AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) dated as of the 15th day of
July 2008, between Xxxx Pharmaceuticals, Inc., a Delaware corporation having its principal
executive offices at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000-0000 (the “Company”),
and Xxxxx X. Xxxxxx (the “Employee”).
WITNESSETH:
WHEREAS, the Company, Xxxx Laboratories, Inc. (“BLI”) and the Employee entered into an
employment agreement dated as of January 4, 1993, which was amended and restated as of August 16,
2002, October 24, 2002 and March 13, 2006 (as so amended and restated, the “Prior
Agreement”);
WHEREAS, the Company and the Employee wish to amend and restate the Prior Agreement;
WHEREAS, the Company wishes to assure itself of the services of the Employee and provide an
inducement for the Employee to remain in its employ; and
WHEREAS, the Employee is willing to remain in the employ of the Company on the terms and
conditions hereafter set forth;
NOW, THEREFORE, the Company and the Employee hereby agree that, effective as of the date first
stated above, the Prior Agreement is amended and restated in its entirety to read as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee agrees to serve
in the employ of the Company, during the term of this Agreement on the terms and conditions
hereafter set forth.
2. Term. The term of this Agreement shall commence on July 15, 2008 (the
“Commencement Date”) and shall terminate at 5 P.M. on December 31, 2009 unless sooner
terminated in accordance with the terms of this Agreement or extended as hereinafter provided. The
term of this Agreement shall be extended, without further action by the Company or the Employee, on
the date (the “Extension Effective Date”) that is six (6) months before December 31, 2009
and on the date (also an “Extension Effective Date”) that is six (6) months before each
subsequent December 31, for successive periods of twelve (12) months each, unless the Company shall
have given written notice to the Employee, or the Employee shall have given written notice to the
Company, in the manner set forth in paragraph 13(e) or (f) below, prior to the Extension Effective
Date in question, that the term of this Agreement that is in effect at the time such written notice
is given is not to be extended or further extended, as the case may be.
3. Position and Responsibilities; Place of Performance.
(a) Throughout the term of this Agreement, the Employee agrees to serve in the employ of the
Company, and the Company agrees to employ the Employee, as its Chief Executive Officer, reporting
only to the Company’s Board of Directors (the “Board”). As the Company’s Chief Executive
Officer, the Employee shall be the most senior officer of the
Company and its Subsidiaries (as defined in paragraph 11(b)), shall have effective supervision,
control and policy-making authority over, and responsibility for, the strategic direction and
general leadership and management of the business and affairs of the Company and its Subsidiaries,
subject only to the authority of the Board, and shall have all of the powers, authority, duties and
responsibilities usually incident to the position and role of Chief Executive Officer in public
companies that are comparable in size, character and performance to the Company. All employees of
the Company and its Subsidiaries shall report, directly or indirectly, to the Employee. The
Company agrees to use its best efforts to secure the Employee’s election as a member and Chairman
of the Board and as a member and Chairman of the Board of Directors of Xxxx Laboratories, Inc. (the
“BLI Board”) during the term of this Agreement, and the Employee agrees to serve as such
and as an officer and member of the board of directors of any other Affiliate (as defined in
paragraph 11(b)) to which he may be elected or appointed during the term of this Agreement, without
additional compensation beyond that provided in this Agreement.
(b) In connection with the Employee’s employment by the Company, the Employee shall be based
at a location of his choosing in the greater Washington, D.C. metropolitan area or at any other
Company or Subsidiary location, as he may determine to be appropriate for the performance of his
duties, and the Employee agrees to travel, to the extent reasonably necessary to perform the
Employee’s duties and obligations under this Agreement, to Company facilities and other
destinations elsewhere at the Company’s expense.
(c) During the term of this Agreement, the Employee shall serve the Company on an exclusive basis
(it being understood that the Employee’s engaging in activities on behalf of an Affiliate shall be
deemed serving the Company for this purpose) and shall devote all the Employee’s business time,
attention, skill and efforts to the faithful performance of the Employee’s duties hereunder;
provided that the Employee may engage in community service and charitable activities or such other
activities as approved by the Board that do not materially interfere with the performance of the
Employee’s duties and responsibilities hereunder.
4. Compensation. For all services rendered by the Employee in any capacity during the
term of this Agreement, and for the Employee’s undertakings with respect to confidential
information, non-solicitation and disparaging remarks set forth in Sections 6 and 7 below, the
Employee shall be entitled to the following:
(a) a salary, payable in installments not less frequent than monthly, at the annual rate of one
million five hundred thousand dollars ($1,500,000), with such increases in such rate, if any, as
the Board or a committee of the Board may approve from time to time during the term of this
Agreement in accordance with the Company’s regular administrative practices applicable to officers
from time to time during the term of this Agreement (the Employee’s annual salary rate as increased
from time to time during the term of this Agreement being hereafter referred to as the “Base
Salary”);
(b) participation in the Company’s annual executive incentive or bonus plan as in effect from
time to time, with the opportunity to receive, for each fiscal year of the Company that begins or
ends during the term of this Agreement, a target award of seventy-five percent (75%) of the Base
Salary earned during such year (or such higher amount as the Board or a committee of the Board may
determine, in its discretion, up to a maximum of the lesser of (i) one
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hundred percent (100%) of Base Salary earned during such year or (ii) three percent (3%) of the
Company’s pre-tax and pre-bonus net operating income for such year), in accordance with the terms
and conditions of such incentive or bonus plan, it being understood that any award for the fiscal
year of the Company in which the term of this Agreement terminates pursuant to the terms hereof
shall be prorated based on the portion of such fiscal year that coincides with the term of this
Agreement and shall be made at the same time as awards (if any) are made to other participants with
respect to such fiscal year. The Company will pay the Employee’s annual incentive bonus for each
year at the same time as annual incentive bonus payments for such year (if any) are made to other
participants with respect to such fiscal year, and in all events within the two and one half (21/2)
months following the end of the calendar year in which the bonus is earned. Annual incentive
bonuses are intended to qualify for the short-term deferral exception to Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”). The Employee recognizes and agrees
that the Board will delay the payment of any portion of his annual bonus to the extent that, and
for such period of time and on such terms and subject to such conditions as, may be reasonably
necessary to avoid a loss by the Company or an Affiliate of a tax deduction with respect to such
portion of his annual bonus under Code Section 162(m). Any such delayed amount shall be paid as
soon as reasonably practicable following the first date on which the Company or an Affiliate
anticipates or reasonably should anticipate that, if the payment were made on such date, the
Company’s or Affiliate’s deduction with respect to such payment would no longer be restricted due
to the application of Code Section 162(m). Any such delayed amount shall be non-forfeitable, shall
constitute an unfunded, unsecured obligation of the Company, and until paid shall be deemed
invested in such hypothetical investments as the Employee may select from among the hypothetical
investment options that are available from time to time during the delay period under the Company’s
excess 401(k) plan or, if no such investment options are available at the time in question under
that plan, then from among the same hypothetical investment options that were available under the
Company’s excess 401(k) plan on January 1, 2008 or a reasonable facsimile thereof;
(c) participation in the stock incentive plan applicable to Company officers as from time to time
in effect, subject to the terms and conditions of such plan;
(d) the business and personal use of an automobile at Company expense including, without
limitation, payment or reimbursement of automobile insurance and maintenance expenses, or a cash
allowance in lieu thereof, in accordance with the Company’s automobile policy applicable to
similarly situated officers; and
(e) participation in all health, welfare, savings and other employee benefit and fringe benefit
plans (including vacation pay plans or policies and life and disability insurance plans) in which
other officers of the Company participate during the term of this Agreement, subject in all events
to the terms and conditions of such plans as in effect from time to time. Nothing in this paragraph
(e) shall preclude the Company or an Affiliate from amending or terminating any such plan at any
time prior to a Change in Control or Potential Change in Control. The plans covered by this
paragraph (e) shall not include the annual incentive or stock incentive plans, which are covered by
paragraphs (b) and (c) above.
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5. Termination of Employment.
(a) Termination by the Company or an Affiliate without Good Cause or by the Employee for Good
Reason; Non-Renewal Termination.
