Exhibit 10.7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 16th day of August, 2002 between Xxxx
Laboratories, Inc., a New York corporation having its principal executive
offices at 000 Xxxxxxxxx Xxxxx, Xxxxxxxx #00, Xxxxxxx Corporate Park, Blauvelt,
New York 10913 (the "Company"), and Xxxxx X. Xxxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee entered into an employment agreement
dated as of January 4, 1993, the term of which has been extended annually
pursuant to Section 2 of that agreement so that it is presently scheduled to
expire on January 4, 2005 (the "Employment Agreement"); and
WHEREAS, the Company and the Employee wish to amend and restate the
Employment Agreement in its entirety;
NOW, THEREFORE, the Company and the Employee hereby agree that, effective
as of August 16, 2002, the Employment 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 remain in the employ of the Company, during the term of this Agreement
and on the other terms and conditions hereafter set forth.
2. Term. The term of this Agreement shall commence on August 16, 2002 (the
"Commencement Date") and shall terminate at the close of business on the third
anniversary of the Commencement Date 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 second anniversary of the Commencement Date (the "Extension
Effective Date") and on each subsequent anniversary of the Commencement Date
(each also an "Extension Effective Date"), for successive periods of twelve
months each, unless either party shall have given written notice to the other
party, 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. Examples that illustrate the intended operation of
the preceding sentence appear in the Appendix to this Agreement.
3. Positions and Responsibilities; Place of Performance.
(a) Throughout the term of this Agreement, the Employee agrees to
remain in the employ of the Company, and the Company agrees to employ the
Employee, as the Chief Executive Officer of the Company, reporting only to the
Board of Directors of the Company (the "Board"). As the Chief Executive Officer
of the Company, the Employee shall be the most senior officer of the Company and
its subsidiaries, 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 he has had prior to the Commencement Date
and 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 during the term of this
Agreement, and the Employee agrees to serve as such without additional
compensation beyond that provided in this Agreement.
(b) In connection with his 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 location, as he may determine to be
appropriate for the performance of his duties, and he agrees to travel, to the
extent reasonably necessary to perform his duties and obligations under this
Agreement, to Company facilities and other destinations elsewhere.
(c) During the term of this Agreement, the Employee shall serve the
Company on an exclusive basis and shall devote all his business time, attention,
skill and efforts to the faithful performance of his duties hereunder; provided
that the Employee may engage in community service and charitable activities and,
with the approval of the Board, may serve as a member of the board of directors
of other companies (and retain remuneration for such service) if such activities
and service do not materially interfere with the performance of his duties and
responsibilities hereunder.
4. Compensation. For all services rendered by the Employee in any capacity
during the term of this Agreement, and for his 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 eight hundred and fifty thousand dollars
($850,000), with such increases in such rate, if any, as the Compensation
Committee of the Board may approve from time to time during the term of this
Agreement (the 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 an
award in accordance with the terms and conditions of such plan, for each fiscal
year of the Company that commences or terminates during the term of this
Agreement, of up to 50% of the Base Salary earned during such year (or such
higher percentage as the Board or a committee of the Board may allow from time
to time during the term of this Agreement), it being understood that any award
for the fiscal year of the Company in which the term
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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 Employee recognizes and
agrees that the Board may defer the payment of any portion of his annual bonus
to the extent that, and for such period of time as, may be reasonably necessary
to avoid a loss of the Company's tax deduction with respect to such portion of
his annual bonus under section 162(m) of the Internal Revenue Code. Any such
deferred 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
deferral 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 are available under such plan on
the date of this Agreement or a reasonable facsimile thereof;
(c) participation in the Company's stock incentive plan 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 in accordance with the Company's automobile
policy applicable to senior officers on the Commencement Date; and
(e) participation in all Company 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 senior 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 from amending or
terminating any such plan at any time. 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.
5. Termination of Employment.
(a) Termination by the Company without Good Cause or by the Employee
for Good Reason.
