EXHIBIT 10.6
------------
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 29 day of May, 2002, by and between Able
Laboratories, Inc., a Delaware corporation, with its principal office in
Needham, Massachusetts (the "Company"), and Xxxxxxxxx X. Xxxxxxx of Needham,
Massachusetts (the "Executive").
WITNESSETH
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Company and the Executive agree as follows:
1. EMPLOYMENT The Executive shall serve the Company as President, Chief
Executive Officer and a Director. In such positions, the Executive shall have
the duties, responsibilities and authorities as determined and designated from
time to time by the Board of Directors of the Company, including, without
limitation, management authority with respect to, and responsibility for, the
overall day-to-day business and affairs of the Company. The Executive shall
serve under the direction and supervision of, and report to, the Board of
Directors. Notwithstanding the above, the Executive shall not be required to
perform any duties and responsibilities which would result in noncompliance with
or violation of any applicable law or regulation.
2. COMPENSATION AND BENEFITS. The compensation and benefits payable to the
Executive under this Agreement shall be as follows:
2.1. SALARY. For all services rendered by the Executive to the Company,
the Executive shall be entitled to receive a base salary at the rate of $250,000
per year beginning April 1, 2002. The Executive's base salary shall be reviewed
annually by the Compensation Committee of the Board of Directors, with the first
review no later than January 31, 2003, and shall be subject to increase from
time to time as approved by the Compensation Committee of the Board of
Directors. In addition, if the Compensation Committee of the Board of Directors
increases the Executive's annual base salary, such increased annual base salary
shall become a floor below which such annual base salary shall not fall (OTHER
THAN concurrently with across-the-board salary reductions based on the Company's
financial performance similarly affecting all senior management personnel of the
Company) without the Executive's written consent. The Executive's salary shall
be payable in periodic installments in accordance with the Company's usual
practice for its senior executives.
2.2. BONUS. The Compensation Committee of the Board of Directors shall
determine, on an annual basis, the amount of any bonus to be paid to the
Executive.
2.3. AUTOMOBILE. The Executive shall also be provided with the use of
an automobile at the Company's expense. The Executive shall comply with such
reasonable reporting and expense limitations on the use of the automobile as may
be established from time to time by the Company. The Company shall include
annually on the Executive's Form W-2 any amount attributable to his personal use
of such automobile.
2.4. DEBT FORGIVENESS. Effective as of the date of this Agreement, the
Company agrees to forgive $122,525 owed by the Executive to the Company, which
amount includes all interest accrued as of the date of this Agreement.
2.5. REGULAR BENEFITS. The Executive shall also be entitled to
participate in any and all employee benefit plans, medical insurance plans,
disability income plans, retirement plans, bonus incentive plans, and other
benefit plans from time to time in effect for senior executives of the Company.
Such participation shall be subject to (i) the terms of the applicable plan
documents, (ii) generally applicable policies of the Company and (iii) the
discretion of the Board of Directors of the Company or any administrative or
other committee provided for in or contemplated by such plan.
2.6. BUSINESS EXPENSES. The Company shall reimburse the Executive for
all reasonable travel and other business expenses incurred by the Executive in
the performance of his duties and responsibilities, subject to such reasonable
requirements with respect to substantiation and documentation as may be
specified by the Company.
2.7. VACATION. The Executive shall be entitled to not less than four
(4) weeks of vacation per year, to be taken at such times and intervals as shall
be determined by the Executive consistent with his responsibilities.
2.8. GENERAL. Nothing paid to the Executive under any plan, policy or
arrangement currently in effect or made available in the future shall be deemed
to be in lieu of other compensation to the Executive as described in this
Agreement.
3. SERVICE.
3.1. EXTENT OF SERVICE. The Executive shall, subject to the direction
and supervision of the Board of Directors, devote his full time, best efforts
and business judgment, skill and knowledge to the advancement of the Company's
interests and to the discharge of his duties and responsibilities hereunder;
PROVIDED, HOWEVER, that nothing herein shall be construed as preventing the
Executive from:
(a) investing his assets in such form or manner as shall not
require any material services on his part in the operations or affairs
of the companies or the other entities in which such investments are
made;
(b) serving on the board of directors of any company, PROVIDED
that he obtains the prior approval of a majority of the Board of
Directors and shall not be required to render any material services
with respect to the operations or affairs of any such company; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair his ability to fulfill his
duties and responsibilities under this Agreement.
