EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT (the "AGREEMENT") made as of the 26th day
of August, 2003 by and between XXXXXX DRUG CO., INC., a New York corporation
(the "CORPORATION"), with principal executive offices at 000 Xxxxx Xxxxxxxxxx
Xxxx, Xxxxxxxx, XX 00000 and XXXXXX X. XXXXXXX, residing at 000 Xxxxx Xxxx
Xxxxxx, Xxxxx, XX 00000 (the "EMPLOYEE").
W I T N E S S E T H
WHEREAS, the Corporation desires to employ the Employee to engage in
such activities and to render such services as are required under the terms and
conditions hereof and the Board of Directors has authorized and approved the
execution of this Agreement; and
WHEREAS, the Employee desires to be employed by the Corporation
under the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Services. The Corporation hereby employs the Employee for the
Term (as hereinafter defined in Section 2 hereof), to render exclusive and
full-time services to the business and affairs of the Corporation as the
President and Chief Executive Officer of the Corporation, subject to the
direction of the Board of Directors of the Corporation, and, in connection
therewith, the Employee shall have all the duties and responsibilities
customarily rendered by a President and Chief Executive Officer, and as may be
further reasonably and customarily
directed or requested to be performed by the Board of Directors, to which the
Employee shall report, and to use his commercially reasonable best efforts,
skill and abilities to promote the interests of the Corporation and its
subsidiaries. The Employee's office shall be based initially and temporarily at
the Corporation's Congers, New York facility. The Corporation shall use its
commercially reasonable best efforts to transfer its administrative headquarters
to a location in eastern Pennsylvania no more than forty-five (45) driving miles
from Exton, Pennsylvania, within twelve (12) months from the date of this
Agreement. Upon the completion of such transfer, the Employee shall be based at
such headquarters. The Employee shall provide services to and shall travel to
such of the Corporation's various offices and locations as the Corporation and
the Employee mutually agree is in the best business interests of the
Corporation.
1.2 Acceptance. The Employee hereby accepts such employment and
agrees to render the services described in Section 1.1 hereof.
2. Term of Employment. The term of the Employee's employment under this
Agreement shall commence on the date of this Agreement and shall expire two (2)
years from the date hereof (the "INITIAL TERM"), unless sooner terminated
pursuant to Section 7 of this Agreement; provided, however, that the Employee's
term hereunder shall automatically be extended for successive one (1) year
periods (each, "RENEWAL PERIOD" and together with the Initial Term, the "TERM"),
unless either the Corporation or the Employee provides written notice of
non-renewal of the Employee's employment with the Corporation ninety (90) days
prior to the expiration of the Initial Term or any Renewal Period.
3. Compensation. In consideration of the services to be rendered by the
Employee pursuant to this Agreement, the Employee shall receive from the
Corporation the following compensation:
2
(a) Base Salary. The Corporation shall pay the Employee an aggregate
base salary at the initial annual rate of $300,000 (the "BASE SALARY"), payable
in equal bi-weekly installments, less such deductions or amounts to be withheld
as shall be required by applicable laws and regulations. The Employee's Base
Salary shall be reviewed at least annually and be subject to increase by the
Board of Directors of the Corporation, in its sole and absolute discretion.
(b) Annual Bonus. During the Term, the Employee will be eligible to
receive from the Corporation an annual bonus (the "BONUS") in the amount of up
to thirty-five percent (35%) of the Employee's Base Salary during the fiscal
year (or portion thereof) for which the Bonus may be awarded. The Bonus will be
based upon on the achievement of such targets, conditions or parameters (the
"BONUS CRITERIA") as will be agreed upon by the Employee and the Board of
Directors or the Compensation Committee of the Board of Directors of the
Corporation (i) no later than sixty (60) days from the date of this Agreement in
the case of the Bonus Criteria for fiscal year 2003, and (ii) no later than
sixty (60) days from the beginning of each fiscal year thereafter during the
Term. The Bonus shall be paid at the same time as bonuses are paid to other
executive officers, but in any event within seventy-five (75) days following the
end of the Corporation's fiscal year.