(i) If the Employee’s employment with the Company is terminated by the Company or an
Affiliate without Good Cause (except as an incident of assigning the rights to Employee’s
services to a Permitted Assignee in accordance with paragraph 13(d) below) when the Employee
is willing and able to continue performing services, or is terminated by the Employee for
Good Reason, in either case during the term of this Agreement and other than at the
expiration of the term of this Agreement as the same may have been extended in accordance
with the provisions of Section 2 above (any such employment termination being hereafter
referred to as a “Compensable Termination”), the Company shall pay the Employee, in
accordance with normal payroll practices, the portion of the Employee’s Base Salary accrued
through the date of the Compensable Termination and any other amounts to which the Employee
is entitled by law or pursuant to the terms of any compensation or benefit plan or
arrangement in which the Employee participated prior to the Compensable Termination and, in
addition, subject to all of the provisions of this Section 5, Section 14 below, and further
subject to compliance by the Employee with the provisions of Sections 6 and 7 below,
relating to confidential information, non-solicitation and disparaging remarks, the Company
shall, as liquidated damages or severance pay or both (whichever characterization(s) will
serve to validate the payments), and as additional consideration for the Employee’s
undertakings under Sections 6 and 7 below, pay the Employee the following:
(A) the Employee’s annual bonus for the fiscal year of the Company preceding the fiscal year of
the Company in which the Compensable Termination occurs, if unpaid at the time of the Compensable
Termination. Such annual bonus shall be paid at the same time as bonuses (if any) for such
preceding fiscal year are paid to other officers, and in all events within the first two and one
half (21/2) months of the fiscal year in which the Compensable Termination occurs. The amount of
such bonus shall be determined by the Board or a committee of the Board on a basis consistent with
the prior bonus determinations with respect to the Employee or, in the event a Change in Control or
Potential Change in Control (as defined in Section 11 below) occurred before the Compensable
Termination, consistent with the bonus determinations with respect to the Employee prior to the
Change in Control or Potential Change in Control; and
(B) a prorated annual bonus for the fiscal year of the Company in which the Compensable
Termination occurs, payable at the same time as bonuses (if any) for such fiscal year are paid to
other officers, and in all events within the first two and one half (21/2) months of the fiscal year
following the fiscal year in which the Compensable Termination occurs. Such prorated annual bonus
shall be determined by multiplying the “Applicable Average Bonus” as defined below in this
subparagraph 5(a)(i)(B) by a fraction, the numerator of which shall be the number of days elapsed
in such fiscal year through (and including) the date on which the Compensable Termination occurs
and the denominator of which shall be the number three hundred sixty-five (365). For purposes of
this Agreement,
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the “Applicable Average Bonus” means the highest of (I) the average annual bonus (including
any portion of the bonus that is deferred) awarded to the Employee during the three (3)-year period
immediately preceding the Compensable Termination, (II) the average annual bonus (including any
portion of the bonus that is deferred) awarded to the Employee during the three (3) fiscal years of
the Company that precede the fiscal year in which the Compensable Termination occurs; provided
that, if the Compensable Termination occurs after a Change in Control or Potential Change in
Control, the Applicable Average Bonus shall not be less than the average annual bonus (including
any portion of the bonus that is deferred) awarded to the Employee during the three (3) years
preceding the date on which the Change in Control or Potential Change in Control occurred; or (III)
the Employee’s target bonus (based on the greatest of (i) the Employee’s target bonus percentage
and Base Salary rate as specified in Section 4 above, (ii) the Employee’s approved target bonus
percentage and Base Salary rate in effect on the date of the Compensable Termination, or (iii) the
Employee’s approved target bonus percentage and Base Salary rate in effect on the date of notice of
such Compensable Termination); and
(C) an amount of money (the “Severance Payment”) equal to three (3) times the Employee’s
“Annual Cash Compensation” as hereafter defined, unless the Employee has attained age sixty-five
(65) but not age seventy (70) (or such later age or ages as the Board may in its discretion
determine) prior to the Compensable Termination, in which case the Severance Payment shall be equal
to two (2) times such Annual Cash Compensation, or unless the Employee has attained age seventy
(70) (or such later age as the Board may in its discretion determine) prior to the Compensable
Termination, in which case the Severance Payment shall be equal to one (1) times such Annual Cash
Compensation. Notwithstanding the foregoing, if the Severance Payment is payable solely on account
of the Employee’s resignation for Good Reason pursuant to subparagraph 5(d)(v) below (relating to
the Company or an Affiliate giving the Employee notice of non-extension), no amount will be payable
under this subparagraph 5(a)(i)(C), and the Employee shall instead receive the payment set forth in
subparagraph 5(a)(ii). Except as otherwise provided hereafter in this subparagraph 5(a)(i)(C) and
Section 14, the Severance Payment shall be paid as follows: seventy-five percent (75%) of the
Severance Payment (or, if the Employee has attained age sixty-five (65) prior to the Compensable
Termination, one hundred percent (100%) of the Severance Payment) shall be paid in a lump sum
within ten (10) days after the date of the Compensable Termination. Any balance of the Severance
Payment shall be paid in six (6) equal monthly installments, one (1) of which shall be paid at the
end of each of the first six (6) months after the date of the Compensable Termination, provided,
that the Employee has not accepted full-time or regular part-time employment with or regularly
served as a consultant to a for-profit pharmaceutical company prior to the date for payment of such
installment, it being understood and agreed that the foregoing condition shall not be violated by
the Employee’s serving as a member of a board of directors of a for-profit pharmaceutical company
or by his performing consulting services on an ad hoc basis for such a company. If a
Change in Control occurs that is a “change
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in control event” within the meaning of Code Section 409A and Treasury Regulation
§1.409A-3(i)(5)(i) (or any similar or successor provisions) (either before or after the
Compensable Termination and in accordance with Treasury Regulation §1.409A-3(c)), the
Severance Payment (or, in the case of such a “change in control event” that occurs after the
Compensable Termination, any portion thereof that remains unpaid at the time such “change in
control event” occurs) shall be paid in a lump sum within ten (10) days after the
Compensable Termination (or, in the case of such a “change in control event” that occurs
after the Compensable Termination, within ten (10) days after the “change in control event”
occurs), and the two (2) preceding sentences of this subparagraph shall not apply. For
thirty-six (36) months following a Compensable Termination, the Company shall also provide
the Employee (and, as applicable, the Employee’s covered dependents), at Company expense,
with continuation coverage under the Company’s group health plan(s) covering similarly
situated executives. For purposes of this Section 5, the Employee’s “Annual Cash
Compensation” shall mean the sum of (I) the Employee’s highest Base Salary (i.e., one
(1) year’s salary at its highest rate), plus (II) the “Applicable Average Bonus” as defined
in subparagraph 5(a)(i)(B) above.
(ii) If the term of this Agreement as the same may have been extended in accordance with the
provisions of Section 2 above is not extended or further extended because the Company or an
Affiliate gives written notice of non-extension to the Employee as provided in Section 2 above, and
there is not Good Cause for termination of the Employee’s employment at the time of giving such
notice, and the Employee does not thereafter resign for Good Reason during the term of this
Agreement as permitted by paragraph 5(d)(v) below, and the Employee is willing and able to renew or
execute a new agreement providing terms and conditions substantially similar to those in this
Agreement and to continue providing such services, then the Company shall pay the Employee, subject
to fulfillment by the Employee of the Employee’s obligations under this Agreement during the
balance of the term and the Employee’s compliance with the provisions of Sections 6 and 7 below,
relating to confidential information, non-solicitation and disparaging remarks, as non-renewal
compensation, and as additional consideration for the Employee’s undertakings under this Agreement,
including Sections 6 and 7 below, an amount of money (the “Non-Renewal Payment”) equal to
two (2) times the Employee’s Annual Cash Compensation as defined in subparagraph 5(a)(i)(C) above
(unless the Employee has attained age seventy (70) or such later age as the Board may in its
discretion determine) prior to the Compensable Termination, in which case the Non-Renewal Payment
shall be equal to one (1) times the Employee’s Annual Cash Compensation), in addition to any other
amounts to which the Employee may be entitled hereunder (including without limitation the
Employee’s annual bonus pursuant to paragraph 4(b) above for the fiscal year of the Company in
which the Employee’s Compensable Termination occurs and any amounts to which the Employee may be
entitled under paragraph 5(f) or Section 8, 9 or 10 below) or by law or pursuant to the terms of
any compensation or benefit plan or arrangement in which the Employee participated before the
Employee’s Compensable Termination occurred. Except as otherwise provided hereafter in this
subparagraph 5(a)(ii), the Non-Renewal Payment shall be paid as follows: seventy-five percent (75%)
of the Non-Renewal Payment, or if
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the Employee has attained age sixty-five (65) prior to the Compensable Termination, one hundred
(100%) of the Non-Renewal Payment, shall be paid in a lump sum within ten (10) days after the date
on which the Employee’s Compensable Termination occurs, subject to paragraph 5(i) and Section 14.
Any balance of the Non-Renewal Payment shall be paid in six (6) equal monthly installments one (1)
of which shall be paid at the end of each of the first six (6) months after the date on which the
Employee’s Compensable Termination occurred. If a Change in Control occurs that is a “change in
control event” within the meaning of Code Section 409A and Treasury Regulation §1.409A-3(i)(5)(i)
(or any similar or successor provisions) (either before or after the Employee’s termination and in
accordance with Treasury Regulation §1.409A-3(c)), the Non-Renewal Payment (or, in the case of such
a “change in control event” that occurs after the Employee’s Compensable Termination, any portion
thereof that remains unpaid at the time such “change in control event” occurs) shall be paid in a
lump sum within ten (10) days after the date on which the Employee’s Compensable Termination occurs (or, in the
case of such a “change in control event” that occurs after the Employee’s Compensable Termination,
within ten (10) days after the “change in control event” occurs), and the two (2) preceding
sentences of this subparagraph shall not apply. For thirty-six (36) months following the
Employee’s termination, the Company shall also provide the Employee (and, as applicable, the
Employee’s covered dependents), at Company expense, with continuation coverage under the Company’s
group health plan(s) covering similarly situated executives.
