Exhibit 10.1
EMPLOYMENT
AGREEMENT
This Employment Agreement (this
“Agreement”) entered into as of May 21, 2009 (the
“Effective Date”), is by and between
Pro-Pharmaceuticals (“Pro-Pharmaceuticals”) or
(“Company”), a Nevada corporation with a principal
place of business at 7 Wells Avenue, Suite 34, Newton,
Massachusetts, 02459 and Theodore D. Zucconi, Ph.D.
(“Zucconi” or “Executive”), having a
residence at 3006 E. Dry Creek Road, Phoenix, Arizona,
85048.
A. Pro-Pharmaceuticals is engaged in
the business of biotechnology drug development
B. Pro-Pharmaceuticals desires to
have the services of Zucconi.
C. Zucconi is willing to be employed
by Pro-Pharmaceuticals.
Therefore, the parties agree as
follows:
1. EMPLOYMENT.
Zucconi agrees to be employed by
Pro-Pharmaceuticals as Chief Executive Officer (“ CEO
”) and President and, when and as elected by Company
security holders entitled to vote thereon, to serve as a member of
the Board of Directors (the “Board”). Zucconi will
provide to Pro-Pharmaceuticals the following services: the duties
of the CEO, including overall responsibility of managing the
company, all operational and strategic matters, subject to general
oversight of the Board; the general duties of a President,
including but not limited to: hiring and dismissal of executives,
salary and compensation for all executives and consultants;
approval of all finance, licensing, partnerships, and other
corporate activities such as press releases, mergers, acquisitions
and/or divestitures. Zucconi will also perform (i) such other
duties as are customarily performed by a CEO/President in a similar
position, and (ii) such other and unrelated services and
duties as may be assigned to Zucconi from time to time by the Board
.
Zucconi will provide
Pro-Pharmaceuticals with all information, suggestions, and
recommendations regarding Pro-Pharmaceuticals’ business, of
which Zucconi has knowledge that will be of benefit to
Pro-Pharmaceuticals.
2. BEST EFFORTS OF
EXECUTIVE. Zucconi agrees
to perform faithfully, industriously, and to the best of his
ability, experience, and talents, all of the duties that may be
required by the express and implicit terms of this Agreement, to
the reasonable satisfaction of Pro-Pharmaceuticals. Such duties
shall be provided primarily at the principal offices of the Company
in Newton, Massachusetts, and at such other place(s) as the needs,
business, or opportunities of Pro-Pharmaceuticals may require from
time to time. Zucconi shall observe all Company rules and policies,
including such policies as amended from time to time. He will
devote a majority of his business time to the work of the Company
but may serve on one outside charitable Board and two outside
for-profit Boards approved in advance by the Board of
Pro-Pharmaceuticals.
3. COMPENSATION OF
EXECUTIVE .
(a) As compensation for the services
under this Agreement, Pro-Pharmaceuticals will pay Zucconi an
annual salary of $260,000, retroactive to February 12, 2009,
payable in accordance with Pro-Pharmaceuticals’ usual payroll
procedures. Zucconi’s salary will be adjusted proportionately
to the adjustments for other executives. All temporary reductions
to employee salary to conserve cash will be made up when possible
by mutual agreement, and such reductions in connection with 2009
compensation shall be paid no later than the first calendar quarter
of 2010.
(b). Zucconi shall be entitled to
the following additional benefits:
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(i)
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Use of a
Company apartment within reasonable commuting distance of the
Company’s principal offices, maintained by Zucconi, which
will also be available for the use of visiting Board members; and
up to $20,000 per year additional temporary living
costs;
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(ii) Fourteen (14) round
trip single passenger airline tickets (by coach) per year between
Massachusetts and Phoenix, Arizona which may be used by either
Zucconi or a family member;
(iii) As incentives to enter
into and undertake employment pursuant to this Agreement, and to
meet certain Company milestones, Zucconi shall be granted stock
options exercisable for seven years to purchase an aggregate of up
to 2,000,000 shares of Pro-Pharmaceuticals common, as follows:
(i) 400,000 as of the Effective Date, (ii) 150,000 with a
vesting date of December 31, 2009; (iii) 200,000 with a
vesting date of December 31, 2010; and upon achieving the
following milestones :
a. 100,000 after the Effective Date
of an investigational new drug application by the U.S. Food and
Drug Administration (“FDA”) , e.g., for fibrosis
or anti-hypoxia, filed by the Company, a partner, an agent or
subsidiary;
b. 300,000 for any FDA approval of
marketing and sales of DAVANAT;
c. 100,000 for each of first three
agreements to sell/distribute a product;
d. 150,000 for the initiation of
sales of DAVANAT anywhere in the world;
e. 150,000 for the initiation of
sales of DAVANAT specifically in the United States; and
f. 250,000 following the first
fiscal quarter in which the Company achieves
profitability.
