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Exhibit 10.31
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
12th day of December, 1997 by and between NOVEN PHARMACEUTICALS, INC., a
Delaware corporation (hereinafter called the "Company"), and XXXXXX X. XXXXXXX
(hereinafter called the "Executive").
Recitals
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A. The Board of Directors of the Company (the "Board") recognizes and
desires to assure the Company of the Executive's continued employment in an
executive capacity and to compensate him therefor.
B. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
Agreement
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NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 EMPLOYMENT AND TERM. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein, for the period commencing on the date hereof
and expiring on December 31, 2002 (the "Initial Term") unless sooner terminated
as hereinafter set forth; provided, however, that commencing on January 1,
2003 and each January 1, thereafter, the Initial Term of this Agreement shall
automatically be extended for one additional year unless at least ninety (90)
days prior to such January 1 date, the Company shall have delivered to the
Executive or the Executive shall have delivered to the Company written notice
that the term of the Executive's employment hereunder will not be extended.
1.2 DUTIES OF EXECUTIVE. The Executive shall serve as the President
and Chief Executive Officer of the Company and shall have powers and authority
superior to any other officer or employee of the Company or of any subsidiary of
the Company except the Chairman of the Board. Subject to the preceding
sentence, during the term of Employment, the Executive shall diligently perform
all services as may be reasonably assigned to him by the Board, and shall
exercise such power and authority as may from time to time be delegated to him
by the Board. The Executive shall be required to report solely to, and shall be
subject solely to the supervision and direction of the Board at duly called
meetings thereof, and no other person or group shall be given authority to
supervise or direct Executive in the performance of his duties. In addition,
the Executive shall regularly consult with and provide information to the
Chairman of the Board with respect to the Company's business and affairs. The
Executive shall devote substantially all his working time and attention to the
business and affairs of the Company (excluding any vacation and sick leave to
which the Executive is entitled), render such services to the best of his
ability, and use his reasonable best efforts to promote the interests of the
Company. It shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees (it being agreed
that in no event shall Executive serve on the board of directors of more than
four other corporations and the acceptance of any new directorship after the
date hereof shall be subject to the consent of the Board, which shall not be
unreasonably withheld), (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments,
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so long as such activities do not interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement.
1.3 PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at the Company's principal executive
offices except for travel reasonably necessary in connection with the Company's
business. The Company shall not, without the written consent of the Executive,
relocate or transfer its principal executive offices outside Dade or Broward
County, Florida.
2. COMPENSATION.
2.1 BASE SALARY. Commencing on the effective date of this
Agreement, the Executive shall receive a base salary at the annual rate of not
less than $400,000 (the "Base Salary") during the term of this Agreement, with
such Base Salary payable in installments consistent with the Company's normal
payroll schedule, subject to applicable withholding and other taxes. On
January 1 of each calendar year (the "Salary Adjustment Date") commencing on
January 1, 1999, the Executive's then Base Salary shall be increased by an
amount equal to the previous year's Base Salary multiplied by the percentage
increase, if any, in the "Consumer Price Index: Dade County, All Items--Urban
Wage Earners and Clerical Workers", published by the Bureau of Labor Statistics
of the United States Department of Labor (the "CPI"), between the CPI as of
December 31 for the year then ended, and the CPI as of December 31 for the year
prior to the year then ended. In the event that there is a change in the basis
of calculating the CPI, or if a change is made in the terms or number of items
contained in the CPI, or if the CPI is discontinued, the Company shall, in good
faith, designate a substitute index or formula, and such substitute index or
formula shall have the same effect as if it had been originally designated
herein. The Base Salary shall also be reviewed, at least annually, for merit
increases (if any) and may, by action and in the discretion of the Board, be
increased at any time or from time to time. The Base Salary, if increased, shall
not thereafter be decreased for any reason.
2.2 INCENTIVE COMPENSATION. The Executive shall be entitled to
receive such bonus payments or incentive compensation as may be determined at
any time or from time to time by the Board (or any authorized committee hereof)
in its discretion. Such potential bonus payments and/or incentive compensation
shall be considered at least annually by the Board (it being agreed that such
consideration shall not create any implication that the Board shall award any
such bonus or incentive compensation).
2.3 STOCK OPTION.
(a) The Company hereby grants to the Executive a seven-year
incentive stock option (the "Option") to purchase 525,000 shares of the
Company's common stock, par value $.0001 per share ("Common Stock"), at a per
share exercise price $6 3/16. The Option shall be treated as an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code to
the greatest extent permitted by law. The Option shall be evidenced by an
agreement in substantially the form attached hereto as EXHIBIT A.
