Document:

EX-10.1 2007 PERFORMANCE BONUS PLAN

 

Exhibit 10.1

2007 PRG-Schultz

Performance Bonus Plan

Confidential Treatment Requested

Confidential portions of this Agreement which have been redacted are marked with

brackets (“[***]”). The omitted material has been filed separately with the United States

Securities and Exchange Commission.

 

	 	 	 	 	 
	I. Plan Overview
	 	 	2	 
	A. Philosophy
	 	 	2	 
	B. Plan Objectives
	 	 	2	 
	C. Effective Period
	 	 	2	 
	D. Eligibility
	 	 	2	 
	 
	 	 	 	 
	II. Plan Description
	 	 	2	 
	A. Target Bonus and Maximum Bonus
	 	 	2	 
	B. Actual Bonus to be Paid: The Concept
	 	 	2	 
	C. Calculation of Total Bonus Pool
	 	 	3	 
	D. Calculation of Operating Group Bonus Pools
	 	 	3	 
	E. Allocation to Bonus Eligible Employees of Amounts up to
the Target Bonus Pool
	 	 	4	 
	F. Allocation of any Excess Pool to Bonus Eligible Employees
	 	 	4	 
	G. Qualification for and Payment of Bonus
	 	 	4	 
	 
	 	 	 	 
	III. Plan Interpretation and Administration
	 	 	5	 
	 
	 	 	 	 
	IV. Plan Acknowledgement Form
	 	 	6	 

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I. Plan Overview

A.    Philosophy

PRG-Schultz, as an organization of professionals, believes that its senior leaders
should have common objectives and should share together in the profits created by their
combined efforts as a team. In addition, the company wants to encourage its leadership
to achieve desired results and to strive for excellence through exemplary behaviors,
creativity, innovation and teamwork.

B.    Plan Objectives

The PRG-Schultz Performance Bonus Plan (the Plan) promotes the following:

	 	•	 	Achievement of PRG-Schultz business and financial objectives
	 
	 	•	 	Collaboration throughout the organization
	 
	 	•	 	Customer/client relations
	 
	 	•	 	Development of PRG-Schultz leaders

C.    Effective Period

The Plan is effective from January 1, 2007 through December 31, 2007.

D.    Eligibility

Full-time, salaried PRG-Schultz employees whose positions are assigned a Level 14E
or higher in the PRG-Schultz U.S. salary grade structure and employees that hold
positions of a comparable level in PRG-Schultz’s non-U.S. operations (excluding
Meridian) are eligible to participate in the Plan (Bonus Eligible Employees). The term
“Bonus Eligible Positions” refers to the positions described in this paragraph.

II. Plan Description

The Plan provides for a bonus payment in 2008 to Bonus Eligible Employees upon the
achievement by the company of certain 2007 financial objectives, subject to the more detailed
Plan description below.

A.    Target Bonus and Maximum Bonus

Each Bonus Eligible Position has associated with it a specific target bonus (Target
Bonus) and maximum bonus (Maximum Bonus).

The sum of the Target Bonuses for all Bonus Eligible Positions is the “Target Bonus
Pool” for the company as a whole. The sum of the Maximum Bonuses for all Bonus Eligible
Positions in the plan is the “Maximum Bonus Pool” for the company as a whole.

B.    Actual Bonus to be Paid: The Concept

The actual bonus to be paid to any Bonus Eligible Employee will be a function of
three things:

	 	•	 	The Total Bonus Pool (described below) earned by the company as a whole.
	 
	 	•	 	The portion of the Total Bonus Pool allocated to the Operating Group within the
company to which the Bonus Eligible Position is assigned (the Operating Group Bonus
Pool). For purposes of this Plan there are four Operating Groups:

	 	o	 	Corporate

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	 	o	 	United States
	 
	 	o	 	Europe
	 
	 	o	 	APLAC

	 	•	 	The portion of the Operating Group Bonus Pool allocated to each Bonus Eligible
Employee within the Operating Group.

C.    Calculation of Total Bonus Pool

For purposes of this Plan the term “adjusted EBITDA” means the company’s earnings
before (1) interest, taxes, depreciation and amortization, (2) unusual and other
significant items that management views as distorting the company’s operating results,
such as severance expenses, expenses associated with dark leases, and stock based
compensation expenses, and (3) bonuses payable under this Plan.

The Total Bonus Pool is a function of the company’s total adjusted EBITDA for 2007 as
compared to the total adjusted EBITDA for 2007 included in the company’s 2007 budget
approved by the company’s board of directors ($[******]).

