EXTENSION AND SEVERANCE COMPENSATION AGREEMENT
AGREEMENT
dated
as of June 9, 2005 between Callisto Pharmaceuticals, Inc., a Delaware
corporation (the “Company”) and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D (the
“Executive”).
The
Company’s Board of Directors has determined, in light of the importance of the
Executive’s continued services to the stability and continuity of management of
the Company, it is appropriate and in the best interests of the Company and
its
stockholders to reinforce and encourage the Executive’s continued disinterested
attention and undistracted dedication to his duties in the potentially
disturbing circumstances of a possible change in control of the Company.
Accordingly, the Company’s Board of Directors has determined that it is
desirable to pay the Executive the severance compensation set forth below if
the
Executive’s employment with the Company terminates under the circumstances
described below following a Change in Control of the Company (as defined
below).
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
in this Agreement, it is agreed between the Company and the Executive as
follows:
0.
EXTENSION
OF EMPLOYMENT AGREEMENT.
(a) The
“Employment Term” defined in Section 1.2 of the agreement dated as of September
23, 2003 between the Company and Executive, as amended April 6, 2004 (the
“Employment Agreement”) is hereby extended to June 13, 2007, unless earlier
terminated in accordance with Section 4 of the Employment Agreement.
(b) Except
as modified by this Agreement all of the terms of the Employment Agreement
shall
continue in full force and effect. In the event of a discrepancy between the
Employment Agreement and this Agreement, the terms of this Agreement shall
be
controlling.
1.
TERM
OF AGREEMENT.
This
Agreement shall commence on the date hereof and shall terminate, except to
the
extent that any obligation of the Company under this Agreement remains
unfulfilled as of such time, upon the earliest of (i) five years from the date
hereof if a Change in Control of the Company has not occurred within such
five-year period, (ii) the termination of the Executive’s employment with the
Company as a result of death, Disability (as defined in Section 3(b)),
Retirement (as defined in Section 3(c)) or Cause (as defined in Section 3(d))
or
(iii) two years from the date of Change in Control of the Company if the
employment of the Executive has not terminated within such two-year
period.
2.
CHANGE
IN CONTROL.
No
compensation shall be payable under this Agreement unless and until (a) there
shall have been a Change in Control of the company while the Executive is an
employee of the Company and (b) the Executive’s employment by the Company
thereafter shall have terminated in accordance with Section 3 of this Agreement.
For purposes of this Agreement, a “Change in Control” shall be deemed to have
occurred if (i) there shall be consummated (A) any
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consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company’s Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company’s Common Stock immediately prior to
the merger
have substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company; or (ii)
the
stockholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company, (ii) any person (as such term is
used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the
“Exchange Act”)), other than the Company or any employee benefit plan sponsored
by the Company, shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of the Company representing 20%
or
more of the combined voting power of the Company’s then outstanding securities
ordinarily (and apart from rights accruing in special circumstances) having
the
right to vote in the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise,
or
(iv) at any time during a period of two consecutive years, individuals who
at
the beginning of such period constituted the Board of Directors of the Company
shall cease for any reason to constitute at least a majority thereof, unless
the
election or the nomination for election by the Company’s stockholders of each
new director during such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such two-year period (or in the case that the Executive is the
CEO
of the Company, in addition if the Board appoints a new CEO during the term
of
this Agreement or substantially reduces the title and authority of the Executive
without the Executive’s prior consent).
3.
TERMINATION
FOLLOWING CHANGE IN CONTROL.
(a) Circumstances
In Which Severance Compensation is Payable.
If a Change in Control of the Company shall have occurred while the Executive
is
an employee of the Company, the Executive shall be entitled to the compensation
provided in Section 4 of this Agreement upon the subsequent termination of
the
Executive’s employment with the Company by either the Company, or the Executive
pursuant to Section 3(e) of this Agreement, within two years of the date upon
which the Change in Control shall have occurred, unless such termination is
as a
result of (i) the Executive’s death; (ii) the Executive’s Disability; (iii) the
Executive’s Retirement; or (iv) the Executive’s termination for
Cause.
