EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of June 15, 1996, is entered
into between KOS PHARMACEUTICALS, INC., a Florida corporation (the "Company"),
and Xxxxx X. Xxxx (the "Executive").
RECITALS
1. The Company desires to employ the Executive in the capacities
described herein; and
2. A principal inducement of the Company entering into this Agreement
is the employment of Executive by reason of his unique qualifications,
knowledge, skill and ability in managing product development, clinical testing
and regulatory affairs, and a principal inducement for Executive entering into
this Agreement is the opportunity to further enhance such skills by working for
the Company in such capacity in accordance with the terms of this Agreement; and
3. The Executive and the Company previously entered into an Employment
Agreement, dated December 18, 1992 ("1992 Agreement"), which they each now
desire to amend in certain respects. Such amendments are incorporated into this
Agreement, which supersedes and replaces in its entirety the 1992 Agreement.
Upon the execution of this Agreement by the Executive and the Company, the 1992
Agreement shall be deemed terminated and of no further force and effect.
AGREEMENT
For and in consideration of the foregoing and of the mutual covenants
of the parties herein contained and hereinafter set forth, the parties agree-as
follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve in the
capacities described herein and Executive hereby accepts such
employment and agrees to perform the services described herein upon the
terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence as of the date hereof
and shall terminate at the close of business on December 31, 1997,
subject to earlier termination in accordance with Section 9 hereof and
the other terms, provisions, and conditions set forth herein.
Notwithstanding the foregoing, the Company, upon delivery of written
notice to the Executive by September 30, 1997, shall have the option to
extend this Agreement for up to twenty-four additional months.
3. DUTIES AND TITLE.
(a) DUTIES. Executive shall devote his full business
time and efforts to, and shall have project
management responsibility for, (i) the Company's
product development efforts including, as required or
appropriate, formulation development, manufacturing
scale-up, pharmacology and clinical testing, and
regulatory matters relating to such projects; (ii)
feasibility investigation of potential new products
or projects as requested by the Chief Executive
Officer or the Chief Operating Officer of the Company
(collectively referred to herein as "Management"),
and (iii) such other duties as are ordinarily
attended to by individuals employed in the capacities
described herein, as requested by Management.
(b) TITLE. Executive shall have the title of Senior Vice
President, Product Development. Executive's title,
however, may be modified in the future as required by
organizational needs in the discretion of Management,
except that at no time shall the Executive's title be
less than that of Vice President of Product
Development, nor shall Executive's duties be less
than those indicated in Section 3(a) above.
4. COMPENSATION.
(a) BASE COMPENSATION. The Company shall pay Executive,
and Executive agrees to accept, base compensation at
the rate of not less than $195,000 per year in equal,
monthly installments commencing as of July, 1996,
through the term of this Agreement ("Base
Compensation"). The Base Compensation specified in
this Section 4(a) may be increased at any time during
the term of this Agreement in the discretion of
Management and will be reviewed no less frequently
than during the first quarter of each calendar year
beginning in 1997. No increase in the Base
Compensation pursuant to this Section 4 (a) shall at
any time operate as a cancellation of this Agreement;
any such increase shall operate merely as an
amendment hereof, without any further action by
Executive or the Company. If any such increase or
increases shall be so authorized, all of the terms,
provisions and conditions of this Agreement shall
remain in effect as herein provided, except that the
Base Compensation set forth in this Section 4(a)
shall be deemed amended to set forth the higher
amount of such Base Compensation to Executive.
(b) SUPPLEMENTAL COMPENSATION. During the term of this
Agreement and for up to December 31, 2003, the
Company shall pay Executive supplemental compensation
("Royalties") equal to 1% of Net Sales (as
hereinafter defined) of the Company of Niaspan(R) and
Nicostatin(R), or products
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currently planned under the names Niaspan(R) and
Nicostatin(R), approved by the U.S. Food and Drug
Administration (the "FDA") pursuant to new drug
applications. The aggregate maximum amount of
Royalties payable pursuant to this Agreement shall be
subject to a cap of $4,000,000. The Company's
obligation to pay Royalties shall immediately cease
upon the occurrence of either of the following prior
to the expiration of the term of this Agreement
pursuant to Section 2 hereof: (i) the Company's
termination of the Executive for "Cause" (as such
term is used in Section 7 hereof), or (ii) the
Executive's voluntary resignation. If the Executive's
employment with the Company terminates for any reason
other than the reasons designated in the preceding
sentence, the amount of the Royalties payable by the
Company shall continue at 1% of Net Sales through the
expiration of the term of this Agreement pursuant to
Section 2 hereof and thereafter be reduced to 0.5% of
Net Sales. "Net Sales" shall mean the gross sales,
royalties or fees actually received or accrued by the
Company, less returns and allowances granted,
packing, insurance, invoiced transportation charges,
sales, use and other similar taxes and excise duties
imposed on the transaction, and value added taxes,
customs duties and other imposts not ultimately
recovered by the Company. Royalties (up to the
maximum aggregate amount of $4,000,000 in Royalty
payments) shall be paid annually within 30 days
following the audited financial results of the year
during which such Royalties were earned, but in no
event later than June 30 of such year. The payment of
Royalties hereunder shall not be deemed to impart to
the Executive any ownership or other rights of any
nature relating to any product of the Company.
