TERMINATION AGREEMENT
Exhibit 10.1
This Agreement is made as of the April 21, 2006, between MGI PHARMA, INC., a Minnesota
corporation, with its principal offices at 0000 Xxxx Xxx Xxxxxxxx Xxxx, Xxxxx #000, Xxxxxxxxxxx,
Xxxxxxxxx 00000 (the “Company”) and Xxxxxxx X. Xxxxxxxx (“Employee”), residing at 0000 Xxxxxxxxx
Xxxx, Xxxxxxxxx, XX 00000.
WITNESSETH THAT:
WHEREAS, this Agreement is intended to specify the financial arrangements that the Company
will provide to the Employee upon Employee’s separation from employment with the Company under any
of the circumstances described herein; and
WHEREAS, this Agreement is entered into by the Company in the belief that it is in the best
interests of the Company and its shareholders to provide stable conditions of employment for
Employee notwithstanding the possibility, threat or occurrence of certain types of change in
control, thereby enhancing the Company’s ability to attract and retain highly qualified people.
NOW, THEREFORE, to assure the Company that it will have the continued dedication of Employee
notwithstanding the possibility, threat or occurrence of a bid to take over control of the Company,
and to otherwise induce Employee to remain in the employ of the Company, and for other good and
valuable consideration, the Company and Employee agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on the date hereof as
first written above and shall continue in effect through December 31, 2006; provided that
commencing on January 1, 2007 and each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless not later than twelve months prior to such
January 1, the Company shall have given notice that it does not wish to extend this Agreement
(which notice may not, in any event, be given sooner than January 1, 2007; and provided, further,
that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in
effect for a period of 24 months beyond the term provided herein if a Change in Control (as defined
in Section 3(i) hereof) shall have occurred during such term. Notwithstanding any earlier
termination of this Agreement, Section 2(i) of this Agreement shall survive until July 20, 2008.
2. Termination of Employment
(i) Prior to a Change in Control. Prior to a Change in Control (as defined in Section
3(i) hereof), the Company may terminate Employee from employment with the Company at will, with or
without Cause (as defined in Section 3(iii) hereof), at any time. If , however, Employee’s
employment with the Company is terminated without Cause at any time prior to July 20, 2008, then
upon the effective date of such Employee’s termination of employment with Company, any unvested
restricted stock units granted by Company to Employee under Company’s employee stock incentive
plans on or prior to the Company’s 2006 annual incentive grant of long
1
term incentive equity compensation shall immediately vest and Employee shall be entitled to all
right, title and interest of vested restricted stock units under the applicable grant agreement(s).
(ii) After a Change in Control
(a) From and after the date of a Change in Control (as defined in Section 3(i) hereof)
during the term of this Agreement, the Company shall not terminate Employee from employment
with the Company except as provided in this Section 2(ii) or as a result of Employee’s
Disability (as defined in Section 3(iv) hereof) or his death.
(b) From and after the date of a Change in Control (as defined in Section 3(i) hereof)
during the term of this Agreement, the Company shall have the right to terminate Employee
from employment with the Company at any time during the term of this Agreement for Cause (as
defined in Section 3(iii) hereof), by written notice to the Employee, specifying the
particulars of the conduct of Employee forming the basis for such termination.
(c) From and after the date of a Change in Control (as defined in Section 3(i) hereof)
during the term of this Agreement: (x) the Company shall have the right to terminate
Employee’s employment without Cause (as defined in Section 3(iii) hereof), at any time; and
(y) the Employee shall, upon the occurrence of such a termination by the Company without
Cause, or upon the voluntary termination of Employee’s employment by Employee for Good
Reason (as defined in Section 3(ii) hereof), be entitled to receive the benefits provided in
Section 4 hereof. Employee shall evidence a voluntary termination for Good Reason by
written notice to the Company given within 60 days after the date as of which the Employee
knows or should reasonably have known an event has occurred which constitutes Good Reason
for voluntary termination. Such notice need only identify the Employee and set forth in
reasonable detail the facts and circumstances claimed by Employee to constitute Good Reason.
Any notice given by Employee pursuant to this Section 2 shall be effective five business days after
the date it is given by Employee.
