Document:

exv10w16

 

Exhibit 10.16

EMPLOYMENT AGREEMENT

     The Employment Agreement (the “Agreement”) is made and entered into as of March 7th,
2007 (the “Effective Date”) among RXi Pharmaceuticals Corporation, a Delaware corporation
(“RXi” or “Employer”), CytRx Corporation, a Delaware corporation (“CytRx”) and
Pamela A. Pavco, an individual and resident of the State of Colorado (“Employee”).

     WHEREAS, Employer and Employee desire to enter into an employment agreement under which
Employee shall serve on a full-time basis as RXi’s Vice President of Research and Development or
Vice President of Pharmaceutical Development on the terms set forth in the Agreement, with the term
of the Agreement to commence on the Effective Date.

     WHEREAS, CytRx corporation, as an affiliate of Employer, desires to guarantee the performance
of certain payment and reimbursement obligations of Employer.

     NOW, THEREFORE, upon the above premises, and in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows.

     1. Engagement. Effective as of the Effective Date, Employer shall employ Employee, and
Employee shall serve, as RXi’s Vice President of Research and Development or Vice President of
Pharmaceutical Development. As a condition to the Employee’s employment by the Employer, Employee
shall execute the Employer’s Employee Confidentiality, Non-Competition, and Proprietary Information
Agreement (the “Confidentiality Agreement”).

     2. Duties. Employee shall perform all duties assigned to her by the Employer
faithfully, diligently and to the best of her ability. Such duties include implementation of the
development plans of the Employer. Employee shall have duties commensurate with those of a vice
president of a similarly situated company. Employee’s services hereunder shall be rendered at the
geographic location of the Employee’s choosing (and Employee shall not be required to relocate),
except for travel when and as required in the performance of Employee’s duties hereunder, provided
however that Employee shall not be required to travel more than once in a six week period to RXi’s
office in Worcester, Massachusetts (the “Designated Travel”).

     3. Time and Efforts. Employee shall devote all of her business time, efforts,
attention and energies to Employer’s business and the discharge of her duties hereunder.

     4. Term. The term (the “Initial Term”) of Employee’s employment shall
commence on the Effective Date and shall continue for one (1) year. After the expiration of the
Initial Term, if a Financing (as defined in Section 5.1) has occurred during the Initial Term, the
agreement will be automatically renewed and extended until terminated in accordance with Section 6
(the “Renewal Term” and, together with the Initial Term, the “Term”). If a
Financing has not occurred during the Initial Term, this Agreement will terminate at the end of the
Initial Term.

     5. Compensation. As the total consideration for Employee’s services rendered under the
Agreement, Employer shall pay or provide Employee the following compensation and benefits:

 

 

          5.1. Salary. Commencing on the Effective Date, Employee shall be entitled to receive
an annual salary (the “Base Salary”) of One Hundred Ninety-Eight Thousand Dollars ($198,000).
Until the time that Employer raises gross proceeds of at least $15 million in a financing (or
series of financings) from the issuance of equity, debt or derivatives (collectively, the
“Financing”), CytRx shall guarantee Employer’s obligation to pay Employee’s Base Salary.
If the Financing does not occur by June 30, 2007, CytRx agrees to pay Employee the remainder of her
Base Salary for the Initial Term of this Agreement in accordance with Section 4 of this Agreement.
Such monies shall include any Base Salary due and unpaid, any amount due under Section 6.2,
reimbursement of expenses incurred by Employee in connection with Employee’s duties (including
expenses related to Designated Travel), home office expenses as set forth in Section 5.3, and
reimbursement for health related costs as provided in Section 5.5.

          5.2. Stock Options. At the first regularly scheduled meeting of the Board of
Directors of the Employer following the Financing the Employer shall grant Employee stock options
under the RXi Pharmaceuticals 2007 Incentive Plan (the “Plan”) to purchase a number of
shares of Employer’s common stock equal to one and a half percent (1.5%) of the sum of the number
of outstanding shares of common stock of Employer immediately prior to the closing of the first
tranche of the Financing plus the number of shares subject to options outstanding or contractually
committed to be granted as of the date of the grant of such option to Employee (the
“Option”). The Options shall vest in quarterly installments over 4 years beginning on the
first quartlery anniversary of the Effective Date of the Agreement provided, in each case, that
Employee remains in the continuous employ of Employer through such quarterly anniversary date.
Each vested Option shall (a) be exercisable at an exercise price equal to the fair market value at
the time of granting as determined by Employer’s Board of Directors, (b) have a term of ten years
and be exercisable by Employee at any time during such ten year period, and (c) be on such other
terms as shall be determined by Employer’s Board of Directors (or the Compensation Committee of the
Board) and set forth in a customary form of stock option agreement under the Plan evidencing the
Options. Notwithstanding anything to the contrary in Section 6.2 or other provisions of the
Agreement or of the stock option agreement evidencing the Options, upon the occurrence of a
“Covered Transaction” (as defined in the Plan), the Options shall thereupon vest in full and become
exercisable as to all of the shares covered thereby in accordance with the terms of the Plan.
Furthermore, in the event that the Employee is terminated without Cause (as defined below in
Section 6.1) or Employee is terminated as a result of an Involuntary Termination (as defined in
Section 6.1B), the shares that would have vested during the Severance Period (as defined below in
Section 6.2.1 and 6.2.2 respectively) shall vest and become exercisable as of the date of such
termination. For avoidance of doubt, the full amount of options that would have vested during
the Severance Period shall vest and shall not be reduced in the event that the length of the
Severance Period is reduced for any reason.