(c) STOCK OPTION GRANT. The Company has granted a stock
option to the Executive in the form of Exhibit A
hereto.
5. FRINGE BENEFITS.
(a) VACATION. During the term of this Agreement,
Executive shall be entitled to four weeks paid
vacation per year. In any calendar year, Executive
shall be entitled to carry over from the previous
year (and only from the previous year) up to two
weeks of unused vacation from that prior year.
(b) OTHER. Executive shall be eligible for other fringe
benefits pursuant to any insurance, pension or other
employee fringe benefit plan approved by the Board of
Directors that now or hereafter may be made available
to employees of the Company and for which Executive
will qualify according to his eligibility under the
provisions thereof; provided, however, that such
eligibility specifically does not apply to matters
relating to Executive's
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vacation, disability benefits and compensation, which
matters shall be governed exclusively by the terms
hereof.
6. EXPENSES. During the period of his employment, Executive shall be
reimbursed for his business-related expenses incurred on behalf of the
Company in accordance with the travel and entertainment expense policy
of the Company as adopted by the Board of Directors from time to time
and in effect at the time the expense was incurred, but not less than
first-class for domestic air travel and business-class for
international air travel unless the financial conditions of the Company
deteriorate significantly following the date of this Agreement.
Executive agrees to maintain such records and documentation of all such
expenses to be reimbursed by the Company hereunder as the Company shall
require and in such detail as the Company may reasonably request.
7. TERMINATION. The term of this Agreement may be terminated prior to
expiration of the term provided in Section 2 hereof in accordance with
the following paragraphs:
(a) MUTUAL. This Agreement may be terminated upon the
mutual written agreement (which may include, if so
agreed to by the Board of Directors and Executive,
severance payments and/or benefits) of the Company
and Executive.
(b) DEATH. In the event of the death of Executive, this
Agreement shall automatically terminate.
(c) DISABILITY. If, during the effective period of this
Agreement, Executive shall become disabled and unable
to perform his duties on a full-time basis as
required herein ("Disability"), and (i) for a
consecutive period of one hundred eighty (180) days
(the "Disability Period", the first day of which is
referred to herein as the "Disability Date")
Executive is unable to perform his duties on a
full-time basis, or (ii) in the opinion a qualified
physician fully informed of the circumstances, there
is no prospect of Executive being able to perform his
duties on a full-time basis for the remainder of the
Disability Period, then the Company may, upon thirty
(30) days' written notice to Executive, terminate
this Agreement.
(d) CAUSE. This Agreement may be terminated by the
Company, with or without Cause as herein defined; any
such termination to become effective immediately upon
delivery of notice to Executive. For purposes of this
Agreement, the term "Cause" shall mean the
termination of the Executive by the Board of
Directors of the Company as a result of the existence
or occurrence of one or more of the following
conditions or events:
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(i) Any material intentional breach of the
terms of this Agreement by Executive;
(ii) Substantial and continuing neglect or
inattention by Executive of or to the
duties described in Section 3 hereof.
(iii) Fraud or other willful misconduct or
gross negligence of Executive in
connection with the performance of such
duties.
(iv) The refusal of Executive to perform any
of the duties to perform any of the
duties described in Section 3 hereof, or
elsewhere in the Agreement; and
(v) Conviction of Executive for any felony
or for any crime involving moral
turpitude or violation of the securities
laws.
(e) CHANGE OF CONTROL. In the event of a "Change in
Control" (as defined in this Section 7(e)), Executive
may elect, at any time after the 180-day period
immediately following such Change in Control but
prior to the first anniversary of such change in
Control, to deliver 60 days' written notice to the
Company of his termination of employment hereunder.
