EXHIBIT 10.4
AGREEMENT dated as of July 30, 2003, by and between Xxxx
Laboratories, Inc., a New York corporation (the "Company"), and Xxxxxx Xxxxxx
("Xxxxxx").
WITNESSETH:
WHEREAS, Xxxxxx has been employed by the Company since 1999 as
a Senior Vice President, has served as its General Counsel and is presently
serving as its Senior Vice President - Strategic Business Development; and
WHEREAS, Xxxxxx wishes to retire as an officer and employee of
the Company, start, among other things, an independent consulting practice and
render consulting services to the Company on a non-exclusive basis; and
WHEREAS, Xxxxxx possesses an intimate knowledge of the
business and affairs of the Company, including but not limited to its legal
affairs and its strategic initiatives and plans; and
WHEREAS, the Company wishes to assure itself of Xxxxxx'x
availability to render consulting services after his employment terminates, and
Xxxxxx is willing to make himself available to the Company on the terms and
subject to the conditions hereinafter stated;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements herein contained, the parties hereto hereby
agree as follows:
1. Termination of Employment
Effective at the close of business on August 29, 2003, Xxxxxx
hereby resigns as an officer and employee of the Company and as an officer,
director or other official of any subsidiary or affiliate of the Company.
2. Consulting Services
(a) Xxxxxx agrees that, during the period commencing on
September 1, 2003 and ending on February 28, 2005 (such period being hereafter
referred to as the "Consulting Period"), he will make himself available to
perform consulting services on behalf of the Company at such time or times as
the Company may reasonably request, on the terms and subject to the conditions
set forth in this Agreement.
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(b) The Company shall not be responsible for providing an
office or support personnel for Xxxxxx; Xxxxxx `s consulting activities shall
for clients other than the Company not be conducted at the Company's offices in
Woodcliff Lake, New Jersey or any other Company location; and Xxxxxx shall have
discretion to determine the location at which he shall perform any services
under this Agreement; provided that Xxxxxx obtains the Company's consent to any
use of Company facilities.
(c) In no event shall Xxxxxx be required to render more
than 480 hours of consulting services in the first year of the Consulting
Period, or more than 240 hours during the balance of the Consulting Period
thereafter. If requested by the Company and consented to by Xxxxxx, Xxxxxx will
perform consulting services for more than 480 hours or 240 hours, as the case
may be, for an hourly charge of $250 per hour. Xxxxxx shall be reimbursed for
all reasonable and necessary expenses incurred by him in performing his services
hereunder including, without limitation, travel, meals, lodging, communication
and copying costs upon submission of appropriate documentation therefor. Such
additional charges for consulting services and expense reimbursement, shall be
due and payable by the Company within thirty (30) days after receipt of an
invoice therefor.
(d) The services and assignments which Xxxxxx may be
called on to perform under this Agreement shall relate to the business and
affairs of the Company, its subsidiaries and affiliates and shall be performed
in a manner and by means determined by Xxxxxx in the reasonable exercise of his
independent judgment. Such services shall not include legal advice and the
Company shall look to its own counsel for legal advice. Failure of the Company
to call upon Xxxxxx to render any services or his inability to render any
services for reasons of health, incapacity or death shall not relieve the
Company from making any payments provided for in this Agreement.
(e) At all times during the Consulting Period Xxxxxx'x
status will be that of an independent contractor and not an employee of the
Company. Consequently, Xxxxxx will not be eligible to participate in any of the
Company's employee benefit plans, and the Company will not deduct any taxes from
the consulting fees payable under this Agreement unless required by law. Xxxxxx
shall have no authority, nor shall Xxxxxx represent himself as having any
authority, to bind the Company with respect to any matter unless expressly
authorized in writing by an officer of the Company to do so. Xxxxxx specifically
agrees to conduct himself strictly as an independent contractor under this
Agreement with respect to the Company, and to comply with all applicable laws,
rules and regulations, including without limitation those governing workmen's
compensation and unemployment insurance and payment of federal and state income
taxes, self-employment taxes, estimated taxes, and all other federal, state,
local and foreign taxes of any nature imposed with respect to any services under
this Agreement or payments for such services, but excluding taxes
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imposed upon the purchaser of services, which taxes shall be paid by the Company
if it is the purchaser.
