EXECUTIVE EMPLOYMENT AGREEMENT

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made and entered into this the 8th day of September, 2004, by and between TRIMERIS, INC., a Delaware corporation (the “Company”), and STEVEN SKOLSKY (“Executive”).

 

W I T N E S S E T H:

 

WHEREAS, Executive and the Company deem it to be in their respective best interests to enter into an agreement providing for the Company’s employment of Executive pursuant to the terms herein stated;

 

NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, it is hereby agreed as follows:

 

1. Effective Date. Executive’s employment under this Agreement shall be effective as of the 8th day of September, 2004, which date shall be referred to herein as the “Effective Date”.

 

2.	Position and Duties.

 

(a) The Company hereby employs Executive as its Chief Executive Officer commencing as of the Effective Date for the “Term of Employment” (as herein defined below). In this capacity, Executive shall devote his full business time, efforts and attention to the performance of his duties, subject to (b) below. Executive shall have the duties, responsibilities and authority customarily incident to such offices and position and to such other services commensurate with such position as may be reasonably requested by the Board of Directors of the Company (the “Board”), which may include services as a director or chief executive officer for one or more subsidiaries or affiliates of the Company. The Company intends that Executive shall be a member of the Board. Executive shall in his capacity as an employee and officer of the Company be responsible to and obey the reasonable and lawful directives of the Board consistent with this Agreement and shall report directly to the Board.

 

(b) Executive shall devote his full time and attention to such duties, except for sick leave, reasonable vacations, and excused leaves of absences as more particularly provided herein, provided that so long as this does not interfere to any substantial extent with Executive’s duties, Executive may manage his personal investments, be involved in charitable and professional activities and, with the consent of the Board, serve on for profit boards and advisory committees, provided that nothing in this Section 2(b) shall override Executive’s obligations in Section 6 hereof.

 

3.	Compensation.

 

(a) Base Salary. The Company shall pay to Executive during the Term of Employment a minimum salary at the rate of Four Hundred Fifty Thousand dollars

($450,000) per year and agrees that such salary shall be reviewed at least annually. Such salary shall be subject to discretionary annual increases as determined by the Compensation Committee of the Board of Directors. Such salary shall be payable monthly and in accordance with the Company’s normal payroll procedures. (Executive’s annual salary, as set forth above or as it may be increased from time to time as set forth herein, shall be referred to hereinafter as “Base Salary”). At no time during the Term of Employment shall Executive’s Base Salary be decreased from the amount of Base Salary then in effect.

 

(b) Performance Bonus. In addition to the compensation otherwise payable to Executive pursuant to this Agreement, Executive shall be eligible to receive an annual bonus (“Bonus”). The anticipated Bonus (the “Target Bonus”) will equal fifty percent (50%) of Executive’s Base Salary, provided that no Bonus is due if performance is below a specified minimum level of achievement and that the range for Bonuses after such minimum will be from fifty percent (50%) to one hundred fifty percent (150%) of the Target Bonus pursuant to performance criteria developed by the Board in consultation with Executive, which shall be established by the Company for its senior executive officers and which shall provide for bonus compensation to be payable based upon the financial and other performance of the Company and Executive. Executive will be eligible for fiscal year 2004 for a Bonus of no less than a pro rata Target Bonus based on the portion of the fiscal year during which Executive is employed by the Company, with criteria measured only by the portion of the year during which he is employed, except as he otherwise agrees.

 

(c)

Long Term Incentive/Stock Options.

 

(i) The Compensation Committee has agreed that the Executive will be granted an option (the “Option”), contingent on Executive’s commencing employment under this Agreement, to purchase Three Hundred Fifty Thousand (350,000) shares of the Company’s common stock with the date of grant on the Effective Date and an exercise price at a price equal to the fair market value of the common stock on the date of grant. The Option will be subject to the terms and conditions of the Trimeris, Inc. Amended and Restated Stock Incentive Plan (the “Stock Incentive Plan”) and the provisions of the grant agreement annexed hereto as Exhibit A.

 

(ii) The Compensation Committee has agreed that the Executive will receive Fifty Thousand (50,000) shares of restricted stock (the “Restricted Stock”) under the Stock Incentive Plan, contingent on Executive’s commencing employment under this Agreement, with the grant as of the Effective Date and subject to the provisions of the Stock Incentive Plan and the grant agreement annexed hereto as Exhibit B.

