have been a reasonable time period)
        specified in such notice, such time period to be not less than 15 days.

    

     

    5.  Indemnification.

     

    The
      Employer will indemnify the Executive to the fullest extent permitted by
      applicable laws and regulations in accordance with the Bylaws and Amended and
      Restated Articles of Incorporation of the Employer. The Employer shall insure
      and provide a defense to the Executive against all costs, charges and expenses
      incurred in connection with any action, suit or proceeding to which he may
      be
      made a party by reason of his good faith execution of his duties as described
      in
      Section 2. In the event that the Executive is found to be liable or culpable,
      in
      any action, suit or proceeding involving sexual harassment, discrimination
      or
      fraud, the Executive will be obliged to repay to the Employer any costs, charges
      or expenses incurred by the Employer in connection therewith. The Employer
      shall
      enter into an Indemnification Agreement (the “Indemnification Agreement”) with
      the Executive which sets forth in greater detail the indemnification obligations
      of the Employer. 

     

    6.  Consolidation,
      Merger or Sale of Assets.

     

    Nothing
      in this Agreement shall preclude the Employer from consolidating or merging
      into
      or with, or transferring all or substantially all of its assets to another
      organization which assumes this Agreement and all obligations and undertakings
      of the Employer hereunder. Upon such a consolidation, merger or sale of assets,
      the term "Employer" as used will mean the other organization, no termination
      of
      Executive's employment under this Agreement shall be deemed to have occurred
      merely because of the consummation of a transaction described in this Section
      6,
      and this Agreement shall continue in full force and effect.

     

    7.  Assignment.

     

    The
      Employer, with the prior written approval of the Executive, shall have the
      right
      to assign this Agreement to an affiliate or subsidiary corporation, and all
      covenants and agreements hereunder shall inure to the benefit of and be
      enforceable by or against its successors and assigns.

     

    This
      Agreement provides for the personal services of the Executive. The Executive
      shall not have the right to assign or transfer any of the rights or benefits
      hereunder, nor shall they be subject to voluntary or involuntary
      alienation.

     

    8.  Amendment,
      Modification, Termination or Waiver.

     

    The
      parties hereby irrevocably agree that no attempted amendment, modification,
      restatement, termination, discharge or change (collectively, "Amendment") of
      this Agreement shall be valid and effective, unless the parties shall
      unanimously agree in writing to such Amendment. No waiver of any provision
      of
      this Agreement shall be effective unless it is in writing and signed by the
      party against whom it is asserted, and any such written waiver shall

     

    
      
        
        

      

      
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only
        be
        applicable to the specific instance to which it relates and shall not be
        deemed
        to be a continuing or future waiver.

    

     

    9.  Non-Competition.
      

     

    (a)  Noncompetition

     

    The
      parties acknowledge and agree that, because of Executive's access to the Trade
      Secrets and Confidential Information (each as hereinafter defined) as well
      as
      his duties as described in Section 2, efforts by Executive to engage in directly
      competitive activities would cause significant, irreparable harm to Employer.
      The parties further agree that the relevant competitive market for the
      Restricted Activities (defined below) is nationwide, that Executive will be
      actively working on behalf of Employer throughout the United States of America,
      and that Employer would be directly and severely harmed by competitive
      activities anywhere in the United States of America. Therefore, the parties
      agree that, during his employment and the applicable Restricted Period, except
      on behalf of the Employer, Executive shall not engage in the Restricted
      Activities within the United States of America. For purposes of this Section,
      the "Restricted Activities" shall mean activities substantially similar to
      the
      Executive's responsibilities described in Section 2 of this Agreement for any
      company, entity or individual that engages in the research, development,
      marketing or commercialization of pharmaceuticals or biopharmaceuticals that
      use
      an anti-inflammatory mechanism to treat or prevent atherosclerosis. For purposes
      of this Section, the "Restricted Period" shall be one (1) year after termination
      of employment.

     

    (b)  Nonsolicitation
      of joint venture partners.

     

    During
      his employment and for one (1) year thereafter, Executive will not solicit
      or
      induce any company with whom (i) Employer had a joint venture relationship
      or
      similar partnering relationship during the last 24 months of Executive’s
      employment and (ii) Executive had material contact within the last 24 months
      of
      Executive’s employment, for the purpose of establishing a similar joint venture
      relationship on behalf of another entity with regard to the research,
      development, marketing or commercialization of pharmaceuticals or
      biopharmaceuticals that use an anti-inflammatory mechanism to treat or prevent
      atherosclerosis.

     

    (c)  Nonsolicitation
      of customers

     

    During
      his employment and for one (1) year thereafter, Executive will not solicit
      or
      induce any customer or actively sought prospective customer of Employer, with
      whom Executive had material contact during the last 24 months of his employment,
      for the purpose of providing products or services relating to pharmaceuticals
      or
      biopharmaceuticals used to treat or prevent atherosclerosis.

     

    (d)  Nonsolicitation
      of employees

     

    During
      his employment and for one (1) year thereafter, Executive will not solicit
      or
      hire any employee of Employer who was employed by Employer at any time during
      the three (3) 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        
month
        period prior to the date of Executive's termination, and will not solicit,
        encourage, or induce any such employee to leave the employ of
        Employer.

    

     

    (e)  Nondisparagement.

     

    During
      his employment and for three (3) years thereafter, Executive will refrain from
      making derogatory or disparaging statements to any person or entity regarding
      the Company, its management, its products or its services. This provision shall
      not prohibit Executive from responding truthfully to a subpoena or an inquiry
      from a governmental agency or as otherwise required by law.

     

    (f)  Reasonableness
      of covenants

     

    Executive
      acknowledges and agrees that the covenants in this section are reasonably
      limited and are necessary to protect the legitimate business interests of
      Employer. Executive further acknowledges and agrees that he is capable of
      finding adequate employment and making a living without violating these
      covenants.

     

    (g)  Remedies

     

    Executive
      acknowledges and agrees that, in the event of a breach of the above covenants,
      the harm to Employer would be immediate, significant, and irreparable. Executive
      agrees that, in addition to and without waiving any other remedies to which
      Employer may be entitled (including recovery of damages), Employer shall be
      entitled to obtain an injunction to prevent actual or threatened violation
      of
      these covenants, and shall not be required to post a bond or other security
      in
      order to obtain preliminary or permanent injunctive relief.

     

    10.  Intellectual
      Property.

     

    (a)  For
      purposes of this Agreement, the following definitions apply:

     

    (i)  "Trade
      Secret" means any scientific, technical or non-technical data or information
      of
      Employer, without regard to form, including but not limited to, formulas,
      techniques, processes, procedures, improvements, know-how, patterns,
      compilations, programs, computer software, devices, methods, techniques,
      drawings, processes, financial data, financial plans, product or website plans,
      market feasibility studies, designs and design concepts, documents and manuals
      related to product plans, designs and design concepts, or lists (whether in
      written form or otherwise) of actual or potential customers or suppliers, which
      (i) derive 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) are the subject of
      efforts that are reasonable under the circumstances to maintain its secrecy.
      Trade Secrets also include any information described in this Section 10(a)(i)
      which Employer obtains from another party and which Employer treats as
      proprietary or designates as trade secrets, whether or not owned or developed
      by
      Employer.

     

    (ii)  "Confidential
      Information" means any data or information, without regard to form, other than
      Trade Secrets, that is of value to Employer and is not generally known

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        
to
        competitors of Employer, including without limitation, lists of any information
        about Employer's employees, sales and marketing techniques and information,
        price lists, pricing policies, Employer's business methods, training and
        operations materials, and contracts, records and contractual relations with
        Employer's customers and suppliers. Confidential Information also includes
        any
        information described in this Section 10(a)(ii) which Employer obtains from
        another party and which Employer treats as proprietary or designates as
        confidential information, whether or not owned or developed by
        Employer.

    

     

    (iii)  Failure
      to mark any of the Trade Secrets or Confidential Information as confidential
      shall not affect its status as Trade Secrets or Confidential Information under
      this Agreement.

