Contract
EXHIBIT
10.7
EMPLOYMENT AGREEMENT, dated
December 27, 2007, by and between HI-TECH PHARMACAL CO., INC., a Delaware
corporation with offices at 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000 (the “Corporation”), and XXXXX
X. XXXXXX, an individual residing at 0000 Xxxxxxxxx Xxxxx Xxxx Xxxx, Xxxxxxx
00000 (“Employee”).
WITNESSETH
WHEREAS, the Corporation
desires to secure the services of Employee upon the terms and conditions
hereinafter set forth; and
WHEREAS, Employee desires to
render services to the Corporation upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the parties
mutually agree as follows:
Section
1. Employment. The
Corporation hereby employs Employee and Employee hereby accepts such employment,
as an employee of the Corporation, subject to the terms and conditions set forth
in this Agreement.
Section
2. Duties. Employee
shall serve as President of the division of the Corporation which markets and
distributes the products acquired from Midlothian Laboratories, LLC (the
“Division”). Employee’s responsibilities shall include without
limitation, management of the daily operations of the Division and
identification and introduction to the market of new product opportunities in a
timely manner. Employee shall further properly perform such other
duties as may be assigned to him from time to time by the Chief Executive
Officer and/or Board of Directors of the Corporation. During the term
of this Agreement, Employee shall devote substantially all of his available
business time to the performance of his duties hereunder unless otherwise
authorized by the Board of Directors.
Section
3. Term of
Employment. The term of this contract shall commence as of
December 27, 2007 (the “Effective Date”) and shall continue until December 26,
2009 unless earlier terminated by Employee upon 30 days advance written notice
to the Corporation, or unless earlier terminated pursuant to the provisions of
Section 5 hereof (the “Term”).
Section
4. Compensation of Employee.
4.1. Compensation. As
compensation for his services hereunder the Corporation shall pay Employee an
annual salary (“Salary”) equal to $232,782. On the first anniversary
of the Effective Date, Employee’s Salary shall be increased by five (5%)
percent. The Salary shall be payable weekly less such deductions as
shall be required to be withheld by applicable law and
regulations.
4.2. Stock
Options.
(a) Employee
shall receive, on the Effective Date, an option to purchase five thousand
(5,000) shares of the Corporation’s Common Stock, subject to and in accordance
with the terms and provisions of the Corporation’s Amended and Restated Stock
Option Plan (the “Plan”). The Stock Options shall vest in 25%
increments on the first through fourth anniversaries of the grant date and shall
be governed by the terms of the Plan, a copy of which has been provided to
Employee.
(b) On
or after the first anniversary of the Effective Date, Employee may receive
additional stock options at the sole discretion of the Corporation’s management,
such discretion to be exercised via recommendation by the Corporation’s Chief
Executive Officer to the Compensation Committee; provided however, that the
Compensation Committee shall make the final determination, in its discretion, as
to the number of options or other stock or equity based compensation, if any, to
be granted to Employee.
4.3. Bonus. During
the Term of this Agreement;
(a) For
the period commencing on the first day of the month following the Effective Date
(the “Start Date”) and ending on the day immediately prior to the first
anniversary of the Start Date (“Year 1”), Employee shall receive a bonus equal
to the sum of (i) 1.5% of the first $2,000,000 of the Division’s Pre-Tax Net
Income (as hereinafter defined) for Year 1; (ii) 5% of the Division’s Pre Tax
Net Income in excess of $2,000,000 for Year 1.
(b) For
the period commencing on the first anniversary of the Start Date and ending on
the day immediately prior to the second anniversary of the Start Date (“Year
2”), Employee shall receive a bonus equal to the sum of (i) 1.5% of the first
$2,000,000 of the Division’s Pre-Tax Net Income (as hereinafter defined) for
Year 2; (ii) 5% of the Division’s Pre Tax Net Income in excess of $2,000,000 for
Year 2.
(c) “Pre-Tax
Net Income” shall mean gross sales less the sum of (i) returns, chargebacks,
refunds, rebates and discounts; (ii) cost of goods sold; and (iii) all costs
directly attributable to the Division, including without limitation, Selling,
General and Administrative expenses (SG&A) and Research and Development
expenses (R&D), all as determined in accordance with generally accepted
accounting principles of financial reporting in the United States, applied on a
consistent basis.