If actual 2007 adjusted EBITDA is less than [***]% of the budgeted adjusted
EBITDA for 2007 ($[******]), the Total Bonus Pool available for payment of bonuses under
this Plan will be zero.

If actual 2007 adjusted EBITDA is equal to [***]% of the budgeted adjusted
EBITDA for 2007 ($[******]), the Total Bonus Pool available for payment of bonuses under
this Plan will be equal to 50% of the Target Bonus Pool.

If actual 2007 adjusted EBITDA is equal to [***]% of the budgeted adjusted
EBITDA for 2007 ($[******]), the Total Bonus Pool available for payment of bonuses under
this Plan will be equal to the Target Bonus Pool.

If actual 2007 adjusted EBITDA is equal to [***]% of the budgeted adjusted
EBITDA for 2007 ($[******]), the Total Bonus Pool available for payment of bonuses under
this Plan will be equal to the Maximum Bonus Pool.

If actual 2007 adjusted EBITDA is between [***]% and [***]% or between [***]% and
[***]% of the budgeted adjusted EBITDA for 2007, the Total Bonus Pool available for
payment of bonuses under this Plan shall be increased pro-rata, provided however that in
no event will the Total Bonus Pool exceed the Maximum Bonus Pool.

D.    Calculation of Operating Group Bonus Pools 

All of the Total Bonus Pool up to the company’s Target Bonus Pool will be allocated
to the Operating Group Pools, pro rata, based on the relationship that the sum of all
Target Bonuses of all Bonus Eligible Employees within each Operating Group bears to the
Target Bonus Pool. For example, if the sum of the Target Bonuses of all Bonus Eligible
Employees within an Operating Group was 25% of the Target Bonus Pool, that Operating
Group will receive an allocation of 25% of that portion of the Total Bonus Pool that is
less than or equal to the Target Bonus Pool.

If the company’s Total Bonus Pool is greater than the Target Bonus Pool, then the amount
by which the Total Bonus Pool exceeds the Target Bonus Pool (the Excess Pool) will be
allocated among the Operating Groups as follows:

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	 	•	 	The Corporate Operating Group will be allocated its pro rata portion of the
Excess Pool, based on the relationship of the sum of all Maximum Bonuses of all
Bonus Eligible Employees within the Corporate Group to the Maximum Bonus Pool.
	 
	 	•	 	Each Operating Group other than Corporate will get an allocation of the
remainder of the Excess Pool, based on the relationship between that Operating
Group’s dollar contribution to the Excess Pool and the total Excess Pool.

For example, assume all of the Excess Bonus Pool was generated by Europe, i.e. United
States and APLAC made their adjusted EBITDA budget while Europe exceeded its adjusted
EBITDA budget by $2 million. In this case, the $2 million of Excess Pool would be
allocated as follows:

	 	•	 	The Corporate Operating Group would get a portion of the Excess Pool equal to
its pro rata portion (based on the relationship of aggregate Maximum Bonuses of the
Corporate Group’s Bonus Eligible Employees to the Maximum Bonus Pool as described
above) of the Excess Pool.
	 
	 	•	 	The entire remainder of the Excess Pool would then be allocated to the Europe
Operating Group.

E.    Allocation to Bonus Eligible Employees of Amounts up to the Target Bonus Pool

For amounts in the Total Bonus Pool up to the Target Bonus Pool, the allocation of
the Operating Group Bonus Pools to Bonus Eligible Employees within each Operating Group
will be based on the each Bonus Eligible Employee’s pro rata portion of the Operating
Group Bonus Pool (based on the relationship between the Bonus Eligible Employee’s Target
Bonus and the sum of all Target Bonuses for all Bonus Eligible Employees in that
Operating Group).

For example, if the Operating Group Bonus Pool for the U.S. Operating Group is
$1,000,000 and the Target Bonus for the Bonus Eligible Employee is 2% of the sum of the
Target Bonuses of all Bonus Eligible Employees in the U.S. Operating Group, then this
Bonus Eligible Employee should generally expect a bonus of $20,000.

At the discretion of the head of the Operating Group, some Bonus Eligible Employees
within the Operating Group could be paid a bonus somewhat higher, or somewhat lower,
than their pro rata portion of the Operating Group Bonus Pool. These exceptions are
expected to be rare, will be based on individual performance and must be approved in
advance by the company’s SVP-Human Resources and CEO. Since the Operating Group Bonus
Pool will be a fixed amount, if any Bonus Eligible Employee receives more than a pro
rata portion (based on Target Bonuses as described in the first paragraph of this
subsection), one or more other Bonus Eligible Employees must receive less than their pro
rata amount.