(f) It is understood and agreed that Xxxxxx intends to,
among other things, engage in the business of consulting during the Consulting
Period, that his consulting clients may include other pharmaceutical companies,
and that he shall be permitted, during the Consulting Period, to engage in such
consulting business, provided that it does not interfere with the performance of
his duties under this Agreement or violate any of his obligations,
representations or warranties under this Agreement (including but not limited to
Sections 5 and 6 below) or any other legal obligation Xxxxxx may have to the
Company.
(g) Xxxxxx hereby represents and warrants that neither
his entering into this Agreement nor his performance thereof will (i) violate
any other agreement, oral or written, to which Xxxxxx is a party or by which
Xxxxxx is bound, or (ii) conflict with any relationship Xxxxxx has with, or
duties Xxxxxx performs for, other parties. Without limiting the generality of
the foregoing, Xxxxxx agrees that at no time shall he utilize any trade secrets
or other intellectual property of any third party while performing services
hereunder.
3. Consulting Fees
In consideration of Xxxxxx'x agreements and covenants set
forth in Section 2 above (relating to consulting) and in Section 6 below
(restrictive covenants), and as full payment for all his consulting services on
behalf of the Company during the Consulting Period, the Company agrees to pay
Xxxxxx consulting fees in the aggregate amount of $390,000, which shall be paid
as follows: $210,000 shall be paid on or before September 30, 2003 and the
balance of $180,000 shall be paid in 18 monthly installments of $10,000 each of
which shall be paid to Xxxxxx no later than ten days after the close of each of
the 18 months of the Consulting Period.
4. Payment in respect of Unvested Options
In consideration of Xxxxxx'x execution and performance of this
Agreement, other than Section 2 hereof (relating to consulting services), the
Company shall pay Xxxxxx an amount of money equal to the excess (if any) of (a)
over (b) where (a) is the "fair market value" on August 29, 2003 (determined in
accordance with the Company's 1993 Stock Incentive Plan) of the shares of
Company common stock that are subject to the portion of any stock option
heretofore granted to Xxxxxx by the Company that is outstanding on that date but
expires on or after that date without having become exercisable, and (b) is the
purchase price of such shares under the option. The parties agree that the
outstanding stock options and number of shares which are not scheduled to become
exercisable on or before August 29, 2003, and that
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are thus subject to the preceding sentence (unless they become exercisable
before that date), are as follows (all share amounts and purchase prices shown
below having been adjusted for splits since the grant dates of the options):
Purchase Price Portion of Option Number of Shares
Grant Date Per Share Not Exercisable Not Exercisable
---------- --------- --------------- ---------------
Aug. 7, 2002 $39.87 two-thirds 16,000
Any amount payable pursuant to this Paragraph 4 shall be subject to the
withholding of such amounts as the Company may determine it is required to
withhold on account of taxes, and shall be paid no later than September 30,
2003.
5. Confidential Information
Xxxxxx agrees not to disclose, during the Consulting Period or
at any time thereafter, to any person not employed by the Company, or not
engaged to render services to the Company, except with the prior written consent
of an authorized officer of the Company or as necessary for the performance of
his duties hereunder, any confidential information obtained by him while in the
employ of the Company or in connection with his performance of consulting
services on behalf of the Company during the Consulting Period, whether or not
such information was marked confidential or was in written, oral or other form,
including, without limitation, information relating to the female healthcare
products business or any of the inventions, processes, formulae, research, plans
(including but not limited to operating plans and strategic plans), devices,
compilations of information, information systems, computer hardware, software or
data, methods of distribution, suppliers, partners, customers, client
relationships, marketing strategies, legal strategies or trade secrets of the
Company or any subsidiary or affiliate of the Company; provided, however, that
this provision shall not preclude Xxxxxx from use or disclosure of information
known generally to the public (other than as a result of unauthorized disclosure
by Xxxxxx), or from disclosure required by law or court order. Xxxxxx also
agrees that at the commencement of the Consulting Period, as well as at the
expiration of the Consulting Period, he will not take with him, without the
prior written consent of an authorized officer of the Company, and he will
surrender to the Company, any record, list, drawing, blueprint, specification or
other document or property, together with any copy or reproduction thereof,
mechanical or otherwise, then in his possession or under his custody or control
and which contains confidential information or is of a confidential nature
relating to the Company or any subsidiary thereof, or, without limitation,
relating to its or their methods of distribution, suppliers, customers, client
relationships, marketing strategies, operating plans, strategic plans, computer
hardware, software or data or any description of any formulae or secret
processes or
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information system, or which was obtained by him or entrusted to him during the
course of his employment with the Company or in connection with his performance
of consulting services on behalf of the Company during the Consulting Period.