     

    (b)  Executive
      recognizes and acknowledges that Employer is engaged in the business of
      research, development, marketing and commercialization of pharmaceuticals and
      biopharmaceuticals used to treat or prevent specific medical conditions, which
      activities involve the use of skilled experts and the expenditure of substantial
      amounts of time and money. As a result of such investments of skill, time and
      money, Employer has developed certain Confidential Information and Trade Secrets
      which give Employer significant advantages over its competitors. Due to the
      nature of Executive's employment with Employer, Executive understands that
      he
      has had, and may have in the future, frequent direct and indirect contact with
      various suppliers, sources and customers of Employer and may be presented with,
      have access to, and/or participate in the development of both Confidential
      Information and Trade Secrets. These Trade Secrets and Confidential Information
      constitute valuable, special and unique assets of Employer and any disclosure
      thereof contrary to the terms of this Agreement would cause substantial loss
      of
      competitive advantage and other serious injury to Employer.

     

    (c)  For
      the
      reasons recited in Section 10(b) above, Executive covenants and agrees
      that:

     

    (i)  During
      Executive's employment with Employer and after the termination thereof, whether
      such termination is at Executive's instance or Employer's, Executive will not,
      except as expressly authorized or directed by Employer, use, copy, or disclose,
      or permit any unauthorized person access to, any Trade Secrets belonging to
      Employer or any third party; and

     

    (ii)  During
      Executive's employment with Employer and for a period of five (5) years after
      termination, whether such termination is at Executive's instance or Employer's,
      Executive will not use, copy, or disclose, or permit any unauthorized person
      access to, any Confidential Information belonging to Employer or any third
      party.

     

    (iii)  Upon
      request of Employer and in any event upon the termination of Executive's
      employment with Employer, Executive will deliver to Employer all memoranda,
      notes, records, tapes, documentation, disks, manuals, files or other documents,
      and all copies thereof, concerning or containing Confidential Information or
      Trade Secrets in his possession, whether made or compiled by Executive or
      furnished to Executive by Employer.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (iv)  All
      inventions, discoveries, developments, designs, Trade Secrets, trademarks,
      copyrightable subject matter and other proprietary information or work product,
      whether or not patentable (collectively, "Inventions"), which Executive has
      made
      or conceived, or may make or conceive, either solely or jointly with others,
      while providing services to Employer or relating to any of Employer's actual
      or
      anticipated business known to Executive while employed by Employer, or suggested
      by or resulting from any task assigned to Executive or work performed by
      Executive for or on behalf of Employer, shall be the exclusive property of
      Employer. During Executive's employment and thereafter, Executive will promptly
      disclose any and all such Inventions to Employer and will promptly execute
      and
      deliver, without requiring Employer to provide any further consideration
      therefor, such confirmatory assignments, instruments or documents as Employer
      deems necessary or desirable to vest title thereto in Employer. During
      Executive’s employment and thereafter, Executive will assist Employer in
      obtaining, maintaining, and enforcing patents and other proprietary rights
      in
      connection with any Invention, without requiring Employer to provide any further
      consideration therefor. In addition, during Executive’s employment and
      thereafter, Executive will promptly execute and deliver, without requiring
      Employer to provide any further consideration therefor, any documents necessary
      or appropriate to comply with any regulatory requirements, inquiries or requests
      by the Food and Drug Administration or other regulatory bodies, agencies,
      political entities or the like regarding matters for which Executive had
      responsibility during his employment.

     

    (d)  Executive
      acknowledges that Employer does not wish to incorporate any unlicensed or
      unauthorized materials into its products or technology. Therefore, Executive
      agrees that Executive will not knowingly disclose to Employer, knowingly use
      in
      Employer's business, or knowingly cause Employer to use, any information or
      material which is confidential to any third party unless Employer has a written
      agreement with such third party or Employer otherwise has the right to receive
      and use such information. Executive will not knowingly incorporate into
      Executive's work any material which is subject to the copyrights or patent
      of
      any third party unless Employer has a written agreement with such third party
      or
      otherwise has the right to receive and use such material.

     

    (e)  Executive
      represents that there are no other contracts to assign inventions that are
      now
      in existence between Executive and any other person or entity. Executive further
      represents that there are no contracts or other restrictions which would
      restrict or impair Executive’s performance under this Agreement. As a matter of
      record, Executive attaches as Exhibit B a brief description of all Inventions
      made or conceived by Executive prior to Executive’s employment with the Employer
      which Executive desires to be excluded from this Agreement.

     

    11.  Litigation
      Assistance.

     

    Following
      the termination of Executive's employment for whatever reason, Executive agrees
      to assist the Employer (upon the Employer's request) with regard to threatened
      or actual litigation concerning the Employer where Executive has knowledge
      of
      the facts relating to such threatened or actual litigation. Executive's
      assistance in such matter may include, but not be limited to, meeting with
      the
      Employer's attorneys and other professional advisors; providing truthful
      testimony at a deposition, hearing and/or trial; and providing witness
      statements or 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

      affidavits.
        Employer agrees to provide Executive with reasonable notice of the need for
        such
        assistance and to use reasonable efforts to accommodate Executive's schedule
        and
        minimize the burdens on Executive. Employer shall, as soon as practicable,
        reimburse Executive's reasonable out-of-pocket expenses associated with such
        assistance and shall, as soon as practicable, pay to Executive the sum of
        $150
        per hour for Executive's time devoted to these obligations; provided, however,
        that any reimbursement payments or other payments made to Executive pursuant
        to
        this Section 11 shall be paid no later than March 15 of the calendar year
        immediately following the expiration of the calendar year in which the related
        expense was incurred or the service was rendered, as applicable.

    

     

    12.  Dispute
      Resolution.

     

    Any
      controversy or claim arising out of or relating to the interpretation or
      application of this Agreement, or any breach hereof, shall be settled by
      arbitration in the Fulton County, Georgia area in accordance with the rules
      of
      the American Arbitration Association ("AAA") then in effect, and judgment upon
      the award rendered by the arbitrator(s) shall be final and binding on the
      parties hereto and may be entered in any court having jurisdiction
      thereof.

     

    All
      arbitrations pursuant to this Agreement shall be determined by a single
      arbitrator selected from a panel proposed by the AAA pursuant to the
      then-current arbitrator selection procedures of the AAA. Each party will bear
      equally the costs and expenses of arbitration, and each party will bear the
      costs and expenses of its own counsel, technical advisors and expert witnesses,
      unless the decision of the arbitrator otherwise directs. 

     

    Any
      arbitration award rendered in accordance with this Section 12 will be satisfied
      promptly and without the need for the prevailing party to seek enforcement,
      which may be sought in any court having competent jurisdiction. In the event
      resort to enforcement proceedings are required for any award or decision, the
      party which has not complied with the arbitral award or decision will be
      responsible for both parties' reasonable attorneys' fees and all costs in the
      enforcement proceeding. The decision of the arbitrators shall be tendered within
      sixty (60) days of final submission of the parties in writing or any hearing
      before the arbitrators and shall include their individual votes.

     

    Notwithstanding
      the foregoing, in the event of a breach or threatened breach of sections 9
      or
      10, Employer shall be permitted to seek temporary injunctive relief in a court
      of competent jurisdiction. Any damages claims arising out of an alleged breach
      of sections 9 or 10 shall be resolved by arbitration in accordance with this
      Section 12.

     

    The
      parties hereto expressly agree to this arbitration provision: 

     

    Initials:
      ________   Initials:
      ________

     

    13.  Amendment
      of Equity Ownership Agreements.

     

    The
      various Equity Ownership Agreements entered into with respect to stock option
      grants made by the Employer to Executive on or before December 31, 2003 (the
      "Equity Ownership Agreements"), are hereby amended to reflect the accelerated
      option vesting and other 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        
option-related
        provisions of this Agreement. Except as modified herein, the terms of the
        Equity
        Ownership Agreements shall remain in full force and effect, and nothing in
        this
        Agreement shall extend the period during which Executive may exercise the
        stock
        options subject to the Equity Ownership Agreements.

    

     

    14.  Entire
      Agreement.

     

    This
      Agreement and the Indemnification Agreement set forth all the promises,
      covenants, agreements, conditions and understandings between the parties hereto
      with respect to the subject matter hereof, and supersede all prior and
      contemporaneous agreements, understandings, inducements or conditions expressed
      or implied, oral or written, except as contained herein or in the
      Indemnification Agreement. This Agreement shall not supersede any prior grant
      of
      stock options to Executive pursuant to a formal written stock option agreement.
      