Termination of this Agreement pursuant to the
provisions of the preceding sentence shall be deemed
a termination without Cause for purposes of Section 9
hereof. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred when:
(i) if (a) any person (or group of persons
acting in concert) not affiliated with
the shareholders of the Company as of the
date of execution hereof acquires direct
or indirect ownership of 50% or more of
the combine voting power of the then
outstanding voting securities of the
Company, or (b) during any period of two
consecutive years, the individuals (or
any successors to such individuals if
nominated by any shareholder of the
Company as of the date of execution
hereof) who at the beginning of such
period constitute the Board of Directors
of the Company cease for any reason to
constitute at least a majority thereof,
or (c) the shareholders of the Company
approve any consolidation or merger of
the Company in which the Company is not
the surviving corporation, or approve any
sale, lease, exchange or other transfer
(in one transaction or a series of
related transactions) of all, or
substantially all, the assets of the
Company, other than a merger or transfer
in which no shareholder (or group of
shareholders acting in concert) of the
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successor corporation has a greater
percentage interest in the successor
corporation than the aggregate percentage
interest in the successor corporation
held by those individuals who were
shareholders of the Company as of the
date of execution of this Agreement;
and
(ii) if Xxxxxxx Xxxxxxx is neither the
Chairman of the Board or Chief Executive
Officer of the Company or any successor
to the rights and obligations of the
Company under this Agreement.
8. DEATH AND DISABILITY. In the event of termination of this Agreement by
reason of the Executive's death or disability, the Company shall
provide the payments and benefits to Executive as indicated below:
(a) TERMINATION DUE TO DEATH. In the event of Executive's
death, (i) any Royalty Payments otherwise payable to
Executive by the Company pursuant to Section 4(b)
shall be paid to Executive's estate; and (ii) certain
stock options granted pursuant to Exhibit A hereto
may become property of Executive's estate in
accordance with Exhibit A.
(b) DISABILITY PAYMENTS. In the event of Executive's
Disability (as defined in Section 7(c)), in addition
to the payment of any Royalty Payments otherwise
payable to Executive by the Company pursuant to
Section 4(b), Executive shall receive payments from
the Company in the following amounts for the
following periods; provided, however, that all such
payments, except for any Royalty Payments payable
pursuant to Section 4(b), shall terminate on December
31, 1997:
(i) For the six-month period immediately
following the Disability Date, Executive
shall receive 100% of the Base
Compensation he would have otherwise
received as an active employee;
(ii) For the six-month period immediately
following termination of the period
described in subsection (i) above,
Executive shall receive 66-2/3% of the
Base Compensation he would have otherwise
received as an active employee; and
(iii) For the six-month period immediately
following termination of the period
described in subsection (Iii) above,
Executive shall
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receive 50% of the Base Compensation he
would have otherwise received as an
active employee.
To the extent that the Company provides disability insurance to
Executive, any payments received by Executive pursuant to such Company
provided insurance shall be offset against, and thereby reduce, the
Company's obligation under this Section 8(b). To the extent that,
following Executive's termination for disability, he obtains employment
elsewhere (as an employee, executive, consultant, contractor, etc.) and
the Company's payments under this Section 8(b), when added to
Executive's income from such other employment, exceeds the Base
Compensation Executive was receiving at the time of his termination for
Disability, Executive has the duty to so notify the Company and the
Company may reduce its payments under this Section 8(b) by the amount
of such excess.
9. SEVERANCE. In the event of termination of this Agreement for any
reason other than Executive's death or disability, the Company shall
provide the payments and benefits to Executive as indicated below:
(a) WITH CAUSE. If Executive is terminated for Cause (as
defined in Section 7(d) of this Agreement), or if
Executive voluntarily terminates his employment by
the Company, Executive shall no longer be entitled to
receive any payments, including, without limitation,
base compensation, supplemental compensation
(Royalties) or any then-unpaid portion of any signing
bonus, after the date of such termination.
(b) WITHOUT CAUSE OR DUE TO CHANGE OF CONTROL. If
terminated by the Company without Cause or by the
Executive as a result of a Change of Control, (i)
Executive shall receive the Base Compensation he was
receiving at the time of termination until the
earlier to occur of (x) the date twenty-four (24)
months from the date of such termination and (y)
December 31, 1997; (ii) certain stock options shall
vest in accordance with the provisions of Exhibit A;
and (iii) Executive shall receive any supplemental
compensation (Royalties) otherwise payable to
Executive by the Company pursuant to Section 4(b)
hereof.
(c) OTHER EMPLOYMENT. If severance is paid to Executive
pursuant to this Section 9, regardless of the reason
for termination, and Executive obtains employment
elsewhere (as an employee, manager, consultant,
contractor, etc.) and the Company's severance
payments, when added to Executive's income from such
other employment, exceeds the Base Compensation
Executive was receiving at the time of his
termination, Executive has the duty to so notify the
Company and the Company may reduce its severance
payments by the amount of such excess.
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(d) ENTIRE OBLIGATION. In the event of a termination
pursuant to Section 7(d), the severance payments
described in this Section 9 shall constitute the
entire obligation of the Company to Executive and
full settlement of any claim under law or in equity
that Executive might otherwise assert against the
Company or its shareholders, directors, officers,
employees or agents because of such termination.