4. Expenses.
The Corporation shall pay or reimburse the Employee for all
reasonable expenses which are in accordance with the Corporation's expense
policy in force from time to time and which are actually incurred or paid by the
Employee during the Term in the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as the Corporation may reasonably require. Such expenses
shall
3
include, but not be limited to, business travel, travel to corporate facilities
and related temporary living expenses, meals and lodging, business
entertainment, and travel expenses incurred by the Employee during the
recruiting and interviewing process. Such expenses shall also include fees and
expenses associated with membership in various business and civic associations,
approved by the Compensation Committee of the Board of Directors of the
Corporation, in which the Employee's participation is in the Corporation's best
interest.
The Corporation shall reimburse the Employee for the legal fees and
expenses incurred by the Employee for review and negotiation of this Agreement
by the Employee's legal counsel up to Twelve Thousand Dollars ($12,000) on or
before fifteen (15) days following the execution date of this Agreement.
5. Additional Benefits.
(a) In General. In addition to the compensation and expenses to be
paid under Sections 3 and 4 hereof, the Employee will be entitled to such rights
and benefits for which he may be eligible under any insurance, profit-making,
incentive, bonus, stock option, stock grant or pension or retirement plan of the
Corporation as the Board of Directors shall adopt from time to time in its sole
and absolute discretion for the benefit of senior executives or employees
generally of the Corporation.
(b) Stock Options. The Employee is hereby granted stock options to
purchase 5,500,000 shares of the Corporation's common stock, $.01 par value per
share (the "OPTION") at an exercise price of $.34 per share. The Option Shares
shall vest and be exercisable as follows: (i) 1,000,000 Option Shares on March
31, 2004; and (ii) the balance thereafter at the rate of 500,000 Option Shares
per calendar quarter (the first quarterly vesting period to be satisfied on June
30, 2004 and on each September 30, December 31, March 31, and June 30,
thereafter until
4
fully vested). The Option shall have a ten (10) year term, subject to earlier
termination as set forth in Section 7 upon the termination of the Employee's
employment with the Corporation and shall be evidenced by the Non-Qualified
Stock Option Agreement substantially in the form of Exhibit A hereto. The
Employee and the Corporation agree that the Option shall be deemed to have been
issued pursuant to the Corporation's 1998 Stock Option Plan or comparable plan
and the Option Shares shall be duly registered under a registration statement on
Form S-8 filed with the Securities and Exchange Commission. The Employee will
also be eligible in the future to receive annual option or stock grants based on
performance or on achievement of milestones as determined by the Board of
Directors or the Compensation Committee.
Notwithstanding the foregoing and anything to the contrary contained in
this Agreement, the Employee hereby acknowledges and agrees that the grant of
the Option and the issuance of the Option Shares is contingent upon approval by
the shareholders of the Corporation at the next meeting of shareholders of
amendments to the Corporation's 1998 Stock Option Plan (i) to increase the
number of shares reserved for issuance under the 1998 Stock Option Plan and (ii)
to authorize issuance of stock options (including the Option) having an exercise
price less than the fair market value of the common stock of the Corporation on
the date of issuance. The Corporation agrees to recommend such matter to the
shareholders and to use its commercially reasonable best efforts to hold such
meeting as soon as reasonably practicable, but in any event, by March 31, 2004.
Upon the written request of the Employee (and following such shareholder
approval), the Corporation shall promptly confirm to the Employee in writing
that such contingency has been eliminated, that the Option is fully effective,
and that the Option Shares have been duly registered in accordance with this
Section 5(b).
5
(c) Purchase of Options.