Xxxxxx'x obligations under this Section 5 shall be in addition to and not in
lieu of his obligations to refrain from use, disclosure and misappropriation of
trade secrets and confidential information of the Company and its subsidiaries
and affiliates under any other agreement or any applicable statutory or common
law or code of professional ethics.
6. Restrictive Covenants
(a) In consideration of the payments to be made under
this Agreement to Xxxxxx, including but not limited to the payment for his
unexercisable stock options pursuant to Section 4 above, Xxxxxx covenants and
agrees that--
(i) during the Consulting Period, and the six
month period immediately following the Consulting Period he will not, directly
or indirectly, without the express written consent of the Chief Executive
Officer of the Company --
(A) perform services (other than legal
service with respect to matters that do not involve the Company) on behalf of
any person (including without limitation himself), sole proprietorship,
business, enterprise, entity or venture other than the Company or an affiliate
of the Company (a "Third Party") (I) that relate to the research, development,
formulation, testing, manufacturing, marketing, distribution, sale, licensing or
other commercial exploitation of generic or proprietary female healthcare
pharmaceutical products in the United States or Canada, or (II) that may
reasonably be expected to enable, expedite or aid a Third Party's research,
development, formulation, testing, manufacturing, marketing, distribution, sale,
licensing or other commercial exploitation of generic or proprietary female
healthcare pharmaceutical products in the United States or Canada, or
(B) have a financial interest in
(whether as owner, partner, officer, director, investor, advisor, consultant,
agent, employee, independent contractor, manager or in any other capacity) any
Third Party which then is or, to the knowledge of Xxxxxx, intends to be engaged
in the research, development, formulation, testing, manufacturing, marketing,
distribution, sale, licensing or other commercial exploitation of generic or
proprietary female healthcare pharmaceutical products in the United States or
Canada. Ownership of less than 3% of any class of securities that is registered
under the Securities Act of 1933 or the Securities Exchange Act of 1934 shall
not, unto itself, be deemed to violate this clause (B); and
(ii) during the Consulting Period, he will not,
directly or indirectly, without the express written consent of the Chief
Executive Officer of the Company, perform services on behalf of any Third Party
with respect to any matter
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that he theretofore worked on for the Company or brought to the Company (whether
during the Consulting Period or prior thereto), or that he is hereafter engaged
to work on for the Company during the Consulting Period; provided, however, the
foregoing restriction shall not apply to Valera Pharmaceuticals, Inc. formerly
known as Hydro Med Sciences, Inc. or to any business opportunity that the
Company has or in the future decides not to pursue; provided, further, however,
that the foregoing exception shall not be construed as an exception to Xxxxxx'x
obligations under clause (i) above; and
(iii) during the Consulting Period, he will not,
directly or indirectly, induce or attempt to induce any person or business who
at the time Xxxxxx'x employment with the Company terminates either (A) is a
supplier, customer, vendor, distributor or partner of, or investor in, or joint
venturer with, the Company or any of its subsidiaries or affiliates (any such
person or business being hereafter referred to as an "Allied Enterprise"), or
(B) has been specifically targeted as a prospective Allied Enterprise by the
Company or any of its subsidiaries or affiliates and, if initially targeted as
such during the Consulting Period, Xxxxxx has been or is advised in writing of
the Company's plans, to terminate, reduce, refrain from engaging in, or
otherwise alter to the detriment of the Company, its subsidiaries or affiliates
its actual or prospective business or relationship with the Company, its
subsidiaries or affiliates; and
(iv) during the Consulting Period he will not,
directly or indirectly, without the express written consent of the Chief
Executive Officer of the Company, (A) induce or attempt to persuade any employee
of the Company, its subsidiaries or affiliates, or any other person who performs
services for the Company, its subsidiaries or affiliates at the time Xxxxxx'x
employment terminates or during the Consulting Period, to terminate or reduce or
refrain from engaging in his or her employment or other service relationship
with the Company, its subsidiaries or affiliates, or (B) offer, on behalf of any
Third Party, employment to, or participate in the hiring by any Third Party of,
any employee of the Company, its subsidiaries or affiliates or any other person
who performs services for the Company, its subsidiaries or affiliates at the
time Xxxxxx'x employment terminates or during the Consulting Period; and
(v) during the Consulting Period he will not,
directly or indirectly, make disparaging remarks about the Company, its
subsidiaries or affiliates or any of their officers, directors, employees or
products, unless required by law or reasonably necessary to assert or defend his
position in a bona fide dispute arising out of or relating to this Agreement or
any other obligation owing to him by the Company or the breach thereof.