(b) Disability.
If, as a result of the Executive’s Incapacity due to physical or mental illness,
the Executive shall be permanently and totally disabled within the meaning
of
Section 105(d)(4) of the Internal Revenue Code of 1986, as amended (the “Code”),
the Company may terminate the Executive’s employment for “Disability” without
the Executive being entitled to the compensation provided in Section
4.
(c) Retirement.
Termination by the Company or the Executive of the Executive’s employment based
on “Retirement”, shall mean termination in accordance with the Company’s
Retirement Plan applicable to its
employees or in accordance with any other retirement arrangements which have
been entered into with the Executive without the Executive being entitled to
the
compensation provided in Section 4.
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(d) Cause.
The Company may terminate the Executive’s employment for Cause without the
Executive being entitled to the compensation provided in Section 4. For purposes
of this Agreement, the Company shall have “Cause” to terminate the Executive’s
employment only on the basis of (i) the Executive’s willful and continued
failure substantially to perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental illness
or
any such failure or anticipated failure after the issuance of an Executive
Notice of Termination (as defined in Section 3(g) by the Executive) after a
written demand for substantial performance is delivered to the Executive by
the
Chief Executive Officer (or, if the Executive is the Chief Executive Officer,
by
the Board of Directors) which specifically identifies the manner in which the
Chief Executive Officer (or the Board of Directors if the Executive is the
Chief
Executive Officer) believes that the Executive has not substantially performed
his duties, or (ii) the Executive’s willful engagement in gross misconduct
materially and demonstrably injurious to the Company. For purposes of this
subsection, no act or failure to act on the Executive’s part shall be considered
“willful” unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his action or omission was in the best
interest of the Company. The Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a written statement of the Chief Executive Officer (or, if the
Executive is the Chief Executive Officer, a copy of a resolution duly adopted
by
the affirmative vote of not less than two-thirds of the entire membership of
the
Board of Directors at a meeting of the Board of
Directors called and held for the purpose), finding that in the good faith
opinion of the Chief Executive Officer (or the Board of Directors if the
Executive is the Chief Executive Officer) the Executive was guilty of conduct
set forth in clause (i) or (ii) of the second sentence of this Section 3(d)
and
specifying the particulars thereof in detail.
(e) Good
Reason.
The Executive may terminate his or her employment for Good Reason within two
years after a Change in Control of the Company and during the term of this
Agreement and become entitled to the compensation provided in Section 4. For
purposes of this Agreement “Good Reason” shall mean any of the following events
unless it occurs with the Executive’s express prior written
consent:
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(i)
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any
assignment to the Executive by the Company of any duties inconsistent
with, or any diminution of, the Executive’s position, duties, titles,
offices, responsibilities and status with the Company immediately
prior to
a Change in Control of the Company, or any removal of the Executive
from
or any failure to reelect the Executive to any of such positions
or
offices, except in connection with the termination of the Executive’s
employment for Disability, Retirement or Cause or as a result of
the
Executive’s death;
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(ii)
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any
reduction by the Company in the Executive’s base salary as in effect on
the date hereof or as the same may be increased from time to time
during
the term of this Agreement or the Company’s failure to increase (within 15
months of the Executive’s last increase in base salary) the Executive’s
base salary after a Change in Control of the Company in an amount
which is
at least equal, on a percentage basis, to the average percentage
increase
in base salary for all officers of the Company effected during the
preceding 12 months;
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(iii)
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any
failure by the Company to continue in effect any benefit or incentive
plan
or arrangement (including,
without limitation, the Company’s Retirement Plan, Stock Option Plan for
Key Employees, Employees Stock Purchase Plan, 401(k) Savings Plan,
group
