AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.12
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered
into as of May 6, 2009, by and between Cornerstone Therapeutics Inc., a Delaware corporation (the
“Company”), and Xxxxx Xxxxxxx, M.D. (the “Executive”). This Agreement shall be
effective on the Closing Date (as such term is defined in the Stock Purchase Agreement, dated the
same date as this Agreement between the Company and Chiesi Farmaceutici SpA (the “Effective
Date”).
WHEREAS, the Executive is currently employed by the Company pursuant to the terms of an
employment agreement between Cornerstone BioPharma, Inc. and the
Executive dated as of March 1, 2006 (the “Prior Agreement”);
WHEREAS, the Company desires to continue such employment relationship and enter into this
Agreement, which will supersede the Prior Agreement, the Proprietary Information, Inventions,
Non-competition, and Non-solicitation Agreement, dated as of April 28, 2006 between Cornerstone BioPharma,
Inc. and the Executive, and the Agreement Regarding Employment, Employee Duties, Ownership of
Employee Developments, and Confidentiality, dated as of May 2005, between Cornerstone BioPharma, Inc.
and the Executive, and set forth the terms and conditions under which the Executive will continue
to serve the Company and its affiliates; and
WHEREAS, the Executive wishes to continue his employment with the Company on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual agreements hereinafter contained,
the parties hereto agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment with the Company, upon the terms set forth in this Agreement,
for the period commencing on the Effective Date (the “Commencement Date”) and ending on the
one year anniversary of the Effective Date (the “Initial Term”) unless renewed or sooner
terminated in accordance with the provisions of this Section 1 or Section 4, respectively. Upon
each subsequent anniversary of the Commencement Date, the term of this Agreement shall
automatically extend for an additional year (such period, including the Initial Term and as it may
be extended, the “Employment Period”) unless (i) either the Company or the Executive gives
at least ninety (90) days notice of non-renewal prior to such anniversary or (ii) the Agreement is
terminated in accordance with the provisions of Section 4.
2. Title; Capacity. The Executive shall serve as Chief Medical Director and in such
other position as the Company or its Board of Directors (the “Board”) may determine from
time to time. The Executive shall be based at the Company’s office in Cary, North Carolina. The
Executive shall be subject to the supervision of, and shall have such authority as is delegated to
him by, the President and Chief Executive Officer of the Company or his designee.
The Executive hereby accepts such employment and agrees to undertake the duties and
responsibilities inherent in such position and such other duties and responsibilities as the
President and Chief Executive Officer or his designee shall from time to time reasonably assign to
him. The Executive agrees to devote his entire business time, attention and energies to the
business and interests of the Company during the Employment Period; provided,
however, that the Executive may serve as a consultant or a member of an advisory board or a
board of directors with the prior consent of the Board. The Executive agrees to abide by any
rules, regulations, instructions, personnel practices and policies of the Company that are
applicable to him and any changes therein that may be adopted from time to time by the Company.
3. Compensation and Benefits.
3.1. Salary. The Company shall pay the Executive a base salary for the year starting
January 1, 2009 in accordance with its regular payroll practices at an annualized rate of $281,216,
less lawful deductions. Such salary shall be subject to adjustment thereafter as determined by the
Board.
3.2. Annual Target Cash Bonus. The Executive shall be eligible to receive an annual
target cash bonus of up to thirty-five (35) percent of his then annual base salary (“Target Cash
Bonus”). The Board (or a committee thereof) shall determine the amount of the actual award, if
any, based on overall corporate performance and individual performance. Actual awards may be
greater than or less than the Executive’s Target Cash Bonus, depending in part upon the extent to
which actual performance exceeds or falls below the performance goals. Any bonus shall be paid in
a single lump sum, subject to lawful deductions, at such time as bonuses are regularly paid to
senior executives of the Company, but in any event such bonus shall be paid on or before March 15
of the year following the year to which the bonus relates. Except as may be expressly provided
below, the Executive must be employed on the date that the bonus is paid to be eligible for any
Target Cash Bonus. Each cash bonus award that may become payable shall be paid solely from the
general assets of the Company.
3.3. Annual Target Equity Awards. The Executive shall be eligible to receive an
annual target equity award in the form of an option to purchase, in whole or in part, up to fifty
thousand (50,000) shares of common stock of the Company in each of the year 2010, 2011 and 2012.
The Board (or a committee thereof) shall determine the amount of the actual equity award, if any,
based on overall corporate performance and individual performance. Each grant of options under
Sections 3.3 and 3.4 shall vest over a four-year period, 25% per year, pursuant to the terms of the
terms of the Company Stock Plan.
3.4. Grant of Options. Effective as of the date hereof, the Executive shall be
granted an option to purchase, in whole or in part, fifty thousand
(50,000) shares common stock. The option shall be on such terms and conditions as are described on Appendix A hereto.
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3.5. Fringe Benefits. The Executive shall be entitled to participate in all bonus
and benefit programs (excluding the Company’s Cash Bonus Program for Employees (Other than
Executive Officers)) that the Company establishes and makes available to its employees or
executives, if any, to the extent that the Executive’s position, tenure, salary, age, health and
other qualifications make him eligible to participate; provided, however, the
Executive’s participation is subject to the applicable terms, conditions and eligibility
requirements of these plans as they may exist from time to time. The Executive shall be entitled
to three (3) weeks of paid vacation per year, accrued at a rate of 1.25 days per month until the
Executive has completed four (4) years of service with the Company or any of its subsidiaries at
which time vacation shall accrue at 1.67 days per month (four (4) weeks per year), and, if
requested in writing by the Chief Executive Officer, such vacation time shall be taken at such
times as may be approved by the Chief Executive Officer or his designee. Accrued but unused
vacation at the end of each year will not carry over to the next year.
