Exhibit 10.5
NON-COMPETITION AND SEVERANCE AGREEMENT
This Agreement is made and entered into as of this _____ day of
_______, ____ by and between Chattem, Inc., a Tennessee corporation (the
"Company") and _______________ (the "Executive").
WITNESSETH:
WHEREAS, the Company is desirous of assuring itself of continuity of
management through the hiring and retention of certain key executives, and to
xxxxxx their unbiased and analytical assessment of any offer to acquire control
of the Company; and
WHEREAS, the Company desires to impose upon the Executive obligations
of confidentiality and to restrict his ability to obtain employment with certain
competitors of the Company; and
WHEREAS, the Executive is willing to accept obligations of
confidentiality and non-competition in exchange for specified severance
benefits;
NOW, THEREFORE, the Company and the Executive do hereby agree as
follows:
1. TERM. The Term of this Agreement shall commence as of the
day and year first above written and continue indefinitely thereafter for a
period ending three (3) years after the termination of the Executive's
employment with the Company.
2. CONFIDENTIALITY OBLIGATIONS. During the term of this
Agreement the Executive agrees to maintain all confidential information and
trade secrets obtained during the course of his employment with the Company as
confidential and to disclose the same to no one, other than in the furtherance
of the Company's
business in the normal course or to a fellow employee with a reasonable need to
know, unless the Executive can demonstrate by documentary evidence that such
information was (1) known to him prior to his employment with the Company; (2)
subsequently became part of the public domain through no fault of his own; or
(3) was subsequently disclosed to him by a third party not in violation of any
obligation of confidentiality and non-use with the Company.
3. NON-COMPETE. In the event of a Change in Control (as
hereinafter defined) while Executive is employed by the Company and during the
term of this Agreement, Executive will not accept compensation or anything of
value from, nor offer or provide any services, including consulting services, to
any person, company, partnership, joint venture or other entity which has or
does a significant business involving, in whole or in part, health and beauty
aid products sold over-the-counter. This provision applies only to entities
selling the above specified products in competition with the Company in the
United States.
4. SEVERANCE BENEFITS. If the Company Discharges or
Constructively Discharges the Executive during the term of this Agreement within
twenty-four (24) months after the occurrence of a Change in Control, he shall
receive a Severance Benefit. These terms are hereby defined as follows:
A. "Change in Control":
(i) Change of one-third (1/3) or more of any directors
of the Company within any twelve (12) month
period; or
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(ii) Change of one-half (1/2) or more of the directors
of the Company within any twenty-four (24) month
period; or
(iii) Acquisition by any person of the ownership or
right to vote of thirty-five (35%) percent or more
of the Company's outstanding voting shares.
"Person" shall mean any person, corporation,
partnership, or any entity and any affiliate or
associate thereof. "Affiliate" and "associate"
shall have the meanings assigned to them in Rule
12(b)(2) of the General Rules and Regulations
under the Securities Exchange Act of 1934.
B. "Discharges": terminates the Executive for any
reason other than indictment or conviction for a
felony or other crime involving substantial moral
turpitude, disability, death, alcoholism, drug
addiction or the gross, active misfeasance of the
Executive with regard to his duties with the
Company.
C. "Constructively Discharges": changes location or
reduces the Executive's status, duties,
responsibilities or direct or indirect compensation,
(including future increases
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commensurate with those given other managers of the
Company), or so alters the style or philosophy of
the conduct of the Company's business, in the
opinion of the Executive, as to cause it to be
undesirable to the Executive to remain in the
employ of the Company.
D. "Severance Benefit": a payment equal to two hundred
ninety-nine (299%) percent of the Executive's
average annual includible compensation from the
Company during the five (5) most recently completed
taxable years before the date on which the Change in
Control occurs. Any partial taxable years shall be
annualized. In the event that the Executive's
employment is less than five (5) years, the average
annual compensation should be calculated based on
the rate of compensation for the actual term of
employment.