(i) If the Employee's employment with the Company is
terminated by the Company without Good Cause or is terminated by the Employee
for Good Reason during the term of this Agreement and other than at or after 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 the portion of his Base Salary accrued through
the date of the Compensable Termination and any other amounts to which he is
entitled by law or pursuant to the terms of any
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compensation or benefit plan or arrangement in which he participated prior to
the Compensable Termination and, in addition, 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) his 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, the amount of such
bonus to be determined by the Compensation Committee of the Board on a basis
consistent with its prior bonus determinations with respect to the Employee
during the term of this Agreement and, 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 its bonus determinations with respect
to the Employee prior to the Change in Control or Potential Change in Control;
(B) a prorated annual bonus for the fiscal year of the
Company in which the Compensable Termination occurs, such prorated annual bonus
to 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 365. For purposes of this Agreement, the "Applicable Average
Bonus" means the higher of (I) the average annual bonus (including any deferred
bonus) awarded to the Employee during the three year period immediately
preceding the Compensable Termination, or (II) the average annual bonus
(including any deferred bonus) awarded to the Employee during the three fiscal
years of the Company preceding 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 deferred bonus)
awarded to the Employee during the three years preceding the date on which the
Change in Control or Potential Change in Control occurred; 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 attained age 65 but not age 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 attained age 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. Except as otherwise provided hereafter in this
subparagraph 5(a)(i)(C), the Severance Payment shall be paid as follows: fifty
percent (50%) of the Severance Payment (or, if the Employee attained age 65 but
not age 70 (or such later age or ages as the Board may in
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its discretion determine) prior to the Compensable Termination, seventy-five
percent (75%) of the Severance Payment, or if the Employee attained age 70 prior
to the Compensable Termination, one hundred percent (100%) of the Severance
Payment) shall be paid in a lump sum within ten days after the date of the
Compensable Termination. Any balance of the Severance Payment shall be paid in
eighteen (18) equal monthly installments one of which shall be paid at the end
of each of the first eighteen (18) months after the date of the Compensable
Termination, provided, in the case of each of the final 12 of such 18
installments, 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. However, if the Employee attained age 65 (or such
later age as the Board may in its discretion determine) prior to the date of the
Compensable Termination, then any balance of the Severance Payment shall be paid
in six equal monthly installments one of which shall be paid at the end of each
of the first six months after the date of the Compensable Termination, and the
preceding sentence shall not apply. If a Change in Control or Potential Change
in Control as defined in section 11 below occurs (either before or after the
Compensable Termination), the Severance Payment (or, in the case of a Change in
Control or Potential Change in Control that occurs after the Compensable
Termination, any portion thereof that remains unpaid at the time such Change in
Control or Potential Change in Control occurs) shall be paid in a lump sum
within ten days after the Compensable Termination (or, in the case of a Change
in Control or Potential Change in Control that occurs after the Compensable
Termination, within ten days after the Change in Control or Potential Change in
Control occurs), and the two preceding sentences of this subparagraph shall not
apply. During the 18 month period following a Compensable Termination, the
Company shall also provide the Employee with COBRA coverage at its expense. 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 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 gives written notice of non-extension to
the Employee as provided in section 2 above, and the Company does not have 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, then the
Company, subject to fulfillment by the Employee of his obligations under this
Agreement during the balance of the term and his compliance with the provisions
of sections 6 and 7 below, relating to confidential information,
non-solicitation and disparaging remarks, shall, as non-renewal compensation,
and as additional consideration for the Employee's undertakings under this
Agreement including sections 6 and 7 below, pay the Employee an amount of money
(the "Non-Renewal Payment") equal to two (2) times the Employee's Annual Cash
Compensation as defined
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in subparagraph 5(a)(i)(C) above (unless the Employee has attained age 70 (or
such later age as the Board may in its discretion determine) prior to the
termination date, 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 his annual bonus pursuant to paragraph 4(b) above for the fiscal year
of the Company in which his employment terminates and any amounts to which he
may be entitled under section 8, 9 or 10 below) or by law or pursuant to the
terms of any compensation or benefit plan or arrangement in which he
participated before his employment terminated. 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 the
Employee attained age 70 prior to the termination of his employment, one hundred
percent (100%) of the Non-Renewal Payment, shall be paid in a lump sum within
ten days after the date on which the Employee's employment terminates. Any
balance of the Non-Renewal Payment shall be paid in six (6) equal monthly
installments one of which shall be paid at the end of each of the first six
months after the date on which the Employee's employment terminates. If a Change
in Control or Potential Change in Control as defined in section 11 below occurs
(either before or after the termination of his employment), the Non-Renewal
Payment (or, in the case of a Change in Control or Potential Change in Control
that occurs after the employment termination, any portion thereof that remains
unpaid at the time such Change in Control or Potential Change in Control occurs)
shall be paid in a lump sum within ten days after the employment termination
(or, in the case of a Change in Control or Potential Change in Control that
occurs after the employment termination, within ten days after the Change in
Control or Potential Change in Control occurs). During the 18 month period
following the termination of his employment, the Company shall also provide the
Employee with COBRA coverage at its expense.