3.2. LOCATION OF SERVICE. The Executive shall determine, in his
reasonable discretion, the amount of time he will spend in each of the Company's
offices. The Company agrees to maintain an office within twenty-five (25) miles
-2-
of the City of Boston during the first year of this Agreement. The Board of
Directors will re-evaluate the locations of the Company's offices on an annual
basis.
4. TERMINATION BY THE COMPANY FOR CAUSE.
4.1. TERMINATION BY COMPANY. The Executive's employment hereunder may
be terminated by the Company, without further liability on the part of the
Company, effective immediately, by the Board of Directors for Cause (as such
term is defined in Section 4.2) by written notice to the Executive setting forth
in reasonable detail the nature of such Cause, PROVIDED that the Board of
Directors have complied with the provisions of Section 4.3.
4.2. CAUSE. Termination for "Cause" shall mean:
(a) gross neglect of duties for which employed (OTHER THAN on
account of a medically determinable disability which renders the
Executive incapable of performing such services);
(b) committing fraud, misappropriation or embezzlement in the
performance of duties as an employee of the Company;
(c) conviction of a felony involving a crime of moral turpitude;
or
(d) willfully engaging in conduct materially injurious to the
Company in violation of the covenants contained in this Agreement.
4.3. TERMINATION PROCEDURE. In each case, in determining Cause the
alleged acts or omissions of the Executive shall be measured against standards
prevailing in the industry generally and the ultimate existence of Cause must be
confirmed by not less than two-thirds of the Board of Directors (excluding the
Executive) at a meeting prior to any termination therefor; PROVIDED, HOWEVER,
that it shall be the Company's burden to prove the alleged facts and omissions
and the prevailing nature of the standards the Company shall have alleged are
violated by such acts or omissions of the Executive. In the event of such a
confirmation by two-thirds or more of the Board of Directors, the Company shall
notify the Executive that the Company intends to terminate the Executive's
employment for Cause under this Section 4 (the "Confirmation Notice"). The
Confirmation Notice shall specify the acts or omissions upon the basis of which
the Board of Directors have confirmed the existence of Cause and must be
delivered to the Executive within ninety (90) days after a majority of the Board
of Directors (excluding, if applicable, the Executive) has actual knowledge of
the events giving rise to such purported termination. The Confirmation Notice
shall also specify the date (which shall not be earlier than the date of the
Conformation Notice.) If the Executive notifies the Company in writing (the
"Opportunity Notice") within thirty (30) days after the Executive has received
the Confirmation Notice, the Executive (together with counsel) shall be provided
one opportunity to meet with the Board of Directors (or a sufficient quorum
thereof) to discuss such acts or omissions. Such opportunity to meet with the
Board of Directors shall be fixed and shall occur on a date selected by the
Board of Directors (such date being not less than ten (10) nor more than
forty-five (45) days after the Company receives the Opportunity Notice from the
Executive). Such meeting shall take place at the principal offices of the
Company or such other location as agreed to by the Executive and the Company.
During the period commencing on the effective
-3-
date of the termination and ending on the date next succeeding the date on which
such meeting between the Board of Directors (or a sufficient quorum thereof) and
the Executive is scheduled to occur and notwithstanding anything to the contrary
in this Agreement, the Executive shall be suspended from employment with the
Company (with pay to the extent not prohibited by applicable law). If the Board
of Directors properly set the date of such meeting and if the Board of Directors
(or a sufficient quorum thereof) attends such meeting and in good faith does not
rescind its confirmation of Cause at such meeting or if the Executive fails to
attend such meeting for any reason, the Executive's employment by the Company
shall, immediately upon the closing for such meeting and the delivery to the
Executive of the Notice of Termination, be terminated for Cause. If the
Executive does not respond in writing to the Confirmation Notice in the manner
and within the time period specified in this Section 4.3, the Executive's
employment with the Company shall, on the thirty-first day after the receipt by
the Executive of the Confirmation Notice, be terminated for Cause under this
Section 4 effective as of the date specified in the Confirmation Notice.