(e) BENEFITS. All benefits not mandated by law to be
continued will cease upon termination of this
Agreement for any reason, except that where severance
payments are continued and for so long as such
payments are continued, the Company shall pay the
same portion of the cost of Executive's then existing
Company-provided medical insurance as the severance
payments bear to Executive's Base Compensation at the
time of termination, provided (i) Executive chooses
to continue such coverage after termination including
paying his portion (if any) of such costs and (ii) if
Executive obtains employment elsewhere with at least
comparable medical coverage, the Company's obligation
to continue such payments ceases.
10. CONFIDENTIAL INFORMATION. Executive recognizes and acknowledges that
he will have access to certain confidential information of the Company
and of corporations with whom the Company does business, and that such
information constitutes valuable, special and unique property of the
Company and such other corporations. During the term of this Agreement
and for a period of five (5) years immediately following the date of
termination of this Agreement (and for such period thereafter, if any,
as Executive continues to receive Royalties pursuant to Section 4(b)
hereof), Executive agrees not to disclose or use any confidential
information, including without limitation, information regarding
research, developments, product designs or specifications,
manufacturing processes, "know-how," prices, suppliers, customers,
costs or any knowledge or information with respect to confidential or
trade secrets of the Company, it being understood that such
confidential information does not include information that is publicly
available unless such information became publicly available as a result
of a breach of this Agreement. Executive acknowledges and agrees that
all notes, records, reports, sketches, plans, unpublished memoranda or
other documents belonging to the Company, but held by Executive,
concerning any information relating to the Company's business, whether
confidential or not, are the property of the Company and will be
promptly delivered to it upon Executive's leaving the employ of the
Company. Executive also agrees to execute such confidentiality
agreements that the Board may adopt, and may modify from time to time,
as a standard form to be executed by all employees of the Company, to
the extent such standard forms are not materially more restrictive than
the provisions of this Agreement.
11. INTELLECTUAL PROPERTY. Executive acknowledges and agrees that all
discoveries, inventions, designs, improvements, formulas, formulations,
ideas, devices, writings, publications, study protocols, study results,
computer data or programs, or other
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intellectual property, whether or not subject to patent or copyright
laws, which Executive shall conceive solely or jointly with others, in
the course or scope of his employment with the Company or in any way
related to the Company's business, whether during or after working
hours, or with the use of the Company's equipment, materials or
facilities (collectively referred to herein as "Intellectual
Property"), shall be the sole and exclusive property of the Company
without further compensation to Executive. As used in this Section 11
and the following Section 12, it is understood that the Company's
principal "business" is developing pharmaceutical products for
commercial sale, including also medical devices and/or other drug
delivery methods or technologies for administering said pharmaceutical
products. For purposes of this Agreement, any Intellectual Property,
based upon the Company's secret or confidential information, developed
within six (6) months after the termination of Executive's employment,
shall be presumed to be the property of the Company. Executive agrees
to promptly notify the Company and fully disclose the nature of such
Intellectual Property. Executive shall take such steps as are deemed
necessary to maintain complete and current records thereof, and
Executive shall assign to the Company or its designates, the entire
right, title and interest in said Intellectual Property. Further,
Executive shall, at the Company's request and expense (including
reasonable compensation if Executive is no longer employed under this
Agreement), make necessary application for domestic or foreign patents
and assist in securing, defending or enforcing any such title and right
thereto.
12. NON-COMPETITION. Executive acknowledges that his services to be
rendered hereunder are of a special and unusual character that have a
unique value to the Company and the conduct of its business, the loss
of which cannot adequately be compensated by damages in an action at
law. In view of the unique value to the Company of the services of
Executive for which the Company has contracted hereunder, and because
of the confidential information to be obtained by or disclosed to
Executive as herein above set forth, and as a material inducement to
the Company to enter into this Agreement and to pay and make available
to Executive the compensation and other benefits referred to herein,
Executive covenants and agrees that Executive will not, directly or
indirectly, whether as principal, agent, trustee or through the agency
of any corporation, partnership, association or agent (other than as
the holder of not more than 5% of the total outstanding stock of any
company the securities of which are traded on a regular basis on
recognized securities exchanges):
(a) while employed under this Agreement (i) work for
(in any capacity, including without limitation
director, officer or employee) any other
pharmaceutical company, or otherwise work for or
engage in any business which is engaged in
substantially the same business as the Company, (ii)
become an officer, director or employee of any