          5.3. Expense Reimbursement. Employer shall reimburse Employee for reasonable and
necessary business expenses incurred by Employee in connection with the performance of Employee’s
duties in accordance with Employer’s usual practices and policies in effect from time to time. For
avoidance of doubt, Employer shall reimburse Employee or expenses related to the Designated Travel.
In addition, Employer agrees to reimburse Employee for expenses directly related to Employee’s
performance of duties at Employee’s Colorado office including (but not limited to) such reasonable
and necessary expenses directly related to fax, phone, internet, copying and similar items.

 

 

          5.4. Vacation. Employee shall be entitled to twenty (20) business days of vacation
each year during the Term. Vacation time that is not used by Employee during each twelve-month
term of employment will be lost and not be carried over into any future period.

          5.5. Employee Benefits. Employee shall be eligible to participate in any medical
insurance and other employee benefits made available by Employer to all of its employees under its
group plans and employment policies in effect during the Term. Medical, Insurance and other
employee benefits are not anticipated to begin until 90-120 days from the Effective Date. Employee
acknowledges and agrees that, any such plans or policies now or hereafter in effect may be modified
or terminated by Employer at any time in its discretion. If, the benefits are not offered by
Employer (at Employer’s sole discretion) in the state of residence of Employee, then the Employee
will not obtain the benefit, and the Employer will award the employee the amount of money saved, if
any, by not providing the Employee such benefit and, in the event such reimbursement is treated as
taxable income to Employee, Employer shall gross up such amounts to make Employee whole.

          5.6. Payroll Taxes. Employer shall have the right to deduct from the compensation and
benefits due to Employee hereunder any and all sums required for social security and withholding
taxes and for any other federal, state, or local tax or charge which may be in effect or hereafter
enacted or required as a charge on the compensation or benefits of Employee.

     6. Termination. The Agreement may be terminated as set forth in this Section 6.

          6.1.A Termination by Employer for Cause or Voluntary Resignation. Employer may
terminate Employee’s employment hereunder for Cause upon notice to Employee and Employee may
voluntarily resign her employment hereunder upon notice to Employer. “Cause” for the
purpose shall mean any of the following:

               (a) Employee’s breach of any material term of the Agreement; provided that the first occasion
of any particular breach shall not constitute such Cause unless Employee has failed to cure such
breach within ten (10) days after receiving written notice from Employer stating the nature of such
breach;

               (b) Employee’s conviction of, or plea of guilty or nolo contendere to, any felony;

               (c) Employee’s act of fraud;

               (d) Employee’s continual failure or refusal to perform her material duties as required under
the Agreement after written notice from Employer stating the nature of such failure or refusal and
affording Employee at least ten days to correct the same;

               (e) Employee’s act or omission that, in the reasonable determination of Employer indicates
alcohol or drug abuse by Employee; or

 

 

               (f) Employee’s act or personal conduct that, in the judgment of Employer’s Board of Directors
(or a Committee of the Board), gives rise to a material risk of liability of Employee or Employer
under federal or applicable state law for discrimination, or sexual or other forms of harassment,
or other similar liabilities to subordinate employees.

               Upon termination of Employee’s employment by Employer for Cause or by Employee due to a
voluntary resignation, all compensation and benefits to Employee hereunder shall cease and Employee
shall be entitled only to payment, not later than three days after the date of termination, of any
accrued but unpaid salary and unused vacation time (only as accrued during the then-current year of
employment), as provided in Sections 5.1 and 5.5, as of the date of such termination.

          6.1.B Termination by Employee as a result of an Involuntary Termination. Employee may terminate
Employee’s employment hereunder for any of the following reasons (each, an “Involuntary
Termination”):

               (a) Employer’s breach of any material term of the Agreement; provided that the first occasion of
any particular breach shall not constitute such Cause unless Employer has failed to cure such
breach within sixty(60) days after receiving written notice from Employee stating the nature of
such breach

               (b) a reduction in Employee’s salary.

               (c) a reduction in Employee’s title.

               (d) the reduction of Employee’s duties from those typically assigned to a Vice President of a
similarly situated biotechnology or pharmaceutical company.

In the case of b, c and d above, the Employee must first give the Employer written notice before
Involuntary Termination and allow employer 15 days to revert any such change.

          6.2. Termination by Employer without Cause or Remedies for Involuntary Termination By
Employee. Employer may also terminate Employee’s employment without Cause upon notice to
Employee.

               6.2.1. During First Six Months of Initial Term. Upon termination of Employee’s
employment by Employer without Cause or by Employee as a result of an Involuntary Termination
during the first six months of the Initial Term, all compensation and benefits to Employee
hereunder shall cease and Employee shall be entitled to payment of: (a) any accrued but unpaid
salary and unused vacation time (only as accrued during the Initial Term) as of the date of such
termination; (b) her salary through the one year anniversary of the Effective Date (in this
section, this period shall be referred to as the “Severance Period”); and (c) continued
participation at Employer’s cost and expense, during the Severance Period in any
Employer-sponsored group benefit plans in which Employee was participating as of the date of
termination or reimbursement as provided in Section 5.5.