In the event that the Employee is terminated for Cause (as defined
in Section 7.3) during the Term or resigns other than for Good Reason (as
defined in Section 7.5) during the Initial Term, the Corporation shall have the
right, but not the obligation, to purchase the Employee's vested Option Shares
at the Fair Market Value thereof. In the event that the Corporation does not
elect to purchase the Employee's vested Option Shares within ten (10) days of
the date of the Employee's termination for Cause during the Term or other than
with Good Reason resignation during the Initial Term, the Employee shall be
obligated to exercise his Option in writing within the later of forty (40) days
of such termination or resignation or ten (10) business days after written
notice of potential forfeiture from the Corporation to the Employee, failing
which he shall be deemed to have forfeited his Option to the Corporation. For
purposes of this Section 5(c), "FAIR MARKET VALUE" shall mean the product of (i)
the positive difference, if any, between (a) the average of the closing bid and
asked prices of the Corporation's Common Stock as reported by the OTC Bulletin
Board (or the closing price per share of the Corporation's Common Stock as
reported by such exchange or over-the-counter or other market on which the
Corporation's Common Stock may then be listed or admitted for trading) for the
five (5) trading days prior to the date of termination, and (b) the exercise
price of the Option Shares, multiplied by (ii) the number of Option Shares,
which, as of the date of termination or resignation, are vested under the
Option.
6. Vacation. The Employee shall be entitled to four (4) weeks of vacation
during each year of the Term, to be taken at a time or times mutually agreed
upon by the Employee and the Corporation; provided, however, that not more than
one (1) week of such vacation period
6
may be carried over to the year immediately following the year in which such
vacation was to be taken, unless otherwise required by applicable law.
7. Termination.
7.1 Death. If during the Term the Employee shall die, the Employee's
employment under this Agreement shall terminate as of the date of the Employee's
death. Upon such termination under this Section 7.1 the Corporation shall pay to
or for the benefit of the Employee to such person or persons as the Employee may
designate by notice to the Corporation from time to time or, in the absence of
such designation, the Employee's spouse (the "EMPLOYEE'S DESIGNEES") in a lump
sum in cash within thirty (30) days from the date of the Employee's death (a)
the accrued but unpaid portion of the Base Salary payable hereunder, (b) any
accrued and unpaid vacation, and (c) the accrued and unpaid Bonus for such year,
calculated by pro-rating the annual Bonus, which would have been payable to the
Employee but for his termination under this Section 7.1 and assuming full
achievement of the Bonus Criteria for such year based upon the number of days
that the Employee remained in the employ of the Corporation during the year for
which the Bonus is due. Additionally, notwithstanding any language to the
contrary contained in any option agreements with the Employee, the Employee's
Designees shall be entitled to exercise his vested option shares for twelve (12)
months following the date of termination under this Section 7.1.
7.2 Disability. In the event of the Employee's "mental or physical
disability" (as defined herein) which continues for (i) a period of longer than
sixty (60) consecutive days, or (ii) such periods aggregating one hundred twenty
(120) days during any 365 consecutive days, such that the Employee is, despite
reasonable accommodation, unable to substantively perform the essential
functions of his position for said periods, the determination of which shall be
7
confirmed by the Board of Directors in the manner hereinafter provided, this
Agreement shall terminate upon thirty (30) days' prior written notice to the
Employee from the Corporation (the "DISABILITY TERMINATION DATE"). The
Corporation shall continue to pay to the Employee during the period of his
mental or physical disability the Base Salary provided in Section 3 of this
Agreement as well as provide the benefits described herein; provided, however,
that the Base Salary shall be reduced by any disability insurance payments paid
to the Employee. On the Disability Termination Date, (a) the Employee's Base
Salary shall cease, and (b) the Corporation shall pay to the Employee, in a lump
sum in cash, any accrued and unpaid vacation and the accrued and unpaid Bonus
for such year, calculated by pro-rating the annual Bonus, which would have been
payable to the Employee but for his termination under this Section 7.2 and
assuming full achievement of the Bonus Criteria for such year, based upon the
number of days that the Employee remained in the employ of the Corporation
during the year for which the Bonus is due. Additionally, notwithstanding any
language to the contrary contained in any option agreements with the Employee,
the Employee's Designees shall be entitled to exercise his vested option shares
for twelve (12) months following the date of termination under this Section 7.2.