life insurance plan, medical, dental accident and disability insurance
plans, annual bonus and contingent bonus arrangement, and any plan
or
arrangement to receive and exercise stock
appreciation rights, or to acquire stock or other securities of the
Company) in which the Executive is participating at the time of a
Change
in Control of the Company (or to substitute and continue other plans
providing the Executive with substantially similar benefits) hereinafter
referred to as “Benefit Plans”), the taking of any action by the Company
which would adversely affect the Executive’s participation in or
materially reduce the Executive’s benefits under any such Benefit Plan or
deprive the Executive of any material employee benefit enjoyed by
the
Executive at the time of a Change in Control of the Company, or any
failure by the Company to provide the Executive with the number of
paid
vacation days to which the Executive is entitled in accordance with
the
vacation policies in effect at the time of a Change of Control of
the
Company;
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(iv)
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a
relocation of the Company’s principal executive offices from or the
Executive’s relocation to any place other than the location at which the
Executive performed the Executive’s duties immediately prior to a Change
in Control of the Company;
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(v)
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a
substantial increase in business travel obligations of the Executive
over
such obligations as they existed at the time of a Change in Control
of the
Company;
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(vi)
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any
material breach by the Company of any provision of this
Agreement;
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(vii)
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any
failure by the Company to obtain the assumption of this Agreement
by any
successor or assign of the Company;
or
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(viii)
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any
purported termination of the Executive’s employment after a Change in
Control which is not effected pursuant to a Company Notice of Termination
satisfying the requirements of Section 3(f), and, for purposes of
this
Agreement, no such purported termination shall be
effective.
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(f) Notice
of Termination by the Company.
Any termination by the Company pursuant to Section 3(b), 3(c) or 3(d) shall
be
communicated to the Executive by a Company Notice of Termination. For purposes
of this Agreement, a “Company Notice of Termination” shall mean a written notice
which shall indicate the specific termination provision in this Agreement relied
upon and which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated. For purposes of this Agreement, no such purported
termination by the Company shall be effective without such Company Notice of
Termination.
(g) Notice
of Termination by the
Executive.
Any termination by the Executive pursuant to Section 3(e) shall be communication
to the Company by a written letter addressed to
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the
Board of Directors (“Executive Notice of Termination”). If the Executive
terminates his employment pursuant to Section 3(e), such Executive Notice of
Termination shall specify the facts and circumstances claimed to provide a
basis
for termination.
(h) Date
of Termination.
“Date of Termination” shall mean
(a) if the Executive’s employment is terminated by the Company for Disability,
30 days after a Company Notice of Termination is given to the Executive
(provided that the Executive shall not have returned to the performance of
the
Executive’s duties on a full-time basis during such 30-day period) or (b) if the
Executive’s employment is terminated for any other reason, the date on which
either a Company Notice of Termination or Executive Notice of Termination is
given.
4. SEVERANCE
COMPENSATION UPON TERMINATION.
(a) If
the Executive’s employment by the Company is terminated (x) by the Company
pursuant to Section 3(b), 3(c) or 3(d) or by reason of death, or (y) by the
Executive after a Change in Control for other than Good Reason, the Executive
shall not be entitled to any severance compensation under this Agreement, but
the absence of the Executive’s entitlement to any severance compensation under
this Agreement shall not prejudice the Executive’s right to the full realization
of any and all other benefits to which the Executive shall be entitled pursuant
to the terms of any employment contract, any Benefit Plans or other programs,
policies or agreements of the Company, in which the Executive is a participant
or to which the Executive is a party.