(iii) The foregoing provisions of (including any payments under) this paragraph 5(a) shall be
in lieu of any severance pay that may be payable under any plan or practice of the Company, any
other Subsidiary or Affiliate (as such terms are defined in Section 11 below), or by law (including
the WARN Act or any similar state or foreign law), but shall be in addition to (and not in lieu of)
any payments to which the Employee may be entitled under paragraph 5(f) and Sections 8, 9 and 10
below. Subparagraphs 5(a)(i)(C) and 5(a)(ii) above are intended to be mutually exclusive, and in
no event shall such subparagraphs, either individually or collectively, be construed to require the
Company to pay an amount of money in excess of three (3) times the Employee’s Annual Cash
Compensation under such subparagraphs, either individually or collectively, in addition to
continuation coverage under the Company’s group health plan(s) covering similarly situated
executives provided by the Company to the Employee (and, as applicable, the Employee’s covered
dependents), at Company expense, for thirty-six (36) months.
(iv) The Employee shall not be required to mitigate the amount of any payment or benefit provided
for in this Agreement (including but not limited to any payment provided for above in this
paragraph 5(a)) by seeking other employment or otherwise, nor shall any compensation earned by the
Employee in other employment or otherwise reduce the amount of any payment or benefit provided for
in this Agreement, except as provided in subparagraphs 5(a)(i)(C) and 5(a)(ii) above.
(v) A Compensable Termination shall not include a termination of employment by reason of the
Employee’s death.
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(b) Termination by the Company or an Affiliate for Good Cause or by the Employee without
Good Reason. If, during the term of this Agreement, the Employee’s employment by the Company is
terminated by the Company or an Affiliate for Good Cause or by the Employee without Good Reason,
the Employee shall not be entitled to receive any compensation under Section 4 above accruing after
the date of such termination or any payment under paragraph 5(a) above. However, any obligations of
the Company under paragraph 5(f) and Sections 8, 9 and 10 shall not be affected by such termination
of employment. The provisions of this paragraph 5(b) shall be in addition to, and not in lieu of,
any other rights and remedies the Company may have at law or in equity or under any other provision
of this Agreement in respect of such termination of employment. However, if during the term of
this Agreement the Employee’s employment is terminated by the Employee without Good Reason and the
Employee gives the Company at least one hundred twenty (120) days’ advance notice of such
termination, then the Employee shall not have any obligation or liability under this Agreement on
account of such termination of employment, but the Employee’s obligations under Section 6 and 7
hereof shall not be affected by such termination of employment.
(c) Good Cause Defined. For purposes of this Agreement, the Company and the Affiliates
shall have “Good Cause” to terminate the Employee’s employment by the Company during the
term of this Agreement only if:
(i) (A) the Employee fails to substantially perform the Employee’s duties hereunder for any
reason or to devote substantially all the Employee’s business time exclusively to the affairs of
the Company (including Company activities on behalf of the other Affiliates), other than by reason
of a medical condition that prevents the Employee from substantially performing the Employee’s
duties hereunder even with a reasonable accommodation by the Company, and (B) such failure is not
discontinued within a reasonable period of time, in no event to exceed thirty (30) days, after the
Employee receives written notice from the Company or an Affiliate of such failure; or
(ii) the Employee commits an act of dishonesty resulting or intended to result directly or
indirectly in gain or personal enrichment at the expense of the Company or an Affiliate, or engages
in conduct that constitutes a felony in the jurisdiction in which the Employee engages in such
conduct; or
(iii) the Employee is grossly negligent or engages in willful misconduct or
insubordination in the performance of the Employee’s duties hereunder; or
(iv) the Employee materially breaches the Employee’s obligations under Section 6 or
paragraph 7(a) below, relating to confidential information and non-solicitation.
In addition, the Employee’s employment shall be deemed to have terminated for Good Cause if,
after the Employee’s employment has terminated, facts and circumstances arising during the course
of the Employee’s employment are discovered that would have justified a termination for Good Cause
under subparagraphs 5(c)(ii) or (iv) above.
Any foregoing provision of this paragraph 5(c) to the contrary notwithstanding, the Company
and the Affiliates shall not have “Good Cause” to terminate the Employee’s
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employment within three (3) years after a Change in Control or Potential Change in Control (as such
terms are defined in Section 11 below) unless (A) the Employee’s act or omission is willful and has
a material adverse effect upon the Company or an Affiliate, (B) the Board gives the Employee (I)
written notice warning of its intention to terminate the Employee for Good Cause if the specified
act or omission alleged to constitute Good Cause is not discontinued and, if curable, cured, and
(II) a reasonable opportunity after receipt of such written notice, but in no event less than two
(2) weeks, to discontinue and, if curable, cure the conduct alleged to constitute Good Cause, and
(C) the Employee fails to discontinue and, if curable, cure the act or omission in question;
provided that clauses (B) and (C) of this sentence shall not apply with respect to conduct on the
part of the Employee that constitutes a felony in the jurisdiction in which the Employee engages in
such conduct, and, provided further, that this sentence shall not apply to conduct involving moral
turpitude. For all purposes of this Agreement, no act, or failure to act, on the Employee’s part
shall be deemed “willful” unless done, or omitted to be done, by the Employee intentionally and in
bad faith (i.e., without reasonable belief that the Employee’s action or omission was in
furtherance of the interests of the Company, another Subsidiary or Affiliate).
(d) Good Reason Defined. For purposes of this Agreement, the Employee shall have
“Good Reason” to terminate employment during the term of this Agreement only if:
(i) the Company fails to pay or provide any amount or benefit that the Company is obligated to
pay or provide under Section 4 above or Section 8, 9, or 10 below and the failure is not remedied
within thirty (30) days after the Company receives written notice from the Employee of such
failure; or
(ii) the Employee is assigned duties or responsibilities not contemplated by Section 3 above
without the Employee’s consent, or the Employee’s duties or responsibilities or power or authority
contemplated by Section 3 above are limited in any respect materially detrimental to the Employee,
and in either case the situation is not remedied within thirty (30) days after the Company receives
written notice from the Employee of the situation; or
(iii) the Employee is removed from, or not elected or reelected to, the Board, the
board of directors of any successor to the Company, or the office, title and position of
Chairman of the Board and Chief Executive Officer of the Company, and the Company and the
Affiliates do not have Good Cause for doing so; or
(iv) the Company or an Affiliate relocates the Employee’s office outside of either (A) the
greater Washington, D.C. metropolitan area, or (B) such other Company or Subsidiary location as he
may determine to be appropriate for the performance of his duties, in either case (A) or (B)
without the Employee’s written consent (given in a personal rather than representative capacity)
and the situation is not remedied within thirty (30) days after the Company receives written notice
from the Employee of the situation; or
(v) the Company or an Affiliate gives the Employee written notice, in the manner set forth in
paragraph 13(f) below, prior to any Extension Effective Date, that the term of this Agreement that
is in effect at the time such written notice is given is not to be
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extended or further extended, as the case may be; provided that the giving of such written notice
to the Employee shall constitute Good Reason only if and when the Employee shall have performed
such of the Employee’s duties and responsibilities for such period of time, in no event to exceed
six (6) months after the giving of such notice, as the Board may reasonably request in writing to
transition the Employee’s duties and responsibilities; or
(vi) a Change in Control occurs and as a result thereof either (A) equity securities of the
Company cease to be publicly-traded, or (B) the Employee is not elected or designated to serve as
the sole Chief Executive Officer of the Company or its survivor in the Change in Control; or
(vii) a Change in Control or Potential Change in Control occurs and (A) the dollar
value of the stock optioned to the Employee annually thereafter is less than the average
annual dollar value of the stock that was optioned to the Employee during the four (4) years
prior to the Change in Control or Potential Change in Control, or (B) the material terms of
such options (including without limitation vesting schedules) are less favorable to the
Employee than the material terms of the options that were granted to the Employee during the
four (4) years prior to the Change in Control or Potential Change in Control, and in either
case (A) or (B) the situation is not remedied within thirty (30) days after the Company
receives written notice from the Employee of the situation. For purposes of (A) and (B) of
this subparagraph 5(d)(vii), if free-standing stock appreciation rights are granted to the
Employee, the stock subject to such rights shall be considered stock that is optioned to the
Employee, and if alternative stock appreciation rights (a/k/a tandem stock appreciation
rights) are granted to the Employee, the stock appreciation rights shall be considered terms
of the options to which they are alternative/tandem; or
(viii) the Company or a Permitted Assignee attempts to assign any of its rights or
obligations under this Agreement other than in accordance with paragraph 13(d) below and
does not remedy the situation within thirty (30) days after the Company receives written
notice from the Employee of the situation; or
(ix) the Company or any Subsidiary or Affiliate materially breaches the terms of this
Agreement.
