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EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive
Employment Agreement ("Agreement"), dated January 1, 2002,
by and between Structural GenomiX, Inc.,
with its principal place of business at
10505 Roselle Street, San Diego, California
92121 ("SGX"), a Delaware
corporation, and Stephen Burley, M.D., D.
Phil., who resides at ________________
__________________________________________
("Executive").
The parties
agree as follows:
1. Employment.
SGX hereby employs Executive, and Executive hereby accepts
such employment, upon the terms and
conditions set forth herein.
2. Duties.
2.1. Position; Duties and Responsibilities. Executive is employed
in
the position of Senior Vice President of
Research and Chief Scientific Officer
and shall have the duties and
responsibilities assigned by SGX. Executive is
responsible for directing all research and
development strategies and programs
to insure that activities are carried out
in accordance with established
specifications, schedules, and budgets.
Executive shall serve as a key member of
the executive team, as the principal
advisor to the team on the scientific
vision and direction for the Company,
including overall management of the
Company's core technology and shall report
directly to the Chief Executive
Officer. Executive shall perform faithfully
and diligently such duties, as well
as such other duties as SGX shall
reasonably assign from time to time. SGX
reserves the right to modify Executive's
position and duties at any time in its
sole and reasonable discretion, provided
that such modified position is an
executive position of at least the same
general scope and responsibilities as
originally provided herein.
2.2 Best Efforts/Full-time. Executive will expend Executive's
best
reasonable efforts on behalf of SGX, and
will abide by all policies and
decisions made by SGX, as well as all
applicable federal, state and local laws,
regulations or ordinances. Executive will
act in the best interest of SGX at all
times. Other than as provided in Exhibit
"A" hereto, Executive shall devote
Executive's full business time and efforts
to the performance of Executive's
assigned duties, unless Executive notifies
SGX in advance of Executive's intent
to engage in other paid work and receives
SGX' express written consent to do so.
Executive must not engage in any work, paid
or unpaid, that creates an actual or
potential conflict of interest with SGX. If
SGX believes a conflict exists, and
presents Executive with reasonable proof of
the same, SGX may ask Executive to
choose whether to discontinue the other
work or resign employment with SGX.
2.3. Work Location and Effective Date. Executive's principal place
of
work shall be located in San Diego,
California, at SGX' offices or as reasonably
assigned by SGX. Executive will use his
best efforts to take up residence at the
Work Location by January 1, 2002, but in
any case shall arrive and start work no
later than January 29, 2002. This Agreement
shall be effective ("Effective
Date") on Executive's start date of
employment with SGX.
3. Term. The employment relationship pursuant to this Agreement
shall
be for an initial term commencing on the
Effective Date set forth above and
continuing for the period of three (3)
years and for consecutive one (1) year
terms thereafter unless sooner terminated
in accordance with paragraph 7 below.
4.
Compensation.
4.1. Salary. As compensation for the proper and satisfactory
performance of all duties to be performed
by Executive hereunder, SGX shall pay
to Executive an initial annualized Base
Salary of Three Hundred Thousand
($300,000), payable in accordance with the
normal payroll practices of SGX, less
required deductions for state and federal
withholding tax, social security and
all other employment taxes and payroll
deductions. Other than as provided in
Article 7 herein, in the event Executive's
employment under this Agreement is
terminated by either party, for any reason,
Executive will be entitled to
receive the Base Salary prorated to the
date of termination.
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4.2. Incentive Compensation. Executive will be eligible to
receive
incentive compensation. If SGX, in its sole
and absolute discretion, grants
executive incentive compensation, the
terms, amount and payment of such, if any,
will be determined solely by SGX.
4.3. Stock Options. Executive will receive an option to
purchase
200,000 shares of SGX common stock at a
price per share equal to its fair market
value as of first meeting of the Board of
Directors (the "Board") immediately
following or contemporaneous with
Executive's start date, as determined by the
Board in its sole and absolute discretion,
with a four year vesting schedule
subject to the terms and conditions of the
SGX 2000 Equity Incentive Plan (the
"Incentive Plan"). The effective grant date
of the options is the start date of
employment. The offer of these shares is
conditioned upon Executive's acceptance
of SGX' offer of employment and will be in
accordance with the terms and
requirements of the Incentive Plan and the
Company's form of stock option
agreement.