(b) The Option shall be subject to the terms and conditions of
the Company's Stock Option Plan (the "Plan") and contain the following
provisions:
(i) The Option shall be immediately exercisable with
respect to 50,000 shares of Common Stock. The Option shall "vest" (i.e.,
become exercisable) with respect to the remaining 475,000 shares of Common
Stock in whole or in part and cumulatively according to the following schedule
(subject, however, to the accelerated vesting contemplated by the following
clause (ii) of this Section 2.3(b)):
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10% on or after December 12, 1998
20% on or after December 12, 1999
20% on or after December 12, 2000
25% on or after December 12, 2001
25% on or after December 12, 2002
(ii) Notwithstanding the preceding clause (i), the
Option shall become immediately exercisable as to 50% of the shares of Common
Stock not otherwise vested upon any termination of Executive's employment
pursuant to Section 4.4 hereof;
(iii) The Company shall take all action reasonably
requested by the Executive to permit any "cashless" exercise of the Option
that is permitted under the Plan;
(iv) If the Company's Stock Option Committee requests
within six months of the date hereof, paragraph 11 of the attached Option
agreement form shall be reinstated and be applicable. The Company's Chairman
shall use his best efforts to persuade such Committee to not reinstate such
provision. Executive shall not exercise the Option prior to the six month
anniversary of this Agreement unless his employment is terminated;
(v) The Company agrees that, no later than June 30,
1998, it will file a Registration Statement on Form S-8 or take any other
action necessary to ensure that the issuance of Common Stock pursuant to the
Option is registered under the Securities Act of 1933, as amended; and
(vi) The provisions of the Plan shall not be
adversely modified as to the Option granted to Executive pursuant to this
Agreement without the Executive's prior written consent.
3. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
3.1 EXPENSE REIMBURSEMENT. During the term of Executive's employment
hereunder, the Company, upon the submission of reasonable supporting
documentation by the Executive, shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course
of and pursuant to the business of the Company, including expenses for travel
and entertainment.
3.2 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Initial
Term, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable to other key
executives of the Company and its subsidiaries, in each case comparable to
those currently in effect or as subsequently amended. Such plans, practices,
policies and programs, in the aggregate, shall provide the Executive with
compensation, benefits and reward opportunities at least as favorable as the
most favorable of such compensation, benefits and reward opportunities provided
at any time hereafter with respect to other key executives.
3.3 WELFARE BENEFIT PLANS. During the Initial Term, the Executive
and/or the Executive's family (which shall be deemed to include Xx. Xxxxxxx X.
Xxxxxxxx assuming Xx. Xxxxxxxx is insurable and the cost of such coverage is
comparable to the cost of coverage had Xx. Xxxxxxxx been Executive's spouse), as
the case may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and programs provided
by the Company and its subsidiaries (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and programs), at
least as favorable as the most favorable of such plans, practices, policies
and programs in effect at any time hereafter with respect to other key
executives; provided, however, that Xx. Xxxxxxxx may be covered
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under alternative plans or policies so long as the coverage is comparable in
all material respects to the coverage provided to Executive.
3.4 WORKING FACILITIES. During the term of Executive's employment
hereunder, the Company shall furnish the Executive with an office, a secretary
and such other facilities and services suitable to his position and adequate
for the performance of his duties hereunder.
3.5 AUTOMOBILE ALLOWANCE. During the Initial Term, the Company shall
provide Executive with a non-accountable automobile allowance of Seven Hundred
Fifty Dollars ($750.00) per month, which amount is intended to compensate
Executive for wear and tear and, in addition, reimburse the Executive for
all costs of gasoline, oil, repairs, maintenance, insurance and other expenses
incurred by Executive by reason of the use of Executive's automobile for
Company business from time to time.
3.6 VACATION. During the Initial Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its subsidiaries as in
effect at any time hereafter with respect to other key executives of the
Company and its subsidiaries; PROVIDED, HOWEVER, that in no event shall
Executive be entitled to less than five weeks paid vacation per year.