 

4.	Benefits During the Term of Employment.

 

(a) Executive shall be eligible to participate in any life, health and long-term disability insurance programs, pension and retirement programs, stock option and other

 

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incentive compensation programs, and other fringe benefit programs made available to senior executive employees of the Company from time to time for which he qualifies, at a level commensurate with his position, and Executive shall be entitled to receive such other fringe benefits as may be granted to him from time to time by the Company’s Board of Directors. Executive shall be provided with financial planning and tax preparation to an annual maximum of $10,000 (including within such limit a gross-up for any taxes he may incur on the payment for such services).

 

(b) Executive shall be allowed four (4) weeks of vacation with pay and leaves of absence with pay on the same basis as other senior executive employees of the Company.

 

(c) The Company shall reimburse Executive for reasonable business expenses incurred in performing Executive’s duties and promoting the business of the Company, including, but not limited to, reasonable entertainment expenses, travel and lodging expenses, following presentation of documentation in accordance with the Company’s business expense reimbursement policies.

 

5.	Term; Termination of Employment.

 

As used herein, the phrase “Term of Employment” shall mean the period commencing on the Effective Date and ending on the same date two (2) years later; provided, however, that as of the expiration date of each of (i) the initial Term of Employment and (ii) if applicable, any Renewal Period (as defined below), the Term of Employment shall automatically be extended for a two (2) year period (each a “Renewal Period”) unless either the Company or Executive provides ninety (90) days’ prior written notice to the contrary. A notice of nonrenewal by the Company shall be treated as a termination without Cause by the Company as of the end of the then Term of Employment or such earlier date as elected by the Executive. Notwithstanding the foregoing, the Term of Employment shall expire on the first to occur of the following:

 

(a) Termination by the Company. Notwithstanding anything to the contrary in this Agreement, whether express or implied, the Company may, at any time, terminate Executive’s employment for any reason other than Cause, death or Disability by giving Executive at least sixty (60) days’ prior written notice of the effective date of termination. Nothing in this section prevents the Company from removing Executive from service during that period. Company may terminate Employee’s employment for Cause or Disability upon written notice. The terms “Cause” and “Disability” shall have the meaning given them under the Separation and Severance Agreement.

 

(b) Termination by Executive. Notwithstanding anything to the contrary in this Agreement, whether express or implied, the Executive may terminate his employment with the Company at any time with or without Good Reason (as defined in the Separation and Severance Agreement) upon at least 30 days’ advance written notice of his intention to terminate his employment hereunder.

 

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(c) Salary and Benefits Upon Termination. In the event of termination of employment, Executive shall receive all regular Base Salary due up to the date of termination, any accrued but unused vacation (if and to the extent consistent with the Company’s policies), any incurred but unreimbursed business expenses, and if it has not previously been paid to Executive, Executive shall be paid any Bonus due to Executive for any fiscal year ending prior to the effective date of such termination, any rights under any benefit or equity plan, program or practice and his rights to indemnification and directors and officers liability insurance (the “Accrued Amounts and Rights”). In the event such termination is as a result of death, Disability, termination without Cause or termination for Good Reason, Executive shall be entitled to a pro rata Bonus for the year of termination based on actual results for the year with respect to the Company performance factors and on the contribution he made with respect to his individual performance factors during the portion of the year during which Executive was employed, payable when bonuses to other senior executives are paid. Executive’s right to severance benefits, if any, shall be governed by the terms of the Separation and Severance Agreement attached hereto as Exhibit C (the “Severance Agreement”); provided, however, the Resolution of Dispute provisions of Section 12 of this Agreement shall also apply to the Severance Agreement. The Severance Agreement is incorporated in this Agreement by reference and is hereby made a part of this Agreement as if fully set forth herein.