(d) Within
sixty (60) days after the end of each of Year 1 and Year 2, as the case may be,
the Corporation shall deliver to the Employee the unaudited financial statements
of the Division for such Year, together with a determination (“Bonus
Determination”) of the amount of Bonus earned for such Year and showing the
calculations thereof. Any Bonus payable as reflected in such Bonus
Determination shall be paid to the Employee concurrently with the delivery of
such Bonus Determination. Absent manifest error or calculation
errors, such Bonus Determination shall be final, conclusive, and binding upon
the parties hereto.
4.4. Expenses. The
Corporation shall pay or reimburse Employee for all pre-approved reasonable and
necessary business, travel or other expenses incurred by him, upon proper
documentation thereof, which may be incurred by him in connection with the
rendition of the services contemplated hereunder.
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4.5. Benefits. During
the term of this Agreement, Employee shall be entitled to participate in such
pension, profit sharing, group insurance, option plans, hospitalization, and
group health benefit plans and all other benefits and plans as the Corporation
provides to its executives, which benefits plans will cover Employee and his
dependants. The Corporation shall pay for the full cost of Employee’s family
coverage health insurance.
4.6. Discretionary
Payments. Nothing herein shall preclude the Corporation from
paying Employee such bonus or bonuses or other compensation, as the Board of
Directors, in its discretion, may authorize from time to time.
Section
5.
Termination.
5.1. Termination. This
Agreement and Employee’s employment hereunder shall terminate immediately upon
(i) Employee’s death or Total Disability; (ii) the termination of employment of
Employee For Cause, as hereinafter defined; or (iii) a Corporation
Termination. Upon a termination of this Agreement, the Corporation
shall be released from all obligations to Employee with respect to this
Agreement, except as provided in Section 10.7 hereto.
5.2. Definitions.
(a) As
used herein, the term “For Cause” shall mean (i) Employee’s substantiated
misappropriation of the Corporation’s assets or substantiated perpetration of
fraud against, or substantiated dishonesty in dealings with the Corporation;
(ii) Employee’s indictment, plea or conviction in a court of law of any crime or
offense involving willful misappropriation of money or other property or any
other crime involving moral turpitude which constitutes a felony, whether or not
involving the Corporation; (iii) Employee’s behavior which is materially
detrimental to the Corporation’s reputation; (iv) Employee’s disobedience
of a material directive from the Chief Executive Officer or Board of Directors
of the Corporation consistent with Employee’s duties hereunder or Employee’s
willful refusal to follow, or reckless disregard of, the policies and directives
of the Corporation; (v) Employee’s habitual drunkenness or habitual use of
illegal substances; (vi) Employee’s failure to cooperate with a governmental or
regulatory investigation concerning the Corporation or Employee; (vii)
Employee’s leaving of his employment hereunder; or (viii) Employee’s repeated
failure to perform his duties or Employee’s breach of his responsibilities under
this Agreement; provided that the Corporation shall have given Employee notice
of his failure to perform his duties or breach of his responsibilities, and for
a period of five (5) days thereafter, such failure or breach shall not have been
remedied to the reasonable satisfaction of the Corporation.
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(b) As
used herein, the term “Corporation Termination” shall mean the termination by
the Corporation of this Agreement and Employee’s employment upon the giving to
Employee of two weeks prior written notice by the Corporation; provided however,
that a Corporation Termination shall not include a termination by the
Corporation For Cause and/or as a result of Employee’s death or Total
Disability. The Corporation shall be permitted to effect a
Corporation Termination for any reason and at any time.
5.3. Severance. If
Employee’s employment is terminated as a result of a Corporation Termination
during the two years of his employment, then the Corporation shall pay to
Employee after such termination, severance payments (“Severance”) equal to
eighty percent (80%) of Employee’s Salary for a period beginning on the date
that the Corporate Termination occurs and ending on the earlier of (i) the two
year anniversary date of this Agreement, or (ii) the one year anniversary date
of the Corporate Termination. The Severance shall be payable weekly
less such deductions as shall be required to be withheld by applicable law and
regulations. In addition, if Employee’s employment is terminated as a
result of a Corporation Termination, then Employee shall be entitled to the
Bonus for the year in which such termination occurs as provided in Section 4.2
hereof as if Employee had not been terminated. Employee shall not be
entitled to Severance if Employee’s employment is terminated For Cause, or if
Employee’s employment is terminated due to his death or Total
Disability.
5.4. Stock
Options.
(a) Upon
the death or Total Disability of Employee, all stock options granted to Employee
under the Plan (“Stock Options”) shall automatically become fully vested and
immediately exercisable.