In no event shall the Employee’s continued employment after any of the foregoing constitute
the Employee’s consent to the act or omission in question, or a waiver of the Employee’s right to
terminate employment for Good Reason hereunder on account of such act or omission, except as
provided in the following sentence. With respect to any act, omission, or occurrence that is
alleged to occur after the Commencement Date and prior to a Change in Control or Potential Change
in Control, the Employee must provide the Company with written notice of any one (1) or more of the
conditions set forth in this definition of Good Reason within six (6) months of the initial
existence of the condition for such condition to constitute Good Reason. Such notice shall not
excuse the Employee from continuing to perform the duties and responsibilities assigned to the
Employee until such time as the Employee terminates employment. Notwithstanding the foregoing,
this notice requirement shall not apply to acts or omissions alleged to constitute Good Reason that
arise after a Change in Control or Potential Change in Control.
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(e) Disability
(i) Notwithstanding any provision of this Agreement to the contrary, (A) if during the term of
this Agreement as the same may be extended from time to time pursuant to Section 2 above, a medical
condition prevents the Employee, even with a reasonable accommodation by the Company, from
substantially performing the Employee’s duties hereunder (it being understood that a transitory
illness, such as a cold or flu, that prevents the Employee from substantially performing the
Employee’s duties hereunder during a brief period is not such a medical condition), then until the
date, if any, on which the Employee recovers from such medical condition (the “Evaluation
Period”), the Company may terminate the Employee’s employment only pursuant to subparagraph
5(e)(ii) below (a “Disability Termination”) or for willful misconduct constituting Good
Cause under paragraph 5(c) above, and (B) if any notice of non-extension of the term of this
Agreement was given before the Evaluation Period, or is given during the Evaluation Period, whether
by the Company or an Affiliate or the Employee, pursuant to Section 2 above, and, but for this
clause (B), the term of this Agreement would expire during the Evaluation Period as a result of
such notice of non-extension having been given, then the term of this Agreement will automatically
be extended without action by any party until the Employee recovers from such medical condition.
For purposes of this paragraph 5(e), the Employee will be deemed to recover from a medical
condition only if and when the Employee both (I) has been able to substantially perform the
Employee’s duties hereunder (either with or without a reasonable accommodation by the Company) for
more than six (6) months, consecutive or non-consecutive, within any period of twelve (12) or fewer
consecutive months commencing on or after the commencement of the Evaluation Period, and (II) is
not entitled to receive long-term disability (“LTD”) benefits under a LTD plan of the
Company or a Subsidiary.
(ii) Except as otherwise provided in subparagraph 5(e)(i) above, during the Evaluation Period,
the Company may terminate the Employee’s employment only in the event of a “Disability,”
which for this purpose means that a medical condition either (A) has prevented the Employee, even
with a reasonable accommodation by the Company, from substantially performing the Employee’s duties
hereunder for six (6) months, consecutive or non-consecutive, in any period of twelve (12) or fewer
consecutive months, or (B) entitles the Employee to receive LTD benefits under a LTD plan of the
Company or any Subsidiary. The Company will give the Employee at least ten (10) days advance
written notice of a Disability Termination. Notwithstanding any provision of this Agreement to the
contrary, a Disability Termination will not be treated as a termination to which the provisions of
paragraph 5(a) or 5(b) apply.
(iii) In the event of a Disability Termination, the Company will pay or provide the Employee
with the following:
(A) With respect to the period ending on the date of the Disability Termination, the Employee
will receive all of the compensation and benefits provided by Section 4 above. The amount of any
compensation payable to the Employee with respect to the period ending on the date of the
Disability Termination may be reduced by (I) any payments which the Employee receives
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with respect to the same period because of short- or long-term disability under any disability plan
of the Company or any Subsidiary, and (II) any income (whether from Social Security, workers
compensation or any other source) that is deducted in computing the amount of such payments under
any disability plan of the Company or any Subsidiary;
(B) An amount of money equal to the Severance Payment. Except as otherwise provided hereafter in
this subparagraph 5(e)(iii)(B) and Section 14, seventy-five percent (75%) of the Severance Payment
(or, if the Employee has attained age sixty-five (65) prior to the Disability Termination, one
hundred percent (100%) of the Severance Payment) shall be paid in a lump sum within ten (10) days
after the date of the Disability Termination. Any balance of the Severance Payment shall be paid
in six (6) equal monthly installments, one (1) of which shall be paid at the end of each of the
first six (6) months after the date of the Disability Termination. If a Change in Control occurs
that is a “change in control event” within the meaning of Code Section 409A and Treasury Regulation
§1.409A-3(i)(5)(i) (or any similar or successor provisions) (either before or after the Disability
Termination and in accordance with Treasury Regulation §1.409A-3(c)), the Severance Payment (or, in
the case of such a “change in control event” that occurs after the Disability Termination, any
portion thereof that remains unpaid at the time such “change in control event” occurs) shall be
paid in a lump sum within ten (10) days after the Disability Termination (or, in the case of such a
“change in control event” that occurs after the Disability Termination, within ten (10) days after
the “change in control event” occurs), and the two (2) preceding sentences of this subparagraph
shall not apply; and
(C) During the period from the date of the Disability Termination until the first to occur of (I)
the date, if any, on which the Employee recovers from the disabling medical condition, (II) the
Employee’s attainment of age 65, and (III) the death of the Employee, the Company will pay the
Employee a monthly amount of money (the “Supplemental LTD Payments”) equal to the excess, if any,
of (aa) over (bb) where (aa) is 60% of one-twelfth (1/12th) of the Employee’s Base
Salary (as defined in paragraph 4(a) above) immediately before the Disability Termination (i.e.,
60% of the Employee’s monthly salary at its highest rate), and (bb) is the sum of (1) the monthly
LTD benefit (if any) which the Employee receives with respect to the same month under a LTD plan of
the Company or any Subsidiary, plus (2) any income (whether from Social Security, workers
compensation or any other source) that is deducted in computing the amount of such monthly LTD
benefit; provided, however, that the Employee will be entitled to a Supplemental
LTD Payment for a given month only to the extent that the Employee’s cumulative Supplemental LTD
Payments (determined without regard to this proviso) through the end of that month exceed the
Severance Payment.
The payments and benefits provided by the foregoing provisions of this subparagraph 5(e)(iii)
are in addition to and not in lieu of any other amounts to which the Employee is entitled by law or
pursuant to the terms of any compensation or benefit plan
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or arrangement in which the Employee participated prior to the Disability Termination, and any
amounts payable pursuant to Section 8, 9 or 10 below.
(f) Continuation of Medical and Dental Benefit Coverage.
(i) During the Extended Coverage Period as defined in subparagraph 5(f)(iv) below, the Company
will provide the Employee, his spouse on the date of termination (his “Spouse”) and eligible
dependents, at the Company’s expense, with the same medical and dental benefits which the Company
or any Affiliate provides to senior officers of the Company, their spouses and eligible dependents
(whether at the officers’ expense, the employer’s or otherwise) under any medical or dental benefit
plan(s) (whether insured or self-insured) that are in effect from time to time during the Extended
Coverage Period. However, if a Change in Control occurs during the term of this Agreement as the
same may be extended from time to time pursuant to Section 2 above, or during the Extended Coverage
Period, the medical and dental benefits which the Company will thereafter provide the Employee, his
Spouse and eligible dependents pursuant to this subparagraph 5(f)(i) during the Extended Coverage
Period will not be less than those which the Company or any Affiliate provides to senior officers
of the Company, their spouses and eligible dependents (whether at the officers’ expense, the
employer’s or otherwise) under any medical or dental benefit plan(s) (insured or self-insured) that
are in effect immediately prior to the Change in Control.
(A) For the avoidance of doubt, the Employee’s eligible dependents will cease to be entitled
to coverage pursuant to this paragraph 5(f) at any time during the Extended Coverage Period when
the Company and its Affiliates would cease to provide them with coverage under the medical and
dental benefit plan(s) (whether insured or self-insured) that are then in effect even if the
Employee were then a senior officer of the Company, the only exception being that if a Change in
Control occurs during the term of this Agreement as the same may be extended from time to time
pursuant to Section 2 above, or during the Extended Coverage Period, the Employee’s eligible
dependents will not cease to be entitled to coverage pursuant to this paragraph 5(f) before the
Company and its Affiliates would cease to provide them with coverage if any medical or dental
benefit plan(s) (insured or self-insured) that are in effect immediately prior to the Change in
Control were to remain in effect and the Employee were to be employed as a senior officer of the
Company during the Extended Coverage Period.
(B) Nothing in this paragraph 5(f) shall preclude the Company or any Affiliate from amending
or terminating any medical or dental benefit plan at any time, but any such amendment or
termination shall not affect the Company’s obligations under this paragraph 5(f) unless this
paragraph 5(f) provides otherwise.