     

    15.  Change
      in Taxation.

     

    If
      subsequent to the effective date of this Agreement, there occurs a change in
      the
      tax laws, regulations or administrative interpretations which would materially
      impact the taxation of the benefits hereunder, either party to this Agreement
      may propose an amendment. Any such proposed amendment shall be subject to
      Section 8. The provisions of this Agreement have been structured by the Employer
      acting in good faith to avoid to the extent practicable any additional tax
      on
      Executive under Section 409A of the Code.

     

    16.  Provisions
      Severable.

     

    This
      Agreement is intended to be performed in accordance with, and only to the extent
      permitted by, all applicable laws, ordinances, rules, and regulations of the
      jurisdiction in which the parties do business. If any provision of this
      Agreement, or the application thereof to any person or circumstance shall,
      for
      any reason or to any extent, be invalid or unenforceable, the remainder of
      this
      Agreement and the application of such provision to other persons or
      circumstances shall not be affected thereby, but rather shall be enforced to
      the
      greatest extent permitted by law.

     

    17.  Withholding.

     

    The
      Employer shall have the right to withhold from any and all payments required
      to
      be made to the Executive pursuant to this Agreement all federal, state, local,
      and/or other taxes which the Employer determines are required to be withheld
      in
      accordance with applicable statutes or regulations.

     

    18.  Governing
      Law.

     

    This
      Agreement shall be construed in accordance with the laws of the State of Georgia
      and the venue of any dispute or litigation shall be Fulton County,
      Georgia.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    19.  ERISA
      Rules.

     

    Notwithstanding
      anything to the contrary contained in this Agreement, all benefits provided
      hereunder will be subject to applicable rules and regulations promulgated under
      the Employee Retirement Income Security Act of 1974, as amended.

     

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

     

    
      	 ATHEROGENICS,
              INC.
	 
	 By:______________________________
	 Title:_____________________________
	 Date:_____________________________
	 
	 EXECUTIVE:
	 _________________________________
	 Russell
              M. Medford, M.D.
	 Date:_____________________________

    

    

     

     

     

         

     

    [NOTE:
      The parties must initial paragraph 12 in addition to signing on this
      page.]

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    FORM
      OF GENERAL RELEASE

     

    For
      and
      in consideration of the severance payments provided to _______________
      (“Executive”) pursuant to the Employment Agreement between AtheroGenics, Inc.
      (“Employer”) and Executive, effective as of ________________, 200__, which is
      expressly incorporated by reference herein, along with other consideration,
      the
      receipt and sufficiency of which are hereby acknowledged, Executive does hereby
      release, acquit, and forever discharge Employer (or any affiliate, officer,
      director or employee of Employer) from, and does hereby covenant and agree
      never
      to institute or cause to be instituted any suit or other form of action or
      proceeding of any kind or nature whatsoever against Employer (or any affiliate,
      officer, director, or employee of Employer) based upon, any and all claims,
      demands, indebtedness, agreements, promises, causes of action, obligations,
      damages, or liabilities of any nature whatsoever, in law or in equity, whether
      or not known, suspected or claimed, that Executive ever had, has claimed to
      have, now has, or may hereafter have or claim to have against Employer by reason
      of any act, event, occurrence, or thing occurring on or before the date of
      this
      General Release.

    The
      claims released herein specifically include, but are not limited to, any claims
      arising in tort or contract, any claim based on wrongful discharge, any claim
      based on breach of contract, any claim based on sexual harassment or any other
      form of workplace harassment, and any claim arising under federal, state or
      local law prohibiting race, sex, age, religion, national origin, handicap,
      disability or other forms of discrimination, or retaliation, including but
      not
      limited to Title VII of the Civil Rights Act of 1964, as amended; 42 U.S.C.
§
1981; the Age Discrimination in Employment Act; the Older Workers Benefit
      Protection Act; the Pregnancy Discrimination Act; the Americans with
      Disabilities Act; the Family and Medical Leave Act; and the Employee Retirement
      Income Security Act, each as amended.

    Executive
      acknowledges that he has been advised to consult with an attorney of his choice
      regarding the form and content of this General Release, and that he enters
      into
      this General Release voluntarily and of his own free will. Executive further
      acknowledges that he has been provided with a period of at least twenty-one
      (21)
      days within which to consider the terms of this General Release. Executive
      understands that he may revoke this General Release within seven (7) days after
      signing it, by delivering written notice of revocation to the Chief

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        
Executive
        Officer of Employer, and that this General Release will not become effective
        or
        enforceable until the seven-day revocation period has expired. Executive
        acknowledges that execution of this General Release is a condition precedent
        to
        receipt of the severance payments provided in the Employment Agreement, and
        that, in the absence of fulfilling this condition precedent by executing
        this
        General Release, Executive would not be entitled to receive those severance
        payments. If Executive revokes this General Release within seven (7) days
        after
        signing it, it will become null and void, and Executive will not be entitled
        to
        any of the severance benefits provided in the Employment
        Agreement.

    

    This
      General Release and the releases and covenants contained herein shall be binding
      upon Executive, his heirs, executors, administrators, assigns, agents, attorneys
      in fact, attorneys at law, and representatives. This General Release and the
      releases and covenants contained herein shall inure to the benefit of Employer
      and each of its predecessors, successors, and assigns, and to each of its and
      their past and present employees, agents, attorneys in fact, attorneys at law,
      representatives, officers, directors, shareholders, partners, joint venturers,
      and all of said individuals’ heirs, executors, administrators and
      assigns.

     

    Witness
      the execution of this General Release on the ____ day of ________,
      20___.

     

    __________________________________

    Executive

    

     

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    LIST
      OF PRIOR INVENTIONS

     

     

    
      
        
        

      

      
        19Exhibit 10.2 M Colonnese Employment Agreement

    EXHIBIT
      10.2

     

    EMPLOYMENT
      AGREEMENT

     

    THIS
      AGREEMENT ("Agreement"), dated September 25, 2006 (the "Effective Date"), is
      made and entered into by and between AtheroGenics,
      Inc.,
      a
      Georgia corporation (hereinafter called the "Employer"), and Mark
      P. Colonnese,
      a
      resident of the State of Georgia (hereinafter the "Executive").

     

    W
      I T N E S S E T H :

     

    WHEREAS,
      the
      Executive has been employed by Employer since January, 1999;

     

    WHEREAS,
      the
      Employer and Executive mutually desire that the Executive's employment be
      continued; and

     

    WHEREAS,
      the
      Employer and Executive mutually desire to enter into an employment contract
      which will supersede any prior contracts; 

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants and agreements herein
      contained, the parties hereto agree as follows:

     

    1.  Period
      of Employment.

     

    In
      exchange for the compensation, benefits and perquisites described in this
      Agreement, and upon such other terms and conditions hereinafter set forth,
      the
      Employer agrees to employ the Executive for the "Period of Employment" (as
      hereinafter defined). For purposes of this Agreement, the "Period of Employment"
      shall commence as of the Effective Date of this Agreement and, unless earlier
      terminated as provided in this Agreement, shall consist of an initial period
      of
      one (1) year (the "Initial Term"), and shall automatically be extended for
      additional one (1) year terms (each additional one (1) year term called a
      "Renewal Term") unless Employer or Executive shall notify the other not less
      than 30 days prior to the expiration of either the Initial Term or any Renewal
      Term that Executive's employment will end at the expiration of the then existing
      Initial Term or Renewal Term.

     

    2.  Position
      and Responsibilities.

     

    During
      the Period of Employment, the Executive agrees to serve as the Executive Vice
      President of Commercial Operations and Chief Financial Officer of AtheroGenics,
      Inc. reporting directly to the Chief Executive Officer of the Employer
      (hereinafter the "CEO"), and to perform those functions and duties customarily
      assigned to individuals serving in the position in which the Executive serves
      hereunder. Without limiting the foregoing, Executive shall be considered an
      executive officer of Employer, and shall be a member of Employer's management
      executive committee. In addition, Executive shall keep the Board of Directors
      of
      Employer and the CEO of Employer fully apprised of all material developments
      occurring under Executive's supervision and responsibility. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Executive
      shall be responsible for commercial operations activities including marketing,
      commercial product manufacturing, corporate financing activities, accounting
      and
      financial controls, financial strategic planning and financial analysis,
      facilities and administration including human resources. Executive’s duties
      shall include supervision of other employees in finance and administration.
      