corporation or a member or employee of any
partnership or an owner or employee of any other
business that engages in substantially the same
business as the Company, (iii) recruit, or otherwise
influence or attempt to induce employees of the
9
Company to leave the employment of the Company, or
(iv) participate in any non-competitive businesses
except for those involving limited personal time
and/or energies of the Executive that have been
approved in advance in writing by the Chief Executive
Officer of the Company;
(b) for the two-year period immediately following any
termination of this Agreement (and for such period
thereafter, if any, as Executive continues to receive
Royalties pursuant to Section 4(b) hereof), except
for a termination pursuant to Section 7(e) hereof, in
which case such period shall be six months, develop
or assist in the development of any products or
projects which, as of the date of such termination,
the Company sells or which were undergoing research
and development or feasibility consideration by the
Company; provided that for purposes of this Section
12 (b), products or projects under "feasibility
consideration" will consist of potential products or
projects known and identified in writing at the time
of termination but not yet in active development or
specifically scheduled to enter active development at
the time of termination that have either undergone
active formulation efforts and/or in vivo study
within three months prior to termination or do
undergo active formulation efforts and/or in vivo
study within the six months following such
termination; and
(c) in the event that, prior to the earlier to occur of
(x) the third anniversary of the date of this
Agreement and (y) the one year anniversary of the
date of submission to the Food and Drug
Administration of a New Drug Application for the
product Niaspan(R), this Agreement is terminated (i)
by the Company for Cause, or (ii) by Executive other
than pursuant to Section 7(e) hereof, engage, for a
period of one year from the date of any such
termination, in the development of any drug
formulation or drug delivery system, or in any other
activities relating to the development of any drug of
any type, which drug formulation, delivery system or
drug could reasonably be expected to be distributed
in any geographic vicinity in which the Company has a
reasonable expectation at the time of termination of
this Agreement of distributing products in the
foreseeable future.
Executive has carefully read and considered the provisions of Sections
10, 11, and 12 hereof and agrees that the restrictions set forth in
such sections are fair and reasonable and are reasonably required for
the protection of the interests of the Company, its officers,
directors, shareholders, and other employees, for the protection of the
business of the Company, and to ensure that Executive devotes his
full-time and efforts to the business of the Company. Executive
acknowledges that he is qualified to engage in businesses other than
those that are subject to this Section 12. It is the belief of the
parties, therefore, that the best protection that can be given to the
Company that does not in any way infringe upon the rights of Executive
to engage in any unrelated businesses is to provide for the
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restrictions described above. In view of the substantial harm which
would result from a breach by Executive of Sections 10, 11 and 12, the
parties agree that the restrictions contained therein shall be enforced
to the maximum extent permitted by law. In the event that any of said
restrictions shall be held unenforceable by any court of competent
jurisdiction, the parties hereto agree that it is their desire that
such court shall substitute a reasonable judicially enforceable
limitation in place of any limitation deemed unenforceable and that as
so modified, the covenant shall be as fully enforceable as if it had
been set forth herein by the parties.
13. REMEDIES. The provisions of sections 10, 11 and 12 of this Agreement
shall survive the termination of this Agreement as set forth therein,
regardless of the circumstances or reasons for such termination, and
inure to the benefit of the Company. The restrictions set forth in
Sections 10, 11 and 12 are considered to be reasonable for the purposes
of protecting the business of the Company. The Company and Executive
acknowledge that the Company would be irreparably harmed and that
monetary damages would not provide an adequate remedy to the Company if
the covenants contained in Sections 10, 11 and 12 were not complied
with in accordance with their terms. Accordingly, Executive agrees that
the Company shall be entitled to injunctive and other equitable relief
to secure the enforcement of these provisions, in addition to any other
remedy which may be available to the Company, and that the Company
shall be entitled to receive from Executive reimbursement for
reasonable attorneys' fees and expenses incurred by the Company in
enforcing these provisions.
14. PUBLICATIONS. The Executive shall have the right to publish articles
concerning his work in the appropriate scientific/technical
publications, provided that such articles (i) are not inconsistent with
the Company's business objectives or the Executive's confidentiality
obligations under Section 10, (ii) are reviewed in advance by
Management, and (iii) acknowledge the Company's role in such work. The
Executive also shall be given credit for his contributions to the
Company's product development achievements in the Company's
publications and presentations.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered
mail to the addresses below or to such other address as either party
shall designate by written notice to the other:
IF TO THE EXECUTIVE: To the address set forth below his signature on
the signature page hereof.
IF TO THE COMPANY:
Kos Pharmaceuticals, Inc.