3.6. Reimbursement of Expenses. The Company shall reimburse the Executive for all
reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection
with, or related to, the performance of his duties, responsibilities or services under this
Agreement, in accordance with the Company’s expense reimbursement policy, including the Executive’s
presentation of documentation, expense statements, vouchers and/or such other supporting
information as the Company may request, provided, however, that the amount
available for such travel, entertainment and other expenses may be fixed in advance by the Board.
Notwithstanding the foregoing, (i) the expenses eligible for reimbursement in any particular
taxable year may not affect the expenses eligible for reimbursement in any other taxable year,
(ii) such reimbursement must be made on or before the last day of the year following the year in
which the expense was incurred, and (iii) the right to reimbursement is not subject to liquidation
or exchange for another benefit.
3.7. Automobile. While employed by the Company, the Executive shall have full use of
that motor vehicle leased by the Company the Executive is currently using, whether for business or
personal uses. Both a valid driver’s license and an acceptable motor vehicle record are required at
all times to operate a Company vehicle. The Company shall pay, or reimburse the Executive for, the
lease of financing payments, automobile insurance, taxes and title fees associated with such
vehicle. Upon termination of employment with the Company, the Executive will discontinue use of the
vehicle and return the vehicle when and as requested by the Company. The Company reserves the
right to change or discontinue its Company vehicle program at any time. If such motor vehicle is
no longer available, the Executive will receive a monthly car allowance in the amount of $850.
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4. Employment Termination. The employment of the Executive by the Company pursuant to
this Agreement shall terminate upon the occurrence of any of the following:
4.1. Expiration of the Employment Period in accordance with Section 1;
4.2.
At the election of the Company, for Cause (as defined in Section 21), immediately upon
written notice by the Company to the Executive;
4.3. At the election of the Executive, for Good Reason (as defined in Section 21), upon
written notice by the Executive to the Company;
4.4. At the election of the Company without Cause during a Change of Control Period (as
defined in Section 21) or at the election of the Executive for Good Reason during a Change of
Control Period;
4.5. Upon the death or Disability (as defined in Section 21) of the Executive;
4.6. At the election of the Executive, without Good Reason, by providing written notice to the
Company; and
4.7. At the election of the Company, without Cause, by providing written notice to the
Executive.
5. Effect of Termination.
5.1. Termination for Cause. In the event the Executive’s employment is terminated for
Cause pursuant to Section 4.2, the Company shall pay to the Executive the compensation and benefits
otherwise payable to him under Section 3 through the last day of his actual employment by the
Company.
5.2. Termination at the Election of the Executive Without Good Reason. In the event
the Executive elects to terminate his employment pursuant to Section 4.6, the Company shall pay the
Executive the compensation and benefits otherwise payable to him under Section 3 through the last
day of his actual employment by the Company.
5.3. Termination for Death or Disability. If the Executive’s employment is terminated
by death or because of Disability pursuant to Section 4.5, in addition to any disability or life
insurance benefits for which the Executive or the estate of the Executive may be eligible, the
Company shall pay to the estate of the Executive or to the Executive, as the case may be, the
compensation and benefits otherwise payable to him under Section 3 through the last day of his
actual employment by the Company. In addition, if the Executive’s employment terminates as a
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result of his death, the Executive’s estate shall receive an amount equal to a pro rata
payment of the annual cash bonus for which he would have been eligible, less lawful deductions,
within ten (10) calendar days following the effective date of the Release required by Section 5.6,
but not later than ninety (90) days following termination of employment. Notwithstanding the
foregoing, if the ninetieth (90th) day following the Executive’s termination from employment occurs
in the calendar year following the year of the Executive’s termination, then the payment shall be
made no earlier than January 1 of such subsequent calendar year. No other benefits are payable
upon the Executive’s termination pursuant to Section 4.5.
5.4. Termination Without Cause or for Good Reason and not during a Change of Control
Period. If the Executive’s employment is terminated without Cause pursuant to Section 4.7, or
for Good Reason pursuant to Section 4.3 and such termination does not occur during a Change of
Control Period, the Company shall:
(i) pay the Executive a lump sum payment equal to one (1) times his annualized
base salary, less lawful deductions, payable within ten (10) calendar days following
the effective date of the Release required by Section 5.6 but not later than ninety
(90) days following termination of employment. Notwithstanding the foregoing, if
the ninetieth (90th) day following the Executive’s termination from
employment occurs in the calendar year following the year of the Executive’s
termination, then the payment shall be made no earlier than January 1 of such
subsequent calendar year;
(ii) pay on behalf of the Executive, in accordance with the Company’s regular
payroll practices, on a monthly basis an amount equal to (a) one hundred
(100) percent of the Executive’s monthly health and dental COBRA premiums for the
Executive and his dependents, if any, if the Executive properly elects to continue
health and dental insurance under COBRA and (b) pay to the Executive on the first
business day of each applicable month one hundred (100) percent of the cost of the
monthly premiums paid by the Company to the insurance companies for life insurance
and disability insurance for the Executive in the month preceding the Executive’s
termination of employment, such payments under subsections (a) and (b) to continue
until the earlier of (x) twelve (12) months after the termination of the Executive’s
employment and (y) the last day of the first month that the Executive is eligible
for other employer-sponsored health coverage. Notwithstanding the foregoing, to the
extent such payments are reimbursement to the Executive of medical expenses incurred
by the Executive as described in Reg. § 1.409A-1(b)(9)(v)(B), reimbursements may not
be made beyond the period of time during which the Executive would be entitled (or
would, but for such arrangement, be entitled) to COBRA continuation coverage under a
group health plan of the Company;
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(iii) pay the Executive a lump sum payment in an amount equal to a pro rata
payment of the Target Cash Bonus for which he was eligible, less lawful deductions;
such payment shall be paid within ten (10) calendar days following the effective
date of the Release required by Section 5.6, but not later than ninety (90) days
following termination of employment. Notwithstanding the foregoing, if the
ninetieth (90th) day following the Executive’s termination from
employment occurs in the calendar year following the year of the Executive’s
termination, then the payment shall be made no earlier than January 1 of such
subsequent calendar year; and
(iv) accelerate vesting of all of the Executive’s outstanding unvested stock options and
restricted stock by one year.