3. Definitions
(i) A “Change in Control” shall mean:
(a) a change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), or successor provision thereto, whether or not the
Company is then subject to such reporting requirement;
(b) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company representing 35% or more
of the combined voting power of the Company’s then outstanding securities;
2
(c) the Continuing Directors (as defined in Section 3(v) hereof) cease to constitute a
majority of the Company’s Board of Directors; provided that such change is
the direct or indirect result of a proxy fight and contested election or elections for
positions on the Board of Directors; or
(d) the majority of the Continuing Directors (as defined in Section 3(v) hereof)
determine in their sole and absolute discretion that there has been a change in control of
the Company.
(ii) “Good Reason” shall mean the occurrence of any of the following events, except for the
occurrence of such an event in connection with the termination or reassignment of Employee’s
employment by the Company for Cause (as defined in Section 3(iii) hereof), for Disability (as
defined in Section 3(iv) hereof) or for death:
(a) the assignment to Employee of employment responsibilities which are not of
comparable responsibility and status as the employment responsibilities held by Employee
immediately prior to a Change in Control;
(b) a reduction by the Company in Employee’s base salary as in effect immediately prior
to a Change in Control;
(c) an amendment or modification of the Company’s incentive compensation program
(except as may be required by applicable law) which affects the terms or administration of
the program in a manner adverse to the interest of Employee as compared to the terms and
administration of such program immediately prior to a Change in Control;
(d) the Company’s requiring Employee to be based anywhere other than within 50 miles of
Employee’s office location immediately prior to a Change in Control, except for requirements
of temporary travel on the Company’s business to an extent substantially consistent with
Employee’s business travel obligations immediately prior to a Change in Control;
(e) except to the extent otherwise required by applicable law, the failure by the
Company to continue in effect any benefit or compensation plan, stock ownership plan, stock
purchase plan, bonus plan, life insurance plan, health-and-accident plan or disability plan
in which Employee is participating immediately prior to a Change in Control (or plans
providing Employee with substantially similar benefits), the taking of any action by the
Company which would adversely affect Employee’s participation in, or materially reduce
Employee’s benefits under, any of such plans or deprive Employee of any material fringe
benefit enjoyed by Employee immediately prior to such Change in Control, or the failure by
the Company to provide Employee with the number of paid vacation days to which Employee is
entitled immediately prior to such Change in Control in accordance with the Company’s
vacation policy as then in effect; or
3
(f) the failure by the Company to obtain, as specified in Section 5(i) hereof, an
assumption of the obligations of the Company to perform this Agreement by any successor to
the Company.
(iii) “Cause” shall mean termination by the Company of Employee’s employment based upon (a)
the willful and continued failure by Employee substantially to perform his duties and obligations
(other than any such failure resulting from his incapacity due to physical or mental illness or any
such actual or anticipated failure resulting from Employee’s termination for Good Reason) or (b)
the willful engaging by Employee in misconduct which is materially injurious to the Company,
monetarily or otherwise. For purposes of this Section 3(iii), no action or failure to act on
Employee’s part shall be considered “willful” unless done, or omitted to be done, by Employee in
bad faith and without reasonable belief that his action or omission was in the best interests of
the Company.
(iv) “Disability” shall mean any physical or mental condition which would qualify Employee for
a disability benefit under the Company’s long-term disability plan.
(v) “Continuing Director” shall mean any person who is a member of the Board of Directors of
the Company, while such person is a member of the Board of Directors, who is not an Acquiring
Person (as hereinafter defined) or an Affiliate or Associate (as hereinafter defined) of an
Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate,
and who (a) was a member of the Board of Directors on the date of this Agreement as first written
above or (b) subsequently becomes a member of the Board of Directors, if such person’s initial
nomination for election or initial election to the Board of Directors is recommended or approved by
a majority of the Continuing Directors. For purposes of this Section 3(v): “Acquiring Person”
shall mean any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who
or which, together with all Affiliates and Associates of such person, is the “beneficial owner” (as
defined in Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the shares of Common
Stock of the Company then outstanding, but shall not include the Company, any subsidiary of the
Company or any employee benefit plan of the Company or of any subsidiary of the Company or any
entity holding shares of Common Stock organized, appointed or established for, or pursuant to the
terms of, any such plan; and “Affiliate” and “Associate” shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
4. Benefits upon Termination under Section 2(ii)(c)
(i) Upon the termination (voluntary or involuntary) of the employment of Employee pursuant to
Section 2(ii)(c) hereof, Employee shall be entitled to receive the benefits specified in this
Section 4. The amounts due to Employee under subparagraphs (a), (b) and (c) of this Section 4(i)
shall be paid to Employee not later than one business day prior to the date that the termination of
Employee’s employment becomes effective. All benefits to Employee pursuant to this Section 4(i)
shall be subject to any applicable payroll or other taxes required by law to be withheld.