0000 X. Xxxxxxxx Xxxxx
Xxxxx 0000
00
Xxxxx, XX 00000
Attention: Chief Executive Officer
16. ENTIRE AGREEMENT; MODIFICATION.
(a) This Agreement contains the entire agreement of the
Company and Executive, and the company and Executive
hereby acknowledge and agree that this Agreement
supersedes any prior statements, writings, promises,
understandings or commitments, including, without
limitation, the agreements and obligations set forth
in the Letter Agreement dated June 8, 1988 (the "Old
Agreement") between Executive and Xxxxxxx Xxxxxxx,
Jr. (on behalf of the Company), the stock option
granted to Executive by letter from the Company,
dated August 1, 1988 (the "Old Option"), and the 1992
Agreement. The parties hereto agree (i) that the Old
Agreement and the Old option are each hereby
terminated and canceled in their respective
entireties, and shall be of no further force and
effect, (ii) that the stock option grant provided by
Appendix B of the 1992 Agreement is hereby amended
and restated in the form of Appendix A hereto, (iii)
that the grant and acceptance of the stock option
provided by Appendix B of the 1992 Agreement is
hereby reaffirmed, and (iv) that each party agrees be
bound by the terms and conditions of the amended and
restated stock option grant set forth in Appendix A
hereto.
(b) No future oral statements, promises or commitments
with respect to the subject matter hereof, or other
purported modification hereof, shall be binding upon
the parties hereto unless the same is reduced to
writing and signed by each party hereto.
17. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. The Executive may not assign his
rights and obligations under this Agreement.
18. MISCELLANEOUS.
(a) This agreement shall be subject to and governed by
the laws of the State of Florida, without regard to
the conflicts of laws principles thereof.
(b) The section headings contained herein are for
reference purposes only and shall not in any way
affect the meaning or the interpretation of this
Agreement.
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(c) The failure of any party to enforce any provision of
this Agreement shall in no manner affect the right to
enforce the same, and the waiver by any party of any
breach of any provision of this Agreement shall not
be construed to be a waiver by such party of any
succeeding breach of such provision or a waiver by
such party of any breach of any other provision.
(d) All written notices required in this Agreement shall
be sent postage prepaid by certified or registered
mail, return receipt requested.
(e) In the event any one or more of the provisions of
this Agreement shall for any reason be held invalid,
illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced
by a mutually acceptable valid, and enforceable
provision which comes closest to the intent of the
parties.
(f) This Agreement may be executed in any number of
counterparts, each of which shall constitute an
original and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.
KOS PHARMACEUTICALS, INC.
By: /s/ XXXXXX X. XXXX
----------------------------------------
Xxxxxx X. Xxxx
President And Chief Executive Officer
EXECUTIVE
/s/ XXXXX X. XXXX
-------------------------------------------
Xxxxx X. Xxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx 00000
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Exhibit A
KOS PHARMACEUTICALS, INC.
AMENDED AND RESTATED STOCK OPTION GRANT TO
AND AGREEMENT WITH XXXXX X. XXXX
1. PURPOSE. The purpose of this amended and restated grant and agreement
(the "Grant") is to incorporate certain historical information into the
terms of the grant on December 18, 1992, to Xxxxx X. Xxxx (the
"Executive") of an option to acquire shares of the common stock of KOS
Pharmaceuticals, Inc., a Florida corporation (the "Company"). The
purpose of the grant of the stock option continues to be, under the
terms and conditions described herein, to provide, among other things, a
means for this key founding officer of the Company to acquire a sizable
ownership interest in the Company, thereby (i) motivating and
encouraging him to continue his undivided efforts on the Company's
behalf, to cooperate and work with other members of management and
employees of the Company to promote and sustain the overall best
interests of the Company, and to continue his employment relationship
with the Company; and (ii) increasing his personal economic interest in
the continued success and progress of the Company.
2. EFFECTIVE DATE. This Grant became effective (the "Effective Date")
December 18, 1992, having been approved by the Board of Directors as
part of an Employment Agreement between the Company and the Executive
executed on that date ("1992 Employment Agreement"). The 1992
Employment Agreement has been replaced by a new employment agreement
between the Company and the Executive ("1996 Employment Agreement"), to
which this Grant is attached as Exhibit A. Capitalized terms used
herein but not defined have the meaning ascribed to them in the 1996
Employment Agreement.
3. SECURITIES SUBJECT TO THE GRANT; RESERVATION. This Grant conveys to
the Executive the option to acquire certain shares of common stock of
the Company, under the terms and conditions described herein, provided
that in the event that there is more than one authorized class of common
stock, including one or more classes with superior voting rights to
other classes, the Board of Directors may in its sole discretion
stipulate the class or classes of authorized common stock to be issued
upon exercise of the option, including stipulating those classes with
lesser voting rights and, if more than one class is so stipulated, the
extent to which the option may be exercised for each respective class;
provided, however, that the stipulation of such class or classes shall
not serve to diminish the total ownership interest (including the right
to dividends), expressed as a percentage of aggregate common shares
outstanding, to which the Executive is entitled by this Grant. The Board
of Directors shall take all such action as may be necessary to assure
that a sufficient number of shares of common stock shall be reserved for
issuance upon exercise of the Option prior to the first exercise
thereof.