(ii) Any provision of subparagraph 5(f)(i) above to the contrary notwithstanding, the Company may
reduce any medical and dental benefits that it is obligated to pay pursuant to that subparagraph by
(A) any medical and dental benefits paid to or on behalf of the same person (i.e., the Employee,
his Spouse or an eligible dependent) for the same covered event or condition by any other source
(including but not limited to Medicare, if the Employee or
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his Spouse become entitled to Medicare benefits during the Extended Coverage Period), and by (B)
any medical and dental benefits which are not paid to or on behalf of the same person for the same
covered event or condition under any plan or arrangement of a subsequent employer of the Employee
because the Employee does not enroll in, pay the premium for coverage under, or properly submit a
claim for benefits under, such plan or arrangement. If the Employee, his Spouse or eligible
dependents (as applicable) do not provide the Company with information, or do not authorize the
release of medical records, which the Company reasonably requests during the Extended Coverage
Period to ascertain the amount by which benefits payable pursuant to subparagraph 5(f)(i) above are
to be reduced pursuant to the preceding sentence, then until the Employee, his Spouse or eligible
dependents provide that information or authorize the release of those medical records, the Company
may reduce those benefits by the amount it reasonably estimates, based on the information available
to it, to be the proper amount of the reduction pursuant to the preceding sentence; provided that
as soon as practicable after the Employee, his Spouse or eligible dependents provide that
information or authorize the release of those medical records, the Company adjusts (i.e., trues up
or down) the benefits paid to reflect the proper amount of the reduction.
(iii) Whenever the Company pays benefits pursuant to paragraph 5(f)(i) above (whether
to or on behalf of the Employee, his Spouse or eligible dependents), the Company will gross
up the Employee and his Spouse for any taxes they incur on such benefits, to the end that
the Employee and his Spouse will incur no out of pocket expense as a result of the payment
of such benefits or the imposition of federal, state or local taxes thereon. In determining
the amount of taxes to be grossed up and the amount of the gross up to be paid, the Company
will assume that the Employee and his Spouse are subject to income taxes at the highest
federal, state and local tax income rates applicable to residents of the state and locality
in which the Employee and his Spouse reside at the time. Nothing herein will be construed
to require the Employee or his Spouse to reveal any income tax return (or any part thereof)
to the Company as a condition of being grossed up. However, if the Employee and his Spouse
elect to reveal their income tax return (or any part thereof) to the Company, the amount of
the gross up will be based on the information in that income tax return or part of a return
to the extent it is relevant to the gross up calculation.
(iv) For purposes of this paragraph 5(f), the “Extended Coverage Period” means the period that –
(A) commences when, after the employment of the Employee by the Company terminates for
any reason other than Cause (whether a termination of employment by the Company without
Cause, a termination of employment by the Employee for Good Reason, non-renewal of the term
of this Agreement, a Disability Termination, termination of employment by reason of death,
and a termination of employment by the Employee without Good Reason), the Company is not
obligated to provide the Employee with continuation coverage under the Company’s group
health plan(s) at Company expense pursuant
to any other provision of this Agreement. For the avoidance of doubt, the Extended
Coverage Period commences (I) thirty-six (36) months after a Compensable Termination or a
termination to which subparagraph 5(a)(ii) (relating to non-
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renewal of the term of the Agreement) applies, or (II) when the Employee’s
employment by the Company terminates for any other reason (except Cause); and
(B) ends, with respect to the Employee, on the Employee’s attainment of age 65 or
earlier death, and, with respect to the Employee’s Spouse, on her attainment of age
65 or earlier death.
(v) To the extent any payments due under this paragraph 5(f) are subject to Code
Section 409A, then reimbursement for an eligible expense must be made on or before the last
day of the Employee’s taxable year following the taxable year in which the expense was
incurred.
(g) Continuation of Secretarial, Office and Other Support. In recognition of the Employee’s
service and contributions to the Company, and his anticipated continuation of support for the
Company following his separation from service, and of his role as an “ambassador” and advocate for
the generic pharmaceutical and biotech industries, the Company will provide the Employee with, or
reimburse the Employee for, the cost of an office, parking and transportation services, business
travel, and secretarial and other office support, including but not limited to expenses with
respect to telephone(s), furnishings, computer(s), utilities, and any other expenses associated
with the maintenance of an office, either at the Company’s offices in Washington D.C. or at another
location of the Employee’s choosing convenient to his home, for up to eight (8) years following the
Employee’s separation from service with the Company other than for Cause; provided, however, that
(i) the annual amount of such expenses or reimbursements shall not exceed one hundred thousand
dollars ($100,000) in any of the first five (5) years following the Employee’s separation from
service or one hundred twenty-five thousand dollars ($125,000) in years six (6) through eight (8)
following the Employee’s separation from service, and (ii) such expenses or reimbursements shall be
paid or reimbursed in accordance with the provisions of Treasury Regulation §1.409A-3(i)(1)(iv) (or
any similar or successor provisions).
(h) Release. Any and all amounts payable and benefits or additional rights provided pursuant
to this Agreement after Separation from Service beyond any accrued, vested amounts shall only be
payable if the Employee (i) signs after a Separation from Service a general release prepared by the
Company of all claims of the Employee occurring up to and including the date of Separation from
Service excluding claims under this Agreement, claims for compensation and benefits that are vested
as of such date, and claims for indemnification or advancement of expenses related to the
Employee’s service or status as an officer or employee (the “Release”), (ii) delivers the signed
Release to the Company within forty-five (45) calendar days of presentation thereof by the Company
to
the Employee, which presentation shall be made no later than ten (10) calendar days following
the Employee’s Separation from Service, and (iii) does not revoke the Release during the seven (7)
calendar days following the date on which the Employee signs the Release. Subject to the preceding
sentence, any amounts that otherwise would be paid or provided pursuant to this Agreement during
the sixty-two (62) calendar days following the Employee’s Separation from Service shall be paid or
provided between the sixty-third (63rd) and seventy-fourth (74th) calendar days following the
Separation from Service.
(i) Code Section 409A. All payments to be made pursuant to this Section 5 are subject to
Section 14 of this Agreement, including the Six Month Delay Rule, if applicable.
- 15 -
To the extent of
any conflict between Section 14 and this Section 5, Section 14 will control. For purposes of this
Agreement, the Employee’s employment with the Company shall be deemed to be terminated when the
Employee has a “Separation from Service” within the meaning of Code Section 409A, and references to
termination of employment shall be deemed to refer to a Separation from Service. For purposes of
this Section 5, and in accordance with Treasury Regulation §1.409A-1(h)(1)(ii) (or any similar or
successor provisions), a termination of employment shall be deemed to occur, without limitation, if
the Company and the Employee reasonably anticipate that the level of bona fide services the
Employee will perform after a certain date (whether as an employee or as an independent contractor)
will permanently decrease to less than fifty percent (50%) of the average level of bona fide
services provided in the immediately preceding thirty-six (36) months.
6. Confidential Information.
(a) The Employee agrees not to disclose, either while in the employ of the Company, an
Affiliate or Subsidiary or at any time thereafter, to any person not employed by the Company or an
Affiliate, or not engaged to render services to the Company or an Affiliate, except with the prior
written consent of an authorized officer of the Company or an Affiliate or as necessary or
appropriate for the performance of the Employee’s duties hereunder, any confidential information
obtained by the Employee while in the employ of the Company, including, without limitation,
information relating to any of the inventions, processes, formulae, plans, devices, compilations of
information, research, methods of distribution, suppliers, customers, client relationships,
marketing strategies or trade secrets of the Company, another Subsidiary or Affiliate; provided,
however, that this provision shall not preclude the Employee from use or disclosure of information
known generally to the public or of information not considered confidential by persons engaged in
the businesses conducted by the Company, another Subsidiary or Affiliate, or from disclosure
required by law or court order. The Employee also agrees that upon leaving the Company’s employ the
Employee will not take with the Employee, without the prior written consent of an authorized
officer of the Company or an Affiliate, and the Employee will surrender to the Company, any record,
list, drawing, blueprint, specification or other document or property of the Company, another
Subsidiary or Affiliate, together with any copy or reproduction thereof, mechanical or otherwise,
which is of a confidential nature relating to the Company, another Subsidiary or Affiliate, or
without limitation, relating to its or their methods of distribution, suppliers, customers,
client relationships, marketing strategies or any description of any formulae or secret
processes, or which was obtained by the Employee or entrusted to the Employee during the course of
the Employee’s employment with the Company.