 

6.	Confidential Information, Non-Solicitation and Non-Competition.

 

(a)

Executive acknowledges and agrees that:

 

(i) As a result of his employment with the Company, Executive will become knowledgeable of and familiar with the Company’s Confidential Information (as defined below), including know-how related to the Company’s services, plus the special requirements or preferences of the Company’s research, development, marketing, licensing agreements or arrangements and investor relations, so that he would have a competitive advantage against the Company for at least one (1) year following termination of his employment with the Company absent the protection afforded by the restrictive covenants in this Section 6 of the Executive Employment Agreement (the “Restrictive Covenants”);

 

(ii) The time, territory and scope of the Restrictive Covenants are reasonable and necessary for protection of the Company’s legitimate business interests;

 

(iii) Executive has received sufficient and valuable consideration in exchange for his agreement to the Restrictive Covenants, including but not limited to his salary and benefits under the Executive Employment Agreement, the possibility of salary continuation under the Separation and Severance Agreement and any other consideration provided to him under this Agreement;

 

(iv) Executive agrees that the non-compete covenant of Section 6(c) will not impose undue hardship on Executive or prevent Executive from being able to earn an adequate living following termination of this Agreement;

 

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(v) while the Company employs Executive, he agrees that he will not, without the Board’s prior written consent, directly or indirectly, provide services to any other person or organization (except as provided in Section 2(b) hereof). (This prohibition excludes any work performed at the Company’s direction.) The Company acknowledges that Executive is subject to a confidentiality agreement related to his prior service for GlaxoSmithKline. Executive represents to the Company that he is not subject to any agreement, commitment, or policy of any third party that would prevent him from entering into or performing his duties under this Agreement, and he agrees that he will not enter into any agreement or commitment that would prevent or hinder his performance of duties and obligations under this Agreement, provided that this Section 6(a)(v) shall not limit either Executive’s acceptance of future employment provided he promptly notifies the Company thereof or the announcement of such future employment by his future employer,

 

(vi) the parties agree that the Company may request an arbitrator or court to take into account as part of an equitable or other remedy an extension of the time period of protection provided by the Restrictive Covenants for any period of time during which Executive is in violation of such covenants and any period of time required for litigation to enforce such covenants and Executive may oppose any such request, and

 

(vi) Executive has read and reviewed the Restrictive Covenants before agreeing to the terms of this Agreement

 

(b) During the Term of Employment and at all times thereafter, Executive shall not, except as he deems necessary or desirable in good faith discretion to perform his duties hereunder or as required by applicable law, disclose to others or use, whether directly or indirectly, any Confidential Information regarding the Company. “Confidential Information” shall mean information about the Company, its subsidiaries and affiliates, and their respective clients and customers that is not available to the general public or generally known in the industry and that was learned by Executive in the course of his employment by the Company, including (without limitation) (i) any proprietary knowledge, trade secrets, ideas, processes, formulas, cell lines, sequences, developments, designs, assays and techniques, data, formulae, and client and customer lists and all papers, resumes, records (including computer records), (ii) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers (iii) information regarding the skills and compensation of other employees of Company and (iv) the documents containing such Confidential Information. Executive’s rolodex and similar address books shall not be deemed Confidential Information if and to the extent they contain only the names and contact information he has personally used while employed (or acquired prior to employment hereunder) and no other information that would otherwise be Confidential Information. Executive acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Company, and that such information gives the Company a competitive advantage. Upon

 

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the termination of employment for any reason whatsoever, Executive shall promptly deliver to the Company all documents, slides, computer tapes and disks (and all copies thereof) containing any Confidential Information.

 

(c) During the Term of Employment and for one (1) year thereafter, Executive shall not, directly or indirectly in any manner or capacity (e.g., as an advisor, principal, agent, partner, officer, director, shareholder, employee, member of any association or otherwise) engage in, work for, consult, provide advice or assistance or otherwise participate in any activity with respect to a Competing Business, as defined below and except as provided below, provided, however, that the “beneficial ownership” by Executive, either individually or as a member of a “group,” as such terms are used in Rule 13d of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) of not more than five percent (5%) of the voting stock of any publicly held corporation shall not be a violation of this Agreement. Executive agrees that the market area for the Company is worldwide and that, by the nature of the business, it operates globally. Executive also expressly agrees that the Company will or would suffer irreparable injury if Executive were to compete with the Company or any subsidiary or affiliate of the Company in violation of this Agreement.