4. OPTION GRANT. The option hereby granted ("Option") entitles Executive
to acquire 275,000 shares of the stock of the Company, subject to the
vesting provisions of Section 5 below, at an exercise price of $0.75 per
share.
5. VESTING. When used herein, the term "vesting" or "vested" shall refer
to that portion of the Option that, without further conditions, may be
exercised in the sole discretion of the Executive or his estate subject
only to the exercise provisions of Section 6 below. Upon the effective
date of the 1996 Employment Agreement, 100 percent of the Option shall
be vested.
6. EXERCISE PERIOD. The Option may be exercised, in whole or in part,
in accordance with the procedures set forth in Section 10 hereof,
subject to the following terms, conditions and limitations:
(a) EXERCISE DURING EMPLOYMENT. For so long as the
Executive is a full-time employee of the Company, the
Option or any portion thereof may be exercised at any
time during the period beginning December 1, 1995
and, and ending seven years later.
(b) EXERCISE FOLLOWING TERMINATION. In the event the
Executive's full-time employment with the Company
terminates, the unexercised portion of the Option
must be exercised within the following time periods
or they expire:
(i) If, prior to the expiration of the term
of the 1996 Employment Agreement pursuant
to Section 2 of the 1996 Employment
Agreement, termination is by the
Executive for any reason other than
death, disability, or a Change of Control
or by the Company for Cause, the
unexercised portion of the Option must be
exercised within 90 days of termination;
(ii) In the event of any termination not
covered by subsection 6(b)(i) above, the
unexercised portion of the Option must be
exercised before the first anniversary of
such termination.
(c) EXERCISE UPON SALE OR MERGER. In the event of a
sale or merger of the Company with an unaffiliated
entity before the Company has had a "Substantial
Public Offering" as defined below, the Board of
Directors may, in its sole discretion, upon written
notice to Executive, accelerate the exercise periods
otherwise provided herein to a date immediately prior
to or simultaneous with the date of such sale or
merger. For purposes of this Grant, a "Substantial
Public Offering" shall mean a public offering of
shares of common stock of the Company on a firmly
underwritten basis, pursuant to a registration
statement on Forms X-0, X-0, or S-3 (or a similar
form of general application prescribed by the
Securities and Exchange Commission) filed under the
Securities Act of 1933, as amended, in which the
Company receives net proceeds of at least Twenty Five
Million Dollars ($25,000,000).
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7. ANTI-DILUTION ADJUSTMENT. Subsequent to the Effective Date, the Board
of Directors may make appropriate adjustments in the number of shares
granted hereunder to give effect to changes made in the number of
outstanding shares, without diluting the percentage ownership
represented by the Option, as a result of (i) a recapitalization,
reclassification, stock dividend, stock split, or other relevant
changes; or (ii) additional capital investments in the Company by the
shareholders of the Company as of the date of execution of the 1996
Employment Agreement, if such investments are made before and are not
related to investments of new equity capital in the Company by persons
or entities not affiliated with such shareholders. Notwithstanding the
foregoing, this Section 7 shall not result in any adjustment of either
the number of shares subject to the Option or the price per share in
the event of any merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares,
or any other similar transaction on or before July 15, 1996.
8. REPURCHASE OF STOCK ACQUIRED UPON EXERCISE. The provisions of this
Section 8 shall apply only if (i) the Executive is no longer a
full-time employee of the Company and (ii) a registration statement
pertaining to the shares to be issued upon exercise of the Option has
not been filed with and declared effective by the Securities and
Exchange Commission.
(a) COMPANY OPTION. The company shall have the right to
repurchase all or any portion of the shares of common
stock held by the Executive (or his personal
representative or estate) acquired upon the exercise
of this option. such repurchase by the Company shall
be at the price and on the terms and conditions set
forth in Sections 8(c) and (d) below. The Company may
exercise this right by delivering written notice (a
"Notice") to the Executive prior to the later to
occur of (i) the date one year after the termination
date of Executive's full-time employment with the
Company, and (ii) the date one year after the date
Executive acquired the shares which are to be
repurchased.
(b) EXECUTIVE'S OPTION. The Executive (or his personal
representative or estate) shall have the right to
require the Company to repurchase all or any portion
of the shares of common stock acquired upon the
exercise of this option at the price and on the terms
and conditions set forth in sections 8(c) and (d)
below. The Executive may exercise this right by
delivering Notice to the Company at any time after
the six-month anniversary of his termination of
full-time employment with the Company and before the
later to occur of (i) the date one year after his
termination of full-time employment with the Company,
and (ii) the date one year after the date Executive
acquired the shares which are to be repurchased.