Notwithstanding the foregoing Severance Benefit formula, any payments to
which the Executive is entitled upon Discharge or Constructive Discharge from
Company shall be adjusted so that the aggregate present value of all "parachute
payments" (as defined in Section 280G of the Internal Revenue Code of 1954, as
amended from time to time (the "Code")) to which the Executive is entitled is
less than 300% of the Executive's "annualized includible
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compensation for the base period" as defined in the Code. The determination as
to whether there is any adjustment (and the extent thereof) in the payments due
the Executive because of this paragraph shall be made in writing within thirty
(30) days after Discharge or Constructive Discharge, by the Company's
independent certified public accounts on the date of the change in control and
shall be final and binding on the Executive and the Company. The Company shall
furnish said independent certified public accountants with all data required to
make said determination within ten (10) days after Discharge or Constructive
Discharge. If there is any such adjustment, the Executive may elect in the
Executive's sole discretion which payments or distributions shall be reduced
and/or which payments or distributions shall be deferred and promptly notify the
Company in writing of such election.
5. PAYMENT. The Severance Benefit shall be paid to the
Executive in a lump sum or, at the Executive's election, in two (2) equal
installments with the first to be made not later than thirty (30) days after
Discharge or Constructive Discharge and the second installment one (1) year
after the first installment was paid. No interest shall be due upon the
Severance Benefit unless it is not paid when due and in which case interest
shall accrue thereon at the applicable Federal rate used to determine present
value under Section 280(G) of the Internal Revenue Code of 1986 as amended.
6. CONTINUATION OF BENEFITS. The Company shall continue to
provide to the Executive at its cost and expense
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health, medical and life insurance benefits at substantially the same level of
benefits as the Executive has at the date he becomes entitled to the Severance
Benefit in accordance with Section 4 hereof for a period of two (2) years
following the date the Executive becomes entitled to such Severance Benefit.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof, shall be
settled by arbitration in the City of Chattanooga in accordance with the laws of
the State of Tennessee by three (3) arbitrators, one of whom shall be appointed
by the Company, one by the Executive and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event that it shall be necessary or desirable for
the Executive to retain legal counsel and/or incur other costs and expenses in
connection with the enforcement of any and all of his rights under this
Agreement, the Company shall pay (or the Executive shall be entitled to recover
from the Company, as the case may be) his reasonable attorneys' fees and costs
and expenses in connection with the enforcement of his said rights (including
the enforcement of any arbitration award in court), regardless of the final
outcome, unless the arbitrators shall determine that under the
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circumstances recovery by the Executive of all or a part of any such fees and
costs and expenses would be unjust.
8. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and if sent by registered or certified mail to the Executive at the last address
he has filed in writing with the Company or, in the case of the Company, at its
principal executive offices addressed to the President.
9. NON-ALIENATION. The Executive shall not have any right to
pledge, hypothecate, anticipate or in any way create a lien upon any amounts
provided under this Agreement; and no benefits payable hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts,
or by operation of law. Notwithstanding the foregoing provisions, in the event
that the Executive dies following Discharge or Constructive Discharge after a
Change in Control, but before receiving all of his Severance Benefit, the unpaid
Severance Benefit shall be paid to his estate in accordance with the terms of
this Agreement.
10. GOVERNING LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Tennessee.
11. AMENDMENT. This Agreement may not be amended or canceled
except by the mutual agreement of the parties in writing.
12. SUCCESSORS TO THE COMPANY. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
Company and any successor of the Company.
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13. SEVERABILITY. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reasons, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, and its corporate seal to be
hereunto affixed and attested by its Secretary, all as of the day and year first
above written.
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(Executive Name)
ATTEST: CHATTEM, INC.
______________________ By ______________________________
(Assistant) Secretary (CEO Name)
Chief Executive Officer and
Chairman of the Board
(SEAL)
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