(b) In
the event Employee is terminated pursuant to a Corporation Termination, then
Employee’s previously granted and unexercised Stock Options shall continue to
vest on their regular vesting dates until the date this Agreement would have
terminated had there not been a termination without cause.
(c) In
the event Employee is terminated For Cause, all unvested Stock Options shall
immediately terminate and be forfeited.
(d) In
the event there is a conflict between the terms of this Agreement and the Plan,
this Agreement shall govern.
Section
6. Disability.
6.1. Total
Disability. In the event Employee is mentally or physically
incapable or unable to perform his regular and customary duties of employment
with the Corporation for a period of ninety (90) days in any one hundred twenty
(120) day period, Employee shall be deemed to be suffering from a “Total
Disability” and the Corporation shall be entitled to terminate this
Agreement.
6.2. Payment During
Disability. In the event Employee is unable to perform his
duties hereunder by reason of a disability, which disability does not constitute
a Total Disability, the Corporation shall continue to pay Employee his Salary
during the continuance of such disability. To the extent any proceeds
from a disability insurance policy owned by the Corporation are paid to Employee
or his designee, the Corporation shall receive a credit against its obligations
under this Section 6.2 in an amount equal to such proceeds.
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Section
7. Vacations, Holidays, Sick
Days, other benefits. Employee shall be entitled to a vacation
of four (4) weeks for each of Year One and Year Two, during which period his
Salary shall be paid in full. Employee shall take his vacation at
such time or times as Employee and the Corporation shall determine is mutually
convenient. Employee shall also be entitled to the same number of
holidays, sick days and other benefits as are generally allowed to other
executives of the Corporation in accordance with the Corporation policy in
effect from time to time.
Section
8. Disclosure of Confidential
Information.
8.1. Disclosure. Employee
hereby acknowledges that the principal business of the Corporation is the
marketing and distribution of generic and branded pharmaceutical products and
such other businesses as the Corporation may conduct from time to time (the
“Business”). Employee acknowledges that he has acquired and will
acquire confidential information concerning the (i) the products and business
acquired by the Corporation from Midlothian Laboratories LLC, for which Employee
was President; and (ii) the Business, its products, know-how, customers and
plans and that, among other things, his knowledge of the Business will be
enhanced through his employment by the Corporation. Employee
acknowledges that such information is of great value to the Corporation, is the
sole property of the Corporation, and has been and will be acquired by him in
confidence.
8.2. Confidentiality. In
consideration of the obligations undertaken by the Corporation herein, Employee
will not, at any time during or after the term of Employee’s employment with the
Corporation, directly or indirectly, use for Employee’s own benefit or any other
party’s benefit, or reveal, divulge or make known to any person, any information
which is treated as confidential by the Corporation and not otherwise in the
public domain. Confidential information shall not include information
which was previously known by Employee, information which was given to Employee
by any third party under no obligation of confidentiality, or information which
Employee is required to disclose as a result of a governmental investigation or
by a court order. Employee agrees that all materials or copies
thereof containing confidential information of the Corporation in Employee’s
custody or possession will not, at any time, be removed from the Corporation’s
premises without the prior written consent of the Chief Executive Officer of the
Corporation and shall be delivered to the Corporation upon the earlier of
(i) a request by the Corporation or (ii) the termination of Employee’s
employment with the Corporation. After such delivery, Employee shall
not retain any such materials or copies thereof.
8.3. Survival. The
provisions of this Section 8 shall survive Employee’s employment
hereunder.
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Section
9. Conflicts of Interest;
Xxxxxxx Xxxxxxx.
9.1. Conflicts of
Interest. In order to avoid actual or apparent conflicts of
interest, except with the Corporation’s consent, Employee shall not have any
direct or indirect ownership or financial interest in any company, person or
entity which is: (i) a service provider to, or vendor of, the Corporation; (ii)
a customer of the Corporation; or (iii) a competitor of the
Corporation. Employee shall not be deemed to have any direct or
indirect ownership or financial interest for any such interest that does not
exceed two percent (2%) of the issued and outstanding voting securities of any
class of any corporation whose voting capital stock is traded on a national
securities exchange or in the over-the-counter market.
9.2. General
Requirements. Employee shall observe such lawful policies of
the Corporation as may from time to time apply.