4. TERMINATION.
4.1 TERMINATION FOR CAUSE. Notwithstanding anything contained to
the contrary in this Agreement, this Agrement may be terminated by the Company
for Cause. As used in this Agreement, "Cause" shall only mean (i) any material
act or acts of personal dishonesty taken by the Executive which is either (x)
at the expense of the Company, or (y) reasonable likely to bring significant
disrepute to the Company, (ii) subject to the following sentences, any
violation by the Executive of the Executive's material obligations under this
Agreement which is demonstrably willful and deliberate on the Executive's part
and which is not remedied within ten business days after receipt of written
notice from the Company, (iii) the conviction of the Executive for any
criminal act which is a felony or a misdemeanor involving moral turpitude, or
(iv) a material breach of Executive's representation in the last sentence of
Section 17 hereof or a material breach of the Confidentiality and Invention
Agreement contemplated by Section 6.1 hereof. Upon any determination by the
Company's Board of Directors that Cause exists under clause (ii) of the
preceding sentence, the Company shall cause a special meeting of the Board to
be called and held at a time mutually convenient to the Board and Executive,
but in no event later than ten (10) business days after Executive's receipt of
the notice contemplated by clause (ii). Executive shall have the right to
appear before such special meeting of the Board with legal counsel of his
choosing to refute any determination of Cause specified in such notice, and
any termination of Executive's employment by reason of such Cause determination
shall not be effective until Executive is afforded such opportunity to appear.
Any termination for Cause pursuant to clause (i), (iii) or (iv) of the first
sentence of this Section 4.1 shall be made in writing to Executive, which notice
shall set forth in detail all acts or omissions upon which the Company is
relying for such termination. Upon any termination pursuant to this Section
4.1, the Executive shall be entitled to be paid his Base Salary to the date of
termination and the Company shall have no further liability hereunder (other
than for reimbursement for reasonable expenses incurred prior to the date of
termination).
4.2 DISABILITY. Notwithstanding anything contained in this
Agreement to the contrary, the Company, by written notice to the Executive,
shall at all times have the right to terminate this Agreement, and the
Executive's employment hereunder, if the Executive shall, as the result of
mental or physical incapacity, illness or disability, fail to perform his duties
and responsibilities provided for herein for a period of more than one hundred
twenty (120) days in any 12-month period. Upon any termination pursuant to
this Section 4.2, the Executive shall be entitled to be paid his Base Salary to
the date of
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termination and the Company shall have no further liability hereunder (other
than for reimbursement for reasonable business expenses incurred prior to the
date of termination).
4.3 DEATH. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall pay to the estate of the
deceased Executive an amount equal to the sum of (x) any unpaid amounts of
his Base Salary to the date of his death, plus (y) six months of Base Salary,
and the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
the Executive's death).
4.4 TERMINATION WITHOUT CAUSE. At any time the Company shall have
the right to terminate Executive's employment hereunder by written notice to
Executive; provided, however, that the Company shall (i) pay to Executive any
unpaid Base Salary accrued through the effective date of termination specified
in such notice, (ii) pay to the Executive in a lump sum, in cash within 30 days
after the date of employment termination, an amount equal to the Executive's
then annual Base Salary, and (iii) pay to the Executive, in accordance with the
Company's normal payroll periods and for a period of two years from the date of
termination, 50% of the Executive's then Base Salary (I.E., one year's Base
Salary will be paid over two years), provided the Executive is not in breach of
Section 6.3 hereof. The Company shall be deemed to have terminated the
Executive's employment pursuant to this Section 4.4 if such employment is
terminated (i) by the Company without Cause, or (ii) by the Executive
voluntarily for "Good Reason." For purposes of this Agreement, "Good Reason"
means
(a) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 1.2 of this Agreement, or any other action by the
Company, which results in a significant diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company within ten (10) business days after receipt of notice
thereof given by the Executive;
(b) any failure by the Company to comply with any of the
provisions of Section 2, Section 3, Section 7 or Section 17 of this Agreement,
other than an isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(c) the Company's requiring the Executive to be based at any
office or location other than Dade or Broward County, Florida, except for
travel reasonably required in the performance of the Executive's
responsibilities;
(d) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(e) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement; or
(f) any termination by the Executive during the three-month
period following the effective date of any "Change in Control" other than a
termination for Cause.
5. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall mean:
(a) The acquisition (other than by or from the Company), at any time
after the date hereof, by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), of beneficial ownership (within the meaning of Rule
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13d-3 promulgated under the Exchange Act) of 30% or more of either the then
outstanding shares of common stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors; or
(b) The seven (7) individuals who, after the appointment of
Executive as a director pursuant to Section 7 hereof, constitute the Board (as
of the date hereof the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board; or
(c) Approval by the shareholders of the Company (A) a
reorganization, merger or consolidation with respect to which persons who were
the shareholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 51% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (B) a liquidation or dissolution of the Company, or (C) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
(d) The approval by the Board of a distribution (or series of
distributions) of assets representing more than 50% of the Company's current
assets.