4.4. Conditional Compensation. In recognition of Executive's
acceptance of employment with SGX under the
terms and conditions of this
Agreement, Executive will receive a
one-time payment of one hundred thousand
dollars $100,000 ("Payment"), included in
Executive's first SGX paycheck, and
subject to appropriate federal, state, and
payroll tax withholdings. This
Payment will be subject to the following
conditions: (1) if prior to the first
anniversary of the Effective Date,
Executive voluntarily terminates Executive's
employment pursuant to paragraph 7.3 below,
or (2) Executive is terminated for
cause pursuant to paragraph 7.1 below,
Executive will reimburse SGX the full
amount of the Payment at the time of
termination.
4.5. Bonus Stock Options. Executive will receive an additional
option
to purchase 40,000 shares of SGX common
stock at a price per share equal to its
fair market value as of the first meeting
of the Board immediately following or
contemporaneous with Executive's start
date, as determined by the Board in its
sole and absolute discretion. These options
will vest as of the grant date and
otherwise be subject to the terms and
conditions of the Incentive Plan. The
effective grant date is the start date of
employment. The offer of these shares
is conditioned upon Executive's acceptance
of SGX' offer of employment and will
be in accordance with the terms and
requirements of the Incentive Plan and the
Company's form of stock option
agreement.
4.6. Additional Stock Options. To the extent that any of the
options
Executive received in Executive's capacity
as a Founder of Prospect Genomics,
Inc. do not vest as a result of some or all
of the Earnout Milestones (as set
forth in Section 1.9(a) of the Agreement
and Plan of Merger and Reorganization
among Structural GenomiX, Inc., SGX
Acquisition Corp., and Prospect Genomics,
Inc. dated as of April 2, 2001) not being
achieved, SGX will grant Executive an
option to purchase additional shares of
common stock. The number of shares which
will be subject to this option will equal
the number of shares which did not
vest as a result of the Earnout Milestones
not being fully achieved, up to a
maximum of 112,168 shares. The grant of
this option will be subject to approval
by the Board and the price per share will
equal the fair market value of SGX'
common stock as of the first meeting of the
Board immediately following or
contemporaneous with Executive's start
date. The offer of these shares will be
subject to the terms and requirements of
the Incentive Plan and the Company's
form of stock option agreement.
4.7 Cash Bonus Program. As Senior Vice President of Research and
Chief
Scientific Officer, Executive is eligible
to earn a cash bonus equal to 30% of
Executive's base salary, or $90,000 in year
one (1), provided Executive meets
the eligibility requirements and
performance objectives set forth in SGX' bonus
program, which are determined in SGX' sole
and absolute discretion.
4.8 Performance and Salary Review. SGX will periodically review
Executive's performance. Executive's salary
and/or other compensation will be
reviewed yearly by SGX and may be adjusted
from time to time in SGX' sole and
absolute discretion.
4.9. Loan Payment. SGX will provide to Executive the sum of
three
hundred thousand dollars ($300,000)
constituting an interest-free unforgivable
personal loan to Executive (the "Loan")
subject to the terms and conditions of
the Burley Employee Loan Agreement ("Loan
Agreement").
5. Benefits.
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5.1 Fringe Benefits.
Executive will be eligible for all customary and
usual fringe benefits generally available
to executives of SGX subject to the
terms and conditions of SGX' benefit plan
documents, including, but not limited
to, medical, dental, vision, life
insurance, AD&D insurance, long-term and
short-term disability insurance and a
401(k) plan. SGX reserves the right to
modify or eliminate the fringe benefits on
a prospective basis, at any time,
effective upon notice to Executive.
Executive shall accrue vacation on a pay
period basis at the annual rate of
one-hundred-twenty (120) hours. SGX shall
also provide Executive with five (5) days
of sick time per year. SGX covenants
that it has, and at all times will
maintain, adequate insurance, including
liability insurance and Director's and
Officer's insurance to cover any claim or
obligation that Executive may reasonably be
expected to incur as a result of his
employment by SGX. Further, SGX shall
indemnify and defend Executive against any
claims, demands, liability, suits, losses,
damages (including special, punitive,
incidental and consequential damages),
costs and expenses, including actual
attorneys' fees and court costs, which may
be incurred by him and which result
from his employment as an executive,
officer and employee of SGX.
5.2 Relocation
Expenses and Benefits.
(a) SGX shall
reimburse Executive for expenses related to the
relocation of Executive and his family to San Diego as
follows:
(i) Reasonable travel
and living expenses associated with one
(1) trip of up to seven (7) days (including travel) to San
Diego for the purpose of securing a temporary place to live.
If needed, a second trip of like scope will be made
available upon reasonable request. Original receipts are
required for reimbursement.
(ii) Reasonably documented moving expenses up to thirty-five
thousand dollars ($35,000) (including packing, shipping and
temporary storage of household goods and one family
vehicle).