 

“Potentially Competing Business Line” is defined as the business, when such business is carried out by any entity other than the Company, any parent, and any subsidiary, of the discovery, development, testing, manufacturing, and/or marketing of therapeutic components for the treatment of Human Immunodeficiency Virus (HIV) based on a viral fusion protein target. A “Competing Business” is (i) any business entity whose primary or intended primary business line at the date Executive’s employment ends is in the Potentially Competing Business Line if that entity has one or more products that are in or beyond Phase II clinical trials with respect to such Potentially Competing Business Line and (ii) any other business entity engaged, preparing to engage in, or being created to engage in a Potentially Competing Business Line for which the Potentially Competing Business Line constitutes or is projected to constitute twenty-five percent (25%) of the annual revenue of the business entity within two years following termination of employment.

 

(d) During the Term of Employment and for one (1) year thereafter, Executive shall not, directly or indirectly, influence or attempt to influence customers or suppliers of the Company or any of its subsidiaries or affiliates, to divert their business to any Competing Business for which (c) would prevent his employment.

 

(e) Executive recognizes that he will possess confidential information about other employees of the Company relating to their education, experience, skills, abilities, compensation and benefits, and interpersonal relationships with customers of the Company. Executive recognizes that the information he will possess about these other employees is not generally known, is of substantial value to the Company in developing its business and in securing and retaining customers, and will be acquired by him because of his business position with the Company. Executive agrees that, during the Term of Employment (except in the good faith performance of his duties), and for a period of one

 

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(1) year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company for the purpose of being employed by him or by any competitor of the Company on whose behalf he is acting as an agent, representative or employee (provided that, after he ceases to be employed by the Company, he may serve as a reference so long as he is not affiliated with the company receiving the reference) and that he will not at any time convey any such confidential information or trade secrets about other employees of the Company to any other person.

 

(f) Executive agrees and understands that Company has received, and in the future will receive, from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executive’s employment and thereafter, Executive will hold Third Party Information in the strictest of confidence and will not disclose (to anyone other than Company personnel who Executive in good faith determines need to know such information in connection with their work for Company), or use, except in connection with his duties for Company, Third Party Information unless required by legal process.

 

(g)

Inventions

 

(i) Assignment. Executive hereby assigns to Company all his right, title and interest in and to any and all Inventions (and all patent rights, copyright, trade secret rights and all other rights throughout the world in connection therewith, whether or not patentable or registerable under copyright, trademark or similar statutes), together with all goodwill associated therewith, (all of the foregoing being hereinafter referred to collectively as “Proprietary Rights”), made, conceived, reduced to practice or learned by Executive, either alone or jointly with others, during his period of employment with Company. Inventions assigned under this Section 6 are hereinafter referred to as “Company Inventions”. Executive agrees to reasonably assist Company in every reasonably necessary way (but at Company’s expense) to obtain or enforce any patents, copyrights or any proprietary rights relating to Company Inventions and to execute all documents and applications necessary to vest in Company’s full legal title to such Company Inventions, and Executive agrees to continue this assistance after the termination of his employment with Company. Furthermore, Executive hereby designates and appoints Company and its officers and agents as his agents and attorneys-in-fact to execute and file any certificates, applications or documents and to do all other lawful acts reasonably necessary in the opinion of Company to protect Company’s rights in Company Inventions. Executive expressly acknowledges that the foregoing power of attorney is coupled with an interest and is therefore irrevocable and will survive Executive’s termination of employment, death or incompetency.

 

(ii) Government. Executive also will assign to or as directed by Company all his right, title and interest in and to any and all Inventions, full title to which may be required to be in the United States by a contract between Company and the United States or any of its agencies.

 

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(iii) Independent Inventions. Notwithstanding anything in this Agreement to the contrary, Executive’s obligation to assign or offer to assign Executive’s rights in an Invention to Company will not extend or apply to an Invention that Executive has developed entirely on Executive’s own time without using Company’s equipment, supplies, facilities or trade secret information unless such Invention: (a) relates to Company’s business or actual demonstrably anticipated research or development or (b) results from any work performed by Executive for Company. Executive will bear the burden of proof in establishing that the Invention qualifies for exclusion under this Subsection 6(g)(iii).

 

(iv) Assignment of Company Inventions. Executive will reasonably assist Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights related to Company Inventions in any and all countries. Executive’s obligation to reasonably assist Company with respect to Proprietary Rights relating to such Company Inventions will continue beyond the termination of Executive’s employment, but Company will compensate Executive at a reasonable rate after Executive’s termination for the time actually spent by executive at Company’s request on such assistance.