9.3. Xxxxxxx
Xxxxxxx. Considering that the Corporation is a publicly-traded
corporation, Employee hereby agrees that Employee shall comply with any and all
federal and state securities laws, including but not limited to those that
relate to non-disclosure of information, xxxxxxx xxxxxxx and individual
reporting requirements and shall specifically abstain from discussing the
non-public aspects of the Corporation’s business affairs with any individual or
group of individuals (e.g., Internet chat rooms) who does not have a business
need to know such information for the benefit of the
Corporation. Employee hereby agrees to immediately notify the
Corporation’s Compliance Officer in accordance with the Corporation’s Xxxxxxx
Xxxxxxx Policy prior to Employee’s acquisition or disposition of the
Corporation’s securities.
Section
10. Indemnification.
10.1. Indemnification. The
Corporation hereby agrees to indemnify and hold harmless Employee to the fullest
extent permitted by the Corporation’s Certificate of Incorporation, By-Laws, the
Delaware General Corporation Law or any other applicable law, as any or all may
be amended from time to time. Such reimbursements shall include but
not be limited to Employee’s reasonable and necessary out of pocket expenses
including attorneys fees, settlement payments and any other such costs and
expenses.
10.2. Directors and Officers
Policy. The Corporation shall ensure that its Directors’,
Officers’, Insured Entity and Employment Practices Liability Insurance policy
(“D&O Policy”) shall cover Employee as an Insured Person, as such term is
defined in the D&O Policy. Such D&O Policy is currently in
effect and the Corporation knows of no reason why such policy would be
terminated or allowed to lapse. If so, the Corporation shall
immediately notify Employee of such policy termination. Upon
Employee’s written request therefor, Employee will be provided with an annual
certificate of insurance, demonstrating this coverage.
10.3. Undertaking. To
the extent that the Corporation advances payment for any fees or expenses to
Employee pursuant to this Section 10, such advance shall be accompanied by a
written undertaking by Employee to repay such amounts if it shall be ultimately
determined by a court of competent jurisdiction in a final disposition, that
Employee (i) is not entitled to be indemnified by the Corporation or (ii) that
the amount advanced exceeded the indemnification to which he is entitled, in
which case the amount of such excess shall be repaid to the
Corporation.
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10.4. Notice. As
a condition precedent to his right to be indemnified hereunder, Employee shall
give the Corporation notice in writing as soon as practicable of any claim made
against him for which indemnity will or could be sought under this
Agreement.
10.5. Cooperation. Employee
shall fully cooperate with the Corporation in connection with any matter, which
results in the assertion of a claim by Employee for indemnification
hereunder. The Corporation shall be entitled at its own expense to
participate in the defense of any proceeding, claim or action, or, if it shall
elect, to assume such defense, in which event such defense shall be conducted by
counsel chosen by the Corporation, subject to the consent of Employee, which
consent shall not be unreasonably withheld or delayed. Employee may
elect, at his own cost and expense, to have separate counsel represent him as
well.
10.6. Exceptions. The
Corporation shall not be liable under this Agreement to make any payment in
connection with any claim:
(a)
For which payment is actually made to Employee under valid and
collectable insurance policies, premiums for which are paid by the Corporation
or any of its affiliates, except in respect of any deductible and excess beyond
the amount of payment under such insurance;
(b) For
which Employee is indemnified by the Corporation otherwise than pursuant to this
Agreement, provided such amount has previously been paid to
Employee;
(c)
Brought about or contributed to by the dishonesty of
Employee; and
(d) By
Employee who acts as a plaintiff suing the Corporation, its affiliates or
directors, officers or shareholders of the Corporation or its affiliates except
with regard to Employee’s successful enforcement of Section 10.1 hereof.
10.7. Survival. The
obligations of the Corporation hereunder will survive (i) any actual or
purported termination of this Agreement by the Corporation or its successors or
assigns, whether by operation of law or otherwise, (ii) any change in the
Corporation’s Certificates of Incorporation or By-laws, (iii) termination of
Employee’s services to the Corporation (whether such services were terminated by
the Corporation or Employee), if such claim arises as a result of an occurrence
prior to the termination of this Agreement, whether or not a claim is made or an
action or proceeding is threatened or commenced before or after the actual or
purported termination of this Agreement, change in the Corporation’s Certificate
of Incorporation or By-laws, or termination of Employee’s
services.