(b) The Employee agrees that the Company retains all rights to any and all intellectual or
proprietary properties created by the Employee during the Employee’s employment with the Company,
an Affiliate or Subsidiary, including but not limited to all concepts, discoveries and inventions
(whether or not patentable and whether or not reduced to practice); all copyrights (including all
copyrights covering notebooks, presentations, publications, advertising, promotional and/or
educational materials, labels, inserts and packaging materials); all trademarks, trade names and
other similar designations of origin; and all trade secrets, confidential information and ideas,
including but not limited to promotion and marketing plans, customer, supplier and other lists
(collectively “Intellectual Property”). To the extent that
- 16 -
any right, title or interest in or to
any Intellectual Property vests in the Employee in a manner contrary to this paragraph 6(b), the
Employee agrees to, and hereby does, irrevocably assign to the Company any and all such rights,
titles, and interests in and to such Intellectual Property without the need for any further action
by the Company. The Employee agrees to assist the Company, its Affiliates and Subsidiaries,
including following the Employee’s employment with the Company, an Affiliate or Subsidiary, in the
transfer or assignment of such Intellectual Property.
7. Restrictive Covenants
(a) Non-Solicitation. Employee covenants and agrees that, during the Employee’s employment by
the Company and during the one (1)-year period immediately following the termination of the
Employee’s employment with the Company for any reason (including, without limitation, a termination
of employment by the Company or an Affiliate without Cause and a voluntary termination of
employment by the Employee, in either case whether during the term of this Agreement, at the
expiration of the term of this Agreement or at any time thereafter), the Employee will not solicit
or attempt to persuade any employee of the Company, any other Subsidiary or Affiliate (except the
Employee’s personal secretary or administrative assistant), or any other person who performs
services for the Company, any other Subsidiary or Affiliate at the time the Employee’s employment
terminates or at any time within one (1) year thereafter, to terminate or reduce or refrain from
engaging in his or her employment or other service relationship with the Company, any other
Subsidiary or Affiliate; provided, however, that responding to inquiries from any such employees or
other persons that are not initiated by the Employee, and subsequently hiring such employees or
other persons following the termination of their employment with the Company, the other
Subsidiaries and Affiliates, shall be permitted.
(b) Specific Enforcement. Employee recognizes and agrees that, by reason of the Employee’s
knowledge, experience, skill and abilities, the Employee’s services are extraordinary and unique,
that the breach or attempted breach of any of the restrictions set forth above in this Section 7
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.
(c) Restrictions Reasonable. Employee specifically and expressly represents and warrants that
(i) the Employee has reviewed and agreed to the restrictive covenants contained in this Section 7
and their contemplated operation after receiving the advice of counsel of the Employee’s choosing;
(ii) the Employee believes, after receiving such advice, that the restrictive covenants and their
contemplated operation are fair and reasonable; (iii) the Employee 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. Employee recognizes and agrees
that the restrictions on the Employee’s activities contained in
- 17 -
this Section 7 are required for the
reasonable protection of the Company and its investments; and that the restriction on the
Employee’s activities set forth in paragraph 7(a) will not deprive the Employee of the ability to
earn a livelihood.
(d) Non-Disparagement. Employee covenants and agrees that, during the one (1)-year period
immediately following the termination of the Employee’s employment with the Company for any reason
(including, without limitation, a termination of employment by the Company without Cause and a
voluntary termination of employment by the Employee, in either case whether during the term of this
Agreement, at the expiration of the term of this Agreement or at any time thereafter), the Employee
will not make disparaging remarks about the Company, any other Subsidiary or Affiliate, or any of
their officers, directors or employees, unless required by law or reasonably necessary to assert or
defend the Employee’s position in a bona fide dispute arising out of or relating to this Agreement
or the breach thereof.
(e) Effect on Termination Payments. The Employee recognizes and agrees that the Company shall
not be obligated to make any payments provided for in paragraph 5(a) or 5(e) above if the Employee
violates the provisions of Section 6 or paragraph 7(a) or 7(d) above during the one (1)-year period
immediately following the termination for any reason of the Employee’s employment with the Company.
In addition, the Employee recognizes and agrees that, if the Employee violates such provisions, the
Company may recoup any payments the Company may have theretofore made pursuant to paragraph 5(a) or 5(e) above and any payments the Company may thereafter make under paragraph 5(a) or
5(e). The foregoing provisions of this paragraph 7(e) 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.
5(e). The foregoing provisions of this paragraph 7(e) 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.
8. Indemnification. To the fullest extent permitted by applicable law, the Company shall
indemnify, defend and hold harmless the Employee from and against any
and all claims, demands, actions, causes of action, liabilities, losses, judgments, fines,
costs and expenses (including reasonable attorneys’ fees and settlement expenses) arising from or
relating to the Employee’s service or status as an officer, director, employee, agent or
representative of the Company, any other Subsidiary or Affiliate, or in any other capacity in which
the Employee serves or has served at the request of, or for the benefit of, the Company, another
Subsidiary or Affiliate. The Company’s obligations under this Section 8 shall be in addition to,
and not in derogation of, any other rights the Employee may have against the Company, any other
Subsidiary or Affiliate to indemnification or advancement of expenses, whether by statute, contract
or otherwise.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement (other than the second sentence of this paragraph 9(a)) to the
contrary notwithstanding, in the event it shall be determined that any payment or distribution by
the Company, another Subsidiary or Affiliate, to or for the benefit of the Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required under this Section 9) (a
“Payment”), would be subject to the excise tax imposed by Code Section 4999 or any interest or
penalties are incurred by the Employee with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to as the “Excise
Tax”), then the Employee shall be entitled to receive an additional
- 18 -
payment (a “Gross-Up Payment”)
in an amount such that after payment by the Employee of all taxes and any benefits that result from
the deductibility by the Employee of such taxes (including, in each case, any interest or penalties
imposed with respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. However, if it shall be determined that none of the Payments would be subject to
the Excise Tax if the total Payments were reduced in the aggregate by fifty thousand dollars
($50,000) or less, then in that event the total Payments shall be reduced by the smallest amount
(in no event to exceed fifty thousand dollars ($50,000) in the aggregate) necessary to ensure that
none of the Payments will be subject to the Excise Tax. Cash Payments shall be reduced first, and
in the chronological order in which they are payable to or on behalf of the Employee.
(b) Subject to the provisions of paragraph 9(a) above and 9(c) below, all determinations
required to be made under this Section 9, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, and whether Payments are to be reduced pursuant to the second sentence of paragraph
9(a) above, shall be made by Deloitte & Touche or such other certified public accounting firm as
may be designated by the Employee (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and the Employee within fifteen (15) business days of the receipt
of notice from the Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the “change in
ownership or effective control” or “change in the ownership of a substantial portion of
assets” (within the meaning of Code Section 280G(b)(2)(A)) that gives rise to the Excise Tax, or in
the event that the Accounting Firm for any reason is unable or unwilling to make the determinations
required hereunder, the Employee shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Employee within five business (5) days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding upon the Company and the
Employee. As a result of the uncertainty in the application of Code Section 4999 at the time of the
initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that
will not have been made by the Company should have been made (an “Underpayment”), consistent with
the calculations required to be made hereunder. In the event that the Company exhausts its remedies
pursuant to paragraph 9(c) and the Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment, along with any penalty and interest imposed with respect to such Underpayment,
shall be promptly paid by the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require either the payment by the Company of the Gross-Up
Payment or the reduction of Payments pursuant to the second sentence of paragraph 9(a) above. Such
notification shall be given as soon as practicable but no later than ten (10) business days after
the Employee is informed in writing of such claim and shall apprise
- 19 -
the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Employee shall not pay
such claim prior to the expiration of the thirty (30)-day period following the date on which the
Employee gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such claim, the Employee
shall:
(i) give the Company any information reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided,
however, that the Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this paragraph 9(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole option, may pursue
or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct the Employee to pay
the tax claimed and xxx for a refund or contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one (1) or more appellate courts, as the Company shall
determine, provided, however, that if the Company directs the Employee to pay such claim and xxx
for a refund, the Company shall, if permissible under Section 402 of the Xxxxxxxx-Xxxxx Act of
2002, advance the amount of such payment to the Employee on an interest-free basis or, if such an
advance is not permissible thereunder, pay the amount of such payment to the Employee as additional
compensation, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or additional compensation; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the Employee with
respect to which such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
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(d) If, after the receipt by the Employee of an amount advanced or paid by the Company
pursuant to paragraph 9(a) or 9(c), the Employee becomes entitled to receive any refund with
respect to such claim, the Employee shall (subject to the Company’s complying with the requirements
of paragraph 9(c)) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to paragraph 9(c), a determination is made
that the Employee shall not be entitled to any refund with respect to such claim and the Company
does not notify the Employee in writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding the foregoing provisions of this Section 9, the determination of the
amount necessary to indemnify the Employee shall be made taking into account all other payments
made to the Employee under any plans, agreements or arrangements aside from this Agreement that are
intended to indemnify the Employee with respect to excise taxes on “excess parachute payments.”
The Company shall reimburse any fees and expenses provided for under this Section 9 on or before
the last day of the Employee’s taxable year following the taxable year in which the fee or expense
was incurred, and in accordance with the other requirements of Code Section 409A and Treasury
Regulation §1.409A-3(i)(1)(v) (or any similar or successor provisions).