 

 

               6.2.2. Between 6 and 18 months after the Effective Date. Upon termination of Employee’s
employment by Employer without Cause or by Employee as a result of an Involuntary Termination at
any time during the period beginning on the 6th (sixth) month anniversary of the
Effective Date and ending on the 18th (eighteenth) month following the Effective Date,
all compensation and benefits to Employee hereunder shall cease and Employee shall be entitled
to payment of: (a) any accrued but unpaid salary and unused vacation time as of the date of such
termination; (b) twelve (12) months’ of salary from the date of termination; (in this section,
this period shall be referred to as the “Severance Period”) and (c) continued
participation, at Employer’s cost and expense, during the Severance Period in any
Employer-sponsored group benefit plans in which Employee was participating as of the date of
termination or reimbursement as provided in Section 5.

               6.2.3. Between 18 and 24 months after the Effective Date. Upon termination of Employee’s
employment by Employer without Cause or by Employee as a result of an Involuntary Termination
after the 18th (eighteenth) month following the Effective Date but before the
twenty four (24) month anniversary following the Effective Date, all compensation and
benefits to Employee hereunder shall cease and Employee shall be entitled to payment of: (a)
any accrued but unpaid salary and unused vacation time as of the date of such termination;
(b) no less than six (6) and no more than twelve (12) months of salary from the date of
termination, which final figure shall be determined by taking the number 12 and subtracting
the number of months following the 18th month anniversary of the Effective Date
(e.g. if Employee’s termination occurs in month 20, she will be entitled to 10 months of
salary as severance and if Employee’s termination occurs in month 23, she will be entitled to
7 months of salary then in effect) (in this section, this period shall be referred to as the
“Severance Period”) and (c) continued participation, at Employer’s cost and expense,
during the Severance Period in any Employer-sponsored group benefit plans in which Employee
was participating as of the date of termination or reimbursement as provided in Section 5.

               6.2.4.  More Than 24 months after the Effective Date. Upon termination of Employee’s
employment by Employer without Cause or by Employee as a result of an Involuntary Termination
beginning twenty four (24) months following the Effective Date and through the remained of the
Term, all compensation and benefits to Employee hereunder shall cease and Employee shall be
entitled to payment of: (a) any accrued but unpaid salary and unused vacation time as of the
date of such termination; (b) 6 months salary then in effect (in this section, this period shall
be referred to as the “Severance Period”); and (c) continued participation at Employer’s
cost and expense, during the Severance Period in any Employer-sponsored group benefit plans in
which Employee was participating as of the date of termination or reimbursement as provided in
Section 5.5.

               6.2.5 Change of Control. Notwithstanding anything to the contrary contained in this Agreement,
in the event of a Change of Control of Employer if Employee’s employment is terminated by
Employer or Employee for Involuntary Termination within one (1) year after the Change of Control
(other than for Cause), then: (i) the greater of (a) fifty percent (50%) of Employee’s unvested
options shall vest immediately, or (b) twelve (12) months unvested

 

 

options shall vest immediately and; and (ii) Employee shall be entitled to (a) any accrued but
unpaid salary and unused vacation time as of the date of such termination; (b) twelve (12)
months’ of salary from the date of termination, payable in accordance with the normal payroll
practice of the Company; (in this section, this period shall be referred to as the “Severance
Period”) and (c) continued participation, at Employer’s cost and expense, during the
Severance Period in any Employer-sponsored group benefit plans in which Employee was
participating as of the date of termination or reimbursement as provided in Section 5. For
purposes of this Agreement, a “Change in Control” shall mean, other than changes between Cytrx
and RXi, (i) an acquisition of any voting securities of the Employer (the “Voting Securities”) by
any “person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the
Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after which such person
has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act)
(“Beneficial Ownership”) of 50% or more of the combined voting power of the Employer’s then
outstanding Voting Securities without the approval of the Board; (ii) a merger or consolidation
that results in more than 50% of the combined voting power of the Employer’s then outstanding
Voting Securities of the Employer or its successor changing ownership (whether or not approved by
the Board); (iii) the sale of all or substantially all of the Employer’s assets; or (iv) approval
by the shareholders of the Employer of a plan of complete liquidation of the Employer.

          6.3. Death or Disability. Employee’s employment will terminate automatically in the
event of Employee’s death or upon notice from Employer in event of her permanent disability.
Employee’s “permanent disability” shall have the meaning ascribed to such term in any
policy of disability insurance maintained by Employer (or Employee, as the case may be) with
respect to Employee, or if no such policy is then in effect, shall mean Employee’s inability to
fully perform her duties hereunder for any period of at least 75 consecutive days or for a total
of 90 days, whether or not consecutive. Upon termination of Employee’s employment as aforesaid,
all compensation and benefits to Employee hereunder shall cease and Employer shall pay to the
Employee’s heirs or personal representatives, not later than ten days after the date of
termination, any accrued but unpaid salary and unused vacation as of the date of such termination
as required by law.

     7. Equitable Remedies; Injunctive Relief. Employee hereby acknowledges and agrees that
monetary damages are inadequate to fully compensate Employer for the damages that would result from
a breach or threatened breach of the Confidentiality Agreement and, accordingly, that Employer
shall be entitled to equitable remedies, including, without limitation, specific performance,
temporary restraining orders, and preliminary injunctions and permanent injunctions, to enforce
such Section without the necessity of proving actual damages in connection therewith. The
provision shall not, however, diminish Employer’s right to claim and recover damages or enforce any
other of its legal or equitable rights or defenses.

     8. Severable Provisions. The provisions of the Agreement are severable and if any one
or more provisions is determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any partially unenforceable provisions to the extent enforceable, shall
nevertheless be binding and enforceable.