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(c) REPURCHASE PRICE. The price per share at which
shares shall be repurchased and sold pursuant to
this Section 8 shall be as follows:
(i) If the termination of full-time
employment was by reason of the
Executive's death or disability, because
of a Change of Control, or by the Company
without Cause, the repurchase price per
share shall be the price per share
actually paid for the last equity
investment from an investor not
affiliated with the shareholders of the
Company as of the date of Execution of
the 1996 Employment Agreement (the "Last
Price"), plus interest from the closing
date of the transaction in which the Last
Price was paid until the Notice date at
an annual rate of 20%, provided that
there was such a Last Price actually
paid. If there was not such a Last Price
actually paid, the repurchase price shall
be the fair market value per share of the
stock as determined in the good faith
judgment of the Board of Directors, of a
national firm of certified public
accountants selected by the Board, or of
an investment banking firm selected by
the Board.
(ii) If the termination of full-time
employment was by the Executive other
than by reason of death, disability, or a
Change of Control or by the Company for
Cause, the repurchase price shall be the
higher of a Last Price if there was one
or the exercise price plus interest at an
annual rate of 6% from the vesting date
of the option that was exercised to
acquire the shares until the earlier of
the Notice date or the date of the
Company's first FDA approval to market
Niaspan(R)or Nicostatin(R), or products
currently planned under the names
Niaspan(R)and Nicostatin(R), with the
interest rate increasing to 18% from the
date of such FDA approval if before the
Notice date, until such Notice date.
(d) CLOSING. The closing of the repurchase and sale of
common stock pursuant to this Section 8 shall take
place at the corporate offices of the Company at a
date and time agreed upon by the Company and the
Executive (or his estate or personal representative)
but in no event shall such closing take place more
than 30 days after the Notice is delivered. At the
closing, the Company shall deliver to the Executive
(or his estate or personal representative) a Company
check for the repurchase price, and the Executive
shall deliver the stock certificates representing the
shares to be sold, duly endorsed and with all
requisite transfer stamps affixed thereto.
9. EXERCISE PROCEDURE. The Option may be exercised, in whole or in part,
by the Executive notifying the Company in writing specifying the number
of shares with respect
4
to which he wishes to exercise the Option or portion thereof and
delivering the exercise price in full, and any withholding amounts that
may be required for taxes or other items, to the Company. No shares
shall be delivered pursuant to the exercise of an option until payment
in full of the exercise price and required withholding is received by
the Company.
10. TAX LIABILITY. The granting and subsequent exercise of the Option
may create a tax liability for the Executive. It is the Executive's
sole responsibility, without any recourse to the Company, to determine
whether such liability, if any, may exist and to settle such
liabilities as they come due without recourse to the Company.
Notwithstanding this lack of recourse to the Company, however, the
Company is entitled to collect from the Executive any withholding taxes
or other similar items that may be required of the Company because of
the elections the Executive may make with respect to the Option.
11. NONTRANSFERABILITY OF OPTION. The Option may not be pledged, assigned,
or otherwise actually or contingently transferred by the Executive
except by will or the laws of descent and distribution, During the
lifetime of the Executive, the Option may be exercised only by the
Executive.
12. RESTRICTIVE LEGEND ON STOCK. Certificates representing shares of common
stock issued upon the exercise of the Option bear a legend declaring,
if applicable, that such shares (i) have not been registered under the
Securities Act of 1933, as amended, and (ii) are subject to certain
rights of repurchase.
13. TERMINATION OF OPTION.
(e) Notwithstanding any other provision of this Grant,
neither the Executive or his estate will be required
to exercise any or all portions of the Option if he
(or his estate) chooses not to do so for any reason.
In those circumstances, however, where the terms
specified above indicate that the option is required
to be exercised at a particular time, failure to do
so by the Executive (or his estate) will result in
the immediate cancellation of all unexercised
portions of the Option, and the Company will have no
further obligations with respect to those unexercised
portions of the Option.
(f) other than as provided in Section 14(a) above, the
Option shall terminate (i) when and to the extent
that they have it has been exercised, and (ii) in the
case of the unexercised the unexercised portion of
the Option, at the end of the applicable exercise
period.
8. REPLACEMENT OF PRIOR OPTIONS. Upon the effective date of this Grant,
it replaces and terminates the options granted to the Executive on
August 1, 1988, and cancels all obligations of the Company pursuant to
that August 1, 1988 Grant.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed effective as of the Effective Date.
KOS PHARMACEUTICALS, INC.
/s/ XXXXXX X. XXXX
----------------------------------
By: XXXXXX X. XXXX
Its: President
I hereby reaffirm my acceptance of the Option granted on December 18,
1992, in accordance with and subject to the terms and conditions of the Amended
and Restated Stock Option Grant and Agreement set forth above, and agree to be
bound thereby.
Date Accepted: June 15, 1996.
/s/ XXXXX X. XXXX
----------------------------
Xxxxx X. Xxxx
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