 

Executive hereby waives and quitclaims to Company all claims, of any nature whatsoever, which Executive may or may hereafter have for infringement, including past infringements, of any Proprietary Rights assigned hereunder to Company.

 

(v) Obligation to Keep Company Informed. During the period of Executive’s employment, Executive will promptly disclose to Company fully and in writing, and will hold in trust for the sole right and benefit of Company, any and all Inventions. In addition, after termination of Executive’s employment, Executive will disclose any filing of any patent applications by him or on his behalf within a year after termination of such employment.

 

(vi) Prior Inventions. Inventions, if any, patented or unpatented, which Executive made prior to Executive’s commencement of employment with Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, Executive has set forth on the attached Exhibit D, a complete list of all Inventions that Executive has, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of Executive’s employment with Company, that Executive considers to be Executive’s property or the property of the third parties, and Executive wishes to have excluded from the scope of this Agreement. If disclosure of any such Invention on Exhibit D would cause Executive to violate any prior confidentiality agreement with another party, Executive understands that he is not to list such Inventions in Exhibit D but that Executive is to inform Company in writing that all such Inventions have not been listed for that reason.

 

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If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 6 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

 

7. Return of Company Documents. In the event Executive leaves the employment of Company for whatever reason, Executive agrees to deliver to Company any and all laboratory notebooks, drawings, notes, memoranda, specifications, devices, software, databases, formulas, molecules, cells and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Confidential Information of Company. Executive further agrees that any property situated on Company’s premises and owned by Company including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time, with or without notice, for the purpose of protecting Company’s rights and interests in its intellectual property.

 

8. Taxes. All payments to be made to Executive under this Agreement will be subject to any applicable withholding of federal, state and local income and employment taxes.

 

9. Miscellaneous. This Agreement shall also be subject to the following miscellaneous considerations:

 

(a) Executive and the Company each represent and warrant to the other that he or it has the authorization, power and right to deliver, execute, and fully perform his or its obligations under this Agreement in accordance with its terms.

 

(b) This Agreement (including the attached Exhibits) contains a complete statement of all the arrangements between the parties with respect to Executive’s employment by the Company. This Agreement supersedes all prior and existing negotiations and agreements between the parties concerning Executive’s employment. This Agreement can only be changed or modified pursuant to a written instrument duly executed by each of the parties hereto.

 

(c) If any provision of this Agreement or any portion thereof is declared invalid, illegal, or incapable of being enforced by any court of competent jurisdiction, the remainder of such provisions and all of the remaining provisions of this Agreement shall continue in full force and effect.

 

(d) This Agreement shall be governed by and construed in accordance with the internal, domestic laws of the State of North Carolina.

 

(e) The Company may assign this Agreement to any parent of the Company that owns all of the stock of the Company. The Company may only assign this Agreement to

 

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a successor (whether by merger, consolidation, purchase or otherwise) of all or substantially all of the stock, assets or business of the Company and this Agreement shall be binding upon and inure to the benefit of such successors and assigns, provided that such successor promptly delivers to Executive a written assumption of the obligations hereunder. Except as expressly provided herein, Executive may not sell, transfer, assign, or pledge any of his rights or interests pursuant to this Agreement, provided that any amounts due hereunder shall, upon Executive’s death, be paid to his estate unless Executive has designated a beneficiary therefor in accordance with any applicable plan.

 

(f) Any rights of Executive hereunder shall be in addition to any rights Executive may otherwise have under benefit plans of the Company to which he is a party or in which he is a participant, including, but not limited to, any Company-sponsored employee benefit plans. Provisions of this Agreement shall not in any way abrogate Executive’s rights under such other plans.

 

(g) For the purpose 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 personally or by overnight service or delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the Company at its executive office or the Executive at the address on the records of the Company; provided that all notices to the Company shall be directed to the attention of the Chairman of the Board of Directors with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

 

(h) Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

(i) Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of, or failure to insist upon strict compliance with, any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

 

(j) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

10. Legal and Equitable Remedies. Because the Executive’s services are personal and unique, and because the Executive will have access to and become acquainted with Proprietary Rights, Company Inventions and Confidential Information of Company, Company will have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief in any court of competent jurisdiction, without prejudice to any other rights and remedies that Company may have for a breach of this Agreement.