     

    Except
      as
      may otherwise be approved in advance by the CEO of Employer, the Executive
      shall
      devote his full working time throughout the Period of Employment to the services
      required of him hereunder. The Executive shall render his services exclusively
      to the Employer during the Period of Employment, and shall use his best efforts,
      judgment and energy to improve and advance the business and interests of the
      Employer in a manner consistent with the duties of his position. 

     

    3.  Compensation,
      Benefits and Perquisites.

     

    (a)  Base
      Salary

     

    In
      exchange for the performance of his duties and responsibilities hereunder and
      all other services rendered by the Executive in any capacity to the Employer,
      the Employer agrees to pay base salary ("Base Salary") to the Executive for
      the
      Initial Term equal to $316,000.00 per year. For any Renewal Term thereafter
      during which this Agreement remains in effect, the Executive's Base Salary
      for
      each such Renewal Term shall be reviewed based upon an annual performance
      appraisal and competitive market conditions and may be increased from time
      to
      time by the Employer (at the sole discretion of Employer). Base Salary shall
      be
      payable according to the customary payroll practices of the
      Employer.

     

    (b)  Incentive
      Compensation

     

    In
      addition to Base Salary, the Executive shall be eligible to receive such
      incentive compensation ("Incentive Compensation") as shall be determined by
      the
      CEO and the Board of Directors of Employer (or a committee of the Board). The
      amount of such Incentive Compensation to be earned in any year shall be based
      upon certain strategic and financial goals which shall be determined by the
      Executive and the CEO of the Employer. Such strategic and financial goals and
      target Incentive Compensation shall be set forth in the Employer's annual budget
      during the term of this Agreement. For 2006, the target Incentive Compensation
      shall be $94,800.00. Incentive Compensation earned for a calendar year pursuant
      to this Agreement shall be payable no later than sixty (60) days following
      the
      expiration of the calendar year.

     

    (c)  Equity
      Compensation

     

    The
      Executive shall be eligible to participate in the Employer's Equity Ownership
      Plans and receive such awards of stock and/or options thereunder as shall be
      determined by the Board of Directors or a committee thereof. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (d)  General
      Benefits and Perquisites

     

    During
      the term of this Agreement, the Executive shall be entitled to participate,
      in
      accordance with the terms and conditions thereof, in all employee benefit plans
      or perquisite programs generally available to all executive management personnel
      of the Employer which may be in effect from time to time during the term of
      this
      Agreement; provided, however, that nothing contained herein shall require the
      Employer to establish, or maintain, any such plan. These benefits are provided
      in accordance with the provisions of each individual plan, which may be amended
      from time to time at the sole discretion of the Employer.

     

    (e) Additional
      Disability Coverage

     

    In
      addition to the employee benefit plan coverage provided under Section 3(d)
      above, during the term of this Agreement the Executive will be provided with
      additional "Disability" (as hereinafter defined) benefits in an amount such
      that
      the total annual Disability benefit payable under this provision, together
      with
      payments under any short-term and/or long-term disability program or policy
      maintained by the Employer and from workers compensation with respect to the
      disabling condition, will be equal to 70% of the Executive's annualized Base
      Salary immediately prior to the Disability. The Disability benefit provided
      under this Section 3(e) will be paid from the date of the Disability in the
      same
      manner and at the same time that benefits are paid under the Employer’s
      short-term or long-term disability program or policy, as applicable, until
      the
      earliest of (i) the cessation of the Disability; (ii) the Executive's
      death; (iii) the Executive's attainment of age 65; (iv) the date when short-term
      disability benefits terminate if long-term disability benefits do not
      immediately commence thereafter pursuant to the terms of that policy; or (v)
      the
      date when long-term disability policy benefits terminate pursuant to the terms
      of that policy.

     

    For
      purposes of this Agreement, the term "Disability" or "Disabled" has the same
      meaning as provided in the long-term disability plan maintained by the Employer,
      not taking into account any exclusion or waiting period under such plan or,
      if
      the Employer determines that Code Section 409A is applicable, has the meaning
      set forth in Code Section 409A and the related tax regulations. In the event
      of
      a dispute, the determination of Disability or Disabled shall be made by the
      Board of Directors or its designee. In the event that the Executive shall
      dispute the determination of the Board of Directors or its designee as to the
      Disability of the Executive, the Executive may appeal the determination to
      a
      panel of three doctors, one to be selected by the Executive at his expense,
      one
      to be selected by the Board of Directors or its designee at its expense, and
      one
      to be selected by the doctors chosen by the Executive and the Board of Directors
      or its designee whose expense shall be shared equally between Executive and
      Employer. The decision of the panel of doctors shall be final. Any termination
      for Disability under this Agreement shall not affect the rights, if any, that
      the Executive may otherwise have under the long-term disability plan the
      Employer may have in effect at the date of such termination and in which the
      Executive is then participating. Employer shall have the right to review any
      determination of Disability no more frequently than bi-annually. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (f) Reimbursement
      of Business Expenses

     

    The
      Employer will reimburse the Executive for all reasonable and necessary business
      expenses (including, but not limited to, professional and service organization
      dues, journal subscriptions and educational seminars, conferences, symposiums
      and other meetings) and related travel expenses, incurred or expended in
      connection with the performance of his duties and responsibilities as Executive
      under this Agreement in accordance with the reimbursement policies of Employer.
      Any reimbursement payments made to Executive pursuant to the reimbursement
      policies of the Employer during the term of this Agreement shall be paid no
      later than March 15 of the calendar year immediately following the expiration
      of
      the calendar year in which the related expense was incurred.

     

    (g) Change
      of
      Control

     

    In
      the
      event of a Change of Control, as defined in Section 4(g) hereof, 24 months
      of
      vesting for unvested stock options granted to the Executive pursuant to the
      Employer's Equity Ownership Plans (or any other or successor plans) shall be
      immediately accelerated (but the period during which Executive may exercise
      the
      stock options shall not be extended under this Agreement).

     

    4.  Termination
      of Agreement.

     

    (a)  General

     

    Upon
      termination of Executive for any reason, (i) the Employer shall pay the
      Executive any Base Salary that was earned through the effective date of his
      termination but which remained unpaid as of that date, and (ii) Executive shall
      be entitled to any benefits that have been accrued and vested under any of
      Employer's employee benefit plans in accordance with and to the extent provided
      in such benefit plans. Except as otherwise provided in this Agreement, Executive
      shall not be entitled to any other benefits or payments under this Agreement
      in
      the event of termination of Employment.

     

    (b)  Involuntary
      Termination

     

    Employer
      recognizes that the Executive would incur substantial damage to personal and
      professional reputation in the event of an Involuntary Termination.
      Consequently, should such Involuntary Termination occur during the Period of
      Employment, the Employer shall pay to the Executive, as liquidated damages,
      an
      amount (the "Severance Amount") equivalent to the sum of (i) one and one half
      times Executive's then current annualized Base Salary and (ii) a percentage
      of
      the target Incentive Compensation otherwise stipulated for the benefit of
      Executive pursuant to Section 3(b) of this Agreement for the calendar year
      in
      which the Involuntary Termination occurs as follows: 

     

    
      	
               Aggregate
                Period of Employment

               with
                Employer

            	
               Percentage
                of Target Incentive

              Compensation
                Table

            
	
               Under
                one
                year            

            	
               None

            
	 One
              year up to two years	
              50%

            
	 Two
              years and over	
              150%

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    The
      Severance Amount shall be paid in a lump sum in cash on Executive’s Delayed
      Payment Date (together with interest at the Prime Rate from the date of
      Executive’s termination of employment to the Executive’s Delayed Payment Date).
      Payment of the Severance Amount shall be contingent upon Executive signing
      (and
      not revoking) a general release of all claims, in a form attached hereto as
      Exhibit
      A.
      

     

    Upon
      Executive's becoming ineligible to participate in the group health plan(s)
      sponsored by the Employer, Executive may elect continuation coverage
      ("Continuation Coverage") under such plan(s) as permitted by the Consolidated
      Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"). During such
      COBRA coverage period, the Employer will pay the premiums for COBRA Continuation
      Coverage (excluding any medical flexible spending account coverage) until the
      first to occur of (i) the 18 month anniversary of the Involuntary Termination,
      or (ii) the date on which the Executive commences employment with a new employer
      and is eligible to participate in a subsequent employer's medical and healthcare
      employee benefits program with respect to the Employer's insured group health
      plan: provided, however, that such payments shall not exceed the amount paid
      by
      Employer for the medical and healthcare coverage in effect for Executive and
      his
      dependents immediately prior to the COBRA coverage period. All other premiums
      shall be paid by Executive.

