EXHIBIT 10.31
David S. Kabakoff
May 1, 1996
Page
May 1, 1996
Mr. David S. Kabakoff
P.O. Box 9151
16957 Circa Del Sur
Rancho Santa Fe, CA 92067
Dear David:
This letter will serve as the basis by which you will be employed by
Dura Pharmaceuticals, Inc. (the "Company") as its Executive Vice President
and President of Spiros Development Corporation, a separate newly-formed
corporation ("Spiros Corp.").
During your employment beginning May 1, 1996, you will devote your time,
attention and energy to the Company and Spiros Corp. Such service will
become full time on or after June 1, 1996. In your capacity as Executive
Vice President of the Company and President of Spiros Corp. you will perform
such executive duties as are from time to time prescribed by the President
and the Board of Directors of the Company and the Board of Directors of
Spiros Corp. Except for certain interim consultant services to be provided
to, and serving on the Board of, Corvas International, Inc., you will not,
without the prior written consent of the Company's Board of Directors,
directly or indirectly, during the term of your employment: (A) render
significant services of a business, professional or commercial nature to any
other person or entity, either for compensation or otherwise; or (B) engage
in any business activity competitive with or adverse to the Company's
business or welfare, whether alone, as a partner or member, or as an officer,
director, employee or shareholder of another business entity.
Your beginning compensation has been separately established by prior
communication from the Company. Thereafter, for each fiscal year beginning
January 1, 1997, your base salary will be annually reviewed and set by the
Board of Directors and may be increased at the sole discretion of the Board
based upon your performance and other factors. All base salary will be
payable in equal biweekly installments.
The Company will pay you a minimum bonus of $50,000 for 1996, to be paid
the first pay period of January 1997. In subsequent years, the Board of
Directors, in its sole discretion, may pay you a cash bonus based on your
performance during that particular year, and other factors.
In addition to the annual compensation provided for above, you will
receive such fringe benefits as are made available generally to executive
employees of the Company.
You have been nominated for election as a Director of the Company at the
Annual Meeting of Shareholders to be held May 29, 1996. You agree to serve
without additional compensation as a Director or if you are elected or
appointed as an officer of the Company or any subsidiary of the Company. You
also agree to serve without additional compensation as a
David S. Kabakoff
May 1, 1996
Page 2
Director and President of Spiros Corp. The Company will require you to
execute its standard form of employee confidentiality agreement.
The term of your employment will end on April 30, 1997, unless extended by
mutual agreement; provided, however, that unless the Company notifies you at
least nine (9) calendar months prior to any relevant expiration date of its
intention not to renew your employment, your employment will be, at your option
and unless we mutually agree on a larger extension, automatically extended for
additional successive one-year periods. However, your employment shall
terminate earlier upon (1) your death, (2) in the event you become physically or
mentally disabled so as to become unable, for a period of more than 120
consecutive working days or for more than 120 working days in the aggregate
during any 12-month period, to perform your duties hereunder on substantially a
full-time basis, in which case the Company may, at its option, terminate your
employment hereunder upon not less than thirty (30) days' written notice, (3)
for Cause, and (4) without Cause upon not less than sixty (60) days' written
notice. For the purposes of this letter agreement, the Company shall have
"Cause" to terminate your employment hereunder upon (A) your indictment for a
felony, or (B) the engaging by you in misconduct which is injurious to the
Company or any parent, subsidiary or affiliate of the Company, or (C) the
violation by you of any of the material provisions of this letter agreement. If
the Company terminates your employment without Cause, you will be entitled to
six (6) months' base salary at the then current annual rate as severance pay
unless there has been a Change in Control as defined below. In the event that
there has been a Change of Control of the Company during the period in which you
serve as Executive Vice President pursuant to this letter agreement, if the
Company terminates your employment without Cause or if there is an Involuntary
Termination (as defined below), you will be entitled to nine (9) months' base
salary at the then current annual rate as severance pay. In the event of
payment of severance under this agreement, stock option vesting shall continue
during the severance period. Other than the benefits described in this letter,
you will not be entitled to any other salary, benefits or bonus subsequent to
termination.
The term "Change of Control" shall mean (i) any transaction or series of
related transactions (including but not limited to, any merger or other
reorganization) in which the ownership of more than 50% of the voting power of
the Company is transferred; (ii) a sale, transfer or other disposition of all or
substantially all of the assets of the Company; (iii) the successful acquisition
of thirty percent (30%) or more of the Company's outstanding voting stock
pursuant to a third-party tender or exchange offer; or (iv) a change in
composition of the Board which occurs because the individuals nominated for
election or re-election by majority vote of those members of the Board elected
at the last shareholder meeting at which there were not contested elections for
Board membership fail to be elected or re-elected by the shareholders.
The term "Involuntary Termination" shall mean the termination of your
employment with the Company: (i) involuntarily by your dismissal without cause;
or (ii) voluntarily or involuntarily following (a) a change in your position
with the Company which materially reduces
David S. Kabakoff
May 1, 1996
Page 3
your level of responsibility; (b) a reduction of ten percent (10%) or more in
your level of compensation (including base salary, bonuses or fringe
benefits); or (c) a change in your place of employment which is more than
twenty (20) miles from your place of employment prior to the Change in
Control, PROVIDED AND ONLY IF such change or reduction is effected without
your written concurrence.
If a Change in Control of the Company occurs and the Company does not
survive the transaction as an entity, the Company will require the purchaser to
assume the Company's obligations hereunder, and if the purchaser is a subsidiary
of a parent entity, the Company will require the parent entity to guarantee the
performance of the obligations hereunder or to assume directly the obligations
hereunder.
You also agree that for a period ending three (3) years after a termination
of your employment with the Company, you will not (a) divert, directly or
indirectly, any business of the Company to any other person or entity; (b)
disrupt, damage, impair or interfere with the Company's relationships with its
employees, customers, agents or vendors; (c) directly or indirectly, solicit or
otherwise induce any person to leave his or her employment with the company; or
(d) attempt to do any of the foregoing.
No provisions of this letter agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the parties hereto. No waiver by any party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this letter agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or considerations at the
same or at any prior or subsequent time. This letter agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns and you
and your heirs, executors, administrators and legal representatives. The
validity, interpretation, construction and performance of this letter agreement
shall be governed by the laws of the State of California without reference to
conflict of laws.
This letter agreement shall supersede all prior agreements and
understandings between us, oral or written, with respect to your employment.
David S. Kabakoff
May 1, 1996
Page 4
Should this letter reflect your understanding, please sign below and return
one signed copy to me as soon as possible.
Very truly yours,
DURA PHARMACEUTICALS, INC.
/s/ Cam L. Garner
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By: Cam L. Garner
Chairman, President and Chief Executive Officer
ACCEPTED:
/s/ David S. Kabakoff
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David S. Kabakoff
Date: May 1, 1997
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