6. RESTRICTIVE COVENANTS.
6.1 CONFIDENTIALITY. The Executive agrees to promptly execute and
deliver to the Company a Confidentiality and Invention Agreement in
substantially the same form as set forth on EXHIBIT B.
6.2 NONSOLICITATION OF EMPLOYEES. While employed by the Company and
for a period of twenty-four (24) months thereafter, Executive shall not
directly or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity, attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
unless such employee or former employee has not been employed by the Company
for a period in excess of six months.
6.3 NON-COMPETITION. While employed by the Company and for a
period of twenty-four (24) months thereafter, Executive shall not, directly or
indirectly, whether as principal, agent, shareholder (except as set forth
below) or in any other capacity, whether or not compensation is received,
engage or participate in any activity for, be employed by, assist or have an
equity interest in (other than as a passive investor of no more than ten percent
(10%) with no involvement in the management or conduct of the affairs of
business of such entity) any business or other entity which is or plans to
develop, manufacture, market or sell any pharmaceutical product designed to
compete directly with the transdermal/transoral topical or other products of
the Company and its subsidiaries which are under active development or are
manufactured, marketed or sold or other business in which the Company is
engaged during the term of Executive's employment hereunder. Executive
acknowledges that the provisions of this Section 6.3 are reasonably necessary
for the purposes of protecting the Company legitimate business interests and
goodwill. It is accordingly the intention of the parties that this Section 6.3
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be enforceable to the fullest extent permissible under applicable law. Executive
agrees, however, that in the event any restriction or limitation of this
Section 6.3, or any portion thereof, shall be declared or held to be invalid or
unenforceable by a court of competent jurisdiction, then such restriction or
limitation shall be deemed amended to substitute or modify it, as either or
both may be necessary, to render it valid and enforceable.
6.4 INJUNCTION. It is recognized and hereby acknowledged by
the parties hereto that a breach by the Executive of any of the covenants
contained in Section 6.2 or 6.3 of this Agreement will cause irreparable injury
to the Company's legitimate business interests and goodwill. As a result, the
Executive recognizes and hereby acknowledges that the Company shall be entitled
(without the posting of bond or security or the proving of actual damages) to
an injunction from any court of competent jurisdiction enjoining and
restraining any violation of any or all of the covenants contained in Section 6
of this Agreement by the Executive or any of his affiliates, associates,
partners or agents, either directly or indirectly, and that such right to
injunction shall be cumulative and in addition to whatever other remedies the
Company may possess.
7. ELECTION OF EXECUTIVE AS DIRECTOR. Contemporaneously herewith, the
Board is appointing Executive to fill the vacancy on the Board created by the
increase of its size to seven (7) members. For so long as the Executive
continues to serve as the Company's President and Chief Executive Officer, the
Company shall cause the nomination of the Executive as a director of the
Company at each shareholder meeting at which election of directors is
considered.
8. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
9. NOTICES: Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Company: Noven Pharmaceuticals, Inc.
00000 X.X. 000xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Chairman
WITH A COPY TO:
Xxxxxxx X. Xxxxx
Shapo, Xxxxxxxx & Xxxxx, P.A.
000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
If to the Executive: Xxxxxx X. Xxxxxxx
000 Xxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
WITH A COPY TO:
Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx
Xxxxx & Quentel, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
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or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
10. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of, be enforceable
by and be binding upon the Company's successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law or otherwise.
11. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
12. WAIVERS. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
13. DAMAGES. Nothing contained herein shall be construed to prevent
the Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
14. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
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15. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others (it being agreed that nothing herein shall require any
severance or other payment following a proper termination of Executive's
employment for Cause). In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement.
16. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be nondeductible by the Company for Federal
income tax purposes because of Section 162(m) or 280G of the Code, then the
aggregate present value of amounts payable or distributable to or for the
benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced to the Reduced Amount. The "Reduced
Amount" shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any Payment to be
nondeductible by the Company because of Section 162(m) or 280G of the Code.