(b) If
the Executive’s employment by the company is terminated (x) by the Company other
than pursuant to Section 3(b), 3(c) or 3(d) or by reason of death or (y) by
the
Executive pursuant to Section 3 (e), then the Executive shall be entitled to
the
severance compensation and other benefits below:
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(i)
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In
lieu of any further salary payments to the Executive for periods
subsequent to the Date of Termination, the Company shall pay the
Executive
as a severance payment in a lump sum, an amount equal to the compensation
due to the Executive for the Employment Term under the Employment
Agreement, as extended by Section 0 of this Agreement, for the time
remaining of such Employment Term, plus all earned but unpaid compensation
to the Termination Date. Such payments will be made no later than
the
tenth business date after the Termination
Date.
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(ii)
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All
unvested stock options shall immediately and irrevocably vest and
the
exercise period of such options shall be automatically extended to
the
later of the longest period permitted by the Company’s stock option plans
or ten years following the Termination
Date.
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(iii)
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The
severance compensation provided for in subsection (b)(i) above shall
be
paid not later than the tenth day following the Date of Termination;
provided,
however, that
if the amount of such compensation cannot be finally determined on
or
before such day, the Company shall pay to the Executive on such day
an
estimate, as determined in good faith by the Company but subject
to the
provisions of Section
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4(c),
of the minimum amount of such compensation and shall pay the remainder
of
such compensation (together with interest at the Federal short-term
rate
provided in Section 1274(d)(7)(C)(1) of the Code) as soon as the
amount
thereof can be determined but in no event later than the thirtieth
day
after the Date of Termination. In the event the amount of the estimated
payment exceeds the amount subsequently determined to have been due,
such
excess shall constitute a loan by the Company to the Executive payable
on
the fifth day after demand by the Company (together with interest
at the
Federal short-term rate provided in Section 1274(d)(7)(C)(1) of the
Code).
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(c) If
the payment of the Total Payments (as defined below) will be subject to the
tax
(the “Excise Tax”) imposed by Section 4999 of the Code, the Company shall pay
the Executive on or before the tenth day following the Date of Termination,
an
additional amount (the “Gross-Up Payment”) such that the net amount retained by
the Executive, after deduction of any Excise Tax on Total Payments and any
federal and state and local income tax and Excise Tax upon the payment provided
for by this paragraph, shall be equal to the Total Payments. For purposes of
determining whether any of the payments will be subject to the Excise Tax and
the amount of such Excise Tax, (i) any payments or benefits received or to
be
received by the Executive in connection with a Change in Control of the Company
or the Executive’s termination of employment, whether payable pursuant to the
terms of Section 4 of this Agreement or
any other plan, arrangement or agreement with the company, its successors,
any
person whose actions result in a Change in Control of the company or any
corporation affiliated (or which, as a result of the completion of transaction
causing such a Change in control, will become affiliated) with the company
within the meaning of Section 1504 of Code (the “Total Payments”) shall be
treated as “parachute payments” within the meaning of Section 28OG(b)(2) of the
Code, and all “excess parachute payments” within the meaning of Section
28OG(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company’s independent auditors and acceptable to
the Executive the Total Payments (in whole or in part) do no constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 28OG(b)(4) of the Code either in their entirety or in excess
of the base amount within the meaning of Section 28OG(b)(3) of the Code, or
are
otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments
that shall be treated as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Total Payments or (B) the amount of excess
parachute payments or benefit shall be determined by the Company’s independent
auditors in accordance with the principles of Section 28OG(d)(3) and (4) of
the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive’s residence an the
Date of Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
the
Excise Tax is subsequently determined to be less than the amount into account
hereunder at the time of termination of the Executive’s employment, the
Executive shall repay to the Company at the time the amount of such reduction
in
Excise Tax is finally determined the portion of the Gross-Up Payment that can
be
repaid such that the Executive remains whole on an after-tax basis following
such repayment (taking into account any reduction in income or excise taxes
to
the Executive from such repayment) plus interest on the
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amount
of such repayment at the Federal short-term rate provided in Section
1274(d)(1)(C)(i) of the Code. In the event the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the termination
of
the Executive’s employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
the
Company shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
5.