F.    Allocation of any Excess Pool to Bonus Eligible Employees 

Any portion of any Excess Pool allocated to an Operating Group as described above
(Operating Group Excess Pool) will be allocated within the Operating Group to Bonus
Eligible Employees only after the allocation to Bonus Eligible Employees of the Target
Bonus Pool as described in the Plan subsection immediately above. The allocation of
excess Operating Group Excess Pool will be made based on the recommendation of the head
of the Operating Group and approved by the company’s SVP- Human Resources and CEO.

G.    Qualification for and Payment of Bonuses

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Bonus Eligible Employees must have at least a satisfactory performance rating
during the Plan year and at the time bonus payments are made to be eligible to receive a
bonus payment under this Plan.

Bonuses will be paid annually, and in most cases within thirty (30) days after
completion of the annual audit of the company’s 2007 results.

Bonus Eligible Employees must be actively employed by PRG-Schultz at the time of the
payment in order to receive a bonus. Exceptions to this requirement may be made in
connection with terminations due to retirement, disability or death.

If an employee becomes eligible to participate in the PRG-Schultz Performance Bonus Plan
after January 1st (by beginning work in a Bonus Eligible Position), he/she
may be eligible for a prorated payout based on the date of entry into the Plan, but may
not enter the plan after November 1st.

III. Plan Interpretation and Administration

Overall responsibility for the administration of the Plan resides with the SVP-Human
Resources.

All bonus payments are subject to the approval of the company’s SVP-Human Resources, CEO, and
the Compensation Committee of the company’s Board of Directors.

The company reserves the right to discontinue or amend the Plan. Such changes could include,
for instance, the revision of the company’s financial targets in the event of business or
organizational changes, including acquisitions and divestitures, deemed to warrant such
action. This Plan is a discretionary bonus plan and confers no rights to Bonus Eligible
Employees or other employees. Authority and responsibility for interpretation and application
of the Plan rest solely with the company’s SVP-Human Resources, CEO and the Compensation
Committee of the company’s Board of Directors.

[This space intentionally left blank.]

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IV. Plan Acknowledgement Form

I have received and reviewed the terms of the 2007 PRG-Schultz Performance Bonus Plan. I
understand and agree that this Plan does not create a contract of employment between the
PRG-Schultz and me.

	 	 	 	 	 	 	 	 	 	 	 
	Position:

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	2007 Target Bonus:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	2007 Maximum Bonus:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 

	 	 	 
	 
	Employee’s Signature

	 	Date

 

Employee’s Name (typed or printed)

PLEASE FORWARD THE COMPLETED EMPLOYEE ACKNOWLEDGEMENT FORM TO MONIKA THORNTON IN HUMAN RESOURCES IN
ATLANTA.

6EX-10.1 Elliston Employment Agreement

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered as of May 15, 2007 between
ADVANCED VIRAL RESEARCH CORP., a Delaware corporation (“Employer”), and STEPHEN M. ELLISTON
(“Employee”).

R E C I T A L S

     A. Employee and Employer desire to enter into this Agreement to memorialize the employment
relationship between Employer and Employee.

     B. Subject to the terms and conditions of this Agreement, Employee shall continue to be the
President and Chief Executive Officer of Employer.

     NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto mutually agree as follows:

1. RECITALS. The above stated Recitals are true and correct and are incorporated by reference into
this Agreement.

2. TERM. The term of this Agreement shall be two (2) years commencing as of May 15, 2007 (the
“Effective Date”) and ending on May 14, 2009 unless terminated earlier as provided herein (the
“Term”).

3. DUTIES.

     3.1. In General. Upon the terms and subject to the conditions of this Agreement,
Employer hereby employs Employee and Employee hereby accepts such employment with Employer for the
term of this Agreement as the President and Chief Executive Officer of Employer. Employee shall
have the powers and duties with respect to Employer’s business interests (the “Businesses”) as set
forth in the Bylaws of Employer for its President and Chief Executive Officer and such other
executive and managerial duties as normally associated with such positions, subject to the
direction of the Board of Directors in accordance with the reasonable policies adopted from time to
time by the Board of Directors and communicated by written notice to Employee (the “Duties”).
During the term of this Agreement and subject to Section 3.4 below, Employee shall devote
substantially all of his business time, attention, skill and efforts to the faithful performance of
the Duties.

     3.2. Place of Performance. The Duties shall be performed in Yonkers, New York, except
for such travel in the ordinary course of Employer’s business as may from time to time be
reasonably required. Employee’s principal place of business shall be at the executive offices of
Employer in Yonkers, New York.