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Section
11. Miscellaneous.
11.1. Injunctive
Relief. Employee agrees that any breach or threatened breach
by him of Sections 8 or 9 of this Agreement shall entitle the Corporation, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to enjoin such breach or threatened
breach. The parties understand and intend that each restriction
agreed to by Employee herein shall be construed as separable and divisible from
every other restriction, that the unenforceability of any restriction shall not
limit the enforceability, in whole or in part, of any other restriction, and
that one or more or all of such restrictions may be enforced in whole or in part
as the circumstances warrant. In the event that any restriction in
this Agreement is more restrictive than permitted by law in the jurisdiction in
which the Corporation seeks enforcement thereof, such restriction shall be
limited to the extent permitted by law.
11.2. Impact of Restatement of
Financial Statements Upon Previous Awards. If any of the
Corporation’s financial statements are required to be restated, resulting from
errors, omissions, or fraud, the Corporation may (in its sole discretion, but
acting in good faith) recover all or a portion of any performance bonus paid to
Employee with respect to any fiscal year of the Corporation the financial
results of which are negatively affected by such restatement. The
amount to be recovered from Employee shall be the amount by which the affected
bonus exceeded the amount that would have been payable to Employee had the
financial statements been initially filed as restated, or any greater or lesser
amount (including, but not limited to, the entire award) that the Corporation
shall determine. The Compensation Committee of the Corporation shall
determine whether the Corporation shall effect any such recovery (i) by seeking
repayment from Employee; (ii) by reducing (subject to applicable law and the
terms and conditions of the applicable agreement, plan, program or arrangement)
the amount that would otherwise be payable to Employee; (iii) by withholding
payment of future increases in compensation (including the payment of any
discretionary bonus amount) or grants of compensatory awards that would
otherwise have been made in accordance with the Corporation’s otherwise
applicable compensation practices; or (iv) by any combination of the
foregoing. This Section shall survive the termination of this
Agreement.
11.3. Assignment. Neither
Employee nor the Corporation may assign or delegate any of their rights or
duties under this Agreement, except as expressly provided herein.
11.4. Entire
Agreement. This Agreement constitutes and embodies the entire
and complete understanding and agreement of the parties with respect to
Employee’s employment by the Corporation, supersedes all prior understandings
and agreements, if any, whether oral or written, between Employee and the
Corporation and shall not be amended, modified or changed except by an
instrument in writing executed by the party to be charged. The
invalidity or partial invalidity of one or more provisions of this Agreement
shall not invalidate any other provision of this Agreement. No waiver
by either party of any provision or condition to be performed shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time.
11.5. Binding
Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors.
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11.6. Captions. The
captions contained in this Agreement are for convenience of reference only and
shall not affect in any way the meaning or interpretation of this
Agreement.
11.7. Notices. All
notices, requests, demands and other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by fax or certified, mail, postage prepaid, to
the party at the address set forth above or to such other address as either
party may hereafter give notice of in accordance with the provisions
hereof.
11.8. Governing
Law. This Agreement shall be governed by and interpreted under
the laws of the State of New York applicable to contracts made and to be
performed therein without giving effect to the principles of conflict of laws
thereof. Except in respect of any action commenced by a third party
in another jurisdiction, the parties hereto agree that any legal suit, action,
or proceeding against them arising out of or relating to this Agreement may be
brought in the United States Federal Courts in the State of New York or the
state courts, in the State of New York. The parties hereto hereby
accept the jurisdictions of such courts for the purpose of any such action or
proceeding, and agree that venue for any action or proceeding brought in the
State of New York shall lie in the United States Federal Courts in the Eastern
District or any state court located in Nassau County, New York, as the case may
be. By its execution hereof, the parties hereby irrevocably waive any
objection and any right of immunity on the ground of venue, the convenience of
the forum or the jurisdiction of such courts or from the execution of judgments
resulting therefrom. The parties hereby irrevocably accept and submit
to the jurisdiction of the aforesaid courts in any such suit, action or
proceeding.
11.9. Counterparts. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
11.10. WAIVER OF JURY
TRIAL. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS
PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND
THAT ANY ACTION OR PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY SHALL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
11.11 No Restriction Imposed
Hereby. Nothing contained in this
Employee Agreement shall preclude Employee from negotiating an employment
agreement that contains compensation and/or bonus terms comparable or superior
to the terms contained herein upon the two year anniversary of this
agreement.
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INTENTIONALLY
LEFT BLANK
10
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date set forth
above.
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HI-TECH
PHARMACAL CO., INC.
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/s/Xxxxx Xxxxxxx
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By:
Xxxxx Xxxxxxx, President and Chief Executive Officer
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Dated:
12/27/07
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/s/Xxxxx X. Xxxxxx
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XXXXX
X. XXXXXX
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Dated:
12/27/2007
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