 

 

     9. Successors and Assigns. The Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns and Employee and her heirs and representatives;
provided, however, that neither party may assign the Agreement without the prior written consent of
the other party.

     10. Entire Agreement. The Agreement including Schedule A contains the entire
agreement of the parties relating to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of the Agreement that are
not set forth otherwise therein or herein. Except as expressly provided herein, the Agreement
supersedes any and all prior or contemporaneous agreements, written or oral, between Employee and
Employer relating to the subject matter hereof. Any such prior or contemporaneous agreements are
hereby terminated and of no further effect, and Employee, by the execution hereof, agrees that any
compensation provided for under any such agreements is specifically superseded and replaced by the
provisions of the Agreement. Notwithstanding the foregoing, Employer agrees to pay Employee for
work done prior to signing this agreement and reasonable expenses, at the rate of $250 an hour for
work, and $125 an hour for travel (up to 8 hours of travel per day). Such work was performed by
Employee pursuant to an oral agreement to provide consulting services.

     11. Amendment. No modification of the Agreement shall be valid unless made in
writing, approved by the Compensation Committee and signed by the parties hereto and unless such
writing is made by an executive officer of Employer (other than Employee). The parties hereto
agree that in no event shall an oral modification of the Agreement be enforceable or valid.

     12. Governing Law. The Agreement is and shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the choice-of-law rules
of Massachusetts.

     13. Notice. All notices and other communications under the Agreement shall be in
writing and mailed, telecopied (in case of notice to Employer only) or delivered by hand or by a
nationally recognized courier service guaranteeing overnight delivery to a party at the following
address (or to such other address as such party may have specified by notice given to the other
party pursuant to the provision):

     If to Employer:

RXi Pharmaceuticals Corp.

One Innovation Drive

Worcester, MA 01605

Attention: CEO

If to CytRx:

CytRx Corporation

11726 San Vicente Boulevard, Suite 650

Los Angeles, CA 90049

 

 

Facsimile: (310) 826-5529

Attention: Chief Executive Officer

If to Employee:

Dr. Pamela A. Pavco

822 Plateau Rd.

Longmont, CO 80504

     14. Survival. Sections 7 through 16 shall survive the expiration or termination of
the Agreement.

     15. Counterparts. The Agreement may be executed in counterparts, each of which shall
be deemed to be an original and all of which together shall be deemed to be one and the same
agreement.

     16. Attorney’s Fees. In any action or proceeding to construe or enforce any provision
of the Agreement the prevailing party shall be entitled to recover its or her reasonable attorneys’
fees and other costs of suit in addition to any other recoveries.

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the Agreement is executed as of the day and year first above written.

	 	 	 	 	 
	 	EMPLOYER

RXi Pharmaceuticals Corporation

 	 
	 	By:  	/s/
Tod Woolf	 
	 	 	Tod Woolf 	 
	 	 	Chief Executive Officer

RXi Pharmaceuticals Corporation 	 
	 
	 	CYTRX

CytRx Corporation

 	 
	 	By:  	/s/
Steven A. Kriegsman	 
	 	 	Steven A. Kriegsman 	 
	 	 	Chief Executive Officer

CytRx Corporation 	 
	 

	 	 	 	 	 
	EMPLOYEE

 	 	 
	/s/ Pamela A. Pavco	 	 
	Pamela A. Pavco 	 	 
	 	 	 
	 

 

 

Schedule A

Outside business activities of the Employee and disclosed conflicts of interest:

NONEexv10w17

 

Exhibit 10.17

EMPLOYMENT AGREEMENT

     The
Employment Agreement (the “Agreement”) is made and
entered into as of May 23,
2007 (the “Effective Date”) by and between RXi Pharmaceuticals Corporation, a Delaware
corporation (“RXi” or “Employer”), and James Warren, an individual and resident of
the State of Massachusetts (“Employee”).

     WHEREAS, Employer and Employee desire to enter into an employment agreement under which
Employee shall serve on a full-time basis as RXi’s Chief Financial Officer on the terms set forth
in the Agreement, with the term of the Agreement to commence on the Effective Date.

     NOW, THEREFORE, upon the above premises, and in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows.

     1. Engagement. Effective as of the Effective Date, Employer shall employ Employee, and
Employee shall serve, as RXi’s Chief Financial Officer. As a condition to the Employee’s
employment by the Employer, Employee shall execute the Employee Confidentiality, Non-Competition,
and Proprietary Information Agreement, attached hereto as Exhibit 1 (the “Confidentiality
Agreement”).

     2. Duties. Employee shall perform all duties assigned to him by the Employer
faithfully, diligently and to the best of his ability. Such duties include the oversight of the
financial matters of the Employer. Employee shall report directly to the President of Employer.
Employee’s services hereunder shall be rendered at RXi’s office in Worcester, Massachusetts, except
for travel when and as required in the performance of Employee’s duties hereunder.

     3. Time and Efforts. Employee shall devote all of his business time, efforts,
attention and energies to Employer’s business and the discharge of his duties hereunder, except as
noted on Schedule A, which contains other potential activities of the Employee and disclosed
conflicts of interest.

     4. Term. The term (the “Term”) of Employee’s employment shall commence on the
Effective Date and shall continue for one (1) year.