     3.3. Delegation. Notwithstanding anything to the contrary contained in this Section 3,
Employee shall have the right and authority to delegate responsibility to one or more personnel as
he deems appropriate, and is hereby authorized to hire on behalf of Employer additional agents,
employees and other representatives which in his reasonable opinion are necessary to handle the
affairs of Employer, and to terminate the employment of any and all agents, employees and other
representatives of

 

 

Employer, other than appointed officers of Employer, the termination of whom shall be subject
to the prior approval by Employer’s Board of Directors.

     3.4. Other Activities. Employee shall use his best efforts for the benefit of
Employer by whatever activities he reasonably deems appropriate to maintain and improve Employer’s
standing in the community generally and among other members of the industries in which Employer is
from time to time engaged, including such entertaining for business purposes as he reasonably
considers appropriate. Employee shall not, without the approval of the Board of Directors of
Employer, render services of a business nature to any other person or entity, if such activities
would interfere with the performance of Employee’s Duties as required under this Agreement or
otherwise prevent Employee from devoting substantially all of his business time, attention, skill
and efforts to the performance of Employee’s Duties as required under this Agreement. Subject to
the foregoing limitations, the following activities shall be deemed to be permissible: (i) owning
or managing real or personal property owned by Employee or his family members; (ii) owning any
business which does not compete, directly or indirectly, with Employer; and (iii) holding
directorships or similar positions in any organization which is not competing with Employer and
which is approved by the Board of Directors of Employer.

4. COMPENSATION AND OTHER BENEFITS.

     4.1. Compensation and Employee Benefit Plans. For all services rendered by Employee
in any capacity during his employment under this Agreement (including any renewals hereof),
Employer shall pay to Employee as compensation the sum of the amounts set forth in the following
subparagraphs (a) through (d).

          (a) Base Salary. Commencing upon the Effective Date, Employee shall be paid the sum
of Three Hundred Fifty Thousand Dollars ($350,000) on an annualized basis (the “Base Salary”),
which amount shall be paid in accordance with Employer’s customary payroll practices. On each
anniversary of the Effective Date, during the term of this Agreement and any extensions thereof,
Employer will review the Base Salary.

          (b) Stock Options. On the Commencement Date, Employer shall grant to Employee the
option to acquire 40,000,000 shares of the Employer’s Common stock upon such terms and conditions
as set forth in that certain Stock Option Agreement attached hereto and incorporated by reference
hereby as Exhibit A to this Agreement (the “Stock Option”).

          (c) Benefit Plans. During the term of Employee’s employment with Employer, Employee
shall be entitled to participate in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other executives of Employer (“Investment Plans”) and
Employee and his family shall be eligible for participation in and shall receive all benefits
under, welfare benefit plans, practices, policies and programs applicable generally to other
executives of Employer, including but not limited to comprehensive medical and dental coverage,
disability and basic and supplemental life insurance (“Welfare Plans”).

          (d) Dues. Employer shall pay the dues of such professional associations and societies of
which Employee is a member in furtherance of his Duties.

     4.2. Business Expenses. Employee is authorized to incur reasonable expenses to
execute and/or promote the Businesses of Employer, including, but not limited to, expenses related
to maintenance of professional licenses and expenses for reasonable entertainment, travel, and
similar items, in each case, in accordance with the policies, practices and procedures of Employer.
Employer will reimburse Employee for all reasonable travel or other expenses incurred while on
business.

2

 

Employer agrees and acknowledges that reasonable travel expenses will include expenses related
to Employee’s travel between Yonkers, NY and Raleigh, North Carolina and moderately priced
accommodations near Employer’s headquarters.

     4.3. Vacation. Employee will be entitled to four (4) weeks paid vacation annually or
such other time as authorized by the Board of Directors during which time his compensation shall be
paid in full. Vacation Days unused in any calendar year may not be accumulated and carried forward
and used in future years.

5. TERMINATION OF EMPLOYMENT.

     5.1. Termination by Employee. Employee may terminate his employment with Employer at
any time upon notice to Employer for “Good Reason.” As used herein, “Good Reason” shall mean:

          (a) Employer’s material breach of this Agreement; provided, however, that in the event
Employee believes that this Agreement has been materially breached, he shall provide Employer with
written notice of such breach and provide Employer with a thirty (30) day period in which to cure
or remedy such breach; or

          (b) Assignment to Employee of regular duties inconsistent with his position, or status with
Employer;

     5.2. Termination by Employer. Employee’s employment may be terminated by Employer at
any time upon notice to Employee for “Cause.” As used herein, the term “Cause” shall mean:

          (a) Employee’s material breach of any provision of this Agreement; provided, however, that in
the event Employer believes that this Agreement has been breached, it shall provide Employee with
written notice of such breach and provide Employee with a thirty (30) day period in which to cure
or remedy such breach. For the avoidance of doubt, it shall constitute a material breach of this
Agreement if Employee fails to perform his Duties hereunder by way of intentional neglect or
chronic absenteeism (excluding Disability);

          (b) The commission by Employee of a crime, or an act of fraud or dishonesty against Employer,
its subsidiaries or affiliates; or

          (c) The use by Employee of an illegal substance, including, but not limited to, marijuana,
cocaine, heroin, and all other illegal substances, and/or the dependence by Employee upon the use
of alcohol, which, in any case, in the opinion of both Employee’s family physician and a physician
chosen by Employer, materially impairs Employee’s ability to perform his Duties hereunder, which
dependence is not cured or rehabilitated, as determined by Employee’s physician, within three (3)
months of receipt of written notice from Employer to Employee.

     5.3. Death or Disability. This Agreement shall terminate upon the death or the
Disability of Employee. Employee or his heirs or estate (as the case may be) shall be entitled to
the compensation provided for with respect to a termination by death or Disability in this
Agreement. As used in this Agreement, the term “Disability” means (A) Employee’s incapacity due to
a permanent mental or physical illness that prevents Employee from performing his duties hereunder
for 26 consecutive weeks or (B) a physical condition that renders the performance by Employee of
his duties hereunder a serious threat to the health and well being of Employee. Disability shall
be determined by a physician selected by Employee (or his legal representative) and reasonably
acceptable to Employer.

3

 

     5.4. Payments Upon Termination.

          (a) Termination by Employer for Cause; Voluntary Unilateral Decision by Employee Without
Good Reason; Death or Disability. If Employee’s employment is terminated by Employer for
Cause; by Employee by a voluntary unilateral decision by Employee without Good Reason; or as a
result of Employee’s death or Disability, then Employee shall be entitled to: (1) the base salary
pursuant to Section 4.1(a) earned through the date of termination; (2) all applicable
reimbursements from Employer due under Section 4.2 hereof; and (3) accrued vacation under Section
4.3 hereof.

          (b) Other Termination. If Employee’s employment is terminated for any reason by
either party other than by Employer for Cause, by Employee’s voluntary unilateral decision for Good
Reason, or as a result of Employee’s death or Disability, then Employee shall be entitled to the
following (collectively, the “Severance Benefits”): (1) that amount which is equivalent to
Employee’s base salary for the remainder of the Term, which amount shall be paid in accordance with
Employer’s customary payroll practices; and (2) all applicable reimbursements from Employer due
under Section 4.2 hereof. Payment of the Severance Benefits shall be conditioned upon the
execution by Employee of a valid release, to be prepared by Employer, in which Employee releases
Employer, to the maximum extent permitted by law, from any and all claims Employee may have against
Employer that relate to or arise out of Employee’s employment or termination of employment.

     5.5. Termination of Obligations. Upon the resignation of Employee or termination of
Employee’s employment in accordance with the provisions of this Section 5, all obligations of
Employee and Employer hereunder shall be terminated except as otherwise provided herein.

     5.6. Resignation. Any termination of employment under this Agreement, whether or not
voluntary, will automatically constitute a resignation of Employee as an officer of Employer and
all subsidiaries of Employer and if requested to do so by Employer’s Board of Directors, shall
resign as a member of the Board of Directors of Employer and all subsidiaries of Employer;
provided, however, that Employee shall execute such resignation documents as Employer may
reasonably request in order to evidence such resignation and this provision shall survive the
termination of this Agreement.

6. NON-COMPETITION.

     6.1. Non-Competition. While in the employment of Employer and for the period of one (1) year
thereafter (the “Non-Competition Period”), unless otherwise agreed to in writing by Employer,
Employee will not, directly or indirectly, own, manage, operate, join, control, be employed by or
participate in the ownership, management, operation or control of, or be connected in any manner
with any business that is developing, manufacturing and/or distributing pharmaceutical products
which exhibit substantially similar biological mechanisms of action as Employer’s products in the
clinical indications pursued by Employer.