     

    If
      the
      Executive's employment terminates due to an Involuntary Termination, the
      Employer shall accelerate the vesting of its stock options previously granted
      to
      Executive pursuant to the Employer's Equity Ownership Plan (or any other or
      successor plans) as follows (but the period during which Executive may exercise
      the stock options shall not be extended under this Agreement):

     

    
      	
               

              Aggregate
                Period of

               Employment
                with Employer 

            	
               Options
                to Have Accelerated

               Vesting
                as of Date of

               Involuntary
                Termination

            
	Under
              one year	 None
	
              One
                year up to two years

               

               

            	
               Options
                otherwise vesting within 12

               months
                following Involuntary

               Termination

            
	
               Two
                years and over 

               

                 

            	
              Options
                otherwise vesting within 18 

              months
                following Involuntary

              Termination

            

    

     

    If
      the
      Involuntary Termination or a Constructive Discharge occurs within 24 months
      following a Change of Control, in lieu of the Severance Amount provided in
      the
      first paragraph 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        
of
        this
        Section 4(b) (but paid in the same manner as earlier provided), the Severance
        Amount shall be the aggregate of (i) 2 times annualized Base Salary and (ii)
        two
        times the target Incentive Compensation otherwise payable to him for the
        year in
        which the Involuntary Termination or Constructive Discharge occurs. In addition,
        vesting for all unvested stock options granted pursuant to the Employer's
        Equity
        Ownership Plan (or any other or successor plans) shall be immediately
        accelerated (but the period during which Executive may exercise the stock
        options shall not be extended under this Agreement). In order to reduce the
        impact of any possible excise tax, AtheroGenics agrees to provide a gross
        up
        payment equal to the sum of a) the excise tax under Code Section 4999 payable
        on
        the severance package and b) the federal, state, local, employment tax and
        excise tax on the gross up payment. 

    

     

    Except
      as
      provided under this Section 4(b), as of the effective date of an Involuntary
      Termination, all other obligations of the Employer to Executive under this
      Agreement shall cease.

     

    (c)  Voluntary
      Resignation

     

    Except
      in
      the case of a voluntary resignation which results from a Constructive Discharge,
      if the Executive voluntarily resigns from the positions described in Section
      2
      during the period in which this Agreement is in effect, then the Employer shall
      pay the Executive the benefits provided in Section 4(a) of this Agreement.
      No
      Incentive Compensation will be paid to the Executive following the date of
      a
      voluntary resignation. The respective terms and provisions of any other employee
      benefit or perquisite program shall control in the case of a voluntary
      resignation.

     

    Unless
      otherwise specifically stated in this Agreement, as of the effective date of
      a
      voluntary resignation, all obligations of the Employer to Executive under this
      Agreement shall cease.

     

    The
      Executive must notify the Board of Directors in writing of his intent to
      voluntarily terminate employment at least thirty (30) days prior to the
      effective date of such voluntary resignation.

     

    (d)  Termination
      for Cause

     

    Notwithstanding
      any other provision contained in this Agreement, the Employer has the right,
      at
      any time, to effect a "Termination for Cause" (as defined in Section 4(g)),
      of
      Executive's employment under this Agreement. Upon the date of such Termination
      for Cause, the Employer shall pay the Executive the benefits provided in Section
      4(a) of this Agreement. No Incentive Compensation will be paid to the Executive
      following the date of a Termination for Cause. The respective terms and
      provisions of any other employee benefit or perquisite program shall control
      in
      the case of a Termination for Cause.

     

    Unless
      otherwise specifically stated in this Agreement, as of the effective date of
      a
      Termination for Cause, all obligations of the Employer to Executive under this
      Agreement shall cease.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (e)  Disability

     

    In
      the
      event the Executive becomes Disabled at any time during the term of this
      Agreement, the Employer shall make payments to the Executive in amounts equal
      solely to those specified in Section 3(e) and for the time period specified
      in
      Section 3(e). Such payments shall be paid in the same manner and at the same
      time that Base Salary would have been paid had this Agreement continued.
      Notwithstanding the foregoing, the Executive shall also be entitled to a pro
      rata portion of his target Incentive Compensation otherwise stipulated for
      the
      benefit of Executive for the calendar year in which he became Disabled, provided
      Executive is Disabled as of the end of such calendar year. Such pro rata portion
      shall be determined by multiplying (i) the total target Incentive Compensation
      that the Executive was projected to receive in respect of the year of his
      Disability by (ii) the quotient of the number of days in such year prior to
      his
      Disability, divided by 365. Such pro rata Incentive Compensation will be payable
      at the same time that the full Incentive Compensation would have been payable
      to
      the Executive as provided in Section 3(b) hereof.

     

    Except
      as
      provided under this Section 4(e) and Section 3(e), as of the effective date
      of
      the Disability, all other obligations of the Employer to Executive under this
      Agreement shall cease.

     

    (f)  Death

     

    In
      the
      event of the death of Executive during the term of this Agreement, the heirs,
      personal representatives or beneficiaries designated in writing by Executive,
      as
      required by applicable law, shall receive (i) the benefits and payments
      described in Section 4(a) of this Agreement; (ii) a pro rata portion of the
      target Incentive Compensation otherwise stipulated for the benefit of Executive
      for the calendar year in which Executive dies (such pro rata portion determined
      by multiplying (x) the total target Incentive Compensation that the Executive
      was projected to receive in respect of the year of his death by (y) the quotient
      of the number of days in such year prior to his death, divided by 365); and
      (iii) accelerated vesting of stock options previously granted to Executive
      that
      otherwise would have vested within 12 months following Executive's death. Such
      pro rata Incentive Compensation will be payable at the same time that the full
      Incentive Compensation would have been payable to the Executive as provided
      in
      Section 3(b) hereof. 

     

    (g)  Certain
      Definitions

     

    "Change
      of Control"
      shall be
      deemed to have occurred if (i) a tender offer shall be made and consummated
      for
      the ownership of 50% or more of the outstanding voting securities of the
      Employer, (ii) the Employer shall be merged or consolidated with another
      corporation and as a result of such merger or consolidation less than 50% of
      the
      outstanding voting securities of the surviving or resulting corporation shall
      be
      owned in the aggregate by the former shareholders of the Employer, (iii) the
      Employer shall sell all or substantially all of its assets to another
      corporation which corporation is not wholly owned by the Employer, (iv) a
      person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in
      effect on the date hereof) of the Securities Exchange Act of 1934, as amended
      ("Exchange Act"), or other legal entity shall acquire 50% or more of the
      outstanding voting securities of the Employer (whether directly, 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        
indirectly,
        beneficially or of record), or (v) individuals who, as of the date hereof,
        together with those directors (x) for whose election proxies shall have been
        solicited by the board and (y) who are then serving as directors appointed
        by
        the board to fill pre-existing vacancies on the board or vacancies caused
        by
        death or resignation, but not by either removal or to fill newly created
        directorships, constitute the Board of Directors of the Employer (the “Incumbent
        Board”) cease to constitute at least a majority of the Board as a result of an
        actual or threatened election contest with respect to the election or removal
        of
        directors or other actual or threatened solicitation of proxies or consents
        by
        or on behalf of a person other than the Incumbent Board. For purposes hereof,
        ownership of voting securities shall take into account and shall include
        ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i)
        (as in
        effect on the date hereof) pursuant to the Exchange Act. 

    

     

    “Code”
      means
      the
      Internal Revenue Code of 1986, as amended. 

     

    "Constructive
      Discharge"
      means
      the termination of the Executive's employment by the Executive on account of
      (i)
      any reduction in the Executive's then-current Base Salary without the consent
      of
      the Executive, (ii) any material reduction in the level or scope of the job
      responsibility or status of the Executive occurring without the consent of
      the
      Executive (including not reporting directly to the Chief Executive Officer
      of
      the Company or its successor; not retaining “Officer” status, such as Chief
      Medical Officer, Chief Financial Officer or Chief Scientific Officer of the
      Company or its successor; or ceasing to have responsibility for a significant
      department or function), or (iii) any relocation to any Employer location which
      is more than 50 miles from its current location and to which the Executive
      has
      not agreed; provided, however, that no termination by Executive shall be
      considered a Constructive Discharge unless Executive has first provided written
      notice to the Chief Executive Officer of Employer of the factual circumstances
      forming the basis for the claim of constructive discharge and of Executive’s
      intent to treat those circumstances as a Constructive Discharge under this
      Agreement, and has further provided the Employer with a period of at least
      fifteen (15) days in which to cure such alleged breach.