As used herein, the term "MENTALLY OR PHYSICALLY DISABLED" shall
have the meaning ascribed thereto in the Corporation's disability insurance
policy then in force and effect for the Employee or, if no such disability
policy then exists, it shall mean the inability of the Employee, by reason of
physical or mental injury, illness or other similar cause to perform the
essential functions of his duties and responsibilities in connection with the
conduct of the business and affairs of the Corporation as determined by a
reputable physician of the Corporation's selection. The Employee hereby consents
to, and agrees to make himself available for, such examination.
8
7.3 Termination For Cause. The Corporation may at any time during
the Term, by written notice, and after affording the Employee the opportunity to
be heard in person by the Board of Directors, terminate this Agreement and
discharge the Employee for "Cause", whereupon the Corporation's obligation to
pay compensation or any other amounts payable hereunder to or for the benefit of
the Employee shall terminate on the date of such discharge except for accrued
and unpaid Base Salary and expenses to the date of discharge. For purposes of
this Agreement, the term "Cause" shall mean: (i) any act of the Employee's
constituting willful misconduct which is materially detrimental to the
Corporation's best interests, including misappropriation of, or intentional
damage to, the funds, property or business of the Corporation; (ii) conviction
of a felony or of a crime involving moral turpitude or conviction of any crime
involving dishonesty or fraud with respect to the Corporation or any of its
affiliates; (iii) material failure of the Employee to perform his duties in
accordance with this Agreement after written notice to the Employee by the Board
of Directors specifying such failure and giving the Employee fourteen (14) days
to correct the defects in performance; or (iv) breach by the Employee of any
material provision hereof which, if capable of remedy, remains unremedied for
more than fourteen (14) days after written notice.
7.4 Termination Without Cause. The Corporation may terminate the
Employee's employment with the Corporation at any time "Without Cause", upon
thirty (30) days' written notice to the Employee. A termination "WITHOUT CAUSE"
shall mean a termination by the Corporation of the Employee's employment other
than due to death, disability or for Cause as provided in Sections 7.1, 7.2, and
7.3, respectively.
7.5 Termination By the Employee For Good Reason. The Employee may
terminate his employment for "GOOD REASON", upon thirty (30) days' written
notice to
9
Corporation. "GOOD REASON" shall mean a termination of employment by the
Employee following, without the Employee's express prior written consent: (i)
any material diminution in the Employee's duties, status, offices, reporting
requirements, or job title, except in connection with termination of the
Employee's employment for Cause as provided in Section 7.3 or death or
disability as provided in Sections 7.1 and 7.2; (ii) any requirement by the
Board that the Employee change the location at which the Employee performs his
principal duties for the Corporation to a new location that is more than
forty-five (45) driving miles from Exton, Pennsylvania; (iii) the failure of the
Corporation timely to pay the Employee's salary, bonus or benefits due the
Employee within seven (7) days of receipt of written notice from the Employee to
that effect, or any material breach by the Corporation of this Agreement; (iv)
any change in the Corporation's pay plan or employment agreement with the
Employee that results in a material diminution of the Employee's annual Base
Salary or eligible Bonus amounts; (v) the failure of the Corporation to obtain
an agreement, in a form reasonably satisfactory to the Employee, from any
successor to the Corporation to assume and agree to perform this Agreement; (vi)
the failure of the shareholders of the Corporation, by March 31, 2004, to
approve those amendments to the Corporation's 1998 Stock Option Plan described
in Section 5(b) above; or (vii) the failure of Employee to be duly elected to
the Board of Directors or the removal of the Employee from the Board of
Directors without cause.
7.6 Payment, Benefits and Stock Options Upon Termination Without
Cause Or For Good Reason.
