EXHIBIT 10.3
[CIMA Letterhead]
June 23, 2003
Xxxx X. Xxxxxxx, Ph.D.
00000 Xxxxx Xxxxx Xxxx.
Eden Prairie, MN 55347
Dear Xxxx:
This letter will confirm our agreement to amend and restate our earlier
Letter Agreement, dated April 4, 2003 (the "Original Letter Agreement"),
regarding the transition and termination of your employment with CIMA LABS INC.
(the "Company"). The sole purpose of this Amended and Restated Letter Agreement
(the "Letter Agreement") is to resolve the parties' current dispute regarding
the nature of your working relationship with CyDex, Inc. and its impact on your
continued employment with the Company by replacing the last sentence of section
2 of the Original Letter Agreement with the underscored language reflected in
section 2 below. This Letter Agreement shall not be construed as in any other
way imposing obligations on either party beyond those set forth in the Original
Letter Agreement and restated herein.
1. Employment. Your employment with the Company will end as a result of
your retirement effective December 31, 2003, or such earlier date in accordance
with paragraph 2 below. Your status as President and Chief Executive Officer of
the Company ("CEO") ended effective April 30, 2003. While you are employed by
the Company during the period from May 1, 2003 through December 31, 2003 (the
"Transition Period"), you will perform such transition duties as may be
requested by the Company. Such transition duties requested by the Company will
not exceed eight days per month during the Transition Period and will be
performed by you at times mutually agreed upon with the Company. During the
Transition Period, you may provide consulting services for other business
entities so long as such services are not "directly competitive" (as defined in
paragraph 9 below) and do not interfere with your ability to provide services to
the Company in accordance with this paragraph.
2. Termination of Employment. Between now and December 31, 2003, the
Company may terminate your employment only (a) for "Cause," as defined in the
Employment Agreement between you and the Company, dated as of June 30, 2000 (the
"Employment Agreement"), provided, however, that a material breach by you of
this Letter Agreement shall be considered a material breach of the Employment
Agreement; or (b) if you become employed with any other employer. If you
commence employment with any other employer, your employment with the Company
will immediately end without further action by either you or the Company. For
purposes of this Letter Agreement, the terms "employer" and "employment" shall
have their common law meaning. See Nationwide Mut. Ins. Co. x. Xxxxxx, 503 U.S.
318 (1992). Notwithstanding the above, the parties agree that your stated
working relationship with CyDex, Inc. between now and December 31, 2003 shall
not be considerered "employment" and CyDex shall not be considered your
"employer" during that same period of time.
Xxxx X. Xxxxxxx, Ph.D.
June 23, 2003
Page 2
3. Compensation During Employment. While you are employed by the
Company, you will continue to receive base salary at your current annual rate of
$336,544.00 and those benefits as set forth in Section 3(c), (d), (e), and (f)
of the Employment Agreement. Except as provided in paragraph 5(b)(iii) of this
Letter Agreement below, you will not be eligible for any incentive bonus for
calendar year 2003. You will not be eligible for any other compensation or
benefits from the Company relating to your employment or the termination of your
employment except as stated in this Letter Agreement.
4. Releases. At the time you signed the Original Letter Agreement, you
executed a Release By Xxxx X. Xxxxxxx attached to the Original Letter Agreement
as Exhibit A (the "First Release"). The First Release is specifically
incorporated into this Letter Agreement by reference hereto. On or within 21
days after your last day of employment with the Company, you will sign a second
Release in the form enclosed with this Letter Agreement as Exhibit 1 (the
"Second Release"), as a condition of receiving the pay and benefits set forth in
paragraph 5(b) of this Letter Agreement.
5. Compensation Following Employment.
a. In the event of termination by the Company for Cause, the Company
shall have no further obligation to you under this Letter Agreement except to
pay your base salary and benefits accrued through your last date of employment,
including without limitation any earned and unused vacation time in accordance
with the normal policies and practices of the Company.
b. In the event of termination of your employment for any reason
other than for Cause, and if you sign the Second Release on or within 21 days
following your last date of employment and have not rescinded the First Release
or the Second Release within 15 days after signing each of them, and subject to
your complying with all terms of this Letter Agreement, the Company will provide
you with the following additional benefits:
i. The Company will pay you, or in the event of your death, your
Estate, devisees, heirs, beneficiaries, assigns, or successors in
interest, an amount equal to your final base salary, at the annual rate
of $336,544.00, for the period from your last date of employment and
continuing for twelve (12) months. Such pay will be subject to normal
tax withholdings and will be paid by the Company in accordance with its
regular payroll schedule.
ii. If following your last date of employment you, or in the
event of your death, or any of your dependents, elect to continue your
group medical and dental insurance in accordance with the terms of the
applicable plans and laws, the Company will continue to pay its portion
of the monthly premiums for such coverage as if you were still employed
by the Company, from your last date of employment through the earlier
of (i) twelve (12) months following your last date of employment, (ii)
the date you become eligible for other health or dental (as applicable)
insurance benefits through a new employer, and (iii) the date
continuation coverage is no longer available in accordance
Xxxx X. Xxxxxxx, Ph.D.