5.5. Termination Without Cause or for Good Reason during a Change of Control Period.
If the Executive’s employment is terminated without Cause pursuant to Section 4.4, or for Good
Reason pursuant to Section 4.4 and such termination occurs during a Change of Control Period, the
Company shall:
(i) pay the Executive a lump sum payment equal to one (1) times his annualized
base salary, less lawful deductions, payable within ten (10) calendar days following
the effective date of the Release required by Section 5.6, but not later than ninety
(90) days following termination of employment. Notwithstanding the foregoing, if
the ninetieth (90th) day following the Executive’s termination from
employment occurs in the calendar year following the year of the Executive’s
termination, then the payment shall be made no earlier than January 1 of such
subsequent calendar year;
(ii) pay on behalf of the Executive, in accordance with the Company’s regular
payroll practices, on a monthly basis an amount equal to (a) one hundred
(100) percent of the Executive’s monthly health and dental COBRA premiums for the
Executive and his dependents, if any, if the Executive properly elects to continue
health and dental insurance under COBRA and (b) pay to the Executive on the first
business day of each applicable month one hundred (100) percent of the cost of the
monthly premiums paid by the Company to the insurance companies for life insurance
and disability insurance for the Executive in the month preceding the Executive’s
termination of employment, such payments under subsections (a) and (b) to continue
until the earlier of (x) twelve (12) months after the termination of the Executive’s
employment and (y) the last day of the first month that the Executive is eligible
for other employer-sponsored health coverage. Notwithstanding the foregoing, to the
extent such payments are reimbursement to the Executive of medical expenses incurred
by the Executive as described in Reg. § 1.409A-1(b)(9)(v)(B), reimbursements may not
be made beyond the period of time during which the Executive would be entitled (or
would, but for such arrangement, be entitled) to COBRA continuation coverage
under a group health plan of the Company;
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(iii) pay the Executive a lump sum payment in an amount equal to a pro rata
payment of the Target Cash Bonus for which he was eligible, less lawful deductions;
such payment shall be paid ten (10) calendar days following the effective date of
the Release required by Section 5.6, but not later than ninety (90) days following
termination of employment. Notwithstanding the foregoing, if the ninetieth (90th)
day following the Executive’s termination from employment occurs in the calendar
year following the year of the Executive’s termination, then the payment shall be
made no earlier than January 1 of such subsequent calendar year; and
(iv) accelerate vesting of one hundred (100) percent of all of the Executive’s outstanding
unvested stock options and restricted stock.
5.6 Release of Claims as a Condition of Payment. Notwithstanding any provision of
this Agreement to the contrary, the Company’s obligation to provide the payments and benefits under
Sections 5.2, 5.3, 5.4, and 5.5 is conditioned upon the Executive’s, or the Executive’s estate,
execution of a severance agreement and full release of all claims against the Company and all
affiliated persons and entities, drafted by and satisfactory to counsel for the Company (the
“Release”) and the Executive’s compliance with Sections 7 and 8 of this Agreement. The Release
shall include clauses covering confidentiality, non-disparagement, cooperation, and non-admissions,
among other terms, all in a form acceptable to the Company. If the Executive chooses not to
execute such a release or fails to comply with those Sections, then the Company’s obligation to
compensate the Executive ceases on the effective termination date except as to base salary up
through the termination date. The Release shall be provided to the Executive within thirty (30)
days of the Executive’s separation from service and the Executive must execute it within the time
period specified in the Release (which shall not be longer than forty-five (45) days from the date
of receipt). Such Release shall not be effective until any applicable revocation period specified
therein has expired.
6. Vesting of Stock Upon a Change of Control. One hundred (100) percent of the
Executive’s outstanding unvested stock options and restricted stock will vest on a Change of
Control (as defined in Section 21).
7. Non-Compete.
(a) During the Executive’s employment with the Company and for a period of one year following
the cessation thereof, the Executive will not engage in any of the following on his own behalf or
in any capacity on another’s behalf:
(i) engage in any business activity (or assist others to engage in any business activity) that
directly competes with the Company; or
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(ii) have any interest in any business that directly competes with the Company; or
(iii) be employed (or otherwise engaged) in (A) a management capacity, (B) other capacity
providing the same or similar services which Executive provided to the Company, or (C) any capacity
connected with competitive business activities, by any person or entity that engages in the same,
similar or otherwise competitive business as the Company.