     

    “Delayed
      Payment Date”
      means
      the date that is six (6) months and one (1) day after the date of Executive’s
      termination of employment.

     

    "Involuntary
      Termination"
      means
      the Executive's (i) involuntary separation from service with the Employer,
      other
      than as a result of his death, Disability, mandatory retirement pursuant to
      a
      retirement policy of Employer or Termination for Cause, or (ii) receipt of
      notice of the Employer's intent not to extend the Period of Employment as
      specified in Section 1. Involuntary Termination also means Executive's voluntary
      resignation of employment within 90 days following events constituting a
      Constructive Discharge. Any other type of voluntary termination of employment
      shall not be deemed an Involuntary Termination. 

     

    “Prime
      Rate”
      means
      the “Prime Rate” of interest as reported in “Interest Rates & Bonds” in the
      Wall Street Journal, compounded daily.

     

    "Termination
      for Cause"
      means
      the termination of the Executive's employment as a result of conduct by the
      Executive amounting to (i) fraud or dishonesty against the Employer,
      (ii) willful misconduct, or repeated refusal to follow the reasonable
      directions of the Board of 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        
Directors
        or chief executive officer of the Employer, (iii) knowing violation of law
        in
        the course of performance of the duties of Executive's employment with the
        Employer, (iv) any violation of the Employer’s formal policies regarding
        nondiscrimination and equal employment opportunity, sexual harassment and
        other
        forms of unlawful workplace harassment, or insider trading of Employer’s
        securities (whether directly or indirectly), (v) repeated and frequent
        absences from work without a reasonable excuse, (vi) intoxication with
        alcohol or drugs while on the Employer's premises during regular business
        hours,
        (vii) a conviction or plea of guilty or nolo contendere
        to a
        felony or other crime of moral turpitude in the course of his employment
        (e.g.,
        fraud, theft, embezzlement and the like), (viii) gross negligence in the
        performance of Executive’s duties; or (ix) a breach or violation of the terms of
        this Agreement. With respect to (ii) above, Termination for Cause shall not
        be
        permitted until after the Executive has been given written notice of his
        alleged
        actions described in clause (ii), listing in reasonable specificity such
        alleged
        actions, and after the Executive shall have failed to improve such performance
        within the time period (which shall have been a reasonable time period)
        specified in such notice, such time period to be not less than 15 days.

    

     

    5.  Indemnification.

     

    The
      Employer will indemnify the Executive to the fullest extent permitted by
      applicable laws and regulations in accordance with the Bylaws and Amended and
      Restated Articles of Incorporation of the Employer. The Employer shall insure
      and provide a defense to the Executive against all costs, charges and expenses
      incurred in connection with any action, suit or proceeding to which he may
      be
      made a party by reason of his good faith execution of his duties as described
      in
      Section 2. In the event that the Executive is found to be liable or culpable,
      in
      any action, suit or proceeding involving sexual harassment, discrimination
      or
      fraud, the Executive will be obliged to repay to the Employer any costs, charges
      or expenses incurred by the Employer in connection therewith. The Employer
      shall
      enter into an Indemnification Agreement (the “Indemnification Agreement”) with
      the Executive which sets forth in greater detail the indemnification obligations
      of the Employer.

     

    6.  Consolidation,
      Merger or Sale of Assets.

     

    Nothing
      in this Agreement shall preclude the Employer from consolidating or merging
      into
      or with, or transferring all or substantially all of its assets to another
      organization which assumes this Agreement and all obligations and undertakings
      of the Employer hereunder. Upon such a consolidation, merger or sale of assets,
      the term "Employer" as used will mean the other organization, no termination
      of
      Executive's employment under this Agreement shall be deemed to have occurred
      merely because of the consummation of a transaction described in this Section
      6,
      and this Agreement shall continue in full force and effect.

     

    7.  Assignment.

     

    The
      Employer, with the prior written approval of the Executive, shall have the
      right
      to assign this Agreement to an affiliate or subsidiary corporation, and all
      covenants and agreements hereunder shall inure to the benefit of and be
      enforceable by or against its successors and assigns.

     

    This
      Agreement provides for the personal services of the Executive. The Executive
      shall not have the right to assign or transfer any of the rights or benefits
      hereunder, nor shall they be subject to voluntary or involuntary
      alienation.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    8.  Amendment,
      Modification, Termination or Waiver.

     

    The
      parties hereby irrevocably agree that no attempted amendment, modification,
      restatement, termination, discharge or change (collectively, "Amendment") of
      this Agreement shall be valid and effective, unless the parties shall
      unanimously agree in writing to such Amendment. No waiver of any provision
      of
      this Agreement shall be effective unless it is in writing and signed by the
      party against whom it is asserted, and any such written waiver shall only be
      applicable to the specific instance to which it relates and shall not be deemed
      to be a continuing or future waiver.

     

    9.  Non-Competition.
      

     

    (a)  Noncompetition

     

    The
      parties acknowledge and agree that, because of Executive's access to the Trade
      Secrets and Confidential Information (each as hereinafter defined) as well
      as
      his duties as described in Section 2, efforts by Executive to engage in directly
      competitive activities would cause significant, irreparable harm to Employer.
      The parties further agree that the relevant competitive market for the
      Restricted Activities (defined below) is nationwide, that Executive will be
      actively working on behalf of Employer throughout the United States of America,
      and that Employer would be directly and severely harmed by competitive
      activities anywhere in the United States of America. Therefore, the parties
      agree that, during his employment and the applicable Restricted Period, except
      on behalf of the Employer, Executive shall not engage in the Restricted
      Activities within the United States of America. For purposes of this Section,
      the "Restricted Activities" shall mean activities substantially similar to
      the
      Executive's responsibilities described in Section 2 of this Agreement for any
      company, entity or individual that engages in the research, development,
      marketing or commercialization of pharmaceuticals or biopharmaceuticals that
      use
      an anti-inflammatory mechanism to treat or prevent atherosclerosis. For purposes
      of this Section, the "Restricted Period" shall be one (1) year after termination
      of employment.

     

    (b)  Nonsolicitation
      of joint venture partners.

     

    During
      his employment and for one (1) year thereafter, Executive will not solicit
      or
      induce any company with whom (i) Employer had a joint venture relationship
      or
      similar partnering relationship during the last 24 months of Executive’s
      employment and (ii) Executive had material contact within the last 24 months
      of
      Executive’s employment, for the purpose of establishing a similar joint venture
      relationship on behalf of another entity with regard to the research,
      development, marketing or commercialization of pharmaceuticals or
      biopharmaceuticals that use an anti-inflammatory mechanism to treat or prevent
      atherosclerosis.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (c)  Nonsolicitation
      of customers

     

    During
      his employment and for one (1) year thereafter, Executive will not solicit
      or
      induce any customer or actively sought prospective customer of Employer, with
      whom Executive had material contact during the last 24 months of his employment,
      for the purpose of providing products or services relating to pharmaceuticals
      or
      biopharmaceuticals used to treat or prevent atherosclerosis.

     

    (d)  Nonsolicitation
      of employees

     

    During
      his employment and for one (1) year thereafter, Executive will not solicit
      or
      hire any employee of Employer who was employed by Employer at any time during
      the three (3) month period prior to the date of Executive's termination, and
      will not solicit, encourage, or induce any such employee to leave the employ
      of
      Employer.

     

    (e)  Nondisparagement.

     

    During
      his employment and for three (3) years thereafter, Executive will refrain from
      making derogatory or disparaging statements to any person or entity regarding
      the Company, its management, its products or its services. This provision shall
      not prohibit Executive from responding truthfully to a subpoena or an inquiry
      from a governmental agency or as otherwise required by law.