4
(a) The Company shall pay to Employee any and all amounts payable to Employee pursuant
to any standard or general severance policy of the Company or its Board of Directors;
(b) In lieu of any further base salary payments to Employee for periods subsequent to
the date that the termination of Employee’s employment becomes effective, the Company shall
pay as severance pay to Employee a lump-sum cash amount equal to twenty-four (24) times the
Employee’s monthly base salary (as in effect in the month preceding the month in which the
termination becomes effective or as in effect in the month preceding the Change in Control,
whichever is higher);
(c) The Company shall also pay to Employee all legal fees and expenses incurred by
Employee as a result of such termination of employment (including all fees and expenses, if
any, incurred by Employee in seeking to obtain or enforce any right or benefit provided to
Employee by this Agreement whether by arbitration or otherwise); and
(d) Any and all contracts, agreements or arrangements between the Company and Employee
prohibiting or restricting the Employee from owning, operating, participating in, or
providing employment or consulting services to, any business or company competitive with the
Company at any time or during any period after the date the termination of Employee’s
employment becomes effective, shall be deemed terminated and of no further force or effect
as of the date the termination of Employee’s employment becomes effective, to the extent,
but only to the extent, such contracts, agreements or arrangements so prohibit or restrict
the Employee; provided that the foregoing provisions shall not constitute a license or right
to use any proprietary information of the Company and shall in no way affect any such
contracts, agreements or arrangements insofar as they relate to nondisclosure and nonuse of
proprietary information of the Company notwithstanding the fact that such nondisclosure and
nonuse may prohibit or restrict the Employee in certain competitive activities.
(ii) Employee shall not be required to mitigate the amount of any payment provided for in this
Section 4 by seeking other employment or otherwise. The amount of any payment or benefit provided
in this Section 4 shall not be reduced by any compensation earned by Employee as a result of any
employment by another employer or from any other source.
(iii) In the event that any payment or benefit received or to be received by Employee in
connection with a Change in Control of the Company or termination of Employee’s employment (whether
payable pursuant to the terms of this Agreement or pursuant to any other plan, contract, agreement
or arrangement with the Company, with any person whose actions result in a Change in Control of the
Company or with any person constituting a member of an affiliated group” as defined in Section
280G(d)(5) of the Internal Revenue Code of 1986, as amended (the “Code”), with the Company or with
any person whose actions result in a Change in Control of the Company (collectively, the “Total
Payments”)) would be subject to the excise tax imposed by Section 4999 of the Code or any interest,
penalties or additions to tax with respect to such excise tax (such excise tax, together with any
such interest, penalties or additions to tax, are collectively referred to as the “Excise Tax”),
then Employee shall be entitled to receive from the Company an additional cash
5
payment (a “Gross-Up Payment”)in an amount such that after payment by Employee of all taxes
(including any interest, penalties or additions to tax imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, Employee would retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments, as determined in
accordance with the provisions of this Section 4(iii).
(a) All determinations required to be made under this Section 4(iii), including whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the
independent accounting firm retained by the Company on the date of the Change in Control
(the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations
of its determination to both the Company and the Employee within 15 business days of the
Employment Termination Date, or at such earlier time as is requested by the Company. For
purposes of determining the amount of any tax pursuant to this Section 4(iii), the
Employee’s tax rate shall be deemed to be the highest statutory marginal state and Federal
tax rate (on a combined basis and including the Employee’s share of F.I.C.A. and Medicare
taxes) then in effect.
(b) Employee shall in good faith cooperate with the Accounting Firm in making the
determination of whether a Gross-Up Payment is required, including but not limited to
providing the Accounting Firm with information or documentation as reasonably requested by
the Accounting Firm. A determination by the Accounting Firm regarding whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment shall be conclusive and binding
upon the Employee and the Company for all purposes.
