EMPLOYMENT AGREEMENT

 

 

                                                              Exhibit 10.1

 

 

 

                              EMPLOYMENT AGREEMENT

 

         THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between

Michael Sorell (the "Executive") and Neurologix, Inc., a Delaware corporation

(the "Company") as of September 21, 2004 (the "Commencement Date").

 

         WHEREAS, the Company desires to provide for the service and employment

of the Executive with the Company and the Executive wishes to perform services

for the Company, all in accordance with the terms and conditions provided

herein.

 

         NOW, THEREFORE, in consideration of the mutual agreements hereinafter

set forth, the Executive and the Company hereby agree as follows:

 

         Section 1. EMPLOYMENT. The Company does hereby employ the Executive

and the Executive does hereby accept employment as Chief Executive Officer of

the Company. The Executive shall have all the duties, responsibilities and

authority attendant to the office of a chief executive and shall render

services consistent with such position on the terms set forth herein and shall

report to the Board of Directors of the Company (the "Board") with his primary

contact being the Chairman of the Board. In addition, the Executive shall have

such other executive and managerial powers and duties with respect to the

Company as may reasonably be assigned to him by the Board, to the extent

consistent with his position and status as set forth above. The Executive

agrees to devote all of his working time and efforts to the business and

affairs of the Company, subject to periods of vacation and sick leave to which

he is entitled, and shall not engage in activities that substantially interfere

with such performance; provided, however, that this Agreement shall not be

interpreted to prohibit the Executive from continuing his current consulting

relationships with Cascadia Capital LLC, Special Situations Fund and NGN

Capital, and membership on the boards of directors of SCOLR Pharma, Inc. and

Applied NeuroSolutions, Inc., to the extent that such relationships and board

memberships do not interfere with Executive's fulfillment of his duties to the

Company.

 

         Section 2. TERM OF AGREEMENT. Subject to Section 6 hereof, the term

(the "Term") of this Agreement shall commence on the Commencement Date and

shall continue for a period of eighteen (18) months (the "Initial Term");

provided that, upon expiration of the Initial Term, the Term shall be

automatically extended an additional eighteen (18) months, unless the Executive

or the Company shall provide to the other a written notice of non-renewal prior

to the expiration of the Initial Term (the "Notice of Non-Renewal").

 

         Section 3. BOARD MEMBERSHIP. Simultaneously with the execution hereof,

the Company shall cause the Executive to be appointed to the Board as a Class I

Director and the Executive shall continue to serve as a member of the Board

throughout his period of employment as Chief Executive Officer of the Company,

subject to the By-laws of the Company. The Executive shall not be paid any

additional compensation for his service as a member of the Board but shall be

entitled to reimbursement for expenses in accordance with the policies of the

Board.

 

         Section 4. LOCATION. Although the Company's corporate offices are

located in Fort Lee, New Jersey, the Executive may choose to use his home

office and equipment if it does not unreasonably interfere with Executive's

fulfillment of his duties to the Company. If the Executive so chooses to use

his home office and equipment, he agrees to do so without any charge to the

Company for the cost associated with doing so; to the extent that any

additional equipment or software is required to perform his services, such

equipment will be provided by the Company.

 

         Section 5. COMPENSATION.

 

                    (a) BASE SALARY. Effective as of the Commencement Date, the

Company shall pay the Executive a base salary ("Base Salary") at an initial

rate of $150,000 per year, payable in accordance with the Company's policies

relating to salaried employees, but no less frequently than monthly. The

Executive's Base Salary shall be increased as set forth below, in each case

effective as of the closing date of the relevant triggering event.

 

                         (i) In the event that the Company closes a financing

         with gross proceeds equal to at least $2.5 million ($2,500,000),

         including corporate partner contributions in the form of up-front

         payments or payments based on milestones which, in the judgment of the

         Board, are likely to be realized within eighteen (18) months following

         the date of such closing (the "Corporate Payments"), then the

         Executive's base salary shall be increased to $175,000.

 

                         (ii) In the event that the Company enters into a

         corporate partnership pursuant to which, in the judgment of the Board,

         the Company shall be able to defray more than fifty percent (50%) of

         the Company's future clinical trial costs for its Parkinson's disease

         or epilepsy protocols, then the Executive's base salary shall be

         increased to $175,000.

 

                        (iii) In the event that the Company closes a financing

         including Corporate Payments in an amount that is equal to or greater

         than $2.5 million ($2,500,000) but less than $5 million ($5,000,000),

         then the Executive's base salary shall be increased to an amount

         between $175,000 and $200,000 that is proportional to the linear

         increase between $2.5 million ($2,500,000) and $5 million

         ($5,000,000).