(a) Cash Payments and Severance. In the event of a termination
of the Employee's employment with the Corporation without Cause or a termination
by the Employee
10
of his employment with the Corporation for Good Reason, during the Term, the
Corporation shall pay to the Employee,
(i) in a single lump sum in cash within thirty (30) days
after the date of termination:
(x) the Employee's then accrued and unpaid Base Salary
through and including the date of termination;
(y) the Employee's then accrued and unpaid unused
vacation through and including the date of
termination, and
(z) the Employee's then accrued and unpaid Bonus for
such year, calculated by pro-rating the annual
Bonus, which would have been payable to the
Employee but for his termination and assuming full
achievement of the Bonus Criteria for such year,
based upon the number of days that the Employee
remained in the employ of the Corporation during
the year for which the Bonus is due; and
(ii) the greater of (x) the Employee's Base Salary for the
remainder of the Initial Term and (y) one (1) year of
the Employee's Base Salary in effect immediately prior
to the date of termination ("SEVERANCE PAY"). The
Severance Pay shall be paid in equal monthly
installments over a twelve (12) month period commencing
on the date of termination.
(b) Benefits. In addition, the Employee shall be entitled to any
benefits under any employee benefit plans, and for a period of time equal to the
greater of the remainder of the Initial Term or twelve (12) months from the date
of termination ("SEVERANCE PERIOD"), the Employee will, at the Employee's
option, (i) continue to receive all benefits to which he was entitled pursuant
to Section 5(a) of this Agreement as of the date of termination including
continued medical, dental, disability, and life insurance coverage for the
Employee and the Employee's family, on terms substantially as in effect on the
date of termination, subject to
11
the payment by the Employee of all applicable employee contributions, or (ii)
receive a lump sum payment in cash within thirty (30) days of his termination
without Cause or for Good Reason representing the value of such continued
benefits, plus any income tax payable by the Employee on such value. If the
Employee elects option (i) above and for any reason at any time the Corporation
is unable to treat the Employee as being or having been an employee of the
Corporation under any benefits plan in which he is entitled to participate and
as a result thereof the Employee receives reduced benefits under such plan
during the period that the Employee is continuing to receive payments pursuant
to this Section 7.6(b), then the Corporation shall provide the Employee with
such benefits by direct payment or, at the Corporation's option, by making
available equivalent benefits from other sources. During the Severance Period,
the Employee shall not be entitled to receive salary and/or benefits except as
provided herein and shall not be entitled to participate in any employee benefit
plan of, or receive any other benefit from, the Corporation that is introduced
after the date of termination, except that an appropriate adjustment shall be
made if such new employee benefit or employee benefit plan is a replacement for
or amendment to an employee benefit or employee benefit plan in effect as of the
date of termination.
(c) Stock Options. In the event of a termination of the Employee's
employment with the Corporation without Cause or a termination by the Employee
of his employment with the Corporation for Good Reason, during the Term, the
Corporation shall accelerate the vesting of any outstanding option to purchase
shares of stock of the Corporation granted to the Employee by one (1) year, and
accelerate the lapse of all repurchase rights or forfeiture restrictions
applicable to any restricted stock granted to the Employee by one (1) year, such
that all unvested option share or restricted shares which would have continued
vesting in
12
accordance with their vesting schedule for a period of one (1) year following
the date of such termination, but for such termination, will be deemed
immediately vested and exercisable. In connection therewith, the Corporation
shall cause all restrictive legends, stop transfer orders or similar
restrictions to be removed from such shares, except as required by applicable
law. Additionally, notwithstanding any language to the contrary contained in any
option agreements with the Employee, the Employee shall be entitled to exercise
his vested option shares for twelve (12) months following the date of
termination without Cause or for Good Reason.
7.7 Change of Control. In the event that (i) a Change of Control (as
hereinafter defined) occurs during the Term and (ii) the Employee's employment
with the Corporation is terminated by the Corporation other than for Cause or
the Employee resigns or terminates his employment hereunder for any reason by
giving sixty (60) days prior written notice to the Corporation subsequent to the
date of closing of the Change of Control transaction, the Employee shall be
entitled to the accrued salary, unused vacation, bonus, Severance Pay, benefits,
and stock option treatment as are provided in Sections 7.6(a), (b), and (c)
above, except, that (i) the Severance Pay shall be payable in a lump sum in cash
within thirty (30) of the date of such termination and (ii) upon termination or
resignation under this Section 7.7, the Corporation shall accelerate fully the
vesting of any outstanding option to purchase shares of stock of the Corporation
granted to the Employee and accelerate fully the lapse of all repurchase rights
or forfeiture restrictions applicable to restricted stock granted to the
Employee, such that all options shall vest in their entirety and be immediately
exercisable.