     5. Compensation. As the total consideration for Employee’s services rendered under the
Agreement, Employer shall pay or provide Employee the following compensation and benefits:

          5.1. Salary. Commencing on the Effective Date, Employee shall be entitled to receive
an annual Base Salary of Two Hundred Thousand Dollars ($200,000). Until the time that Employer
raises at least $15 million in equity financing (the “Financing”), CytRx Corporation
(“CytRx”) assumes responsibility for the payment of Employee’s Base Salary. If the
Financing does not occur by June 30, 2007, CytRx agrees to pay Employee the remainder of his Base
Salary for the Term of this Agreement in accordance with Section 4 of this Agreement.

          5.2. Stock Options. At the first regularly scheduled meeting of the Board of
Directors of the Employer following the closing of the Financing, the Employer shall grant Employee
a stock option under the RXi Pharmaceuticals Corporation 2007 Incentive Plan (the “Plan”)
to purchase a number of shares of Employer’s common stock equal to one and a half percent (1.5%) of
the fully diluted capitalization of Employer immediately prior to the closing of the Financing (the
“Option”). Immediately upon the grant of the Option, 8/48ths of the Option shall vest and
become immediately

 

 

exercisable. The remainder of the Option shall vest and become exercisable in
40 equal monthly installments beginning on the one-month anniversary of the
Effective Date of the Agreement, provided, in each case, that Employee remains in the continuous
employ of Employer through such anniversary date. The Option shall (a) be exercisable at an
exercise price equal to the fair market value at the time of granting as determined by Employer’s
Board of Directors, (b) have a term of ten years, and (c) be on such other terms as shall be
determined by Employer’s Board of Directors (or the Compensation Committee of the Board) and set
forth in a customary form of stock option agreement under the Plan evidencing the Option.
Notwithstanding anything to the contrary in Section 6.2 or other provisions of the Agreement or of
the stock option agreement evidencing the Option, upon the occurrence of a “Covered Transaction”
(as defined in the Plan), the Option shall thereupon vest in full and become exercisable as to all
of the shares covered thereby in accordance with the terms of the Plan. Furthermore, in the event
that the Employee is terminated without Cause (as defined below in Section 6.1) during the Term,
the shares that would have vested during the Term shall vest as of the date of such termination.

          5.3. Expense Reimbursement. Employer shall reimburse Employee for reasonable and
necessary business expenses incurred by Employee in connection with the performance of Employee’s
duties in accordance with Employer’s usual practices and policies in effect from time to time.

          5.4. Vacation. Employee shall be entitled to twenty (20) business days of vacation
each year during the Term. Vacation time that is not used by Employee during each twelve-month
term of employment will be lost and not be carried over into any future period.

          5.5. Employee Benefits. Employee shall be eligible to participate in any medical
insurance and other employee benefits made available by Employer to all of its employees under its
group plans and employment policies in effect during the Term. Employee acknowledges and agrees
that, any such plans or policies now or hereafter in effect may be modified or terminated by
Employer at any time in its discretion. If, the benefits are not offered by Employer (at
Employer’s sole discretion) in the state of residence of Employee, then the Employee will not
obtain the benefit, and the Employer will award the employee the amount of money saved, if any, by
not providing the Employee such benefit.

          5.6. Payroll Taxes. Employer shall have the right to deduct from the compensation and
benefits due to Employee hereunder any and all sums required for social security and withholding
taxes and for any other federal, state, or local tax or charge which may be in effect or hereafter
enacted or required as a charge on the compensation or benefits of Employee.

          5.7. Reduced Time. At the Employer’s discretion, Employee’s position may be changed
from a full-time position to a half-time position at any time during the Term. If such change is
made, Employee will work approximately twenty-one (21) hours a week for Employer and his Base
Salary will be reduced pro rata. However, as long as Employee remains employed in the half-time
position, Employee will retain his rights under this Agreement, including the continued receipt of
benefits as described in Section 5.5 and the vesting of the Option pursuant to Section 5.2.

     6. Termination. The Agreement may be terminated as set forth in this Section 6.

          6.1. Termination by Employer for Cause or Voluntary Resignation. Employer may
terminate Employee’s employment hereunder for Cause upon notice to Employee and Employee may

 

 

voluntarily resign his employment hereunder upon notice to Employer. “Cause” for the
purpose shall mean any of the following:

               (a) Employee’s breach of any material term of the Agreement; provided that the first occasion
of any particular breach shall not constitute such Cause unless Employee has failed to cure such
breach within ten (10) days after receiving written notice from Employer stating the nature of such
breach;

               (b) Employee’s conviction of, or plea of guilty or nolo contendere to, any felony or other
crime of moral turpitude;

               (c) Employee’s act of fraud or dishonesty injurious to Employer or its reputation;

               (d) Employee’s continual failure or refusal to perform his material duties as required under
the Agreement after written notice from Employer stating the nature of such failure or refusal and
affording Employee at least ten days to correct the same;

               (e) Employee’s act or omission that, in the reasonable determination of Employer indicates
alcohol or drug abuse by Employee; or

               (f) Employee’s act or personal conduct that, in the judgment of Employer’s Board of Directors
(or a Committee of the Board), gives rise to a material risk of liability of Employee or Employer
under federal or applicable state law for discrimination, or sexual or other forms of harassment,
or other similar liabilities to subordinate employees.

               Upon termination of Employee’s employment by Employer for Cause or by Employee due to a
voluntary resignation, all compensation and benefits to Employee hereunder shall cease and Employee
shall be entitled only to payment, not later than three days after the date of termination, of any
accrued but unpaid salary and unused vacation time (only as accrued during the then-current year of
employment), as provided in Sections 5.1 and 5.5, as of the date of such termination.