 

                        (iv) In the event that the Company closes a financing

         including Corporate Payments in an amount that is at least $5 million

         ($5,000,000), then the Executive's base salary shall be increased to

         $200,000.

 

                    (b) ANNUAL BONUS. The Executive shall not be entitled to

receive any guaranteed bonus, provided that the Board, in its sole discretion,

may grant to the Executive a performance-based bonus based on the achievement

of certain goals, including but not limited to completion of out-licensing

agreements or other revenue-generating transactions.

 

                    (c) EQUITY PARTICIPATION. As of the Commencement Date, the

Executive shall be granted the following stock options in accordance with the

Company's 2000 Stock Option Plan and a stock option agreement to be entered

into by and between the Company and the Executive (the "Stock Option

Agreement") in accordance with the terms set forth in this Agreement. The

exercise price of the options referred to in (i) and (ii) of this subparagraph

5(c) shall be $0.75 and all such options shall have a term of ten (10) years

unless terminated earlier as set forth below or in the Stock Option Agreement

(which shall be in accordance with the terms of this Agreement). The stock

options described below are intended to qualify as incentive stock options

within the meaning of the Internal Revenue Code of 1986, as amended (the

"Code"), to the maximum extent permitted under the Code as set forth in the

Stock Option Agreement.

 

                         (i) Base Grant. The Executive shall be granted an

         option to purchase 250,000 shares of Company common stock (the "Base

         Grant") which options shall vest with respect to (A) 25,000 shares on

         the date hereof, (B) 100,000 shares on March 31, 2005, (C) 100,000

         shares on December 31, 2005 and (D) 25,000 shares on March 31, 2006,

         and shall become exercisable with respect to (x) 125,000 shares on

         March 31, 2005, (y) 100,000 shares on December 31, 2005 and (z) 25,000

         shares on March 31, 2006.

 

                         (ii) Incentive Grant. The Executive shall be granted

         an option to purchase 900,000 shares of Company common stock (the

         "Incentive Grant"). Except as otherwise provided in this subparagraph

         5(c)(ii), notwithstanding anything to the contrary herein, the

          Incentive Grant shall expire on June 30, 2005 if, for any reason, the

         Company has not closed a financing(s) and/or Corporate Payment

         transaction with gross proceeds of at least five million dollars ($5

         million) on or prior to such date. If the Company does close a

         financing(s) described above prior to June 30, 2005, at a price per

         share of Company common stock that is at least $1.30 but less than

         $2.65 (without taking into account the value of warrants, if any,

         included in the financing), then, upon closing of such financing(s),

         one percent (1%) of the shares of Company common stock underlying the

         Incentive Grant shall expire for each $0.03 decrement of price below

          $2.65 per share. The unexpired portion of the Incentive Grant shall

         vest one-third on the closing of the last financing(s) on or prior to

         June 30, 2005, and two-thirds monthly ratably over the subsequent

         twenty-four (24) month period, provided that the Executive remains

         either a director or an officer of the Company during such time. For

         purposes of this paragraph 5(c), the "price per share" shall be

         calculated using the weighted average of all financings done at a

         price greater than or equal to $1.30 prior to June 30, 2005. All share

         prices referenced herein shall be adjusted for all stock splits,

         reverse splits, stock dividends, recapitalization and similar

         transactions. In the event that all equity offerings done at prices

         per share greater than $1.30 do not equal five million ($5 million),

         then Corporate Payments shall be included in calculating the five

         million ($5 million) threshold referred to in this paragraph 5(c).

 

                         (iii) Change of Control. In the event that there is

         consummated a transaction pursuant to which (A) in the case of a

         merger or other reorganization, the Company is not the surviving

         entity or (B) the Company sells all or substantially all of its assets

         ("Change of Control"), then all outstanding stock options, whether

         vested or unvested, exercisable or not exercisable, shall vest and

         become exercisable, provided that the Incentive Grant shall vest only

         if, and to the extent that the condition for exercisability thereof

         set forth in subparagraph 5(c)(ii) shall have been satisfied on or

         before the closing of such Change of Control; and provided that this

         paragraph 5(c)(iii) shall not apply to any Change of Control in which:

         (i) a majority of the Board of Directors of the Company remains the

         same before and after the Change of Control; or (ii) the Executive

         continues to be employed by the Company in accordance with the terms

         of this Agreement after the Change of Control.

 

                    (d)   FRINGE BENEFITS.