     6.2. Confidential Information. During and after the term of the Agreement, Employee
shall not directly or indirectly, divulge, furnish or make accessible to any party not authorized
by Employer to receive it, any of the proprietary or confidential information or knowledge of
Employer, including without limitation, any financial information, marketing plans, strategies,
trade secrets, data, know-how, processes, techniques and other proprietary information of Employer
or its subsidiaries (the “Confidential Information”), other than in the course of performing his
duties hereunder and with the consent of Employer, which consent shall not unreasonably be
withheld, and in accordance with Employer’s policies and regulations, as established from time to
time, for the protection of the Employer’s Confidential Information. The term “Confidential
Information” does not include, and there

4

 

shall be no obligation hereunder with respect to information (including office practices and
procedures) that is obvious, or that may readily be determined by any person reasonably
knowledgeable in the industry in which Employer operates by diligent review and examination of
public sources, or that becomes generally available to the public other than as a result of a
disclosure by Employee or any agent or other representative thereof. Employee shall not have any
obligation hereunder to keep confidential any Confidential Information to the extent disclosure of
any thereof is required by law, or determined in good faith by Employee to be necessary or
appropriate to comply with any legal or regulatory order, regulation
or requirement; provided,
however, that in the event disclosure is required by law, Employee shall provide Employer
with reasonable notice of such requirement so that Employer may seek an appropriate protective
order and Employee shall reasonably cooperate with Employer’s efforts to seek such a protective
order. Upon termination of employment on the expiration of the Agreement, all tangible evidence of
such confidential or proprietary information in the possession of Employee shall be returned to
Employer, and Employee shall not make or retain any copies or excerpts thereof, except that
Employee may retain copies of all materials that may be of a personal nature to Employee. Employee
further agrees not to use any Confidential Information for the benefit of any person or entity
other than Employer or its subsidiaries.

     6.3. Non-Solicitation. During the term of the Agreement and for a period of two (2)
years thereafter (the “Non-Solicitation Period”), Employee shall not influence or attempt to
influence customers of Employer or any of its present or future subsidiaries either directly or
indirectly, to divert their business from Employer to any individual, partnership, firm,
corporation, or other entity that is in competition with the business of Employer or any subsidiary
of Employer at any time during the Non-Solicitation Period. During the Non-Solicitation Period,
Employee shall not directly or indirectly solicit any of Employer’s employees or independent
contractors to work for (as an employee or independent contractor) any business, individual,
partnership, firm, corporation, or other entity in competition with the business of Employer or any
subsidiary of Employer at any time during the Non-Solicitation Period.

     6.4. Patents/Assignment and Transfer of Inventions. Employee shall disclose, assign
and transfer to the Company any and all ideas, concepts, discoveries, inventions, developments,
improvements, trade secrets, technical data, know-how or other materials conceived, devised,
invented, developed or reduced to practice or tangible medium by Employee or any of his affiliates,
or under his direction, during the term of this Agreement (hereinafter “Inventions”). If any
patents shall be developed by Employee or any patents shall result from the knowledge of Employee
during the term of this Agreement,, Employee shall assign such patents to the Employer. Employee
also agrees to execute such documents and perform such activities as the Employer may reasonably
request to obtain such patents and to assist the Employer, as reasonably requested by the
Employer’s Board of Directors in defending its patents.

     6.5. Remedies. In the event of an actual or threatened breach by the Employee of this Section
6, including any subparagraph hereof, Employer shall be entitled to an injunction restraining
Employee from its prohibited conduct. If the court should hold that the duration and/or scope
(geographic or otherwise) of the covenants contained herein are unreasonable, then, to the extent
permitted by law, the court may prescribe a duration and/or scope (geographic or otherwise), that
is reasonable and the parties agree to accept such determination, subject to their rights of
appeal. Nothing contained herein shall be construed as prohibiting Employer or any third party
from pursuing any of the remedies available to it for such breach or threatened breach, including
recovery of damages from Employee. In any action or proceeding to enforce the provisions of this
Section 6, the prevailing party (other than Employee in the event Employee prevails as a result of
a determination that the duration and/or scope (geographic or otherwise) of the covenants contained
herein are unreasonable) shall be reimbursed by the other party for all costs incurred in such
action or proceeding, including, without limitation, all court costs and filing fees and all
reasonable attorneys’ fees, incurred either at the trial level or at the appellate level. If

5

 

Employee shall be in violation of any of the restrictive covenants contained in this
Agreement, then the time limitation otherwise applicable to such restrictive covenant shall be
extended for a period of time equal to the period of time during which such breach or breaches
occur. If Employer seeks injunctive relief from such breach in any court, then the covenant shall
be extended for a period of time equal to the pendency of such proceedings, including all appeals.
The existence of any claim or cause of action by Employee against Employer, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of the
foregoing restrictive covenant, but shall be litigated separately.