(b) For purposes of this Agreement, no entity shall be
considered an
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affiliate of the Company unless the Company owns 50% or more of the equity
interests or voting interests of such entity. If Xxxxxx believes the provisions
of this Section 6 are not applicable to services he intends to perform for a
Third Party, then he shall send a written notice of non-applicability to the CEO
and General Counsel of the Company and if the CEO or General Counsel does not
disagree in writing with Xxxxxx'x contention of non-applicability within ten
(10) business days of receipt, then the Company shall be deemed to have agreed
with Xxxxxx that the services to be performed by Xxxxxx do not violate the
provisions of this Agreement.
(c) Xxxxxx recognizes and agrees that, by reason of his
knowledge, experience, skill and abilities, his services are extraordinary and
unique, that the breach or attempted breach of any of the restrictions set forth
above in this Section 6 will result in immediate and irreparable injury for
which the Company will not have an adequate remedy at law, and that the Company
shall be entitled to a decree of specific performance of those restrictions and
to a temporary and permanent injunction enjoining the breach thereof, and to
seek any and all other remedies to which the Company may be entitled, including,
without limitation, monetary damages, without posting bond or furnishing
security of any kind.
(d) Xxxxxx specifically and expressly represents and
warrants that (i) he has reviewed and agreed to the restrictive covenants
contained above in this Section 6 and their contemplated operation after
receiving the advice of counsel of his choosing; (ii) he believes, after
receiving such advice, that the restrictive covenants and their contemplated
operation are fair and reasonable; (iii) he will not seek or attempt to seek to
have the restrictive covenants declared invalid, and, after receiving the advice
of counsel, expressly waives any right to do so; and (iv) if the full breadth of
any restrictive covenant and/or its contemplated operation shall be held in any
fashion to be too broad, such covenant or its contemplated operation, as the
case may be, shall be interpreted in a manner as broadly in favor of the
beneficiary of such covenant as is legally permissible. Xxxxxx recognizes and
agrees that the restrictions on his activities contained above in this Section 6
are required for the reasonable protection of the Company and its investments;
that the Company competes in the United States and Canada with other enterprises
engaged in the commercial exploitation of female healthcare pharmaceutical
products and other pharmaceutical products; that the geographic restriction on
his activities set forth in paragraph 6(a)(i)(A) and (B) is reasonable and
necessary to protect the Company against unfair competition; and that the
restrictions on his activities set forth in paragraph 6(a)(i)(A) and (B) will
not deprive him of the ability to earn a livelihood.
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7. Cooperation in Litigation
In consideration of the payments to be made under this
Agreement, Xxxxxx also agrees to cooperate with the Company in any legal action
for which his participation is needed during the Consulting Period or
thereafter. The Company agrees to try to schedule all such participation so that
it does not unduly interfere with Xxxxxx'x pursuits after he is no longer in the
Company's employ. The Company will reimburse Xxxxxx for reasonable out-of-pocket
expenses he incurs in connection with such participation. Xxxxxx also hereby
agrees not to communicate with anyone (other than his own attorneys) with
respect to the facts or subject matter of any pending or potential litigation,
or regulatory or administrative proceeding involving the Company, its
subsidiaries or affiliates, other than any litigation or proceeding in which
Xxxxxx is a party-in-opposition, without giving prior notice to the Company and
its legal counsel, and in the event that any other party attempts to obtain
information or documents from Xxxxxx with respect to matters possibly related to
such litigation or proceeding, Xxxxxx shall promptly notify the Company and its
legal counsel.