For purposes of this Section 7.7, the term "CHANGE OF CONTROL" means the
occurrence of any of the following, in one or a series of related transactions:
(v) the sale or transfer of fifty percent (50)% or more of the Outstanding
Shares of the Corporation to any person or entity other
13
than (i) a transfer to a wholly-owned subsidiary of the Corporation or (ii) a
transfer by a holder or holders of the Corporation's common stock or convertible
securities as of the date hereof to Affiliates (as defined below), or (w) the
sale, lease, license or other transfer of all or substantially all of the assets
or earning power of the Corporation to any person or entity other than (i) a
wholly-owned subsidiary of the Corporation or (ii) an Affiliate whereby the
purpose or effect of such transfer is to provide for the transfer by a holder or
holders of the Corporation's common stock or convertible securities as of the
date hereof of such holders' direct or indirect interests in the assets of the
Corporation to Affiliates and so long as such transfer does not result in a
transaction described by one of the other clauses of this paragraph of Section
7.7; or (x) merger, consolidation, reorganization, recapitalization, share
exchange, business combination or a similar transaction which results in any
person or entity (other than the persons who are shareholders or security
holders of the Corporation immediately prior to such transaction (or their
Affiliates as of the date of such transaction)) owning fifty percent (50%) or
more of the Outstanding Shares or combined voting power of the Corporation, (y)
merger, consolidation, reorganization, business combination or a similar
transaction in which the Corporation is not the surviving entity; or (z) a
transaction commonly known as "going private" whereby the Corporation engages
one or a series of transactions which results in the Corporation not being
required to file periodic reports with the Securities and Exchange Commission,
unless the Employee is a participant in such transaction. "OUTSTANDING SHARES"
shall mean the total number of common shares and common share equivalents of the
Corporation outstanding at the time the Change of Control. "AFFILIATE" shall
mean (i) any person or entity controlling, controlled by or under the common
control of the existing holders of common stock or convertible securities of the
Corporation and (ii) any partner, shareholder or member of the existing holders
of common stock or convertible securities
14
of the Corporation. For the purposes hereof, "CONTROL" shall mean the direct or
indirect ownership of at least fifty (50%) percent of the outstanding shares or
other voting rights of the subject entity or if it possesses, directly or
indirectly, the power to direct or cause the direction of management and
policies of such other entity.
In the event that the Employee resigns or terminates his employment
following a Change of Control as described above, the Employee acknowledges and
agrees that upon the request of the Corporation, he will execute and deliver a
release in customary form releasing all claims of the Employee arising out of
his employment with the Corporation except for the obligations of the
Corporation under this Agreement.
8. Protection of Confidential Information. In view of the fact that the
Employee's work for the Corporation will bring him into close contact with all
the confidential affairs thereof, and plans for future developments, the
Employee agrees to the following:
8.1 Secrecy. During the Term and for five (5) years after the date
of termination of the Employee's employment, to preserve the confidential nature
of, and not disclose, reveal, or make accessible to anyone other than the
Corporation's officers, directors, employees, consultants or agents, otherwise
than within the scope of his employment duties and responsibilities hereunder,
any and all documents, information, knowledge or data of or pertaining to the
Corporation, its subsidiaries or affiliates or pertaining to any other
individual, firm, corporation, partnership, joint venture, business,
organization, entity or other person with which the Corporation or any of its
subsidiaries or affiliates may do business during the Term (including licensees,
licensors, manufacturers, suppliers and customers of the Corporation or any of
its subsidiaries or affiliates) and which is not in the public domain, including
trade secrets, "know how", names and lists of licensees, licensors,
manufacturers, suppliers and customers,
15
development plans or programs, statistics, manufacturing and production methods,
processes, techniques, pricing, marketing methods and plans, specifications,
advertising plans and campaigns or any other matters, and all other confidential
information of the Corporation, its subsidiaries and affiliates (hereinafter
referred to as "CONFIDENTIAL INFORMATION"). The restrictions on the disclosure
of Confidential Information imposed by this Section 8.1 shall not apply to any
Confidential Information that was part of the public domain at the time of its
receipt by the Employee or becomes part of the public domain in any manner and
for any reason other than an act by the Employee, unless the Employee is legally
compelled (by applicable law, deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process) to disclose such
Confidential Information, in which event the Employee shall provide the
Corporation with prompt notice of such requirement so that the Corporation may
seek a protective order or other appropriate remedy, and if such protective
order or other remedy is not obtained, the Employee shall exercise reasonable
efforts in good faith to obtain assurance that confidential treatment will be
accorded such Confidential Information.