The restrictions set forth in subparagraphs 7(a)(i)–(iii) shall apply in the following severable
geographic areas: (i) the Raleigh-Xxxx-Xxxxxx-Chapel Hill, NC metropolitan areas; (ii) any city,
metropolitan area, county, state (or similar political subdivisions in foreign countries) in which
the Company is located or does or, during the last twelve (12) months of Executive’s employment
with the Company, did business; (iii) any city, metropolitan area, county, or state (or similar
political subdivisions in foreign countries) in which Executive’s services were provided, or for
which Executive had responsibility, or in which Executive worked on Company projects, during the
last twelve (12) months of Executive’s employment with the Company; or (iv) the entire United
States of America and its territories.
(b) During Executive’s employment with the Company and for a period of one (1) year following
the cessation thereof (whether voluntary or involuntary and regardless of the reason for, or party
initiating, the termination), Executive will not engage in any of the following on his own behalf
or in any capacity on another’s behalf, directly or indirectly:
(i) solicit, persuade, induce, encourage or attempt to solicit, persuade, induce or encourage
any person to leave his or her employment with the Company or to refrain from providing services to
the Company; or
(ii) induce or attempt to induce (including, without limitation, by soliciting business from),
or otherwise encourage or assist, any customer, client, or business relation of the Company with
which Executive had contact on behalf of the Company (A) to cease doing business with the Company
or reduce the level of business it conducts with the Company, or (B) to purchase or promote any
prescription pharmaceutical product that competes directly with the Company’s products for the
treatment of any indication for which the Company has received United States Food and Drug
Administration (“FDA”) approval or for an indication which the Company’s products are being
developed or may be developed.
Upon cessation of Executive’s employment with the Company, the Executive will sever all marketing
and sales relationships with customers of the Company and Executive agrees that any attempt to
retain these customers for his or her own or another’s benefit will be a material breach of this
Agreement.
(c) The Executive agrees that, if requested by the Company in writing, he will give notice to
the Company of each new business activity he plans to undertake during the non-
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competition period, at least ten (10) business days prior to beginning any such activity. The
notice shall state the name and address of the individual, corporation, association or other entity
or organization (“Entity”) for whom such activity is undertaken and the name of the Executive’s
business relationship or position with the entity. The Executive further agrees to provide the
Company with other pertinent information concerning such business activity as the Company may
reasonably request in order to determine the Executive’s continued compliance with his obligations
under this Agreement. The Executive agrees that, if requested by the Company in writing, he will
provide a copy of Section 7 and 8 of this Agreement to all persons and Entities with whom he seeks
to be hired or do business before accepting employment or engagement with any of them.
(d) If any restriction set forth in this Section 7 is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted to extend only
over the maximum period of time, range of activities or geographic area as to which it may be
enforceable.
(e) The Executive acknowledges that the restrictions contained in this Section are necessary
for the protection of the business and goodwill of the Company and in light of, among other things,
the highly competitive market in which the Company operates. The Executive agrees that any breach
of this Section will cause the Company substantial and irrevocable damage and therefore, in the
event of any such breach, in addition to such other remedies which may be available, the Company
shall have the right to seek specific performance and injunctive relief without posting a bond.
(f) If the Executive violates the provisions of this Section 7, he shall continue to be held
by the restrictions set forth in this Section, until a period equal to the period of restriction
has expired without any violation.
8. Proprietary Information and Developments.
8.1. Proprietary Information.
(a) The Executive agrees that all information and know-how, whether or not in writing, of a
private, secret or confidential nature concerning the Company’s business or financial affairs
(collectively, “Proprietary Information”) is and shall be the exclusive property of the Company.
By way of illustration, but not limitation, Proprietary Information may include inventions,
products, processes, methods, techniques, formulas, compositions, compounds, projects,
developments, plans, research data, clinical data, financial data, personnel data, computer
programs, and customer and supplier lists. Executive will disclose Proprietary Information solely
to employees, officers, and directors of the Company and only on a need-to-know basis and will use
the same solely for purposes of performing Executive’s duties and responsibilities on behalf of
Company as described in Section 2 hereof, unless otherwise permitted by prior written approval of
an officer of the Company. Developments (defined in
Section 8.2(a) below) shall constitute Proprietary Information of Company for all purposes
hereunder.
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(b) The Executive agrees that all files, letters, memoranda, reports, records, data, sketches,
drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible
material containing Proprietary Information, whether created by the Executive or others, which
shall come into his custody or possession, shall be and are the exclusive property of the Company
to be used by the Executive only in the performance of his duties for the Company.
(c) The Executive agrees that his obligations set forth in paragraphs (a) and (b) above also
extend to such types of information, know-how, records and tangible property of customers of the
Company or suppliers to the Company or other third parties who may have disclosed or entrusted the
same to the Company or to the Executive in the course of the Company’s business.
8.2. Developments.
(a) The Executive will make full and prompt disclosure to the Company of all inventions,
discoveries, processes, methods, developments, software, and works of authorship, whether or not
patentable or copyrightable, which are created, made, conceived or reduced to practice by the
Executive or under his direction or jointly with others during his employment by the Company,
whether or not during normal working hours or on the premises of the Company (all of which, along
with all improvements, modifications, and derivative works thereof and thereto and all proprietary
know-how and other information associated therewith, are collectively referred to in this Agreement
as “Developments”).