 

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11. Survival of Provisions. The executory provisions of this Agreement will survive the termination of this Agreement or the assignment of this Agreement by Company to any successor in interest or other assignee.

 

12. Resolution of Disputes. Except as otherwise specifically provided in Section 10 above, any dispute or controversy arising under or in connection with this Agreement and/or the Separation and Severance Agreement shall be settled exclusively by arbitration administered by the American Arbitration Association and conducted before one arbitrator in Raleigh, Wake County, North Carolina, all in accordance with its Commercial Arbitration rules then in effect. The Company and Executive hereby agree that the arbitrator will not have the authority to award punitive damages, damages for emotional distress or any other damages that are not contractual in nature. Judgment shall be final and binding upon the parties and judgement may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any violation or the continuation thereof, of the provisions of Section 6 of this Agreement, and Executive consents that such restraining order or injunction may be granted without the necessity of the Company’s posting any bond except to the extent otherwise required by applicable law.

 

13. Legal Fees. Company shall pay the reasonable legal fees incurred in connection with the negotiation of this Agreement, to a limit of $25,000. In the event of any dispute in connection with this Agreement, including the Severance Agreement, if the arbitrator or judge, as the case may be, determines that the Executive has prevailed in such dispute, the Executive shall be awarded his reasonable legal fees, disbursements and costs; provided that if the arbitrator or judge determines that the Company has prevailed and that the dispute by the Executive was frivolous or brought in bad faith, the Company shall instead be awarded its reasonable legal fees, disbursements and costs.

 

14. Indemnification. The Executive shall be indemnified to the fullest extent permitted by law with regard to actions or inactions taken as an officer or director of the Company or any affiliate or as a fiduciary of any benefit plan. The Executive shall be covered by directors and officers liability insurance with regard to the foregoing to the highest extent of any other officer or director both during his service to the Company and thereafter while any liability may exist.

 

15. Excise Tax Gross Up. In the event that Executive would be subject to an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), as a result of any transaction involving the Company or its stock, Exhibit E shall apply.

 

Signatures on Page Following

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

EXECUTIVE				TRIMERIS, INC.
By:		/s/ Steven Skolsky		By:		/s/ Dani P. Bolognesi
Name:		Steven Skolsky		Name:		Dani P. Bolognesi
				Title:		Vice Chairman of the
						Board of Directors
				Address:		3518 Westgate Drive
						Durham, NC 27707

 

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EXHIBIT A

TO

EXECUTIVE EMPLOYMENT AGREEMENT

 

THE SECURITIES THAT MAY BE PURCHASED UNDER THIS AGREEMENT MAY NOT BE SOLD OR DISTRIBUTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

TRIMERIS, INC. INCENTIVE STOCK OPTION AGREEMENT

 

Trimeris, Inc. (the “Company”) granted to the individual named below, in recognition of his becoming an employee and a member of the Company’s Board of Directors, an option to purchase certain shares of common stock of the Company, pursuant to the Trimeris, Inc. Amended and Restated Stock Incentive Plan, in the manner and subject to the provisions of this Option Agreement.

 

1.	Definitions:

 

(a)

“Code” shall mean the Internal Revenue Code of 1986, as amended. (All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.)

 

(b)

“Company” shall mean Trimeris, Inc., a Delaware corporation, and any successor corporation thereto.

 

(c)

“Date of Option Grant” shall mean September 8, 2004.

 

(d)

“Disability” shall mean disability within the meaning of Section 22(e)(3) of the Code.

 

(e)

“Exercise Commencement Date” shall mean September 8, 2004.

 

(f)

“Exercise Price” shall mean $             per share as may be adjusted from time to time.

 

(g)

“Number of Option Shares” shall mean Three Hundred Fifty Thousand (350,000) shares of common stock of the Company (the “Common Stock”) as may be adjusted from time to time.

 

(h)

“Option Term Date” shall mean the date ten (10) years after the Date of Option Grant or such earlier date as provided for expiration of the Option under Section 5(f) of the Plan, using as the date employment ends the later of the date his service ends as an employee of the Company and the date he ceases to be a

 

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member of the Board of Directors of the Company, provided that the date shall be further extended, to the extent permitted by the Plan, if and to the extent necessary to satisfy Section 3(a) below with respect to terminations on or before March 8, 2005 (the “Six Month Anniversary”).