8.2 Return Memoranda, etc. To deliver promptly to the Corporation on
termination of his employment, or at any other time the Corporation may so
request, all memoranda, notes, records, reports, manuals, drawings, blueprints
and other documents (and all copies thereof) relating to the Corporation's
business and all property associated therewith, which the Employee may then
possess or have under his control.
8.3 Non-competition. Provided that this Agreement has not been
breached by the Corporation, the Employee agrees that he shall not at any time
prior to one (1) year after the expiration or termination of his employment with
the Corporation, own, manage, operate, be a director or an employee of, or a
consultant to any person, business, corporation, partnership,
16
trust, limited liability company or other firm or enterprise ("PERSON") which is
engaged in marketing, selling or distributing products or in developing product
candidates in the United States which are directly competitive with products or
product candidates in development as evidenced by the current written product
development plan and/or business plan of the Corporation at the time of
termination of the Employee's employment and/or described in the Corporation's
most recent filing on Form 10-K with the Securities and Exchange Commission as
of the date of the termination of the Employee's employment.
If any of the provisions of this section, or any part thereof, is
hereinafter construed to be invalid or unenforceable, the same shall not affect
the remainder of such provision or provisions, which shall be given full effect,
without regard to the invalid portions. If any of the provisions of this
section, or any part thereof, is held to be unenforceable because of the
duration of such provision, the area covered thereby or the type of conduct
restricted therein, the parties agree that the court making such determination
shall have the power to modify the duration, geographic area and/or other terms
of such provision and, as so modified, said provision shall then be enforceable.
In the event that the courts of any one or more jurisdictions shall hold such
provisions wholly or partially unenforceable by reason of the scope thereof or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Corporation's right to the relief provided for
herein in the courts of any other jurisdictions as to breaches or threatened
breaches of such provisions in such other jurisdictions, the above provisions as
they relate to each jurisdiction being, for this purpose, severable into diverse
and independent covenants.
8.4 Injunctive Relief. The Employee acknowledges and agrees that,
because of the unique and extraordinary nature of his services, any breach or
threatened breach of the
17
provisions of Sections 8.1, 8.2, or 8.3 hereof will cause irreparable injury and
incalculable harm to the Corporation, and the Corporation shall, accordingly, be
entitled to injunctive and other equitable relief for such breach or threatened
breach and that resort by the Corporation to such injunctive or other equitable
relief shall not be deemed to waive or to limit in any respect any right or
remedy which the Corporation may have with respect to such breach or threatened
breach.
8.5 Expenses of Enforcement of Covenants. In the event that any
action, suit or proceeding at law or in equity is brought to enforce the
covenants contained in Section 8.1, 8.2, or 8.3 hereof or to obtain money
damages for the breach thereof, the party prevailing in any such action, suit or
other proceeding shall be entitled upon demand to reimbursement from the other
party for all expenses (including, without limitation, reasonable attorneys'
fees and disbursements) incurred in connection therewith.