10. Certain Enforcement Matters
(a) If, after a Change in Control or Potential Change in Control, a dispute arises (i) with
respect to this Agreement or the breach thereof, or (ii) with respect to the Employee’s or the
Company’s rights or obligations under this Agreement, including but not limited to any such dispute
between the Employee and the Company, the Company shall pay or reimburse the Employee for all
reasonable costs and expenses (including court costs, arbitrators’ fees and reasonable attorneys’
fees and disbursements) the Employee incurs in connection with such dispute, including without
limitation costs and expenses the Employee incurs to obtain payment or otherwise enforce the
Employee’s rights under this Agreement, or to obtain payment of costs and expenses due under this
paragraph 10(a). In addition, the Company shall pay the Employee such additional amount (a “Gross
Up”) as will be sufficient, after the Employee pays the Employee’s tax liability with respect to
the Gross Up from the Gross Up, to pay all of the Employee’s federal, state and local tax liability
with respect to any costs and expenses that are paid by the Company pursuant to this paragraph
10(a). The Company shall promptly pay or reimburse the Employee for all such costs and expenses as
the Employee incurs them, upon presentation of reasonable documentation of such costs and expenses,
and shall promptly pay the related Gross Up as and when it pays or reimburses costs and expenses.
The Employee shall not be obligated to repay any such costs, expenses or Gross Up unless it is
finally determined by the trier of fact in a non-appealable judicial or arbitral decision or ruling
(as applicable) that the Employee’s principal positions with respect to the principal matter(s) in
dispute were unreasonable and pursued in bad faith. The following provisions apply to any costs
and expenses that are to be paid or reimbursed pursuant to the preceding provisions of this
paragraph 10(a) but that are not covered by the exclusion from the term “deferral of compensation”
that is set forth in Treasury Regulation §1.409A-1(b)(11) (or any similar or successor provisions).
Any
- 21 -
such reasonable costs and expenses are hereafter referred to as “Non-Excluded Expenses.”
Non-Excluded Expenses may consist of court costs, arbitration costs, arbitrators’ fees, attorneys’
fees and disbursements (including without limitation disbursements for transportation, printing,
document production, consultants and experts), and transportation, hotel, food and other
out-of-pocket expenses (such as telecommunications charges) the Employee incurs in preparing for
and attending depositions, hearings and meetings with attorneys and witnesses and in preparing for
and giving testimony. Non-Excluded Expenses will be paid or reimbursed if they are incurred during
the ten (10)-year period following a Change in Control. Non-Excluded Expenses shall be paid or
reimbursed on or before the last day of the year following the year in which the expense was
incurred, may not be liquidated or exchanged for another benefit, and may not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other year.
(b) Any payments to which the Employee may be entitled under this Agreement, including,
without limitation, under Section 5, 8, 9 or 10 hereof, shall be made forthwith on the applicable
date(s) for payment specified in this Agreement. If for any reason the amount of any payment due to
the Employee cannot be finally determined on that date, such amount shall be estimated on a good
faith basis by the Company and the estimated amount shall be paid no later than ten (10) days after
such date. As soon as practicable thereafter, the final determination of the amount due shall be
made and any adjustment requiring a payment to or from the Employee shall be made as promptly as
practicable.
(c) Any controversy or claim arising, after a Change in Control or Potential Change in
Control, out of or related to this Agreement or the breach thereof, shall be settled by binding
arbitration in the City of New York, in accordance with the employment dispute arbitration rules of
the American Arbitration Association then in effect, and the arbitrator’s decision shall be binding
and final and judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except that the Employee may elect to have any such controversy or claim settled by
judicial determination in lieu of arbitration by bringing a court action, if the Employee is the
plaintiff or, if the Employee is not the plaintiff, demanding such judicial determination within
the time to answer any complaint in any arbitration action that may be commenced.
11. Change in Control
(a) The term “Change in Control” as used in this Agreement means a change of control of the
Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), whether or not the Company is then subject to such reporting requirement; provided that,
whether or not any of the following events would constitute a change of control of such a nature, a
Change in Control shall be deemed to occur for purposes of this Agreement if and when any of the
following events occur:
(i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) (a
“Person”), other than—
(A) the Company,
(B) a Subsidiary,
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(C) a trustee or other fiduciary holding securities under an employee benefit plan of the
Company or a Subsidiary, or
(D) an underwriter engaged in a distribution of the Company stock to the public with the
Company’s written consent,
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of Voting Securities that represent more than thirty percent
(30%) of the combined voting power of the then outstanding Voting Securities. However, if the
Person in question is an institutional investor whose investment in Voting Securities is purely
passive when such Person becomes such a more than thirty percent (30%) beneficial owner of Voting
Securities, then such event (i.e., such Person’s becoming a more than thirty percent (30%)
beneficial owner of Voting Securities) shall not be deemed to constitute a Change in Control under
this subparagraph 11(a)(i) for so long as (and only for so long as) such Person’s investment in
Voting Securities remains purely passive; or
(ii) the stockholders of the Company approve a merger, consolidation, recapitalization or
reorganization of the Company or a Subsidiary, reverse split of any class of Voting Securities, or
an acquisition of securities or assets by the Company or a Subsidiary, or consummation of any such
transaction if stockholder approval is not obtained, other than (A) any such transaction in which
the holders of outstanding Voting Securities immediately prior to the transaction receive, with
respect to such Voting Securities (or, in the case of a transaction in which the Company is the
surviving corporation or a transaction involving a Subsidiary, retain), voting securities of the
surviving or transferee entity representing more than fifty percent (50%) of the total voting power
outstanding immediately after such transaction, with the voting power of each such continuing
holder relative to other such continuing holders not substantially altered in the transaction, or
(B) any such transaction which would result in the Company or a Related Party beneficially owning
more than fifty percent (50%) of the voting securities of the surviving entity outstanding
immediately after such transaction; or
(iii) the stockholders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially all of the
Company’s assets other than any such transaction which would result in a Related Party owning or
acquiring more than fifty percent (50%) of the assets owned by the Company immediately prior to the
transaction; or
(iv) the persons who were members of the Board immediately before a tender or exchange offer
for shares of Common Stock of the Company by any person other than the Company or a Related Party,
or before a merger or consolidation of the Company or a Subsidiary, or contested election of the
Board, or before any combination of such transactions, cease to constitute a majority of the Board
as a result of such transaction or transactions.
(b) For purposes of this Agreement, including paragraph 11(a) above:
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(i) the term “Related Party” shall mean (A) a Subsidiary, (B) an employee or group of
employees of the Company or any Subsidiary, (C) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any Subsidiary, or (D) a
corporation or other form of business entity owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their ownership of
Voting Securities;
(ii) the term “Subsidiary” means a corporation or other form of business association
of which shares (or other ownership interests) having more than fifty percent (50%) of the
voting power are, or in the future become, owned or controlled, directly or indirectly, by
the Company;
(iii) the term “Affiliate” means a Person that directly, or indirectly through one (1)
or more intermediaries, controls, or is controlled by, or is under common control with, the
Company. For the purposes of the preceding sentence, the word “control” (by itself and as
used in the terms “controlling”, “controlled by” and “under common control with”) means the
possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; and
(iv) the term “Voting Securities” shall mean any securities of the Company that carry
the right to vote generally in the election of directors.
(c) For purposes of this Agreement, a “Potential Change in Control” means that (i) the Company
or a Subsidiary enters into an agreement, the consummation of which would result in the occurrence
of a Change in Control; or (ii) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a potential change in control has occurred.
(d) A “Change in Control” as such term is used in this Agreement shall also be deemed to occur
if the Company as defined in this Agreement (including paragraph 13(d) below) ceases to be an
Affiliate.
12. Severability; Survival
(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 that may be invalid for any reason or unenforceable in any
jurisdiction shall remain in effect and be enforceable in any jurisdiction in which such provision
shall be valid and enforceable.
(c) The provisions of Sections 6, 7, 8, 9 and 10 and paragraphs 5(e), (f), (g), and (h) of
this Agreement, and any other provision of this Agreement that is intended to apply, operate or
have effect after the expiration or termination of the term of this Agreement, or at a time when
the term of this Agreement may have expired or terminated, shall survive the expiration or
termination of the term of this Agreement for any reason.
- 24 -
13. 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. All
payments to be made by the Company hereunder shall be subject to the withholding of such amounts as
the Company may determine it is required to withhold under the laws or regulations of any
governmental authority, whether foreign, federal, state or local.
(b) To the extent that the Employee 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, without giving effect to the principles of conflicts of laws of that
State.