NO
OBLIGATION
TO MITIGATE DAMAGES: NO EFFECT ON OTHER CONTRACTUAL RIGHTS,
(a) The
Executive shall not be required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or otherwise,
nor
(except to the extent provided in Section 4(b)(iii)) shall the amount of any
payment provided for under this Agreement be reduced by any compensation earned
by the Executive as a result of employment by another employer after the
termination of the Executive’s employment, or otherwise.
(b) The
provisions of this Agreement, and any payment provided for hereunder, shall
not
reduce any amounts otherwise payable, or in any way
diminish the Executive’s existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, employment agreement
or
other contract, plan or arrangement of the Company or any of its subsidiaries
of
which the Executive shall be a beneficiary.
(c) This
Agreement shall have no effect on the enforceability of Sections 3.1 and 3.2
of
the Employment Agreement between the Company and the Executive dated September
23, 2003, as amended April 6, 2004.
6.
SUCCESSOR
TO THE COMPANY.
(a) The
Company will require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all the
business and/or assets of the Company, by agreement in form and substance
,satisfactory to the Executive, to assume and agree to perform this Agreement
in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Any failure
of
the Company to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement and in
such case the Executive shall have the right to terminate his or her employment
for Good Reason and become fully entitled to the benefits of Section 4 of this
Agreement. As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor assign to its business and/or assets
as
aforesaid which executes and delivers the agreement provided for in this Section
6 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive should die while
any amounts are still payable to the
Executive
hereunder, all such amounts, unless otherwise provided herein, shall be paid
in
accordance with the
terms of this Agreement to the Executive’s devisee, legatee, or other designee
or, if there be no such designee, to the Executive’s estate.
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7.
NOTICE.
For
purposes of this Agreement, notices and all other communications provided for
in
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, as follows:
if
to the Company:
Callisto
Pharmaceuticals, Inc.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or
such other address as either party may have furnished to the other in writing
in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
8.
MISCELLANEOUS.
No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in a writing signed by the
Executive and the Company. No waiver by either party hereto at any time of
any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any
prior to subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either
party which are not set forth expressly in this Agreement. This Agreement shall
be governed by and construed in accordance with the laws of
Delaware.
9.
EMPLOYMENT.
The
Executive agrees to be bound by the terms and conditions of this Agreement
and
to remain in the employ of the Company during any
period following any public announcement of any proposed transaction or
transactions which, if effected, would result in a Change in Control of the
Company until a Change in Control of the Company has taken place or, in the
opinion of the Board of Directors such person has abandoned or terminated its
efforts to effect a Change in Control of the Company. Subject to the foregoing,
nothing contained in this Agreement shall impair or interfere in any way with
the right of the Executive to terminate the Executive’s employment or the right
of the Company to terminate the employment of the Executive with or without
cause prior to a Change in Control of the Company. Nothing contained in this
Agreement shall be construed as a contract of employment between the Company
and
the Executive or as a right of the Executive to continue in the employ of the
Company, or as a limitation of the right of the Company to discharge the
Executive with or without cause prior to a Change in Control of the
Company.
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10. VALIDITY.
The
invalidity or enforceability of any provi-sions of this Agreement shall not
affect the validity or enforce-ability of any other provision of this Agreement,
which shall remain in full force and effect.
11. COUNTERPARTS.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together will constitute one and
same
instrument.
12. LEGAL
FEES AND EXPENSES.
The
Company or one of its subsidiaries shall pay all legal fees and expenses which
the Executive may incur as a result of the Company’s contesting the validity,
enforceability or the Executive’s interpretation of, or determinations under,
this Agreement.
13. CONFIDENTIALITY.
The
Executive shall retain in confidence any and all confidential information known
to the
Executive concerning the Company and its business so long as such information
is
not otherwise publicly disclosed.
| CALLISTO PHARMACEUTICALS, INC., | ||
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| By: | /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
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Name:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
Chairman
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| /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Ph.D.
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