8.6 Non-Solicitation. The Employee covenants and agrees not to (and
not to cause or direct any Person to) hire or solicit for employment any
employee of the Corporation or any of its subsidiaries or affiliates. The
prohibitions of this Section 8.6 shall apply (i) for six (6) months following
the termination of the Employee's employment by the Corporation without Cause or
by the Employee for Good Reason, prior to a Change of Control, (ii) for twelve
(12) months following the termination of the Employee's employment for Cause,
prior to a Change of Control, or (iii) twenty-four (24) months following a
Change of Control.
9. Indemnification. The Corporation will defend, indemnify and hold
harmless the Employee, to the maximum extent permitted by applicable law and the
by-laws of the Corporation, against all claims, costs, charges and expenses
incurred or sustained by him in connection with any action, suit or other
proceeding to which he may be made a party by reason
18
of his being an officer, director or employee of the Corporation or of any
subsidiary or affiliate thereof. Furthermore, the Corporation hereby represents
that it will maintain during the Term, Directors and Officers insurance coverage
in the amount of at least Five Million Dollars ($5,000,000).
10. Warranties.
The Employee hereby warrants that as of the date hereof the Employee
is not employed (other than by the Corporation) and is not a party to any other
employment contract, express or implied. The Employee warrants that he has no
other obligation, contractual or otherwise, which would prevent him from
accepting the Corporation's offer of employment under the terms of this
Agreement and from complying with its provisions. The Employee warrants that he
will not utilize during his employment hereunder any confidential information
obtained through or in connection with his prior employment. The Employee
warrants that he knows of no reason why he would not be able to perform his
obligations under this Agreement. The Employee warrants that he has duly
executed and delivered this Agreement and it is valid, binding and enforceable
against the Employee in accordance with its terms. The Corporation warrants to
the Employee that this Agreement has been duly approved and authorized by its
Board of Directors, that this Agreement has been duly executed and delivered on
behalf of the Corporation and that this Agreement is valid, binding and
enforceable against the Corporation in accordance with its terms.
11. Notices.
All notices, requests, consents and other communications required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by facsimile, with confirmation
of receipt, or mailed first-class, postage
19
prepaid, by registered or certified mail (notices sent by mail shall be deemed
to have been given three (3) business days after the date sent), to the parties
at their respective addresses hereinabove set forth or to such other address as
either party shall designate by notice in writing to the other in accordance
herewith.
12. General.
12.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the local laws of the Commonwealth of
New York applicable to agreements made and to be performed entirely in New York.
12.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof. No representation,
promise or inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
12.4 Nomination to the Board of Directors. During the Term, the
Corporation shall cause the Employee to be nominated for election to the Board
of Directors of the Corporation at each Annual Meeting of shareholders of the
Corporation, and at each special meeting of the shareholders of the Corporation
called for the purpose of electing directors of the Corporation and at any time
at which the shareholders of the Corporation have the right to elect directors
of the Corporation, and shall recommend that the Corporation's shareholders vote
in favor of the election of the Employee to the Board of Directors.
20
12.5 Assignability. This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. The Corporation may
assign its rights, together with its obligations, hereunder in connection with
any sale, transfer or other disposition of all or substantially all of its
business or assets; in any event the rights and obligations of the Corporation
hereunder shall be binding on its successors or assigns, whether by merger,
consolidation or acquisition of all or substantially all of its business or
assets.
12.6 Amendment. This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. No superseding instrument,
amendment, modification, cancellation, renewal or extension hereof shall require
the consent or approval of any person other than the parties hereto. The failure
of either party at any time or times to require performance of any provision
hereof shall in no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
12.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together will constitute one and the same instrument.
12.8 Severability. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held illegal, void or invalid
under applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so
21
changed, legal, valid and binding. If any provision of this Agreement is held
illegal, void or invalid in its entirety, the remaining provisions of this
Agreement shall not in any way be affected or impaired but shall remain binding
in accordance with their terms.
[SIGNATURE PAGE TO FOLLOW]
22
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ATTEST: XXXXXX DRUG CO., INC.
_________________________ By: /s/ Xxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxxx,
Title: Chairman of the Board
WITNESS: EMPLOYEE
___________________________ By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
XXXXXX X. XXXXXXX
23