June 23, 2003
Page 3
with the applicable plans or laws. Your continued coverages will be at
the same level as in effect as of your last date of employment. The
Company shall deduct your contributions for the monthly premiums from
the pay described in paragraph 5(b)(i) above of this Letter Agreement.
You agree to notify the Company in writing within three (3) days of
your acceptance of any employment that provides health or dental
insurance benefits.
iii. The Company will pay you, or in the event of your death,
your Estate, devisees, heirs beneficiaries, assigns or successors in
interest, a prorated annual bonus for calendar year 2003, in the amount
of $78,461.25, less normal tax withholdings. Such bonus payment will be
paid at the same time as annual bonus payments are paid to other
management employees of the Company for calendar year 2003, but in no
event later than March 31, 2004.
c. If your employment with the Company continues through December
31, 2003, you agree that all of your earned vacation time will be used and that
you will not be entitled to payment for any earned vacation time upon
termination of your employment. If your employment with the Company terminates
before December 31, 2003 for any reason, the Company will pay you upon
termination for earned and unused vacation time in accordance with the normal
policies and practices of the Company.
6. Stock Options. You currently have options to purchase shares of the
Common Stock of the Company in accordance with the following schedule, assuming
your continued employment with the Company through December 31, 2003:
Plan Date of Exercise Number of Amount
Xxxxx Xxxxx Shares Granted Exercisable as of
12/31/03
----------- ------------- ------------- -------------- ------------------
DIR 08/04/1994 $9.00 20,000 20,000
DIR 06/07/1995 $4.75 7,500 7,500
SOAP 07/01/1995 $4.00 75,000 0
SOAP 07/01/1995 $4.00 105,000 32,300
SOAP 10/29/1997 $5.875 48,937 48,937
SOAP 10/29/1997 $5.875 51,063 0
SOAP 04/24/1998 $4.375 22,857 0
SOAP 04/24/1998 $4.375 57,143 57,143
SOAP 06/01/1999 $3.375 25,000 25,000
SOAP 06/30/2000 $20.25 14,814 9,876
SOAP 06/30/2000 $20.25 85,186 56,790
2001 SIP 02/20/2003 $18.19 31,397 0
You agree and acknowledge that all of your options to purchase the Company's
Common Stock are listed above and will lapse and cease to be outstanding 90 days
following your last date of employment, unless previously exercised in
accordance with the terms of the applicable option
Xxxx X. Xxxxxxx, Ph.D.
June 23, 2003
Page 4
agreement and plan (and subject to adjustment in accordance with the applicable
option agreements if your employment terminates before December 31, 2003).
7. Confidential Information. Except as permitted or directed by the
Board, during the term of your employment with the Company and at any time
thereafter, you will not divulge, furnish, or make accessible to anyone or use
in any way (other than in the ordinary course of business of the Company) any
confidential or secret knowledge of the Company which you have acquired or
become acquainted with, or will acquire or become acquainted with, prior to the
termination of the period of your employment by the Company, whether developed
by yourself or by others, concerning any trade secrets, confidential or secret
designs, processes, formulae, plans, devices, or materials (whether or not
patented or patentable), directly or indirectly useful in any aspect of the
business of the Company, any customer or supplier list of the Company, any
confidential or secret development or research work of the Company, or any other
confidential information or secret aspects of the business of the Company. You
acknowledge that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company and its predecessors, and that any disclosure
or other use of such knowledge or information other than for the sole benefit of
the Company would be wrong and would cause irreparable harm to the Company. Both
during and after the term of your employment with the Company, you will refrain
from any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is now published
or which subsequently becomes generally publicly known in the form in which it
was obtained from the Company, other than as a direct or indirect result of a
breach by you of this Letter Agreement or of any other obligation of
confidentiality to the Company.
8. Return of Proprietary Property. You agree that all property in your
possession belonging to the Company, including without limitation, all
documents, reports, manuals, memoranda, computer print-outs, customer lists,
credit cards, keys, identification, products, access cards, and all other
property relating in any way to the business of the Company are the exclusive
property of the Company, even if you authored, created, or assisted in authoring
or creating such property. You shall return to the Company all such documents
and property immediately upon termination of employment or at such earlier time
as the Company may reasonably request.