(b) The Executive agrees to irrevocably and unconditionally assign, and does hereby
irrevocably and unconditionally assign, to the Company (or any person or entity designated by the
Company) and to forever waive and never assert any and all his right, title and interest in and to
all Developments and all related patents, patent applications, copyrights, copyright registration
applications, and other intellectual property rights and moral rights associated therewith. The
rights assigned to Company herein shall include, without limitation, the rights (i) to bring claims
and causes of action for damages and other relief by reason of all past and future infringements,
misappropriations, or other violations of any and all rights under such Developments; (ii) to
collect and enjoy damages, benefits, and other remedies resulting therefrom; and (iii) to charge
and collect royalties or other payments arising out of or relating to the grant of licenses or
similar rights under any such Developments.
(c) The Executive agrees to cooperate fully with the Company, both during and after his
employment with the Company, with respect to the prosecution, procurement, maintenance and
enforcement and/or defense of patents, trademarks, copyrights, trade secrets and other means for
protection of the Developments (both in the United States and foreign countries). Executive shall
sign all papers, including, without limitation, copyright registration
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applications, patent applications, declarations, oaths, formal assignments, assignment of
priority rights, and powers of attorney, which the Company may deem necessary or desirable in order
to protect its rights and interests in any Development. The Executive shall further execute and
deliver all such instruments and take all other actions as in the opinion of the Company and its
counsel shall be appropriate to vest in the Company (or in such person as the Company may
specify) all right, title and interest in said Developments and any patents, trademarks,
copyrights, trade secrets and other intellectual property rights associated therewith.
(d) Whenever requested to do so by the Company, both during and after his employment with the
Company, and at the expense of the Company, the Executive shall cooperate fully and assist the
Company in the defense or prosecution of any claims or actions now in existence or which may be
brought in the future in connection with (i) any litigation commenced by the Company against third
parties, (ii) any litigation commenced by a third party against the Company and (iii) any
administrative hearing or administrative proceeding involving the Company. The Executive’s full
cooperation in connection with any claims, actions or administrative proceedings shall include, but
not be limited to, his being available to meet with the Company’s counsel to prepare for trial,
discovery or an administrative hearing and to act as a witness when requested by the Company at
reasonable times designated by the Company.
(e) The Executive hereby irrevocably appoints the Company to be his attorney in fact and, in
his name and on his behalf, to execute all such instruments and take all other actions and
generally to use his name for the purpose of providing to the Company the full benefit of the
provisions of this Section 8 of the Agreement.
(f) The Executive hereby waives and quitclaims to the Company any and all claims, of any
nature, which the Executive now or may hereafter have for infringement, misappropriation, or other
violation of any Development assigned hereunder to the Company.
(g) The Executive acknowledges and agrees that all original works of authorship which are
created by the Executive (solely or jointly with others) within the scope of Executive’s employment
and which are protectable by copyright are “works made for hire,” as that term is defined in the
United States Copyright Act (17 U.S.C. Section 101).
(h) The Executive represents and warrants that to the extent applicable, the Executive has
provided to the Company a list entitled “List of Inventions,” that a true and complete list of all
inventions, discoveries, methods, processes, developments, software, and works of authorship,
whether or not patentable or copyrightable, which were created, made, conceived or reduced to
practice by the Executive, whether solely or jointly with others, prior to his employment by the
Company (collectively, “Inventions”). Any improvements to or derivative works of any such
Inventions, whether or not patentable or copyrightable and whether or not reduced to practice,
conceived or created after commencement of the Executive’s employment by the Company shall
constitute Developments for all purposes hereunder to the extent arising out of or relating to any
use of or other reliance on any Proprietary Information by or on behalf of the Executive.
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8.3. Other Agreements. Other than as previously disclosed to the Company by the
Executive in writing, the Executive hereby represents that he is not bound by the terms of any
agreement with any previous employer or other party to refrain from using or disclosing any trade
secret or confidential or proprietary information in the course of his employment with the Company
or to refrain from competing, directly or indirectly, with the business of such previous employer
or any other party. The Executive further represents that his performance of all the terms of this
Agreement and as an Executive of the Company does not and will not breach any agreement to keep in
confidence proprietary information, knowledge or data acquired by him in confidence or in trust
prior to his employment with the Company.
9. Lock-Up. For a period of two years following the Effective Date, the Executive may
not, directly or indirectly, Transfer any of his vested Covered Shares except pursuant to an Exempt
Transfer. During this two year period, any Transfer or purported Transfer in violation of the
foregoing restrictions shall be void and of no effect and shall not be recognized by the Company.
10. Other Severance Arrangements. The benefits under this Agreement will be provided
in lieu of benefits under any severance plan of the Company or under the Executive’s offer letter.
The Executive acknowledges and agrees that the acceleration of vesting of stock options and
restricted stock under this Agreement is in lieu of any acceleration of vesting of stock options
and restricted stock upon a change of control under the Company’s current and any future stock
option plans, including but not limited to, the Company’s 2000 Equity Incentive Plan, 2003 Stock
Incentive Plan, 2004 Stock Incentive Plan, the Cornerstone BioPharma Holdings, Inc. 2005 Stock
Option Plan, and the Cornerstone BioPharma Holdings, Inc. 2005 Stock Incentive Plan, each as
amended from time to time.
11. Mitigation. The Executive has no obligation to mitigate amounts payable under the
Agreement by seeking other employment.
12. Notices. All notices required or permitted under this Agreement shall be in
writing and shall be deemed effective upon personal delivery or upon deposit in the United States
Post Office, by registered or certified mail, postage prepaid, addressed to the other party at the
address shown above, or at such other address or addresses as either party shall designate to the
other in accordance with this Section 12.