Anything to the contrary notwithstanding, if the Reduced Amount is zero and it
is determined further that any Payment which is not an Agreement Payment would
nevertheless be nondeductible by the Company for Federal income tax purposes
because of Section 162(m) or 280G of the Code, then the aggregate present value
of Payments which are not Agreement Payments shall also be reduced (but not
below zero) to an amount expressed in present value which maximizes the
aggregate present value of Payments without causing any Payment to be
nondeductible by the Company because of Section 162(m) or 280G of the Code. For
purposes of this Section 16, present value shall be determined in accordance
with Section 280G(d)(4) of the Code. Any amount which is not paid in the taxable
year in which it was originally scheduled to be paid as a result of the
postponement thereof pursuant hereto shall be payable in the next succeeding
taxable year in which such payment will not result in the disallowance of a
deduction pursuant to either Section 162(m) or 280G of the Code; provided,
however, that all postponed payments shall be placed in a Rabbi trust or similar
vehicle for the benefit of the Executive in such a way that the amounts so
transferred are not taxable to such person or deductible by the Company until
payment from such vehicle to the Executive is made. In the event a payment has
been made to the Executive, but then disallowed as a deduction by the Internal
Revenue Service and return of the payment is required into the trust, said
payment to the Executive shall be treated as a loan and said payment to the
trust shall be treated as repayment of said loan. The Company shall not pledge,
hypothecate or othwerise encumber any amounts held in the trust or other similar
vehicle for the benefit of the Executive hereunder.
(b) All determinations required to be made under this Section 16
shall be made by the Company's independent public accountants (the "Accounting
Firm"), which shall provide (i) detailed supporting calculations both to the
Company and the Executive within twenty (20) business days of the termination
of Executive's employment or such earlier time as is requested by the Company,
and (ii) an opinion to the Executive that he has substantial authority not to
report any excise tax on his Federal income tax return with respect to any
Payments. Any such determination by the Accounting Firm shall be binding upon
the Company and the Executive. The Executive shall determine which and how much
of the Payments shall be eliminated or reduced consistent with the requirements
of this Section 16, provided that, if the Executive does not make such
determination within ten business days of the receipt of the calculations made
by the Accounting Firm, the Company shall elect which and how much of the
Payments shall be eliminated or reduced consistent with the requirements of
this Section 16 and shall notify the Executive promptly of such election.
Within five business days thereafter, the Company shall pay to or
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distribute to or for the benefit of the Executive such amounts as are then due
to the Executive under this Agreement. All fees and expenses of the Accounting
Firm incurred in connection with the determinations contemplated by this Section
16 shall be borne by the Company.
(c) As a result of the uncertainty in the application of Section 162(m)
or 280G of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Payments will have been made by the Company
which should not have been made ("Overpayment") or that additional Payments
which will not have been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm, based upon the assertion
of a deficiency by the Internal Revenue Service against the Executive which the
Accounting Firm believes has a high probability of success, determines that an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of the Executive shall be treated for all purposes
as a loan ab initio to the Executive which the Executive shall repay to the
Company together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by the Employee to the
Company if and to the extent such deemed loan and payment would not either
reduce the amount on which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the event that
the Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, any such Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
17. CONFLICTS WITH CERTAIN EXISTING ARRANGEMENTS. The Company acknowledges
that it has received and reviewed Executive's non-competition covenants with a
prior employer, a copy of which is attached hereto as EXHIBIT C. The Company
agrees that (x) it shall not hereafter acquire a "Conflicting Organization" or
otherwise expand its present business activities such that Executive could
reasonably be expected to be deemed in breach or violation of such
non-competition covenants, and (y) it shall indemnify and hold harmless the
Executive from any and all damages that Executive may hereafter suffer or incur
by reason of any such Company acquisition or expansion of business after the
date hereof. The Executive represents to the Company that his execution and
performance of the Agreement does not violate the provisions of any employment,
non-competition or other material agreement to which he is a party or by which
he is bound.
18. REIMBURSEMENT OF LEGAL EXPENSES. The Company shall promptly reimburse
Executive for up to $3,000 of all reasonable legal fees incurred by Executive in
connection with the preparation, negotiation and execution of this Agreement and
ancillary documents.
19. INDEMNIFICATION. The Company agrees to promptly execute and deliver to
Executive an Indemnification Agreement in substantially the same form as
utilized for the Chairman of the Board, it being agreed that the Company will
use its best efforts to ensure that such agreement will provide for mandatory
indemnification and advancement of expenses to the fullest extent permitted by
law.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
COMPANY:
NOVEN PHARMACEUTICALS, INC.
By:
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Xxxxxx Xxxxxxxxx
Chairman of the Board
EXECUTIVE:
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XXXXXX X. XXXXXXX
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