(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, but shall be in addition to
(and not in lieu of) any payments to which the Employee may be entitled under
sections 8, 9 and 10 below. Subparagraphs 5(a)(i) 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. 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.
(b) Termination by the Company 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 for Good Cause or by the
Employee without Good Reason, the Employee shall not be entitled to receive any
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compensation under section 4 above acruing after the date of such termination or
any payment under paragraph 5(a) above. However, the Company's obligations under
sections 8, 9 and 10 shall not be affected by such termination of employment.
The provisions of this paragraph 6(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 120 days' advance notice of such termination, then
the Employee shall not have any obligation or liability to the Company under
this Agreement in respect of such termination of employment, but his 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
shall have "Good Cause" to terminate the Employee's employment during the term
of this Agreement only if:
(i) the Employee fails to substantially perform his duties
hereunder for any reason or fails to devote substantially all his business time
exclusively to the affairs of the Company or fails to obtain the consent of the
Board to his service on the board of directors of another company, and such
failure is not discontinued within a reasonable period of time, in no event to
exceed 30 days, after the Employee receives written notice from the Company 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
(iii) the Employee is grossly negligent or engages in willful
misconduct or insubordination in the performance of his duties hereunder; or
(iv) the Employee materially breaches his obligations under
section 6 or paragraph 7(a) below, relating to confidential information and
non-solicitation.
Any foregoing provision of this paragraph 5(c) to the contrary notwithstanding,
the Company shall not have "Good Cause" to terminate the Employee's employment
within three 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, (B) the
Board of Directors 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 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
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this sentence shall not apply with respect to misconduct on the part of the
Employee that constitutes a felony in the jurisdiction in which the Employee
engages in such misconduct, 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 him intentionally and in bad faith (i.e.,
without reasonable belief that his action or omission was in furtherance of the
interests of the Company or a subsidiary of the Company).
(d) Good Reason Defined. For purposes of this Agreement, the
Employee shall have "Good Reason" to terminate his 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 30 days after the
Company receives written notice from the Employee of such failure; or
(ii) the Company assigns the Employee duties, responsibilities
or reporting relationships not contemplated by section 3 above without his
consent, or limits his duties or responsibilities or power or authority
contemplated by section 3 above in any respect materially detrimental to him,
and in either case the situation is not remedied within 30 days after the
Company receives written notice from the Employee of the situation; or
(iii) he is removed from, or not elected or reelected to, the
Board of Directors of the Company or the office, title and position of Chairman
of the Board and Chief Executive Officer of the Company, and the Company does
not have Good Cause for doing so; or
(iv) the Company relocates his office outside of either (A)
the greater Washington, D.C. metropolitan area, or (B) such other Company
location as he may determine to be appropriate for the performance of his
duties, in either case (A) or (B) without his written consent (given in a
personal rather than representative capacity), and the situation is not remedied
within 30 days after the Company receives written notice from the Employee of
the situation; or
(v) the Company gives the Employee written notice, in the
manner set forth in paragraph 13(e) or (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 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 his duties and responsibilities for such period of time, in no event to
exceed six months after the giving of such notice, as the Board may reasonably
request in writing to transition his duties and responsibilities; or
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(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 surviving company; 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 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 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 30 days after the Company receives written notice from the Employee of
the situation.
In no event shall the Employee's continued employment after any of the foregoing
constitute his consent to the act or omission in question, or a waiver of his
right to terminate his employment for Good Reason hereunder on account of such
act or omission.