          6.2. Termination by Employer without Cause. Employer may also terminate Employee’s
employment without Cause upon notice to Employee. Upon termination of Employee’s employment by
Employer without Cause during the Term, all compensation and benefits to Employee hereunder shall
cease and Employee shall be entitled to payment of: (a) any accrued but unpaid salary and unused
vacation time (only as accrued during the Term) as of the date of such termination; (b) three (3)
months’ of salary from the date of termination (the “Severance Period”) in the form of
salary continuation; and (c) continued participation, at Employer’s cost and expense, during the
Severance Period in any Employer-sponsored group benefit plans in which Employee was participating
as of the date of termination.

          6.3. Death or Disability. Employee’s employment will terminate automatically in the
event of Employee’s death or upon notice from Employer in event of his permanent disability.
Employee’s “permanent disability” shall have the meaning ascribed to such term in any
policy of disability insurance maintained by Employer (or Employee, as the case may be) with
respect to Employee, or if no such policy is then in effect, shall mean Employee’s inability to
fully perform his duties hereunder for any period of at least 75 consecutive days or for a total of
90 days, whether or not

 

 

consecutive. Upon termination of Employee’s employment as aforesaid, all
compensation and benefits to Employee hereunder shall cease and Employer shall pay to the
Employee’s heirs or personal representatives, not later than ten days after the date of
termination, any accrued but unpaid salary and unused vacation as of the date of such termination
as required by law.

     7. Equitable Remedies; Injunctive Relief. Employee hereby acknowledges and agrees that
monetary damages are inadequate to fully compensate Employer for the damages that would result from
a breach or threatened breach of the Confidentiality Agreement and, accordingly, that Employer
shall be entitled to equitable remedies, including, without limitation, specific performance,
temporary restraining orders, and preliminary injunctions and permanent injunctions, to enforce
such Section without the necessity of proving actual damages in connection therewith. The
provision shall not, however, diminish Employer’s right to claim and recover damages or enforce any
other of its legal or equitable rights or defenses.

     8. Severable Provisions. The provisions of the Agreement are severable and if any one
or more provisions is determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any partially unenforceable provisions to the extent enforceable, shall
nevertheless be binding and enforceable.

     9. Successors and Assigns. The Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns and Employee and his heirs and representatives;
provided, however, that neither party may assign the Agreement without the prior written consent of
the other party.

     10. Entire Agreement. The Agreement including Schedule A contains the entire
agreement of the parties relating to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of the Agreement that are
not set forth otherwise therein or herein. Except as expressly provided herein, the Agreement
supersedes any and all prior or contemporaneous agreements, written or oral, between Employee and
Employer relating to the subject matter hereof. Any such prior or contemporaneous agreements are
hereby terminated and of no further effect, and Employee, by the execution hereof, agrees that any
compensation provided for under any such agreements is specifically superseded and replaced by the
provisions of the Agreement.

     11. Amendment. No modification of the Agreement shall be valid unless made in
writing, approved by the Compensation Committee and signed by the parties hereto and unless such
writing is made by an executive officer of Employer (other than Employee). The parties hereto
agree that in no event shall an oral modification of the Agreement be enforceable or valid.

     12. Governing Law. The Agreement is and shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the choice-of-law rules
of Massachusetts.

     13. Notice. All notices and other communications under the Agreement shall be in
writing and mailed, telecopied (in case of notice to Employer only) or delivered by hand or by a
nationally recognized courier service guaranteeing overnight delivery to a party at the following
address (or to such other address as such party may have specified by notice given to the other
party pursuant to the provision):

 

 

If to Employer:

RXi Pharmaceuticals Corp.

One Innovation Drive

Worcester, MA 01605

If to Employee:

Mr. James
Warren

[Address]

     14. Survival. Sections 7 through 16 shall survive the expiration or termination of
the Agreement.

     15. Counterparts. The Agreement may be executed in counterparts, each of which shall
be deemed to be an original and all of which together shall be deemed to be one and the same
agreement.

     16. Attorney’s Fees. In any action or proceeding to construe or enforce any provision
of the Agreement the prevailing party shall be entitled to recover its or his reasonable attorneys’
fees and other costs of suit in addition to any other recoveries.

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the Agreement is executed as of the day and year first above written.

	 	 	 	 	 
	 	EMPLOYER

RXi Pharmaceuticals Corporation

 	 
	 	By:  	/s/ Tod Woolf
 	 
	 	 	Tod Woolf 	 
	 	 	Chief Executive Officer

RXi Pharmaceuticals Corporation 	 
	 

	 	 	 
	EMPLOYEE
	 	 
	 
	 	 
	/s/ James Warren
 

	 	 
	James Warren
	 	 
	Chief Financial Officer
	 	 
	RXi Pharmaceuticals Corporation
	 	 

 

 

Exhibit 1

RXi Pharmaceuticals Corporation

EMPLOYEE CONFIDENTIALITY, NON-COMPETITION, AND

PROPRIETARY INFORMATION AGREEMENT

     AGREEMENT, effective as of May 23, 2007, between RXi Pharmaceuticals Corporation, a Delaware
corporation (the “Company”), and James Warren (the “Employee”).