The options at each grant
(i) at Zucconi’s election may be incentive stock
options, as defined in the Internal Revenue Code of 1986, or
non-qualified stock options, or a combination of both; and
(ii) shall contain a “cashless” exercise feature.
All options will be priced on date of approval of this agreement
and shall vest as indicated.
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(iv)
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A bonus of
$100,000 payable as follows; $20,000 when an additional $1 million
is raised and $40,000 when each additional million is received
until the total is paid. In return Zucconi will waive all
compensation owed from Zucconi’s previous contract. Zucconi
will receive a cash bonus equivalent to 2% of financing introduced
from sources identified by Zucconi and not from sources, or their
successors, previously identified by Pro-Pharmaceuticals or
10X Capital Management. This shall be payable within twenty
(20) business days of receipt by Pro-Pharmaceuticals of the
funds.
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(v)
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Pro-Pharmaceuticals shall pay a cash bonus to
Zucconi in the event a partnership or joint venture is formed to
sell or distribute a Pro-Pharmaceuticals drug or reached with
another company with upfront fees and milestone payments. The
amount of the cash bonus payable to Zucconi shall equal 1% of the
upfront fees and milestone payments which shall be payable within
twenty (20) business days of receipt by Pro-Pharmaceuticals of
the upfront fees and milestone payments;
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(vi.)
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The stock
options granted to Zucconi herein shall (a) be fully vested
per the schedule (b) expire on the seventh anniversary of the
date of grant, and (c) be exercisable during the 7-year term
whether or not Zucconi is then employed by Pro-Pharmaceuticals or
this agreement has terminated. Zucconi may elect to take stock
instead of options. All options will fully vest in the event of
Zucconi’s death.
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(vii.)
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An automobile
allowance of $500 per month;
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(ix)
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A bonus based
on annual goals set by the Board of Directors, in an amount to be
determined by the compensation committee.
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4. PERSONAL TIME OFF.
Zucconi shall be entitled to four
(4) weeks of paid Personal Time Off (PTO). Such PTO must be
taken at a time mutually convenient to Pro-Pharmaceuticals and
Zucconi. Accrued vacation will be paid in accordance with MA state
law and Pro-Pharmaceuticals customary procedures. Up to three weeks
can be carried over to the following year. Unpaid time off will be
by mutual agreement.
5. BENEFITS.
Zucconi will be entitled (i) to
insurance and other benefits commensurate with Zucconi’s
position and in accordance with the Company’s standard
Executive benefits policies as in effect from time to time;
(ii) to participate in the Company’s 401(k) plan with an
employer match percentage as in effect from time to time;
(iii) customary Massachusetts holidays; and (iv) Medical
insurance through the company or reimbursement for premiums paid by
Zucconi. If Zucconi performs his duties and completes the term of
this contract he will be eligible for health benefits for himself
and his spouse until their death; however, this provision shall
take effect only upon written certification by the Board of
Directors that the Company’s financial condition can support
such expense. Should the Board vote not to certify this financial
condition at its last meeting prior to Zucconi’s cessation of
employment, the Board shall revisit the issue at each and every
subsequent meeting thereafter until it does make such
certification. Upon reaching eligibility Zucconi will apply for
Medicare insurance and the insurance from the Company will be
secondary.
The Company shall maintain insurance
with respect to (i) directors’ and officers’
liability, (ii) errors and omissions and (iii) general
liability insurance; Zucconi shall be covered by such insurance to
the same extent as other senior executives and directors of the
Company. Zucconi shall be indemnified against any liability the
company incurred before the initiation of this contract.