9. Restrictive Covenant. You acknowledge that the Company needs to be
protected against the potential for unfair competition and impairment of the
Company's goodwill by your use of the Company's training, assistance,
confidential information, and trade secrets in direct competition with the
Company. You therefore agree that during your employment with the Company and
for a period of one (1) year thereafter, you will not operate, join, control, be
employed by, or participate in ownership, management, operation, or control of,
or be connected in any manner as an independent contractor, consultant, or
otherwise, with any person or organization engaged in any business activity
which is the same as, or directly competitive with any business of the Company
or any successor of the Company as of the date of the termination of your
employment with the Company within the states of the United States of America.
For
Xxxx X. Xxxxxxx, Ph.D.
June 23, 2003
Page 5
purposes of this paragraph, "directly competitive" means any business or
technical activity that is either described in any granted patent or patent
application (whether or not yet filed) owned by or licensed to the Company at
any time during your employment with the Company. You agree that the provisions
of this paragraph 9 shall survive the termination of your employment with the
Company or the termination of this Letter Agreement, whether such termination be
voluntary or involuntary, or with or without cause.
10. Covenant Not to Recruit. You recognize that the Company's work
force constitutes an important and vital aspect of its business. You agree that
during your employment with the Company and for a period of one (1) year
thereafter, you will not recruit or solicit, or assist anyone else in the
recruitment or solicitation of, any of the Company's then current employees to
terminate their employment with the Company and to become employed by any
business enterprise with which you may then be associated or connected, whether
as an owner, employee, partner, agent, investor, consultant, contractor or
otherwise. You expressly agree that the provisions of this paragraph 10 shall
survive the termination of your employment with the Company or the termination
of this Letter Agreement, whether such termination be voluntary or involuntary
or with or without cause.
11. Severability. In the event any provision of this Letter Agreement
shall be held illegal or invalid for any reason, said illegality or invalidity
will not in any way affect the legality or validity of any other provision
hereof. It is the intention of the parties hereto that the Company be given the
broadest possible protection respecting its confidential information and trade
secrets; and respecting competition by you following the termination of your
employment with the Company.
12. Remedies. You agree that, in addition to, but not to the exclusion
of any other available remedy, the Company shall have the right to enforce the
provisions of paragraphs 7, 8, 9, and 10 by applying for and obtaining temporary
and permanent restraining orders or injunctions from a court of competent
jurisdiction without the necessity of filing a bond therefore, and the
prevailing party in any such action shall be entitled to recover reasonable
attorneys' fees and costs in enforcing or defending any claims regarding the
provisions of paragraphs 7, 8, 9, and 10.
13. Company Obligations. The sole obligations of the Company will be
its obligations as set forth in this Letter Agreement, except as otherwise
provided by law. This Letter Agreement represents the entire agreement between
you and the Company relating to your employment, the termination of your
employment, and compensation and benefits relating thereto. This Letter
Agreement supersedes all prior negotiations, discussions,
communications and agreements relating to the same subject matter, including
without limitation the Employment Agreement, except as specifically incorporated
herein.
14. Governing Law; Venue. All matters relating to the interpretation,
construction, application, validity and enforcement of this Letter Agreement
shall be governed by the laws of the State of Minnesota. Any action at law, suit
in equity, or judicial proceeding arising directly, indirectly, or otherwise in
connection with, out of,
Xxxx X. Xxxxxxx, Ph.D.
June 23, 2003
Page 6
related to or from this Letter Agreement or any provision hereof, shall be
litigated only in the courts of the State of Minnesota, County of Hennepin. You
hereby waive any right you may have to transfer or change the venue of any
litigation brought against you by the Company.
* * * * *
This Letter Agreement is intended to amend and restate all the terms of
the conclusion of your employment by the Company. Please indicate your
acceptance of all such terms by signing both copies of this Amended and Restated
Letter Agreement, and returning one copy to the undersigned.
Sincerely,
CIMA LABS, INC.
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman of the Board and Interim
Chief Executive Officer
On this 7th day of July, 2003, I, Xxxx X. Xxxxxxx, hereby accept and agree to
the terms of the above Letter Agreement. I further acknowledge that I have 21
days after the last date of my employment to decide whether to sign the Second
Release. I also hereby specifically confirm (a) that I am being advised by the
Company to seek independent advice from legal counsel of my own selection in
connection with this Letter Agreement, the First Release and the Second Release
(and that I have had adequate opportunity to do so); and (b) that I have not
relied to any extent on any statement or other communication from any
shareholder, director, officer, employee, attorney or agent of the Company in
connection herewith.
/s/ Xxxx X. Xxxxxxx 7 Jul 2003
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Xxxx X. Xxxxxxx, Ph.D. Dated