     

    (f)  Reasonableness
      of covenants

     

    Executive
      acknowledges and agrees that the covenants in this section are reasonably
      limited and are necessary to protect the legitimate business interests of
      Employer. Executive further acknowledges and agrees that he is capable of
      finding adequate employment and making a living without violating these
      covenants.

     

    (g)  Remedies

     

    Executive
      acknowledges and agrees that, in the event of a breach of the above covenants,
      the harm to Employer would be immediate, significant, and irreparable. Executive
      agrees that, in addition to and without waiving any other remedies to which
      Employer may be entitled (including recovery of damages), Employer shall be
      entitled to obtain an injunction to prevent actual or threatened violation
      of
      these covenants, and shall not be required to post a bond or other security
      in
      order to obtain preliminary or permanent injunctive relief.

     

    10.  Intellectual
      Property.

     

    (a)  For
      purposes of this Agreement, the following definitions apply:

     

    (i)  "Trade
      Secret" means any scientific, technical or non-technical data or information
      of
      Employer, without regard to form, including but not limited to, formulas,
      techniques, processes, procedures, improvements, know-how, patterns,
      compilations, programs, computer software, devices, methods, techniques,
      drawings, processes, financial data, financial 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        
plans,
        product or website plans, market feasibility studies, designs and design
        concepts, documents and manuals related to product plans, designs and design
        concepts, or lists (whether in written form or otherwise) of actual or potential
        customers or suppliers, which (i) derive 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) are the subject of efforts that are reasonable under the circumstances
        to maintain its secrecy. Trade Secrets also include any information described
        in
        this Section 10(a)(i) which Employer obtains from another party and which
        Employer treats as proprietary or designates as trade secrets, whether or
        not
        owned or developed by Employer.

    

     

    (ii)  "Confidential
      Information" means any data or information, without regard to form, other than
      Trade Secrets, that is of value to Employer and is not generally known to
      competitors of Employer, including without limitation, lists of any information
      about Employer's employees, sales and marketing techniques and information,
      price lists, pricing policies, Employer's business methods, training and
      operations materials, and contracts, records and contractual relations with
      Employer's customers and suppliers. Confidential Information also includes
      any
      information described in this Section 10(a)(ii) which Employer obtains from
      another party and which Employer treats as proprietary or designates as
      confidential information, whether or not owned or developed by
      Employer.

     

    (iii)  Failure
      to mark any of the Trade Secrets or Confidential Information as confidential
      shall not affect its status as Trade Secrets or Confidential Information under
      this Agreement.

     

    (b)  Executive
      recognizes and acknowledges that Employer is engaged in the business of
      research, development, marketing and commercialization of pharmaceuticals and
      biopharmaceuticals used to treat or prevent specific medical conditions, which
      activities involve the use of skilled experts and the expenditure of substantial
      amounts of time and money. As a result of such investments of skill, time and
      money, Employer has developed certain Confidential Information and Trade Secrets
      which give Employer significant advantages over its competitors. Due to the
      nature of Executive's employment with Employer, Executive understands that
      he
      has had, and may have in the future, frequent direct and indirect contact with
      various suppliers, sources and customers of Employer and may be presented with,
      have access to, and/or participate in the development of both Confidential
      Information and Trade Secrets. These Trade Secrets and Confidential Information
      constitute valuable, special and unique assets of Employer and any disclosure
      thereof contrary to the terms of this Agreement would cause substantial loss
      of
      competitive advantage and other serious injury to Employer.

     

    (c)  For
      the
      reasons recited in Section 10(b) above, Executive covenants and agrees
      that:

     

    (i)  During
      Executive's employment with Employer and after the termination thereof, whether
      such termination is at Executive's instance or Employer's, Executive will not,
      except as expressly authorized or directed by Employer, use, copy, or disclose,
      or permit any unauthorized person access to, any Trade Secrets belonging to
      Employer or any third party; and

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (ii)  During
      Executive's employment with Employer and for a period of five (5) years after
      termination, whether such termination is at Executive's instance or Employer's,
      Executive will not use, copy, or disclose, or permit any unauthorized person
      access to, any Confidential Information belonging to Employer or any third
      party.

     

    (iii)  Upon
      request of Employer and in any event upon the termination of Executive's
      employment with Employer, Executive will deliver to Employer all memoranda,
      notes, records, tapes, documentation, disks, manuals, files or other documents,
      and all copies thereof, concerning or containing Confidential Information or
      Trade Secrets in his possession, whether made or compiled by Executive or
      furnished to Executive by Employer.

     

    (iv)  All
      inventions, discoveries, developments, designs, Trade Secrets, trademarks,
      copyrightable subject matter and other proprietary information or work product,
      whether or not patentable (collectively, "Inventions"), which Executive has
      made
      or conceived, or may make or conceive, either solely or jointly with others,
      while providing services to Employer or relating to any of Employer's actual
      or
      anticipated business known to Executive while employed by Employer, or suggested
      by or resulting from any task assigned to Executive or work performed by
      Executive for or on behalf of Employer, shall be the exclusive property of
      Employer. During Executive's employment and thereafter, Executive will promptly
      disclose any and all such Inventions to Employer and will promptly execute
      and
      deliver, without requiring Employer to provide any further consideration
      therefor, such confirmatory assignments, instruments or documents as Employer
      deems necessary or desirable to vest title thereto in Employer. During
      Executive’s employment and thereafter, Executive will assist Employer in
      obtaining, maintaining, and enforcing patents and other proprietary rights
      in
      connection with any Invention, without requiring Employer to provide any further
      consideration therefor. In addition, during Executive’s employment and
      thereafter, Executive will promptly execute and deliver, without requiring
      Employer to provide any further consideration therefor, any documents necessary
      or appropriate to comply with any regulatory requirements, inquiries or requests
      by the Food and Drug Administration or other regulatory bodies, agencies,
      political entities or the like regarding matters for which Executive had
      responsibility during his employment.

     

    (d)  Executive
      acknowledges that Employer does not wish to incorporate any unlicensed or
      unauthorized materials into its products or technology. Therefore, Executive
      agrees that Executive will not knowingly disclose to Employer, knowingly use
      in
      Employer's business, or knowingly cause Employer to use, any information or
      material which is confidential to any third party unless Employer has a written
      agreement with such third party or Employer otherwise has the right to receive
      and use such information. Executive will not knowingly incorporate into
      Executive's work any material which is subject to the copyrights or patent
      of
      any third party unless Employer has a written agreement with such third party
      or
      otherwise has the right to receive and use such material.

     

    (e)  Executive
      represents that there are no other contracts to assign inventions that are
      now
      in existence between Executive and any other person or entity. Executive further
      represents that there are no contracts or other restrictions which would
      restrict or impair Executive’s performance under this Agreement. As a matter of
      record, Executive attaches as Exhibit B a brief description of all Inventions
      made or conceived by Executive prior to 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        
Executive’s
        employment with the Employer which Executive desires to be excluded from
        this
        Agreement.

    

     

    11.  Litigation
      Assistance.

     

    Following
      the termination of Executive's employment for whatever reason, Executive agrees
      to assist the Employer (upon the Employer's request) with regard to threatened
      or actual litigation concerning the Employer where Executive has knowledge
      of
      the facts relating to such threatened or actual litigation. Executive's
      assistance in such matter may include, but not be limited to, meeting with
      the
      Employer's attorneys and other professional advisors; providing truthful
      testimony at a deposition, hearing and/or trial; and providing witness
      statements or affidavits. Employer agrees to provide Executive with reasonable
      notice of the need for such assistance and to use reasonable efforts to
      accommodate Executive's schedule and minimize the burdens on Executive. Employer
      shall, as soon as practicable, reimburse Executive's reasonable out-of-pocket
      expenses associated with such assistance and shall, as soon as practicable,
      pay
      to Executive the sum of $150 per hour for Executive's time devoted to these
      obligations; provided, however, that any reimbursement payments or other
      payments made to Executive pursuant to this Section 11 shall be paid no later
      than March 15 of the calendar year immediately following the expiration of
      the
      calendar year in which the related expense was incurred or the service was
      rendered, as applicable. 

     

    12.  Dispute
      Resolution.

     

    Any
      controversy or claim arising out of or relating to the interpretation or
      application of this Agreement, or any breach hereof, shall be settled by
      arbitration in the Fulton County, Georgia area in accordance with the rules
      of
      the American Arbitration Association ("AAA") then in effect, and judgment upon
      the award rendered by the arbitrator(s) shall be final and binding on the
      parties hereto and may be entered in any court having jurisdiction
      thereof.