8. Payments Conditional. Xxxxxx recognizes and agrees that, if he
violates the provisions of section 5 or 6 above, the Company shall not be
obligated to make any payments it would otherwise be obligated to make under
this Agreement on or after the date of such violation (the "Remaining
Payments"), and, if the Company shall pay (or shall have paid) any of the
Remaining Payments to Xxxxxx on or after the date of such violation, Xxxxxx
shall be obligated to repay such payments to the Company promptly on demand. If
the Remaining Payments amount to less than $25,000 in the aggregate, Xxxxxx
shall be obligated to make any repayment required by the preceding sentence and,
in addition, shall promptly repay the Company on demand that amount of the
consulting fees paid pursuant to section 3 above which, when added to the
Remaining Payments, equals $25,000. The foregoing provisions of this section 8
shall be in addition to and not by way of limitation of any other rights and
remedies the Company may have in respect of the violation in question.
9. Severability
(a) In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement not so invalid or unenforceable shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law; and
(b) Any provision of this Agreement which may be invalid
or unenforceable in any jurisdiction shall be limited by construction thereof,
to the end that such provision shall be valid and enforceable in such
jurisdiction; and
(c) Any provision of this Agreement which may for any
reason be
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invalid or unenforceable in any jurisdiction shall remain in effect and be
enforceable in any jurisdiction in which such provision shall be valid and
enforceable.
10. General Provisions
(a) No right or interest to or in any payments to be made
under this Agreement shall be subject to anticipation, alienation, sale,
assignment, encumbrance, pledge, charge or hypothecation or to execution,
attachment, levy or similar process, or assignment by operation of law;
provided, however, that Xxxxxx may assign his obligation to perform consulting
services hereunder and his right to receive payment therefor to Xxxxxx Xxxxxx,
LLC, if (and only if) Xxxxxx will personally perform consulting services
hereunder in his capacity as an employee or other representative of Xxxxxx
Xxxxxx, LLC; provided, further, that no further assignment shall be permitted
without the written consent of the Company. This Agreement shall be binding upon
and inure to the benefit of the Company, its successors and assigns, and Xxxxxx,
his permitted assign, and his heirs and legal representatives.
(b) To the extent that Xxxxxx acquires a right to receive
payments from the Company under this Agreement, such right shall be no greater
than the right of an unsecured general creditor of the Company. All payments to
be made hereunder shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of any amount hereunder.
(c) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
contracts entered into and to be performed in that State.
(d) No provision of the Agreement may be amended,
modified or waived unless such amendment, modification or waiver shall be agreed
to in a writing signed by Xxxxxx and an officer of the Company authorized to do
so.
(e) This instrument contains the entire agreement of the
parties relating to the subject matter of this Agreement and supersedes and
replaces all prior agreements and understandings with respect to such subject
matter, and the parties have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
Without limiting the generality of the foregoing, this Agreement is intended to
and shall supersede any and all employment agreements between the parties,
including the employment agreement between the Company and Xxxxxx dated December
13, 1999, which shall be null and void and of no further force or effect. Xxxxxx
hereby releases, waives, and discharges the Company from, any claims arising out
of or relating to any such employment
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agreement or the breach thereof, other than claims for any unpaid compensation
or benefits for his services prior to the termination of his employment.
However, the foregoing release shall not be construed to relieve the Company of
any obligations it may have to defend, indemnify and hold harmless Xxxxxx as an
officer, director or employee of the Company either pursuant to the terms of
such employment agreement or any other agreement, by law or the certificate of
incorporation of the Company. Xxxxxx further agrees, to the fullest extent
permitted by law, never to xxx or grieve or commence any judicial or
administrative proceeding or participate in any action, suit or proceeding
against the Company with respect to any claim released in this Paragraph.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
XXXX LABORATORIES, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------------
/s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
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