13. Pronouns. Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.
14. Entire Agreement. This Agreement constitutes the entire understanding between the
parties hereto with respect to the subject matter hereof, and this Agreement supersedes and renders
null and void any and all prior oral or written agreements, understandings or
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commitments pertaining to the subject matter hereof. The parties agree and acknowledge that
the Prior Agreement, the Proprietary Information, Inventions, Non-competition, and
Non-solicitation Agreement, dated as of April 28, 2006 between Cornerstone BioPharma, Inc. and the
Executive, and the Agreement Regarding Employment, Employee Duties, Ownership of Employee Developments,
and Confidentiality, dated as of May 2005, between Cornerstone
BioPharma, Inc. and the Executive, are hereby cancelled and shall have no further force or effect. To the extent
this Agreement is inconsistent or conflicts with any other agreement entered into between Executive
and the Company, including any option or restricted stock award agreements, this Agreement shall
control.
15. Amendment. This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Executive.
16. Governing Law. This Agreement shall be interpreted and enforced in accordance
with the laws of the State of North Carolina without regard to conflict of laws provisions. Any
action, suit, or other legal proceeding which is commenced to resolve any matter arising under or
relating to any provision of this Agreement shall be commenced only in a court of the State of
North Carolina (or, if appropriate, a federal court located within the State of North Carolina) and
the Company and the Executive each consents to the jurisdiction of such a court.
17. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of both parties and their respective successors and assigns, including any corporation with
which or into which the Company may be merged or which may succeed to its assets or business,
provided, however, that the obligations of the Executive are personal and shall not be assigned by
the Executive.
18. Dispute Resolution. Any claim or controversy arising out of or relating to this
Agreement, or any breach thereof, or otherwise arising out of or relating to the Executive’s
employment, compensation and benefits with the Company or the termination thereof including any
claim for discrimination under any local, state or federal employment discrimination law, except as
specifically excluded herein, shall be brought in any court having jurisdiction thereof. Both the
Company and the Executive expressly waive any right that any party either has or may have to a jury
trial of any dispute arising out of or in any way related to the Executive’s employment with or
termination from the Company. The Executive expressly acknowledges and agrees that he hereby
waives any right to claim or recover punitive damages.
19. Acknowledgment. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A REASONABLE PERIOD
SUFFICIENT TO STUDY, UNDERSTAND AND CONSIDER THIS AGREEMENT, THAT HE HAS HAD AN OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL OF HIS CHOICE, THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ALL OF
ITS TERMS, THAT HE IS ENTERING
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INTO AND SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY, AND THAT IN DOING SO HE IS NOT
RELYING UPON ANY STATEMENTS OR REPRESENTATIONS BY THE COMPANY OR ITS AGENTS.
20. Miscellaneous.
20.1. No delay or omission by the Company in exercising any right under this Agreement shall
operate as a waiver of that or any other right. A waiver or consent given by the Company on any
one occasion shall be effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
20.2. The captions of the sections of this Agreement are for convenience of reference only and
in no way define, limit or affect the scope or substance of any section of this Agreement.
20.3. In case any provision of this Agreement shall be invalid, illegal or otherwise
unenforceable, the validity, legality and enforceability of the remaining provisions shall in no
way be affected or impaired thereby.
20.4. Nothing in this Agreement should be construed to create a trust or to establish or
evidence Executive’s claim of any right to payment other than as an unsecured general creditor with
respect to any payment to which Executive may be entitled.
20.5. The provisions of Sections 7 and 8 shall survive the termination of this Agreement.
20.6. Upon termination of Executive’s employment by the Company for any reason whatsoever
whether voluntarily or involuntarily, or at any other time upon the Company’s request, Executive
agrees to promptly return to the possession of the Company any materials or copies thereof, in hard
copy or electronically, containing and/or pertaining to Proprietary Information relating to the
Company or any of its subsidiaries or affiliates and shall not take any material or copies thereof
from the possession of the Company, or destroy any such materials. In addition, Executive shall
also return to the Company all Company property and equipment in the Executive’s possession or
control, including but not limited to, all documents, product samples, tapes, notes, computer
files, equipment, phone, facsimile, printer, computer, physician lists, employee lists, lab
notebooks, files, computer equipment, security badges, telephone calling cards, credit cards, and
other information or materials (and all copies) which contain confidential, proprietary or
non-public information of the Company. The Executive further agrees to leave intact all electronic
Company documents on the Company’s servers or computers, including those which Executive developed
or helped develop during Executive’s employment. Executive further agrees to promptly return or
make available to the Company or its agents any motor vehicle provided to Executive by the Company.
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21. Definitions.
21.1. For the purposes of this Agreement, “Cause” for termination shall be deemed to exist
upon (a) the Executive’s use of alcohol or narcotics which proximately results in the willful
material breach or habitual willful neglect of the Executive’s duties under this Agreement; (b) the
Executive’s criminal conviction of fraud, embezzlement, misappropriation of assets, or the
Executive’s conviction of any felony or other crime that brings embarrassment to the Company, but
in no event traffic or similar violations; (c) any act of the Executive constituting willful
misconduct which is materially detrimental to the Company’s best interests, including but not
limited to misappropriation of, or intentional damage to, the funds, property or business of the
Company; (d) the Executive’s material violation of the Company’s policies, including but not
limited to violations of the Company’s policies prohibiting harassment or discrimination; or (e)
the Executive’s willful Material Breach (as defined below) of this Agreement, if such willful
Material Breach is not cured by the Executive within thirty (30) days after the Company’s written
notice thereof specifying the nature of such willful Material Breach. “Material Breach” shall mean
(x) the substantial and continual willful nonperformance of the Executive’s material duties under
this Agreement resulting from the Executive’s gross negligence or willful misconduct which the
Board reasonably determines has resulted in material injury to the Company or (y) the breach of
Section 7 or Section 8 of this Agreement.