(iii) Up to six (6) months of temporary housing and costs
associated with a rental car until Executive's vehicle
arrives in San Diego.
(iv) Normal and customary non-recurring closing costs,
including
sales commissions, Coop Board Fees and attorney fees, for
the sale of Executive's apartment in New York City, up to
ten percent (10%) of the price of the apartment. Executive
shall provide SGX with reasonable documentation
substantiating the costs associated with the sale of
Executive's New York apartment.
(v) Normal and
customary non-recurring closing costs, including
sales commissions and attorney fees, associated with the
purchase of Executive's new home in San Diego up to three
percent (3%) of the purchase price.
(vi) Reasonable transportation costs for Executive and his
family
associated with their final move trip to San Diego.
(vii) SGX
will provide Executive with a moving allowance of
twenty thousand dollars ($20,000), to be paid with
Executive's first paycheck, and subject to appropriate
federal, state, and payroll tax withholdings, from SGX.
(viii) SGX will provide Executive with a company paid-for
relocation consultant to provide Executive with a variety of
relocation assistance, including, but not limited to,
finding a moving company, interim housing, real estate
professionals and information about the San Diego area.
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(b) SGX will gross-up
all of the reimbursements, payments and
costs of services described in 5.2(a) above, except for item
(vii), (to the extent such items are considered taxable
income) for income and employment taxes. The income tax
gross-up will be calculated using the supplemental wage
rates in effect when payment is made. SGX will be reimbursed
for the pro-rated portion of the above payments and costs
from Executive, other than the services provided by the
relocation consultant, should Executive's employment be
terminated prior to the completion of one (1) year of
service pursuant to subparagraphs 7.1 or 7.3 herein. SGX
shall withhold such amount from Executive's final paycheck.
5.3 Interim
Consultation. Prior to Executive's relocation and start
date with SGX, Executive will continue to provide SGX with
consulting services, and receive payment for the same, under
the
Executive's Founding Scientific Associate and Consulting
Agreement with Prospect Genomics, Inc., of March 1, 2000, as
amended on May 4, 2001. Executive's interim consultation will
be
for the exchange of ideas only. Under no circumstances, will
Executive direct research at SGX prior to his start date of
employment.
6. Business Expenses. Executive
will be reimbursed for all out-of-pocket
business expenses reasonably incurred in
the performance of Executive's duties
on behalf of SGX. Executive will be
permitted to fly business class (or first
class if business class is not available)
on any business flights with greater
than two (2) hours of flight time. To
obtain reimbursement, expenses must be
submitted promptly with appropriate
supporting documentation in accordance with
SGX' policies.
7. Termination of
Employment.
7.1. Termination for Cause by SGX. Although SGX anticipates a
mutually
rewarding employment relationship with
Executive, SGX may terminate Executive's
employment immediately at any time for
cause. Cause includes, but is not limited
to, one or more of the following: (a) acts
or omissions deemed by SGX to
constitute gross negligence, recklessness,
willful misconduct or dishonesty on
the part of Executive with respect to
Executive's obligations under this
Agreement or otherwise relating to the
business of SGX; (b) Executive's willful,
material breach of this Agreement; (c)
Executive's conviction or entry of a plea
of guilty or nolo contendere for fraud,
misappropriation or embezzlement, or of
any felony; or engaging in any conduct
which SGX, in its discretion, determines
has or may adversely impact SGX; (d)
Executive's material breach of fiduciary
duty toward SGX; (e) Executive's material
breach of any element of SGX'
Confidential Information and Invention
Assignment Agreement, including without
limitation, Executive's theft, dilution, or
other misappropriation or careless
treatment of SGX' proprietary information;
(f) Executive's inability to perform
all of the essential functions and duties
of Executive's position, with or
without reasonable accommodation other than
for reason of temporary illness; or
(g) Executive's death. In the event
Executive's employment is terminated in
accordance with this subparagraph 7.1,
Executive shall be entitled to receive
only the Base Salary then in effect,
prorated to the date of termination, and
any benefits, including any benefits under
the bonus program and Incentive Plan,
and expense reimbursements to which
Executive is entitled by virtue of his prior
employment with SGX (collectively referred
to as "Standard Entitlements."). All
other SGX obligations to Executive pursuant
to this Agreement will become
automatically terminated and completely
extinguished. Executive will not be
entitled to receive the Severance Payment
or any part thereof described in
subparagraph 7.2 below.