6. Confidential Information. The Employee agrees not to disclose, either
while in the Company's employ or at any time thereafter, to any person not
employed by the Company, or not engaged to render services to the Company,
except with the prior written consent of an authorized officer of the Company or
as necessary or appropriate for the performance of his duties hereunder, any
confidential information obtained by him 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 or any subsidiary thereof; 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 or any subsidiary thereof, or from disclosure required by law or court
order. The Employee also agrees that upon leaving the Company's employ he will
not take with him, without the prior written consent of an authorized officer of
the Company, and he will surrender to the Company, any record, list, drawing,
blueprint, specification or other document or property of the Company or any
subsidiary thereof, together with any copy or reproduction thereof, mechanical
or otherwise, which is of a confidential nature relating to the Company or any
subsidiary thereof, or without limitation, relating to its or their methods of
distribution, suppliers, customers, client relationships, marketing strategies
or any description of any formulae or secret processes, or which was obtained by
him or entrusted to him during the course of his employment with the Company.
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7. Restrictive Covenants
(a) Non-Solicitation. Employee covenants and agrees that, during his
employment by the Company and during the one year period immediately following
the termination of his 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), he will not solicit or attempt to persuade
any employee of the Company, its subsidiaries or affiliates (except the
Employee's personal secretary or administrative assistant), or any other person
who performs services for the Company, its subsidiaries or affiliates at the
time the Employee's employment terminates or at any time within one year
thereafter, to terminate or reduce or refrain from engaging in his or her
employment or other service relationship with the Company, its subsidiaries or
affiliates; 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, its subsidiaries and affiliates shall be
permitted.
(b) Specific Enforcement. Employee recognizes and agrees that, by
reason of his knowledge, experience, skill and abilities, his services are
extraordinary and unique, that the breach or attempted breach of any of the
restrictions set forth above in this section 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) he has reviewed and agreed to the restrictive
covenants contained in this section 7 and their contemplated operation after
receiving the advice of counsel of his choosing; (ii) he believes, after
receiving such advice, that the restrictive covenants and their contemplated
operation are fair and reasonable; (iii) he will not seek or attempt to seek to
have the restrictive covenants declared invalid, and, after receiving the advice
of counsel, expressly waives any right to do so; and (iv) if the full breadth of
any restrictive covenant and/or its contemplated operation shall be held in any
fashion to be too broad, such covenant or its contemplated operation, as the
case may be, shall be interpreted in a manner as broadly in favor of the
beneficiary of such covenant as is legally permissible. Employee recognizes and
agrees that the restrictions on his activities contained in this section 7 are
required for the reasonable protection of the Company and its investments; and
that the restriction on his 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 year period immediately following the termination of his employment with
the
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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), he will not make disparaging remarks about the Company, its
subsidiaries or affiliates or any of their officers, directors or employees,
unless required by law or reasonably necessary to assert or defend his position
in a bona fide dispute arising out of or relating to this Agreement or 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) above if the Employee violates the provisions of section 6 or
paragraph 7(a) or 7(d) above during the one year period immediately following
the termination for any reason of his 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) above and any payments the Company may
thereafter make under paragraph 5(a). 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 his service or status as an officer,
director, employee, agent or representative of the Company or any subsidiary of
the Company or in any other capacity in which the Employee serves or has served
at the request of, or for the benefit of, the Company or its subsidiaries. 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 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 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 Section 4999 of the United States
Internal Revenue Code (the "Code") 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
page 11 of 19
payment (an "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 $50,000 or less, then
in that event the total Payments shall be reduced by the smallest amount (in no
event to exceed $50,000 in the aggregate) necessary to ensure that none of the
Payments will be subject to the Excise Tax. The decision as to which Payments
shall be so reduced shall be made by 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 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, 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 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 Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which 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
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sentence of paragraph 9(a) above. Such notification shall be given as soon as
practicable but no later than ten business days after the Employee is informed
in writing of such claim and shall apprise 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 30-day period following
the date on which it 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 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 advance the amount of such
payment to the Employee, on an interest-free basis 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; 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
page 13 of 19
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.
(d) If, after the receipt by the Employee of an amount advanced 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 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.
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 he incurs to
obtain payment or otherwise enforce his 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 his tax liability with
respect to the Gross Up from the Gross Up, to pay all of his 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 he 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.