4.4. TERMINATION OF OBLIGATIONS. In the event of termination pursuant
to Section 4, all obligations of the Company under this Agreement, other than
the Company's obligations under the provisions of COBRA, shall terminate as of
the date specified in the Confirmation Notice, but vested rights of the parties
hereunder as of such date shall not be affected.
5. TERMINATION BY THE EXECUTIVE
5.1. TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive shall
be entitled to terminate his employment hereunder for Good Reason (as defined in
Section 5.3) effective immediately by giving written notice to the Board of
Directors. Upon any such termination, the Executive shall be entitled to receive
the benefits set forth in Section 7.
5.2. OTHER VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
effect, upon thirty (30) days prior written notice to the Company, a Voluntary
Termination of his employment hereunder. A "Voluntary Termination" shall mean a
termination of employment by the Executive on his own initiative OTHER THAN a
termination for Good Reason. If the Executive's employment is so terminated due
to Voluntary Termination, the Executive shall be entitled to (i) continuation of
the Executive's medical benefits described in Section 2.3 at the level in effect
on, and at the same out-of-pocket cost to the Executive as of, the date of
termination for the eighteen (18) month period following the termination of the
Executive's employment due to Voluntary Termination and (ii) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs, if any, of the Company. Such
medical benefits shall be deemed to have been provided under the provisions of
COBRA.
5.3. GOOD REASON. For purposes of this Agreement, the term "Good
Reason" shall mean any of the following:
(a) the failure of the Board of Directors of the Company to elect
the Executive to the offices of President and Chief Executive Officer,
or to continue the Executive in such offices;
(b) the failure by the Company to comply with the provisions of
Section 2, which failure is not cured within five (5) business days;
-4-
(c) the failure by the Company to comply with Section 3.2;
(d) termination of the Executive's employment by the Company for
any reason other than Cause;
(e) there occurs any reduction of base salary or material
reduction in other benefits or any material change by the Company to
the Executive's function, duties, authority, or responsibilities in
effect on the date hereof or as set forth in this Agreement, which
change would cause the Executive's position with the Company to become
one of lesser responsibility, importance, or scope from the position
and attributes thereof in effect on the date hereof or as set forth in
this Agreement (and any such material change shall be deemed a
continuing breach of this Agreement); and
(f) a material breach by the Company of any of the provisions of
this Agreement which failure or breach shall have continued for thirty
(30) days after written notice from the Executive to the Company
specifying the nature of such failure or breach.
6. TERMINATION BY THE COMPANY WITHOUT CAUSE. The Executive's employment
with the Company may be terminated without cause by a majority of the Board of
Directors of the Company on thirty (30) days prior written notice to the
Executive, PROVIDED, HOWEVER, that the Company shall have the obligation upon
any such termination to make the payments to the Executive provided for under
Section 7 of this Agreement.
7. CERTAIN TERMINATION BENEFITS. In the event of termination pursuant to
Section 5.1 or 6, the Executive shall be entitled to each of the following
benefits:
7.1. EARNINGS TO DATE OF TERMINATION. An amount equal to the sum of (a)
base salary or other compensation earned through the date of termination, plus
(b) the Executive's PRO RATA share (based on the portion of the fiscal year
during which the Executive was employed) of the larger of: (i) the highest
annual bonus paid during the three fiscal years preceding the termination of
employment or (ii) twenty percent (20%) of the Executive's current Annual
Compensation (as defined below), plus (c) deferred compensation.
7.2. LUMP SUM PAYMENT OF REMAINING SALARY OBLIGATION. A lump sum
severance benefit equal to the Executive's current Annual Compensation. Annual
Compensation shall equal the aggregate of the Executive's then current base
salary plus any commissions, or bonuses paid during or accrued with respect to
the most recently ended fiscal year, together with any contributions or accruals
made on behalf of Executive to any profit sharing plan or pension or retirement
plan, by the Company for the benefit of the Executive for the fiscal year.
7.3. BENEFIT CONTINUATION. For the eighteen (18) month period
subsequent to the date of termination, the Executive shall continue to receive
the disability and medical benefits described in Section 2.3 existing on the
date of termination at the level in effect on, and at the same out-of-pocket
cost to the Executive as of, the date of termination.