 

(i)

“Optionee” shall mean Steven Skolsky.

 

(j)

“Participating Company” shall mean (i) the Company and (ii) any present or future parent and/or subsidiary corporation of the Company while such corporation is a parent or subsidiary of the Company. For purposes of this Option Agreement, a parent corporation and a subsidiary corporation shall be as defined in sections 424(e) and 424(f) of the Code.

 

(k)

“Participating Company Group” shall mean at any point in time all corporations collectively which are then a Participating Company.

 

(l)

“Plan” shall mean the Trimeris, Inc. Amended and Restated Stock Incentive Plan.

 

Other capitalized terms used herein and without definition shall have the meanings ascribed to such terms in the Plan.

 

2.	Status of the Option. This Option is intended to be an incentive stock option as defined in Section 422 of the Code to the extent so qualified. The Optionee should consult with the Optionee’s own tax advisors regarding the tax effects of this Option.

 

3.	Exercise of the Option.

 

(a)

Right to Exercise. The Option shall become exercisable from time to time, subject to the schedule set forth below, in whole or in part:

 

(i)

12.4998% of the Number of Option Shares shall become exercisable on the Six Month Anniversary; and

 

(ii)

2.0833% of the Number of Option Shares shall become exercisable on the 8th day of each successive month after the Six Month Anniversary.

 

On the date that Optionee ceases to be both an employee and director of the Company vesting shall cease and the vested portion of the Option, if any, shall remain exercisable until expiration as provided in paragraph 5; provided however, that if the Optionee is terminated by the Company without Cause or resigns for Good Reason (as such terms are defined in the Executive Employment Agreement between the Company and the Optionee dated September 8, 2004, the “Employment Agreement”) as an employee prior to September 8, 2006, 50% of the shares subject to the Option shall become vested upon such date of termination (and any additional amount that would vest under the formula

 

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shall not commence vesting until such 50% would otherwise have vested based on continued service as a director) and shall be exercisable in accordance with the terms of the Plan and provided further that if a “Change in Control” or “Acquisition Event” (as defined in the Plan or, with respect to Change in Control, if more favorable to the Optionee, in the Employment Agreement) occurs while Optionee is employed or a director, the Option will fully vest, as provided in the Plan.

 

Notwithstanding the foregoing, if the Option would otherwise become exercisable under the preceding paragraph based on a termination of employment prior to the Six Month Anniversary, the options shall vest on such termination of employment but shall not become exercisable until the Six Month Anniversary. The Option will then continue to be exercisable until three months after the later of ceasing to be an employee and director or, if later and to the extent permitted under the Plan, until June 8, 2005.

 

(b)

Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of the shares upon exercise of the Option shall be subject to compliance with all applicable requirements of federal or state law with respect to such securities. The Option may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other law or regulations. In addition, no Option may be exercised unless (i) a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act.

 

As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

 

(c)

Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.

 

4.	Non-Transferability of the Option. The Option may be exercised during the lifetime of the Optionee only by the Optionee and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution.

 

5.	Termination of the Option. The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date as defined above, or (b) upon the occurrence of an Acquisition Event as described in the Plan and to the extent provided therein.

 

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6.

Legends. The Company may at any time place legends referencing affiliate status or any applicable federal or state securities law restriction on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to effectuate the provisions of this paragraph.

 

7.	Binding Effect. This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

8.

Termination or Amendment of Option. The Board may amend, modify or terminate any outstanding Option, including but not limited to, substituting therefor another Option of the same or a different type, changing the date or exercise, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Optionee’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Optionee.

 

9.

Integrated Agreement. This Option Agreement constitutes the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein, and there are no other agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company with respect to the subject matter contained herein other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

 

10.

Terms and Conditions of Plan. The terms and conditions included in the Plan are incorporated by reference herein, and to the extent that any conflict may exist between any term or provision of this Option Agreement and any term or provision of the Plan, the term or provision of the Plan shall control.

 

11.	Applicable Law. This Option Agreement shall be governed by the laws of the State of Delaware, without regard to any applicable conflicts of law.

 

Signatures on Page Following

 

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The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors of the Company made in good faith upon any questions arising under this Option Agreement.

 

The undersi