(d) This Agreement shall be binding upon and inure to the benefit of the Company, its
successors and permitted assigns, and the Employee, his heirs, devisees, distributees and legal
representatives. The Company may assign any or all of its rights and obligations under this
Agreement to any Subsidiary or Affiliate (collectively, “Permitted Assignees”), and, if any rights
or obligations are assigned pursuant to this sentence, the assignee may thereafter assign any or
all of such rights and obligations to any other Permitted Assignee; provided that (i) the
Employee’s title, authority, duties and responsibilities, reporting levels, reporting relationships
and office location immediately before any such assignment are not changed in any respect
detrimental to the Employee in connection with such assignment without the written consent of the
Employee (given in a personal capacity rather than a representative capacity), (ii) no such
assignment shall relieve the Company of any past, present or future payment or benefit obligation
hereunder without the express written consent of the Employee (also given in a personal
capacity), and (iii) no assignment may be made after a Change in Control or Potential Change in
Control without the express written consent of the Employee (also given in a personal capacity). In
the event of an assignment in accordance with this paragraph, the term “Company” as used in this
Agreement shall be deemed to refer, with respect to the period commencing on the effective date of
such assignment, to the Permitted Assignee to which such rights or obligations are assigned and,
with respect to any obligations that are assigned hereunder, to the Company and such Permitted
Assignee jointly and severally. The foregoing provisions of this paragraph are intended to enable
the Company to assign its right to employ the Employee under this Agreement to an Affiliate but
only if (I) such assignment does not change to the detriment of the Employee his title, authority,
duties, responsibilities, reporting levels, reporting relationships, office location or
compensation, (II) such assignment does not result in any Affiliate replacing the Company as an
obligor under this Agreement, and (III) the Employee expressly consents in writing to any
assignment that is to occur after a Change in Control or Potential Change in Control. For the
avoidance of doubt, as an example, the Employee would not have Good Reason under subparagraph
5(d)(ii), (iii) or (iv) above if as a result of an assignment in accordance with this paragraph the
Employee were to cease to be employed by the Company as Chairman of the Board and Chief Executive
Officer of the
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Company and Chairman of the BLI Board, he were employed by the Permitted Assignee as
Chairman of the Board and Chief Executive Officer of the Company and Chairman of the BLI Board, he
were to continue to serve on the Board and the BLI Board and as Chairman of the Board, and his
authority, duties, responsibilities, reporting levels, reporting relationships and office location
were to continue to be those described in subparagraphs 3(a) and 3(b) above as in effect
immediately before the assignment. The term “Company” shall include any successor to the relevant
Permitted Assignee. The rights and obligations of the Employee hereunder are personal to the
Employee and may not be assigned by the Employee; provided that nothing herein shall prevent the
Employee from assigning the right to any amount that may be payable under this Agreement after the
death of the Employee by will or the laws of descent and distribution or to a beneficiary
designated by the Employee with the written consent of the Company.
(e) Any notice or other communication to the Company pursuant to any provision of this
Agreement shall be given in writing and will be deemed to have been delivered:
(i) when delivered in person to the Company’s General Counsel; or
(ii) one (1) week after it is deposited in the United States certified or registered mail, postage
prepaid, addressed to the Company’s General Counsel at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx
00000-0000, or at such other address of which the Company may from time to time give the Employee
written notice in accordance with paragraph 13(f) below.
(f) Any notice or other communication to the Employee pursuant to any provision of the
Agreement shall be given in writing and will be deemed to have been delivered:
(i) when delivered to the Employee in person, or
(ii) one (1) week after it is
deposited in the United States certified or registered mail, postage prepaid, addressed to the
Employee at the Employee’s address as it appears on the records of the Company or at such other
address of which the Employee may from time to time give the Company written notice in accordance
with paragraph 13(e) above.
(g) No provision of this Agreement may be amended, modified or waived unless such amendment,
modification or waiver shall be agreed to in a writing signed by the Employee and an authorized
officer of the Company.
(h) 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 (including any employment agreement between the Employee and the
Company or an Affiliate that was entered into before the date of this Agreement), and the parties
have made no agreements, representations or warranties relating to the subject matter of this
Agreement which are not set forth herein. If this Agreement supersedes an employment agreement
between the Employee and the Company or an Affiliate that was entered into before the date of this
Agreement and that, but for the preceding sentence, would remain in effect after the date of this
Agreement, then no provision of this Agreement shall cause an amount to be paid in 2008 that
otherwise would not have been paid in 2008 or
- 26 -
postpone a payment beyond 2008 that otherwise would
have been paid in 2008 in accordance with the transition rules under Code Section 409A.
14. Code Section 409A. This Agreement is intended to comply with Code Section 409A and the
interpretative guidance thereunder, including the exceptions for short-term deferrals, separation
pay arrangements, reimbursements, and in-kind distributions, and shall be administered accordingly.
The Agreement shall be construed and interpreted with such intent. Each payment under Section 5 of
this Agreement or any Company benefit plan is intended to be treated as one (1) of a series of
separate payments for purposes of Code Section 409A and Treasury Regulation §1.409A-2(b)(2)(iii)
(or any similar or successor provisions). To the extent that payments under the Agreement are
subject to Code Section 409A and are on account of a Separation from Service and the Employee is a
“Specified Employee” (as defined below) as of the date of termination, distributions to the
Employee may not be made before the date that is six (6) months after the date of Separation from
Service or, if earlier, the date of the Employee’s death (the “Six Month Delay Rule”). Payments to
which the Employee would otherwise be entitled during the first six (6) months following the date
of termination (the “Six Month Delay”) will be accumulated and paid on the first day of the seventh
month following the date of termination (or the Employee’s death, if earlier).
(a) During the Six-Month Delay, the Company will pay to the Employee the applicable payments set
forth in Section 5 above, to the extent any of the following exceptions to the Six-Month Delay Rule
apply:
(i) the short-term deferral rule of Code Section 409A and Treasury Regulation §1.409A-1(b)(4) (or
any similar or successor provisions) (including with the treatment of each payment as one (1) of a
series of separate payments for purposes of Code Section 409A and Treasury Regulation
§1.409A-2(b)(2)(iii)) (or any similar or successor provisions),
(ii) payments permitted under the separation pay exception of Code Section 409A and Treasury
Regulation §1.409A-1(b)(9)(iii) (or any similar or successor provisions), and
(iii) payments permitted under the limited payments exception of Code Section 409A and Treasury
Regulation §1.409A-1(b)(9)(v)(D) (or any similar or successor provisions),
provided that the amount paid under this paragraph will count toward, and will not be in addition
to, the total payment amount required to be made to the Employee by the Company under Section 5
above on account of the Separation from Service and any applicable Company benefit plan. The
Employee’s right to the compensation and benefits provided under Section 5 above is to be treated
as a right to a series of separate payments under Treasury Regulation §1.409A-2(b)(2)(iii) (or any
similar or successor provisions).
(b) For purposes of this Agreement, the term “Specified Employee” has the meaning given to
that term in Code Section 409A and Treasury Regulation §1.409A-1(i) (or any similar or successor
provisions). The Company’s “specified employee identification date” (as described in Treasury
Regulation §1.409A-1(i)(3) (or any similar or successor provisions)) will
- 27 -
be December 31 of each
year, and the Company’s “specified employee effective date” (as described in Treasury Regulation
§1.409A-1(i)(4) (or any similar or successor provisions)) will be April 1 of each succeeding year.
(c) Following a Change in Control, if any payment made pursuant to this Agreement shall cause
the Employee or the Employee’s beneficiaries to incur any penalty tax under Code Section 409A
(including any interest or penalties imposed with respect to such penalty) (a “409A Tax”), the
Employee or the Employee’s beneficiaries shall be entitled to receive an additional payment (a
“409A Gross-Up Payment”) in an amount such that, after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with respect thereto) and tax
imposed upon the 409A Gross-Up Payment, the Employee retains an amount of the 409A Gross-Up Payment
equal to the 409A Tax imposed as a result of such payment.
(d) If any payment made pursuant to paragraph 5(e) of this Agreement shall cause the Employee
or the Employee’s beneficiaries to incur a 409A Tax, the Employee or the Employee’s beneficiaries
shall be entitled to receive a 409A Gross-Up Payment in an amount such that, after payment by the
Employee of all taxes (including any interest or penalties imposed with respect to such taxes),
including, without
limitation, any income taxes (and any interest and penalties imposed with respect thereto) and
tax imposed upon the 409A Gross-Up Payment, the Employee retains an amount of the 409A Gross-Up
Payment equal to the 409A Tax imposed as a result of such payment.
15. Consent to Certain Amendments. The Employee agrees that the Company may amend this
Agreement to the minimum extent necessary to satisfy the applicable provisions of Code Section 409A
and the Treasury Regulations or other guidance issued thereunder. The Company cannot guarantee
that the payments and benefits that may be paid or provided pursuant to this Agreement will satisfy
all applicable provisions of Code Section 409A.
[This space left intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
| XXXX PHARMACEUTICALS, INC., | ||||||||
| a Delaware corporation | ||||||||
| /s/ Xxxxx X. Xxxxxx | ||||||||
By:
|
/s/ Xxxx X. Xxxxxxxx | |||||||
Its:
|
||||||||
[SEAL] |
||||||||
Attest: |
||||||||
| /s/ Xxxxxxx Xxxx | ||||||||
Asst. Secretary
|
||||||||
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