21.2. For purposes of this Agreement, a “Change of Control” shall mean:
(a) the acquisition by an individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act (as defined below)) (a “Person”) of beneficial ownership
of any capital stock of the Company if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of the combined
voting power of the then-outstanding securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of
the Board (or, if applicable, the Board of Directors of a successor corporation to the Company),
where the term “Continuing Director” means at any date a member of the Board (x) who was a member
of the Board on the date of the initial adoption of the Employment Agreement by the Board or
(y) who was nominated or elected subsequent to such date by at least a majority of the directors
who were Continuing Directors at the time of such nomination or election or whose election to the
Board was recommended or endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however, that there shall be
excluded from this clause (y) any individual whose initial assumption of office occurred as a
result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a
person other than the Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or share
exchange involving the Company or a sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”), unless, immediately
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following such Business Combination, each of the following two conditions is satisfied:
(x) all or substantially all of the individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include, without limitation, a
corporation which as a result of such transaction owns the Company or substantially all of the
Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring
corporation is referred to herein as the “Acquiring Corporation”) in substantially the same
proportions as their ownership of the Outstanding Company Voting Securities immediately prior to
such Business Combination and (y) no Person (excluding any Executive benefit plan (or related
trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns,
directly or indirectly, 50% or more of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors (except to the extent
that such ownership existed prior to the Business Combination); or
(d) the liquidation or dissolution of the Company.
21.3. For purposes of this Agreement, a “Change of Control Period” shall consist of the period
from three (3) months before until three (3) months after the date on which a Change of Control
occurs.
21.4. As used in this Agreement, the term “Disability” means, with respect to the Executive,
that the Executive is unable to perform the essential functions of his position with a reasonable
accommodation if necessary by reason of any medically determinable physical or mental impairment.
A determination of Disability shall be agreed upon by a physician satisfactory to the Executive and
a physician selected by the Company, provided that if these physicians do not
agree, the Executive and the Company shall each select a physician and these two together shall
select a third physician, whose determination as to Disability shall be binding on all parties.
21.5. As used in this Agreement, the term “Exchange Act” shall mean the Securities Exchange
Act of 1934, as amended.
21.6. For purposes of this Agreement, “Good Reason” shall be deemed to exist upon (a) any
material reduction in the annual base compensation payable to the Executive (but exclusive of any
Target Cash Bonus, annual equity award or other similar cash bonus or equity plans for this
purpose); (b) the relocation of the place of business at which the Executive is principally located
to a location that is greater than thirty (30) miles from its current location; (c) the failure of
the Company to comply with a material term of this Agreement; or (d) a material reduction in
Executive’s level of responsibility to that which is not consistent with to the position held by
the Executive, as defined in Section 2 herein, so long as notice of the Good Reason condition is
given within thirty (30) days of the condition’s initial existence, the
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Company is given thirty (30) days to remedy the condition, and the termination from employment
occurs within ninety (90) days following the initial existence of one or more Good Reason
conditions. By way of clarification, any change in ownership of the outstanding capital stock of
the Company, including but not limited to, the fact that the Company is no longer registered
pursuant to Section 12 of the Securities Act of 1933, as amended, shall not constitute a “good
reason” within the context of this Agreement.
21.7. For purposes of this Agreement, “pro rata payment” shall be deemed to mean the
calculation of a payment by the Company based on the proportion of the calendar year completed,
based on the nearest whole number of months of Executive’s employment (for illustrative purposes
only, if Executive was terminated without Cause by the Company on April 13th of a given
year, Executive would be entitled to 1/4 of his Target Cash Bonus for such year under Section
5.4(iii)).
21.8. For purposes of this Agreement, “Transfer” means any sale, assignment or other outright
transfer, including transfers pursuant to a domestic relations proceeding, testate or intestate
transfers, transfers by merger and transfers otherwise by operation of law, of Beneficial Ownership
of any shares of common stock of the Company. “Transferred” shall have a correlative meaning.
21.9. For purposes of this Agreement, “Covered Shares” means 66 and two thirds percent (66
2/3%) of the number the shares of common stock of the Company Beneficially Owned by the Executive
or shares of Common Stock that may be issued pursuant to all options, warrants, rights, convertible
or exchangeable securities Beneficially Owned by him or her, so long as then exercisable or
exchangeable as of the date of this Agreement, as set forth on Appendix B of this Agreement.
21.10. For purposes of this Agreement, “Beneficially Owns” means, with respect to any
security, having the power to direct or control the voting or disposition of such security, and
“Beneficially Owned” shall have a correlative meaning.
21.11.