1. Employee will make full and prompt disclosure to the Company of all inventions, improvements,
modifications, discoveries, methods, technologies, biological materials, and developments, and all
other materials, items, techniques, and ideas related directly or indirectly to the business of the
Company (all of which are collectively termed “Intellectual Property” hereinafter), whether
patentable or not, made or conceived by Employee or under Employee’s direction during Employee’s
employment with the Company, whether or not made or conceived during normal working hours, or on
the premises of the Company.

2. Employee agrees that all Intellectual Property, as defined above, shall be the sole property of
the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents
and other rights in connection therewith. Employee hereby assigns to the Company any rights
Employee may have or acquire in all Intellectual Property and all related patents, copyrights,
trademarks, trade names, and other industrial and intellectual property rights and applications
therefore, in the United States and elsewhere. Employee further agrees that with regard to all
future developments of Intellectual Property, Employee will assist the Company in every way that
may be reasonably required by the Company (and at the Company’s expense) to obtain and, from time
to time, enforce patents on Intellectual Property in any and all countries that the Company may
require, and to that end, Employee will execute all documents for use in applying for and obtaining
such patents thereon and enforcing the same, as the Company may desire, together with any
assignment thereof to the Company or persons designated by the Company, and Employee hereby
appoints the Company as Employee’s attorney to execute and deliver any such documents or
assignments requested by the Company. Employee’s obligation to assist the Company in obtaining and
enforcing patents for Intellectual Property in any and all countries shall continue beyond the
termination of Employee’s employment with the Company, but the Company shall compensate Employee at
a reasonable, standard hourly rate following such termination for time directly spent by Employee
at the Company’s request for such assistance.

3. Employee hereby represents that Employee has no continuing obligation to assign to any former
employer or any other person, corporation, institution, or firm any Intellectual Property as
described above. Employee represents that Employee’s performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any agreement to keep in
confidence proprietary information acquired by Employee, in confidence or in trust, prior to
Employee’s employment by the

 

 

Company. Employee has not entered into, and Employee agrees not to enter into, any agreement
(either written or oral), which would put Employee in conflict with this Agreement.

4. Employee agrees to assign to the Company any and all copyrights and reproduction rights to any
material prepared by Employee in connection with this Agreement and/or developed during the term of
Employee’s employment with the Company.

5. Employee understands and agrees that a condition of Employee’s employment and continued
employment with the Company is that Employee has not brought and will not bring to the Company or
use in the performance of Employee’s duties at the Company any materials or documents rightfully
belonging to a former employer which are not generally available to the public.

6. Employee recognizes that the services to be performed by Employee hereunder are special, unique,
and extraordinary and that, by reason of Employee’s employment with the Company, Employee may
acquire Confidential Information (as hereinafter defined) concerning the operation of the Company,
the use or disclosure of which would cause the Company substantial loss and damage which could not
be readily calculated and for which no remedy at law would be adequate. Accordingly, Employee
agrees that Employee will not (directly or indirectly) at any time, whether during or after
Employee’s employment with the Company:

	 	(i)	 	knowingly use for personal benefit or for any other reason not authorized by
the Company any Confidential Information that Employee may acquire or has acquired by
reason of Employee’s employment with the Company, or;
	 
	 	(ii)	 	disclose any such Confidential Information to any person or entity except (A)
in the performance of Employee obligations to the Company hereunder, (B) as required
by a court of competent jurisdiction, (C) in connection with the enforcement of
Employee rights under this Agreement, or (D) with the prior consent of the Board of
Directors of the Company.

     As used herein, “Confidential Information” includes information with respect to the facilities
and methods of the Company, reagents, chemical compounds, cell lines or subcellular constituents,
organisms, or other biological materials, trade secrets, and other Intellectual Property, systems,
patents and patent applications, procedures, manuals, confidential reports, financial information,
business plans, prospects, or opportunities, personnel information, or lists of customers and
suppliers; provided, however, that Confidential Information shall not include any information that
is known or becomes generally known or available publicly other than as a result of disclosure by
Employee which is not permitted as described in clause (ii) above, or the Company discloses same to
others without obtaining an agreement of confidentiality.

 

 

     Employee confirms that all Confidential Information is the exclusive property of the Company.
All business records, papers, documents and electronic materials kept or made by Employee relating
to the business of the Company which comprise Confidential Information shall be and remain the
property of the Company during the Employee’s employment and at all times thereafter. Upon the
termination, for any reason, of Employee’s employment with the Company, or upon the request of the
Company at any time, Employee shall deliver to the Company, and shall retain no copies of any
written or electronic materials, records and documents made by Employee or coming into Employee’s
possession concerning the business or affairs of the Company and which comprise Confidential
Information.

7. During the term of Employee’s employment with the Company (the “Restricted Period”), the
Employee shall not directly or indirectly, for Employee’s own account or for the account of others,
as an officer, director, stockholder (other than as the holder of less than 1% of the outstanding
stock of any publicly traded company), owner, partner, employee, promoter, consultant, manager or
otherwise participate in the promotion, financing, ownership, operation, or management of, or
assist in or carry on through proprietorship, a corporation, partnership, or other form of business
entity which is in competition with the Company within the United States or any other country in
which the Company is conducting or is actively seeking or planning to conduct business as of the
date of such termination.