(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 within 10 days after such date. As soon
page 14 of 19
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 he is the plaintiff or, if he 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 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), other than--
(A) the Company,
(B) a Subsidiary,
(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 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 meet two tests: (I) they
represent more than thirty percent (30%) of the combined voting power of the
then outstanding Voting Securities, and (II) they also represent more than the
percentage of the combined voting power of the then outstanding Voting
Securities beneficially owned, directly or indirectly, at that time by Xxxxxxx
X. Xxxxxxx and his affiliates (as defined in Rule 12b-2 under the Exchange Act).
However, the second test stated in clause (II) above shall not apply if the
"person" in question is Xxxxxxx X. Xxxxxxx and/or his affiliates (as defined in
Rule 12b-2 under the Exchange Act). In addition, if the "person" in question is
an institutional investor whose investment in Voting Securities is purely
passive when such
page 15 of 19
person becomes the beneficial owner of Voting Securities that meet the tests set
forth in clause (I) and, if applicable, (II) above, then such event (i.e., such
person's becoming the beneficial owner of such 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 a Related Party beneficially
owning more than 50 percent 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 50 percent of the assets owned by the Company immediately prior to the
transaction; or
(iv) the persons who were members of the Board of Directors of
the Company immediately before a tender or exchange offer for shares of Common
Stock 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 of Directors of the Company, or before any combination of such
transactions, cease to constitute a majority of the Board of Directors of the
Company as a result of such transaction or transactions.
(b) For purposes of paragraph 11(a) above:
(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 50%
page 16 of 19
of the voting power are, or in the future become, owned or controlled, directly
or indirectly, by the Company; and
(iii) the term "Voting Securities" shall mean any securities
of the Company which 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 enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; or (ii) the Board adopts
a resolution to the effect that, for purposes of this Agreement, a potential
change in control of the Company has occurred.
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 which may for any reason be
invalid or unenforceable in any jurisdiction shall remain in effect and be
enforceable in any jurisdiction in which such provision shall be valid and
enforceable.
(c) The provisions of sections 6, 7, 8, 9 and 10 of this Agreement,
and any other provision of this Agreement which 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.
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.
page 17 of 19
(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 assigns, and the Employee, his heirs, devisees,
distributees and legal representatives.
(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 Corporate Secretary or
General Counsel of the Company; or
(ii) one week after it is deposited in the United States
certified or registered mail, postage prepaid, addressed to the Corporate
Secretary of the Company at 000 Xxxxxxxxx Xxxxx, Xxxxxxxx #00, Xxxxxxx Corporate
Park, Blauvelt, New York 10913 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 week after it is deposited in the United States
certified or registered mail, postage prepaid, addressed to the Employee at his
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, and the
parties have made no agreements, representations or warranties relating to the
subject matter of this Agreement which are not set forth herein.
page 18 of 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
XXXX LABORATORIES, INC.
By:_______________________
[SEAL]
Attest:
__________________
Secretary __________________________
Employee
page 19 of 19
APPENDIX
EXAMPLES ILLUSTRATING INTENDED OPERATION OF EXTENSION PROVISIONS OF PARAGRAPH 2
Example 1:
Facts: Neither the Company nor the Employee gives the other party
written notice of non-extension before the second anniversary of the
Commencement Date.
Result: Effective as of the second anniversary of the Commencement
Date, the term of the Agreement is extended 12 months, so that it
will expire on the fourth anniversary of the Commencement Date
unless further extended in accordance with the provisions of
Paragraph 2 of the Agreement.
Example 2:
Facts: Either the Company or the Employee gives the other party
written notice of non-extension before the second anniversary of the
Commencement Date.
Result: The term of the Agreement is not extended, and expires on
the third anniversary of the Commencement Date.
Example 3:
Facts: Neither the Company nor the Employee gives the other party
written notice of non-extension before the third anniversary of the
Commencement Date.
Result: Effective as of the third anniversary of the Commencement
Date, the term of the Agreement as extended in accordance with
Example 1 above is further extended 12 months, so that it will
expire on the fifth anniversary of the Commencement Date unless
further extended in accordance with the provisions of Paragraph 2 of
the Agreement.
Example 4:
Facts: Either the Company or the Employee gives the other party
written notice of non-extension on or after the third anniversary of
the Commencement Date and before the fourth anniversary of the
Commencement Date.
Result: The term of the Agreement as extended is not further
extended, and expires on the fifth anniversary of the Commencement
Date.
page 20 of 19