For purposes of this Agreement, “Exempt Transfer” means any direct or indirect Transfer
of Beneficial Ownership of common stock of the Company made:
(a) to any Trust Affiliate, Partnership Affiliate or Corporate Affiliate of the transferor;
provided, that after giving effect to such Transfer, the transferor continues to own at least one
share of Common Stock and continues to be a party to this Agreement and bound by the terms and
provisions hereof; and further provided, that if on a later date the condition in the foregoing
proviso ceases to be satisfied or such Trust Affiliate, Partnership Affiliate or Corporate
Affiliate ceases to be a Trust Affiliate, Partnership Affiliate or Corporate Affiliate of the
transferor, a Transfer (which shall not constitute an Exempt Transfer) of the amount of common
stock of the Company originally Transferred to such transferee shall be deemed to have occurred; or
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(b) by operation of the laws of descent and distribution.
21.12. For purposes of this Agreement, “Trust Affiliate” means a trust established for the
primary benefit of the Executive, so long as the only persons entitled to direct the voting of any
common stock of the Company held by the trust are the transferor or a bank or other corporation
having trust powers.
21.13. For purposes of this Agreement, “Corporate Affiliate ” means a corporation of which all
the capital stock is owned, directly or indirectly, by the Executive.
21.14. For purposes of this Agreement, “Partnership Affiliate ” means a limited partnership,
the general partner of which is, or is under the exclusive control of, and the majority of the
limited liability partnership interests of which are owned by the Executive.
22. Non-Disparagement. The Executive understands and agrees that as a condition to
him of the monetary consideration provided in connection with this Agreement, during the term of
the Agreement and after the termination of his employment with the Company for any reason, he shall
not make any false, disparaging or derogatory statements in public or private to any person or
media outlet regarding the Company or any of its directors, officers, employees, agents, or
representatives or the Company’s business affairs and financial condition. Nothing in this Section
shall prohibit the Executive from communicating or testifying truthfully (i) to the extent required
or protected by law, (ii) to any federal, state, or local governmental agency, or (iii) in response
to a subpoena to testify issued by a court of competent jurisdiction.
23. Section 409A.
23.1 Parties’ Intent. The parties intend that the provisions of this Agreement comply
with the provisions of Section 409A and all provisions of this Agreement shall be construed in a
manner consistent with the requirements for avoiding taxes or penalties under Section 409A. If any
provision of this Agreement (or of any award of compensation, including equity compensation or
benefits) would cause the Executive to incur any additional tax or interest under Section 409A, the
Company shall, upon the specific request of the Executive, use its reasonable business efforts to
in good faith reform such provision to comply with Section 409A; provided, that to the maximum
extent practicable, the original intent and economic benefit to the Executive and the Company of
the applicable provision shall be maintained, and the Company shall have no obligation to make any
changes that could create any additional economic cost or loss of benefit to the Company. The
Company shall timely use its reasonable business efforts to amend any plan or program in which the
Executive participates to bring it in compliance with Section 409A. Notwithstanding the foregoing,
the Company shall have no liability with regard to any failure to comply with Section 409A so long
as it has acted in good faith with regard to compliance therewith.
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23.2 Separation from Service. A termination of employment shall not be
deemed to have occurred for purposes of any provision of this Agreement providing for the payment
of any amounts or benefits upon or following a termination of employment unless such termination
also constitutes a “Separation from Service” within the meaning of Section 409A and, for purposes
of any such provision of this Agreement, references to a “termination,” “termination of
employment,” “separation from service” or like terms shall mean Separation from Service.
23.3 Separate Payments. Each installment payment required under this Agreement shall
be considered a separate payment for purposes of Section 409A.
23.4 Delayed Distribution to Key Employees. If the Company determines in accordance
with Sections 409A and 416(i) of the Code and the regulations promulgated thereunder, in the
Company’s sole discretion, that the Executive is a Key Employee of the Company on the date the
Executive’s employment with the Company terminates and that a delay in benefits provided under this
Agreement is necessary to comply with Code Section 409A(A)(2)(B)(i), then any severance payments
and any continuation of benefits or reimbursement of benefit costs provided by this Agreement, and
not otherwise exempt from Section 409A, shall be delayed for a period of six (6) months following
the date of termination of the Executive’s employment (the “409A Delay Period”). In such event,
any severance payments and the cost of any continuation of benefits provided under this Agreement
that would otherwise be due and payable to the Executive during the 409A Delay Period shall be paid
to the Executive in a lump sum cash amount in the month following the end of the 409A Delay Period.
For purposes of this Agreement, “Key Employee” shall mean an employee who, on an Identification
Date (“Identification Date” shall mean each December 31) is a key employee as defined in Section
416(i) of the Code without regard to paragraph (5) thereof. If the Executive is identified as a
Key Employee on an Identification Date, then the Executive shall be considered a Key Employee for
purposes of this Agreement during the period beginning on the first April 1 following the
Identification Date and ending on the following March 31.
24. Parachutes. If all, or any portion, of the payments provided under this
Agreement, either alone or together with other payments and benefits which the Executive receives
or is entitled to receive from the Company or an affiliate, would constitute an excess “parachute
payment” within the meaning of Section 280G of the Code, the payments and benefits provided under
this Agreement shall be reduced to the extent necessary so that no portion thereof shall fail to be
tax-deductible under Section 280G of the Code.
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SIGNATURE PAGE TO EXECUTIVE EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set
forth above.
| CORNERSTONE THERAPEUTICS INC. | ||||||
| By: | /s/ Xxxxx X. Xxxxxxx | |||||
| Title: President and Chief Executive Officer | ||||||
| EXECUTIVE | ||||||
| /s/ Xxxxx Xxxxxxx | ||||||
| Xxxxx Xxxxxxx, M.D. | ||||||
Appendix A
Vesting — over 4 years.
Appendix B
No. of
Covered Shares: 253,956