 

                         (i) General. The Executive shall be entitled to

         participate in each health, disability, fringe, welfare and pension

         benefit and incentive program adopted from time to time by the Company

         for the benefit of, and which generally apply to, similarly situated

         employees of the Company.

 

                         (ii) Vacation. The Executive shall be entitled to take

         three (3) weeks of paid vacation annually, subject to the terms of the

         Company's vacation policies as they relate to executive officers.

 

(e)       REIMBURSEMENTS. The Company shall promptly reimburse the Executive for

         all direct expenses incurred by the Executive in the performance of

         his duties under this Agreement, including travel and entertainment.

 

         Section 6. TERMINATION.

 

                    (a) NOTICE OF TERMINATION.

 

                         (i) "Notice of Termination" shall mean a notice that

         shall indicate the specific termination provision in this Agreement

         relied upon and shall set forth in reasonable detail the facts and

         circumstances claimed to provide a basis for termination of the

         Executive's employment under the provisions so indicated.

 

                         (ii) Any purported termination of the Executive's

          employment by the Company or by the Executive shall be communicated by

         written Notice of Termination to the other party hereto in accordance

         with Section 10 hereof.

 

                    (b) DATE OF TERMINATION. Upon the Date of Termination, the

Term shall expire. "Date of Termination" shall mean:

 

                         (i) if the Executive's employment is terminated

         because of death, the date of the Executive's death, or

 

                         (ii) if the Executive's employment is terminated for

         any other reason, the date specified in the Notice of Termination,

         which shall not be a date prior to the date such Notice of Termination

         is given or the expiration of any required notice period.

 

                     (c) ACCRUED AND UNPAID BENEFITS. Following the termination

of the Executive's employment with the Company for any reason, the Executive

shall receive:

 

                         (i) any earned, but unpaid, Base Salary,

 

                          (ii) any earned, but unpaid, bonus,

 

                         (iii) the cash equivalent of any accrued, but unused,

         vacation and

 

                         (iv) any accrued employee benefits, subject to the

         terms of the applicable employee benefit plans.

 

                    The amounts payable under subparagraphs 6(c)(i),

(ii) and (iii) shall be paid within thirty (30) days

following the Date of Termination.

 

                    (d) DEATH OR DISABILITY. In the event that the Executive's

employment hereunder is terminated by reason of the Executive's death or

Disability (as defined below), the Company shall pay the amounts described in

Section 6(c) above and all benefits payable to the Executive, if any, under the

terms of the Company's compensation and benefit plans, programs or

arrangements. All outstanding stock options, whether vested or unvested,

exercisable or not exercisable, shall as of the Date of Termination, vest and

become exercisable, provided that the Incentive Grant shall vest only if, and

to the extent, the condition for exercisability thereof set forth in

subparagraph 5(c)(ii) hereof shall have been satisfied on or before the Date of

Termination. All vested options which are then exercisable shall remain

exercisable by the Executive or the Executive's legal representative for a

period of ninety (90) days from the Date of Termination, but in no event beyond

the original term of the option, and shall thereafter terminate. For the

purposes of this Agreement, "Disability" shall mean that the Executive (i) is

unable to engage in any substantial gainful activity by reason of any medically

determinable physical or mental impairment which can be expected to result in

death or can be expected to last for a continuous period of not less than 12

months, or (ii) is, by reason of any medically determinable physical or mental

impairment which can be expected to result in death or can be expected to last

for a continuous period of not less than 12 months, receiving income

replacement benefits for a period of not less than 3 months under an accident

and health plan of the Company. The Executive's Disability will be established

if a qualified medical doctor selected by the parties so certifies in writing.

If the parties are unable to agree on the selection of such a doctor, each

party will designate a qualified medical doctor who together will select a

third doctor who will make the determination. The Executive will make himself

available for an examination by a doctor selected in accordance with this

paragraph (d).

 

                    (e) TERMINATION FOR CAUSE. The Company may terminate the

Executive's employment under this Agreement for Cause (as defined below) at any

time, in which event any rights of the Executive to continued employment under

the Agreement shall thereupon cease and the Executive shall immediately resign

from his position as a member of the Board. Upon a termination for Cause, the

Company shall pay to the Executive the amounts described in Section 6(c) above.

As of the Date of Termination, all outstanding unvested options to purchase

Company common stock shall terminate immediately.

 

                         (i) As used herein, termination for "Cause" shall mean

         the occurrence of any of the following:

 

                               (A) that Executive shall have been convicted of,

                  or pleads guilty or nolo contendere to, a