-5-
8. CONFIDENTIAL INFORMATION. The Executive will not disclose to any other
Person (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain, any confidential information of either Company obtained by him
incident to his employment with the Company. The term "confidential information"
includes, without limitation, financial information, technical information,
designs, business plans, customers, vendors, prospects and opportunities (such
as lending relationships, financial product developments, or possible
acquisitions or dispositions of business or facilities) which have been
discussed or considered by the management of the Company but does not include
any information which has become part of the public domain by means other than
the Executive's nonobservance of his obligations hereunder. The provisions of
this Section 8 shall survive for a period of three years following the
termination of this Agreement.
9. NON-COMPETITION. In the event of termination pursuant to Sections 4.1
or 5.2, the Executive will not, for a period of one year after termination,
directly or indirectly, alone or as a partner, officer, director, employee,
consultant, agent, or independent contractor of any company or business
organization (a) engage in any business activity which is directly or indirectly
in competition with the business of the Company in the area of developing,
manufacturing, licensing and distributing generic pharmaceutical drugs
("Competitive Activity") or (b) solicit or contact in connection with, or in
furtherance of, a Competitive Activity any of the Company's employees,
consultants, agents, suppliers, customers, or prospects that were such with
respect to the Company at any time during the one year immediately preceding the
date of termination or that become such with respect to the Company at any time
during the one year immediately following the date of termination. The
provisions of this Section 9 shall survive the termination of this Agreement.
10. NO MITIGATION; NO OFFSET. In the event of any termination of employment
under this Agreement, the Executive shall be under no obligation to seek other
employment or to mitigate damages, and there shall be no offset against any
amounts due to the Executive under this Agreement for any reason, including,
without limitation, on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Agreement are in the nature of severance payments or liquidated damages, or
both, and are not in the nature of a penalty.
11. SPECIFIC PERFORMANCE. The Executive agrees that any breach of Section 8
or 9 of this Agreement by the Executive could cause irreparable damage and that
in the event of such breach the Company shall have, in addition to any and all
remedies available at law or in equity, the right to an injunction, specific
performance or other equitable relief to prevent the violation of the
Executive's obligations hereunder.
12. MISCELLANEOUS.
12.1. CONFLICTING AGREEMENTS. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party or is bound, and that he is not now subject to any
covenants against competition or similar covenants which would affect the
performance of his obligations hereunder.
-6-
12.2. TERMINATION OF PRIOR EMPLOYMENT AGREEMENT. Upon the execution of
this Agreement, the Employment Agreement dated November 1, 1991 by and between
the Company and the Executive is hereby terminated and of no further force and
effect.
12.3. DEFINITION OF "PERSON". For purposes of this Agreement, the term
"Person" shall mean an individual, a corporation, an association, a partnership,
an estate, a trust and any other entity or organization.
12.4. WITHHOLDING. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Company under applicable law.
12.5. ARBITRATION OF DISPUTES. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Company, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 12.5. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
12.6. ASSIGNMENT; SUCCESSORS AND ASSIGNS, ETC. Neither the Company nor
the Executive may make any assignment of this Agreement or any interest herein,
by operation of law or otherwise, without the prior written consent of the other
party and without such consent any attempted transfer or assignment shall be
null and of no effect; PROVIDED, HOWEVER, that the Company may assign its rights
under this Agreement without the consent of the Executive in the event either
Company shall hereafter effect a reorganization, consolidate with or merge into
any other Person, or transfer all or substantially all of its properties or
assets to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Company and the Executive, and their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the Company of all payments due his
under this Agreement, the Company shall continue such payments to the
Executive's beneficiary designated in writing to the Company prior to his death
(or to his estate, if he fails to make such designation).
12.7. ENFORCEABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
12.8. WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
-7-
12.9. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company or, in the case of the Company, at its main office, attention of the
Board of Directors.
12.10. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
12.11. GOVERNING LAW. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of The Commonwealth
of Massachusetts.
* * * * *
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by their duly authorized officers, and by the
Executive, as of the date first above written.
ABLE LABORATORIES, INC.
By: /s/ F. Xxxxxx Xxxxxxxxx
--------------------------
Name: F. Xxxxxx Xxxxxxxxx
Title: Director
EXECUTIVE:
/s/ Xxxxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxxxx X. Xxxxxxx
-8-