     

    All
      arbitrations pursuant to this Agreement shall be determined by a single
      arbitrator selected from a panel proposed by the AAA pursuant to the
      then-current arbitrator selection procedures of the AAA. Each party will bear
      equally the costs and expenses of arbitration, and each party will bear the
      costs and expenses of its own counsel, technical advisors and expert witnesses,
      unless the decision of the arbitrator otherwise directs. 

     

    Any
      arbitration award rendered in accordance with this Section 12 will be satisfied
      promptly and without the need for the prevailing party to seek enforcement,
      which may be sought in any court having competent jurisdiction. In the event
      resort to enforcement proceedings are required for any award or decision, the
      party which has not complied with the arbitral award or decision will be
      responsible for both parties' reasonable attorneys' fees and all costs in the
      enforcement proceeding. The decision of the arbitrators shall be tendered within
      sixty (60) days of final submission of the parties in writing or any hearing
      before the arbitrators and shall include their individual votes.

     

    Notwithstanding
      the foregoing, in the event of a breach or threatened breach of sections 9
      or
      10, Employer shall be permitted to seek temporary injunctive relief in a court
      of competent 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        
jurisdiction.
        Any damages claims arising out of an alleged breach of sections 9 or 10 shall
        be
        resolved by arbitration in accordance with this Section 12.

    

     

    The
      parties hereto expressly agree to this arbitration provision: 

     

    Initials:
      ________   Initials:
      ________

     

    13.  Amendment
      of Equity Ownership Agreements.

     

    The
      various Equity Ownership Agreements entered into with respect to stock option
      grants made by the Employer to Executive on or before December 31, 2003 (the
      "Equity Ownership Agreements"), are hereby amended to reflect the accelerated
      option vesting and other option-related provisions of this Agreement. Except
      as
      modified herein, the terms of the Equity Ownership Agreements shall remain
      in
      full force and effect, and nothing in this Agreement shall extend the period
      during which Executive may exercise the stock options subject to the Equity
      Ownership Agreements.

     

    14.  Entire
      Agreement.

     

    This
      Agreement and the Indemnification Agreement set forth all the promises,
      covenants, agreements, conditions and understandings between the parties hereto
      with respect to the subject matter hereof, and supersede all prior and
      contemporaneous agreements, understandings, inducements or conditions expressed
      or implied, oral or written, except as contained herein or in the
      Indemnification Agreement. This Agreement shall not supersede any prior grant
      of
      stock options to Executive pursuant to a formal written stock option agreement.
      

     

    15.  Change
      in Taxation.

     

    If
      subsequent to the effective date of this Agreement, there occurs a change in
      the
      tax laws, regulations or administrative interpretations which would materially
      impact the taxation of the benefits hereunder, either party to this Agreement
      may propose an amendment. Any such proposed amendment shall be subject to
      Section 8. The provisions of this Agreement have been structured by the Employer
      acting in good faith to avoid to the extent practicable any additional tax
      on
      Executive under Section 409A of the Code.

     

    16.  Provisions
      Severable.

     

    This
      Agreement is intended to be performed in accordance with, and only to the extent
      permitted by, all applicable laws, ordinances, rules, and regulations of the
      jurisdiction in which the parties do business. If any provision of this
      Agreement, or the application thereof to any person or circumstance shall,
      for
      any reason or to any extent, be invalid or unenforceable, the remainder of
      this
      Agreement and the application of such provision to other persons or
      circumstances shall not be affected thereby, but rather shall be enforced to
      the
      greatest extent permitted by law.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    17.  Withholding.

     

    The
      Employer shall have the right to withhold from any and all payments required
      to
      be made to the Executive pursuant to this Agreement all federal, state, local,
      and/or other taxes which the Employer determines are required to be withheld
      in
      accordance with applicable statutes or regulations.

     

    18.  Governing
      Law.

     

    This
      Agreement shall be construed in accordance with the laws of the State of Georgia
      and the venue of any dispute or litigation shall be Fulton County,
      Georgia.

     

    19.  ERISA
      Rules.

     

    Notwithstanding
      anything to the contrary contained in this Agreement, all benefits provided
      hereunder will be subject to applicable rules and regulations promulgated under
      the Employee Retirement Income Security Act of 1974, as amended.

     

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

     

    
      
        	 ATHEROGENICS,
                INC.
	 
	 By:______________________________
	 Title:_____________________________
	 Date:_____________________________
	 
	 EXECUTIVE:
	 _________________________________
	Mark
                P. Colonnese
	 Date:_____________________________

      

     

    

     

    

     

    

    

     

    [NOTE:
      The parties must initial paragraph 12 in addition to signing on this
      page.]

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    FORM
      OF GENERAL RELEASE

     

    For
      and
      in consideration of the severance payments provided to _______________
      (“Executive”) pursuant to the Employment Agreement between AtheroGenics, Inc.
      (“Employer”) and Executive, effective as of ________________, 200__, which is
      expressly incorporated by reference herein, along with other consideration,
      the
      receipt and sufficiency of which are hereby acknowledged, Executive does hereby
      release, acquit, and forever discharge Employer (or any affiliate, officer,
      director or employee of Employer) from, and does hereby covenant and agree
      never
      to institute or cause to be instituted any suit or other form of action or
      proceeding of any kind or nature whatsoever against Employer (or any affiliate,
      officer, director, or employee of Employer) based upon, any and all claims,
      demands, indebtedness, agreements, promises, causes of action, obligations,
      damages, or liabilities of any nature whatsoever, in law or in equity, whether
      or not known, suspected or claimed, that Executive ever had, has claimed to
      have, now has, or may hereafter have or claim to have against Employer by reason
      of any act, event, occurrence, or thing occurring on or before the date of
      this
      General Release.

    The
      claims released herein specifically include, but are not limited to, any claims
      arising in tort or contract, any claim based on wrongful discharge, any claim
      based on breach of contract, any claim based on sexual harassment or any other
      form of workplace harassment, and any claim arising under federal, state or
      local law prohibiting race, sex, age, religion, national origin, handicap,
      disability or other forms of discrimination, or retaliation, including but
      not
      limited to Title VII of the Civil Rights Act of 1964, as amended; 42 U.S.C.
§
1981; the Age Discrimination in Employment Act; the Older Workers Benefit
      Protection Act; the Pregnancy Discrimination Act; the Americans with
      Disabilities Act; the Family and Medical Leave Act; and the Employee Retirement
      Income Security Act, each as amended.

    Executive
      acknowledges that he has been advised to consult with an attorney of his choice
      regarding the form and content of this General Release, and that he enters
      into
      this General Release voluntarily and of his own free will. Executive further
      acknowledges that he has been provided with a period of at least twenty-one
      (21)
      days within which to consider the terms of this General Release. Executive
      understands that he may revoke this General Release within seven (7) days after
      signing it, by delivering written notice of revocation to the Chief

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        
Executive
        Officer of Employer, and that this General Release will not become effective
        or
        enforceable until the seven-day revocation period has expired. Executive
        acknowledges that execution of this General Release is a condition precedent
        to
        receipt of the severance payments provided in the Employment Agreement, and
        that, in the absence of fulfilling this condition precedent by executing
        this
        General Release, Executive would not be entitled to receive those severance
        payments. If Executive revokes this General Release within seven (7) days
        after
        signing it, it will become null and void, and Executive will not be entitled
        to
        any of the severance benefits provided in the Employment
        Agreement.

    

    This
      General Release and the releases and covenants contained herein shall be binding
      upon Executive, his heirs, executors, administrators, assigns, agents, attorneys
      in fact, attorneys at law, and representatives. This General Release and the
      releases and covenants contained herein shall inure to the benefit of Employer
      and each of its predecessors, successors, and assigns, and to each of its and
      their past and present employees, agents, attorneys in fact, attorneys at law,
      representatives, officers, directors, shareholders, partners, joint venturers,
      and all of said individuals’ heirs, executors, administrators and
      assigns.

     

    Witness
      the execution of this General Release on the ____ day of ________,
      200__.

     

    __________________________________

    Executive

    

     

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    LIST
      OF PRIOR INVENTIONS

     

    

     

    

     

    

    
      
        
        

      

      
        19

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