     6.6. Acknowledgments by Employee. Employee understands that the restrictions set
forth in this Section 6 may limit his ability to earn a livelihood in a business similar to the
business of Employer or any subsidiary thereof, but he nevertheless believes that he has received
and will receive sufficient consideration and other benefits as an employee of Employer and as
otherwise provided hereunder to justify clearly such restrictions which, in any event (given his
education, skills and ability), Employee does not believe would prevent his from earning a living.
Employee acknowledges that the geographic boundaries, scope of prohibited activities, and duration
of this Section 6 are reasonable in nature and are no broader than are necessary to maintain the
confidentiality and the goodwill of Employer’s proprietary information, plans and services and to
protect the other legitimate business interests of Employer.

7. NOTICES. Any notice, request, demand, offer, payment or communication required or permitted to
be given by any provision of this Agreement shall be deemed to have been delivered and given for
all purposes if written and if (a) delivered personally or by courier or delivery service, at the
time of such delivery; or (b) directed by registered or certified United States mail, postage and
charges prepaid, addressed to the intended recipient, at the address specified below, at such time
that the intended recipient or its agent signs or executes the receipt:

	 	 	 
	If to Employer:

	 	Advanced Viral Research Corp.
	 

	 	200 Corporate Boulevard South
	 

	 	Yonkers, New York 10701
	 

	 	Attn: Chairman of the Board
	 

	 	Tel: 914-376-7383
	 
	 	 
	If to Employee:

	 	Stephen M. Elliston
	 

	 	5808 Rocky Point Court
	 

	 	Raleigh, NC 27613
	 

	 	Tel: 919-845-9695

Any party may change the address to which notices are to be mailed by giving written notice as
provided herein to the other party. Commencing immediately after the receipt of such notice, such
newly designated address shall be such person’s address for purposes of all notices or other
communications required or permitted to be given pursuant to this Agreement.

8. MISCELLANEOUS.

     8.1. Governing Law. This Agreement shall be construed pursuant to the laws of the
State of New York, and all of its provisions shall be administered according to and its validity
shall be determined under the laws of the State of New York without regard to any conflict or
choice of law issues.

     8.2. Gender and Number. Whenever appropriate, references in this Agreement in any
gender shall be construed to include all other genders, references in the singular shall be
construed to include the
plural, and references in the plural shall be construed to include the singular, unless the
context clearly indicates to the contrary.

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     8.3. Certain Words. The words “hereof,” “herein,” “hereunder,” and other similar
compounds of the word “here” shall mean and refer to the entire Agreement and not to any particular
section, provision or paragraph unless so required by the context.

     8.4. Captions. Paragraph titles or captions contained in this Agreement are inserted only as
a matter of convenience and/or reference, and they shall in no way be construed as limiting,
extending, defining or describing either the scope or intent of this Agreement or of any provision
hereof.

     8.5. Counterparts. This Agreement may be executed in one or more counterparts, and any such
counterpart shall, for all purposes, be deemed an original, but all such counterparts together
shall constitute but one and the same instrument.

     Severability. The invalidity or unenforceability of any provision hereunder (or any portion
of such a provision) shall not affect the validity or enforceability of the remaining provisions
(or remaining portions of such provisions) of this Agreement. 8.7.

     8.8. Entire Agreement. This Agreement (and all other documents executed
simultaneously herewith or pursuant hereto) constitutes the entire agreement among the parties
pertaining to the subject matter hereof, and supersedes and revokes any and all prior or existing
agreements, written or oral, relating to the subject matter hereof, and this Agreement shall be
solely determinative of the subject matter hereof.

     8.9. Restrictive Covenant. In the event the non-competition, non-solicitation clause
or any other restrictive covenant of this Agreement shall be deemed unenforceable, invalid or
overbroad in whole or in part for any reason, then any arbitration panel or court of competent
jurisdiction is hereby authorized, requested and instructed to reform such provision(s) to provide
for the maximum competitive restraints upon Employee’s activities (in time and geographic area),
which may then be legal and valid.

     8.10. Waiver. Either Employer or Employee may, at any time or times, waive (in whole or in
part) any rights or privileges to which he or it may be entitled hereunder. However, no waiver by
any party of any condition or of the breach of any term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a
further continuing waiver of any other condition or of any breach of any other terms, covenants,
representations or warranties contained in this Agreement, and no waiver shall be effective unless
it is in writing and signed by the waiving party.

     8.11. Attorneys’ Fees. In the event that either party shall be required to retain the
services of an attorney to enforce any of his or its rights hereunder, the prevailing party in any
arbitration or court action shall be entitled to receive from the other party all costs and
expenses including (but not limited to) court costs and attorneys’ fees (whether in the arbitration
or in a court of original jurisdiction or one or more courts of appellate jurisdiction) incurred by
him or it in connection therewith. The parties hereby expressly confer on the arbitrator the right
to award costs and attorneys’ fees in the arbitration.