6. EXPENSE REIMBURSEMENT.
Pro-Pharmaceuticals will reimburse
Zucconi for expenses incurred by Zucconi to conduct company
business. This will be in accordance with Pro-Pharmaceuticals
policies in effect. Zucconi will be reimbursed for expense accounts
and rent held to conserve cash from 2008 and 2009.
7. TERM/TERMINATION.
Zucconi’s employment under
this Agreement shall be in effect until May 31, 2011. This
Agreement may be amended or superseded by written agreement of both
of the parties hereto. Upon termination of this Agreement, payments
under this paragraph shall cease, provided, however, that Zucconi
shall be entitled to deferred payments, if any, for the contract
and performance bonuses that occurred during employment and for
which Zucconi has not yet been paid, unless Zucconi is in violation
of this Agreement. The compensation paid under this Agreement shall
be Zucconi’s exclusive remedy.
(a) In the event the employment of
Zucconi is terminated by the Company “without cause”
Zucconi shall be entitled to severance as follows:
(i) Full compensation and benefits
of this contract;
(ii) Zucconi shall be reimbursed for
all expenses pursuant to Section 6 incurred through the date
of employment termination and two months thereafter;
(b) Death. If Zucconi’s
employment is terminated by reason of his death, the
Executive’s estate shall be entitled to prompt payment for
the Base Salary pro-rated through the event of death and a
pro-rated bonus payment. Zucconi’s spouse will be paid 50% of
the salary for a period of eighteen months after the event of
death, and the Executive’s spouse and eligible dependents
shall be eligible for benefits to which Zucconi and his spouse were
eligible. Nevertheless, this provision shall take effect only upon
written certification by the Board of Directors that the
Company’s financial condition can support such expense.
Should the Board vote not to certify this financial condition at
its last meeting prior to Zucconi’s cessation of employment,
the Board shall revisit the issue at each and every subsequent
meeting thereafter until it does make such
certification.
(c) Disability . If, as
a result of Zucconi incapacity due to physical or mental illness as
determined by a physician selected by Zucconi, and reasonably
acceptable to the Board, Zucconi shall have been substantially
unable to perform his duties hereunder for 90 days within any
180–day period, the Company shall have the right to terminate
Zucconi’s employment hereunder for “disability”.
If Executive’s employment is terminated by reason of his
disability, Zucconi shall be entitled to prompt payment for the
Base Salary pro-rated through the termination date and a pro-rated
bonus payment, based on the highest bonus paid to Zucconi in any
prior year. The Company shall also provide Zucconi with the excess,
if any, of his full Base Salary over the amount of any long-term
disability benefits that he receives through the Company plans for
a period of two years, payable in accordance with the normal
payroll practices of the Company. In addition, for a period of
eighteen (18) months after the date of termination, Zucconi
and Zucconi’s spouse shall be eligible for continued
participation in the benefits to which Zucconi and his eligible
spouse and dependents were entitled hereof while Zucconi was
employed by the Company. Nevertheless, this provision shall take
effect only upon written certification by the Board of Directors
that the Company’s financial condition can support such
expense. Should the Board vote not to certify this financial
condition at its last meeting prior to Zucconi’s cessation of
employment, the Board shall revisit the issue at each and every
subsequent meeting thereafter until it does make such
certification.
(d) For Cause
. The Company shall have the right,
upon written notice thereof to Zucconi, to terminate
Zucconi’s employment hereunder if Zucconi
(i) in the determination of the
Board by a vote of two-thirds of its members has engaged in gross
negligence or willful gross misconduct in the performance of
Zucconi’s duties hereunder and such conduct results in
material and quantifiable damage to the Company;
(ii) is convicted of a felony or
other violation which in the reasonable judgment of by the Board
could materially impair the Company from substantially meeting its
business objectives; or
(iii) is found by the primary
auditor of the Company or other auditor engaged by the Audit
Committee of the Board to have committed any act of fraud,
misappropriation of funds or embezzlement with respect to the
Company; and
(iv) except as to the matters
referred to in clauses (ii) or (iii), within ninety
(90) days (the “Cure Period”) after delivery of
written notice from the Board stating with specificity the nature
of the reason for an anticipated for-cause termination, Zucconi
fails to cure, or if the matter is not curabl
