EXHIBIT 10.6
FIRST AMENDMENT TO SEPARATION AGREEMENT AND GENERAL RELEASE
THIS FIRST AMENDMENT (the "AMENDMENT") TO SEPARATION AGREEMENT AND GENERAL
RELEASE by and between Xxxxxx Drug Co., Inc. (the "CORPORATION") and Xxxxxxx X.
Xxxxxxx ("XXXXXXX"), dated September 18, 2003 (the "SEPARATION AGREEMENT"), is
dated December 4, 2003.
RECITALS
A. The Company and Xxxxxxx entered into the Separation Agreement providing
the terms of Xxxxxxx'x termination of employment with the Company.
B. Under the terms of the Separation Agreement, the Company agreed, inter
alia, (i) to make a termination payment to Xxxxxxx in the amount of
$400,000 in the form of a note bearing interest at 6% per annum and
maturing on July 16, 2006 (the "Note"), (ii) to pay Xxxxxxx $7,260.30
representing his earned and unused vacation for the calendar year 2003,
(iii) to reimburse Xxxxxxx for attorneys' fees incurred by Xxxxxxx in
connection with the Separation Agreement, not to exceed $6,000, and (iv)
to continue Xxxxxxx'x health insurance coverage and certain other benefits
for the period of twenty four (24) months commencing on June 16, 2003.
C. On or about November 6, 2003, Xxxxxxx filed a Complaint in Illinois
Circuit Court of the 17th Judicial Circuit (the "Court") seeking to
enforce the Separation Agreement The ("Complaint").
D. The Company is in default of the Note by failing to make the first
installment due under the Note on October 16, 2003 and the Company has
represented to Xxxxxxx that it will not have the ability to fulfill its
obligations under the Note or the Separation Agreement and has requested
Xxxxxxx to renegotiate and forgive a portion of the indebtedness and
obligations.
E. The Company has represented to Xxxxxxx that the negotiations and debt
forgiveness is necessary for the Company to reorganize so it can continue
operations and access new capital.
F. The parties desire to enter into this Amendment, inter alia, to settle in
full the Company's payment obligations to Xxxxxxx under the Separation
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and obligations set forth herein, the Company and Xxxxxxx hereby agree
as follows:
1. Xxxxxxx agrees to compromise the monetary payments due him under the
terms of the Separation Agreement. Xxxxxxx agrees to accept, and the
Company agrees to pay to Xxxxxxx, the amount of $162,789.64 as and
for full satisfaction of the Company's obligations as set forth in
Paragraph B of the Recitals as well as any other monetary
obligations of the Company under the Separation Agreement,
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except for medical coverage as set forth in Paragraph 2 below. The
payment shall be payable on the date of execution of this Amendment.
2. Section 3(b) of the Separation Agreement is hereby deleted in its
entirety and replaced with the following:
"For the period commencing on the Termination Date and ending
on March 31, 2004, EMPLOYER shall continue EMPLOYEE's medical
insurance coverage at its full and complete expense."
3. The Promissory Note, dated September 18, 2003, in the principal
amount of $400,000, issued by the Company in favor of Xxxxxxx
pursuant to Section 3(a) of the Separation Agreement is, upon
receipt of the payment required by Paragraph 1 hereof, fully
satisfied. Xxxxxxx agrees to return such Promissory Note to the
Company upon receipt of the payment. Xxxxxxx further waives and
releases the Company from any and all interest and fees which may
have accrued under the said Promissory Note including, without
limitation, in connection with any default by the Company
thereunder.
4. In the event that (i) a petition is filed by or against the Company,
with any court of competent jurisdiction, seeking reorganization or
liquidation of the Company under the United States Bankruptcy Code,
as amended (the "CODE"), (ii) such court determines that the payment
to Xxxxxxx set forth in Paragraph 1 of this Amendment is deemed a
"preference" under the Code, and (iii) Xxxxxxx is required to pay
and pays to the Bankruptcy Trustee the amount of such payment, the
amendments set forth in Paragraphs 1 through 3 of this Amendment
shall be deemed null and void and Xxxxxxx'x claim for the amounts
provided in the Separation Agreement, without giving effect to this
Amendment, shall be deemed reinstated in full.
5. Xxxxxxx hereby consents to, and agrees to execute such documents as
shall be necessary to effect, any and all amendments to, waivers of
and releases from any and all restrictions set forth in, the
Debenture and Warrant Purchase Agreement dated March 10, 1998, by
and among the Company and certain signatories thereto and any and
all documents executed in connection therewith, including, without
limitation, the 5% Convertible Senior Secured Debentures issued
thereunder (the "Debentures"), each as amended through the date
hereof, which consents, waivers and releases may be required so as
to (a) facilitate the purchase by certain investors of the
promissory notes issued by the Company to Xxxxxx Pharmaceuticals,
Inc., including the succession by such investors to the priority
liens securing the Company's obligations under such promissory
notes, and (b) allow the Company to obtain working capital financing
to fund operations through 2004. Such consents, waivers and releases
shall include, without limitation (i) waivers of lien, indebtedness,
registration rights, transfer and other contractual restrictions,
(ii) release and/or subordination of liens on Company and subsidiary
assets, and (iii) conversion of the Debentures into equity of the
Company; provided, however, that in each case (x) the holders of a
majority in the
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principal amount of the Debentures shall provide the same consents,
waivers and releases as is requested of Xxxxxxx, and (y) each of the
holders of the Debentures, in their capacity as Debenture holders,
shall be treated, in all material respects, substantially identical.
6. Xxxxxxx shall execute and file with the Court within ten (10) days
of the date hereof an appropriate order or stipulation voluntarily
dismissing the Complaint with prejudice, and shall provide a filed
copy to Xxxxxx. Such dismissal shall not affect Xxxxxxx'x right
under this Amendment.
7. The Company hereby represents that it is currently engaged in
negotiations with other unsecured creditors seeking to obtain
payment reductions of the Company's outstanding obligations due to
such creditors. As part of such negotiations the Company is seeking
payment concessions which are consistent in all material respects in
magnitude with the revised payment terms set forth in this
Amendment.
8. The Company and Xxxxxxx agree that, except as expressly modified
herein, all provisions of the Separation Agreement shall remain in
full force and effect.
9. This Amendment may be executed in two or more facsimile
counterparts, each of which shall be deemed an original but all of
which shall constitute the same Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective duly authorized officers as of the date first above written.
XXXXXX DRUG CO., INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief
Executive Officer
/s/ Xxxxxxx X. Xxxxxxx
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XXXXXXX X. XXXXXXX
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