7.2. Termination Without Cause By SGX/Severance. SGX may
terminate
Executive's employment under this Agreement
without cause at any time on thirty
(30) days' advance written notice to
Executive, including the failure of SGX to
renew Executive's term of employment under
paragraph 3 of this Agreement. In the
event of such termination, Executive will
receive the Standard Entitlements,
plus a severance payment equivalent to
twelve months of Executive's Base Salary
then in effect on the date of termination
(the "Severance Payment") payable in
accordance with SGX' regular payroll cycle,
including continuation of
Executive's benefits in accordance with
SGX's regular payroll deductions. In
addition, the vesting of any outstanding
stock options, including, but not
limited to, options granted under
paragraphs 4.3 and 4.6, as well as any
subsequently granted incentive or evergreen
stock options, will be accelerated
by 12 months, provided that Executive: (a)
is in material compliance with all
surviving provisions of this Agreement as
specified in
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subparagraph 16.7 below; (b) executes a
full general release, releasing all
claims, known or unknown, that Executive
may have against SGX arising out of or
any way related to Executive's employment
or termination of employment with SGX;
and (c) agrees to act as a consultant for
SGX for up to a maximum of sixty (60)
days, without additional compensation, if
requested to do so by SGX. All other
SGX obligations to Executive pursuant to
this Agreement will become
automatically terminated and completely
extinguished, except for obligations
accruing prior to termination, including
SGX's obligation to indemnify, defend
and insure Executive pursuant to
subparagraph 5.1 hereunder.
7.3. Voluntary Resignation By Executive. Executive may
voluntarily
resign Executive's position with SGX at any
time on thirty (30) days advance
written notice. In the event of Executive's
resignation, Executive shall be
entitled to receive only the Base Salary
then in effect, prorated to the date of
resignation, and the Standard Entitlements.
All other SGX obligations to
Executive pursuant to this Agreement will
become automatically terminated and
completely extinguished, except for
obligations accruing prior to termination,
including SGX's obligation to indemnify,
defend and insure Executive pursuant to
subparagraph 5.1 hereunder. In addition,
Executive will not be entitled to
receive the Severance Payment described in
paragraph 7.2 above.
7.4. Termination of Executive Following Change Of Control.
(a)
Severance Payment. If
Executive's employment is terminated
by SGX without cause, or if Executive
resigns because SGX substantially changes
all of Executive's duties and
responsibilities which existed prior to a Change
in control, within one (1) year after a
Change of Control (as that term is
defined below), Executive shall be entitled
to receive the Standard
Entitlements, plus the Severance Payment
and other benefits described in
subparagraph 7.2 above, and the vesting of
any outstanding stock options,
including, but not limited to, options
granted under paragraphs 4.3 and 4.6, as
well as any subsequently granted incentive
or evergreen stock options, will be
accelerated by twenty-four (24) months,
provided Executive complies with the
conditions in subparagraph 7.2 above. All
other SGX obligations to Executive
pursuant to this Agreement will become
automatically terminated and completely
extinguished, except for obligations
accruing prior to termination, including
SGX's obligation to indemnify, defend and
insure Executive pursuant to
subparagraph 5.1 hereunder.
(b) 280G. If, due to
the benefits provided under subparagraph
7.4(a) above, and/or any other benefits,
Executive is subject to any excise tax
due to characterization of any amounts
payable under subparagraph 7.4(a) and/or
any other benefits, as excess parachute
payments pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended
(the "Code"), Executive may elect, in
Executive's sole discretion, to reduce the
amounts payable under subparagraph
7.4(a)and/or any other benefits, in order
to avoid any "excess parachute
payment" under Section 280G(b)(1) of the
Code.
(c) Change of Control.
A Change of Control is defined as any one
of the following occurrences:
(i) Any "person" (as
such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of
1934 (the "Exchange Act")), other
than a trustee or other fiduciary holding
securities of SGX under an employee
benefit plan of SGX, becomes the
"beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act),
directly or indirectly, of the securities
of SGX representing more than 50% of (a)
the outstanding shares of common stock
of SGX or (b) the combined voting power of
SGX' then-outstanding securities; or
(ii) The sale or disposition of all or substantially all of
SGX' assets (or any transaction having
similar effect is consummated) other than
to an entity of which SGX owns at least 50%
of the Voting Stock so long as the
sale or disposition is not under duress of
SGX' financial hardship; or
(iii) SGX is party to a merger or consolidation that results
in the holders of voting securities of SGX
outstanding immediately prior thereto
failing to continue to represent (either by
remaining outstanding or by being
converted into voting securities of the
surviving entity) less than 50% of the
combined voting power of the voting
securities of SGX or such surviving entity
outstanding immediately after such merger
or consolidation.
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8. Competitive Employment.
During the term of Executive's employment with
SGX and during any