     8.12. Dispute Resolution. Except for any dispute or controversy in which Employer is
seeking injunctive relief pursuant to Section 6, Employee and Employer shall settle by arbitration
any dispute or controversy arising in connection with this Agreement, whether or not such dispute
involves a plan subject to the Employee Retirement Income Security Act of 1974, as amended. Such
arbitration shall be conducted in accordance with the rules of the American Arbitration Association
before a panel of three

7

 

arbitrators sitting in New York City, New York or such other location as shall be mutually
agreed by the parties. The award of the arbitrators shall be final and nonappealable, and judgment
may be entered on the award of the arbitrators in any court having proper jurisdiction. THE
ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD PUNITIVE DAMAGES UNDER ANY CIRCUMSTANCES (WHETHER IT
BE EXEMPLARY DAMAGES, TREBLE DAMAGES, OR ANY OTHER PENALTY OR PUNITIVE TYPE OF DAMAGES) REGARDLESS
OF WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER APPLICABLE LAW, EMPLOYEE AND EMPLOYER HEREBY EACH
WAIVING THEIR RIGHT, IF ANY, TO RECOVER PUNITIVE DAMAGES IN CONNECTION WITH ANY SUCH CLAIMS,
DISPUTES OR DISAGREEMENTS REGARDLESS OF WHETHER SUCH CLAIM, DISPUTE OR DISAGREEMENT ARISES UNDER
THE LAW OF CONTRACTS, TORTS, (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE OF EVERY KIND AND STRICT
LIABILITY WITHOUT FAULT), OR PROPERTY, OR AT COMMON LAW OR IN EQUITY OR OTHERWISE. EMPLOYEE
ACKNOWLEDGES THAT BY SIGNING THIS AGREEMENT) EMPLOYEE IS WAIVING ANY RIGHT THAT EMPLOYEE MAY HAVE
TO A JURY TRIAL OR, OTHER THAN AS PROVIDED BY SECTION 6, A TRIAL BEFORE A JUDGE IN CONNECTION WITH,
OR RELATING TO, A CLAIM.

     8.13. Venue. Any litigation arising hereunder shall be instituted only in New York City, New
York, the place where this Agreement was executed, and all parties hereto agree that venue shall be
proper in said county for all such legal or equitable proceedings.

     8.14. Assignment. The rights and obligations of the parties under this Agreement shall inure
to the benefit of and shall be binding upon their successors, assigns, and/or other legal
representatives. Additionally, covenants in this Agreement which are for the benefit of Employer
also shall run in favor of Employer’s subsidiaries. This Agreement shall not be assignable by
Employer or Employee. The services of Employee are personal and his obligations may not be
delegated by his except as otherwise provided herein.

     8.15. Amendment. This Agreement may not be amended, modified, superseded, canceled, or
terminated, and any of the matters, covenants, representations, warranties or conditions hereof may
not be waived, except by a written instrument executed by Employer and Employee or, in the case of
a waiver, by the party to be charged with such waiver.

     8.16. No Third Party Beneficiary. Nothing expressed or implied in this Agreement is
intended or shall be construed to confer upon or give any person, other than Employer and Employee
and their respective successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

     8.17. Indemnification. To the fullest extent permitted by law and Employer’s
certificate of incorporation and by-laws, Employer shall promptly indemnify Employee for all
amounts (including, without limitation, judgments, fines, settlement payments, losses, damages,
costs and expenses (including reasonable attorneys’ fees)) incurred or paid by the Employee in
connection with any action, proceeding, suit or investigation arising out of or relating to the
performance by Employee of services for (or acting as a fiduciary of any Employee benefit plans,
programs or arrangements of) Employer or any of its subsidiaries or affiliates, including as a
director, officer or employee of Employer or any such subsidiary or affiliate. Employer also
agrees to maintain a directors’ and officers’ liability insurance policy covering Employee to the
extent Employer provides such coverage for its other executive officers.

     8.18. Tax Withholding. All payments to the Employee under this Agreement will be
subject to the withholding of all applicable employment and income taxes.

[Signatures on next page]

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     IN WITNESS WHEREOF, Employer and Employee have caused this Agreement to be executed on the day
and year first above written.

	 	 	 	 	 
	 	ADVANCED VIRAL RESEARCH CORP.

 	 
	 	By:  	/s/ Eli Wilner
 	 
	 	 	Name:  	Eli Wilner 	 
	 	 	Title:  	Chairman of the Board 	 
	 
	 	 	 
	 	                                                  /s/ Stephen M. Elliston
 	 
	 	Stephen M. Elliston 	 
	 	 	 
	 

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