     During the Restricted Period, the Employee shall not, whether for Employee’s own account or
for the account of any other person (excluding the Company):

	 	(i)	 	solicit or contact in an effort to do business with any person who was or is
a customer of the Company during the term of this Agreement or after its termination,
or any affiliate of any such person, if such solicitation or contact is for the
purpose of competition with the Company; or
	 
	 	(ii)	 	solicit or induce any of the Company’s employees to leave their employment
with the Company or accept employment with anyone else, or hire any such employees or
persons who were employed by the Company during the preceding twelve (12) months.

     Nothing herein shall prohibit or preclude the Employee from performing any other types of
services that are not precluded by this Section 7 for any other person.

     Employee has carefully read and considered the provisions of this Section 7 (including the
Restricted Period, scope of activity to be restrained, and the restriction’s geographical scope)
and concluded them to be fair, appropriate and reasonably required for the protection of the
legitimate business interests of the Company, its officers, directors, employees, creditors, and
shareholders. Employee understands that the restrictions contained in this Section may limit
Employee’s ability to engage in a business similar to the Company’s business, but acknowledges that
Employee will receive

 

 

adequate and affluent remuneration and other benefits from the Company hereunder to justify
such restrictions.

     The Employee shall give prompt notice to the Company of the Employee’s acceptance of
employment or other fees for services relationship during the Restricted Period, which notice shall
include the name of, the business of, and the position that Employee shall hold with such other
employer.

8. In the event that Employee’s employment is transferred by the Company to a subsidiary,
affiliated company, or acquiring company (as the case may be), Employee’s employment by such
company will, for the purpose of this Agreement, be considered as continued employment with the
Company, unless Employee executes an agreement, substantially similar in substance to this
Agreement, and until the effective date of said agreement in any such company for which Employee
becomes employed. It is likewise agreed that no changes in Employee’s position or title will
operate to terminate the provisions of this Agreement unless expressly agreed to in writing.

9. Upon termination of Employee’s employment for any reason, unless such employment is transferred
to a subsidiary, affiliated or acquiring company of the Company, Employee agrees to leave with, or
return to, the Company all records, drawings, notebooks, and other documents pertaining to the
Company’s Confidential Information, whether prepared by Employee or others, as well as any
equipment, tools or other devices owned by the Company, that are then in Employee’s possession,
however such items were obtained, and Employee agrees not to reproduce or otherwise retain any
document or data relating thereto.

10. Employee obligations under this Agreement shall survive the termination of Employee’s
employment with the Company regardless of the manner of, and reason for, such termination, and
shall be binding upon Employee’s heirs, executors, and administrators.

11. Prior to entering the employ of the Company, Employee has lawfully terminated employment with
all previous employers. Subject to paragraph 6 of the Employment Agreement, Employee acknowledges
that this Agreement does not constitute a contract of employment for a term and does not otherwise
imply that the Company will continue his or her employment for any period of time. Employee
further understands and agrees that no license to any of the Company’s trademarks, patents,
copyrights or other proprietary rights is either granted or implied by Employee’s access to and
utilization of the Confidential Information or Intellectual Property.

12. No delay or omission by the Company in exercising any right under this Agreement will operate
as a waiver of that or any other right. A waiver or consent given by the Company on any one
occasion is effective only in that instance and will not be construed as a bar to or waiver of any
right on any other occasion.

 

 

13. Employee agrees that in addition to any other rights and remedies available to the Company for
any breach or threatened breach by Employee of Employee’s obligations hereunder, the Company shall
be entitled to enforcement of Employee’s obligations hereunder by whatever means are at the
Company’s disposal, including court injunction.

14. The Company may assign this Agreement to any other corporation or entity which acquires
(whether by purchase, merger, consolidation or otherwise) all or substantially all of the business
and/or assets of the Company. Employee shall have no rights of assignment.

15. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable, then
such provision shall be enforceable to the extent that a court deems it reasonable to enforce such
provision. If such provision shall be unreasonable to enforce to any extent, such provision shall
be severed and all remaining provisions shall continue in full force and effect.

16. This Agreement shall be effective as of the date first written above.

17. This Agreement shall be governed in all respects by the laws of the Commonwealth of
Massachusetts. Each of the Company and Employee (a) hereby irrevocably submits to the exclusive
jurisdiction of the state courts of The Commonwealth of Massachusetts or the United States District
Court located in The Commonwealth of Massachusetts for the purpose of any action between the
Company and Employee arising in whole or in part under or in connection with this Agreement, (b)
hereby waives, to the extent not prohibited by applicable law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, any claim that it is not subject personally
to the jurisdiction of the above-named courts, that its property is exempt or immune from
attachment or execution, that any such action brought in one of the above-named courts should be
dismissed on grounds of forum non conveniens, should be transferred or removed to any court other
than one of the above-named courts, or should be stayed by reason of the pendency of some other
proceeding in any other court other than one of the above-named courts, or that this Agreement or
the subject matter hereof may not be enforced in or by such court, and (c) hereby agrees not to
commence any such action other than before one of the above-named courts. Notwithstanding the
previous sentence, the Company or Employee may commence any action in a court other than the
above-named courts solely for the purpose of enforcing an order or judgment issued by one of the
above-named courts.

IN WITNESS WHEREOF, Employee has executed this Agreement under seal as of the date set forth above:

	 
	BY:                                                             

	Name of Employee: James Warren

 

 

	 
	ACCEPTED AND AGREED TO:

	 

	RXi Pharmaceuticals Corporation

	 

	BY:                                                             

	Name: Tod Woolf

	Title: President and CEO

 

 

Schedule A

Outside business activities of the Employee and disclosed conflicts of interest:

NONE

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