(c) A Gross-Up Payment required to be made pursuant to this Section 4(iii) shall be
paid to Employee within 30 days of a final determination by the Accounting Firm that the
Gross-Up Payment is required. Employee and Company shall report all amounts paid to
Employee on their respective tax returns consistent with the determination of the Accounting
Firm.
(d) The Company and the Employee shall promptly deliver to each other copies of any
written communications, and summaries of any oral communications, with any tax authority
regarding the applicability of Section 280G or 4999 of the Code to any portion of the Total
Payments. In the event of any controversy with the Internal Revenue Service or other tax
authority regarding the applicability of Section 280G or 4999 of the Code to any
portion of the Total Payments, Company shall have the right, exercisable in its sole
discretion, to control the resolution of such controversy at its own expense. Employee and
the Company shall in good faith cooperate in the resolution of such controversy.
(e) If the Internal Revenue Service or any tax authority makes a final determination
that a greater Excise Tax should be imposed upon the Total Payments than is determined by
the Accounting Firm or reflected in the Employee’s tax return pursuant to this
Section, the Employee shall be entitled to receive from the Company the full Gross-Up
Payment calculated on the basis of the amount of Excise Tax determined to be payable by
6
such tax authority. That amount shall be paid to the Participant within 30 days of the date
of such final determination by the relevant tax authority.
5. Successors and Binding Agreement
(i) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise to all or substantially all of the business and/or assets of the
Company), by agreement in form and substance satisfactory to Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the Company to obtain
such agreement prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to compensation from the Company in the same amount and on the
same terms as Employee would be entitled hereunder if employee terminated Employee’s employment
after a Change in Control for Good Reason, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the date that the
termination of Employee’s employment becomes effective. As used in this Agreement, “Company” shall
mean the Company and any successor to its business and/or assets which executes and delivers the
agreement provided for in this Section 5(i) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(ii) This Agreement is personal to Employee, and Employee may not assign or transfer any part
of Employee’s rights or duties hereunder, or any compensation due to Employee hereunder, to any
other person. Notwithstanding the foregoing, this Agreement shall inure to the benefit of and be
enforceable by Employee’s personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees.
6. Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in the Minneapolis-St. Xxxx metropolitan
area, in accordance with the applicable rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.
7. Modification; Waiver. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in a writing signed by
Employee and such officer as may be specifically designated by the Board of Directors of the
Company. No waiver by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
8. Notice. All notices, requests, demands and all other communications required or
permitted by either party to the other party by this Agreement (including, without limitation, any
notice of termination of employment and any notice of intention to arbitrate) shall be in writing
and shall be deemed to have been duly given when delivered personally or received by certified or
registered mail, return receipt requested, postage prepaid, at the address of the other party, as
first written above (directed to the attention of the Board of Directors and Corporate
7
Secretary in the case of the Company). Either party hereto may change its address for purposes of
this Section 8 by giving 15 days’ prior notice to the other party hereto.
9. Severability. If any term or provision of this Agreement or the application hereof
to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of
this Agreement or the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
10. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
11. Governing Law. This Agreement has been executed and delivered in the State of
Minnesota and shall in all respects be governed by, and construed and enforced in accordance with,
the laws of the State of Minnesota, including all matters of construction, validity and
performance, and without taking into consideration the conflict of law provisions of such state.
12. Effect of Agreement; Entire Agreement. The Company and the Employee understand
and agree that this Agreement is intended to reflect their agreement only with respect to payments
and benefits upon termination in certain cases and is not intended to create any obligation on the
part of either party to continue employment. This Agreement supersedes any and all other oral or
written agreements or policies made relating to the subject matter hereof and constitutes the
entire agreement of the parties relating to the subject matter hereof; provided that this Agreement
shall not supersede or limit in any way Employee’s rights under any benefit plan, program or
arrangements in accordance with their terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed, all as of
the date first written above.
MGI PHARMA, INC.
|
||
By
|
/s/ Xxxx X. Xxxxxxx, Xx. | |
| Xxxx X. Xxxxxxx, Xx. Its President & CEO | ||
By
|
/s/ Xxxxxxx X. Xxxxxxxx | |
| Employee, Xxxxxxx X. Xxxxxxxx | ||
8
