EXHIBIT 10.51
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of April 2, 2003
(the "Effective Date") by and between Gen-Probe Incorporated, a Delaware
corporation with offices at 00000 Xxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000 ("Gen-Probe"), and Xxxxx X. Xxxxxxxx (the "Executive").
WHEREAS, on June 17, 0000, Xxx-Xxxxx and Executive entered into an
Employment Agreement specifying certain terms and conditions for Executive's
employment;
WHEREAS, Executive is currently employed as an officer of Gen-Probe;
WHEREAS, from the time the June 17, 1994 employment agreement was
signed until September 15, 2002, Gen-Probe was a wholly-owned subsidiary of
Chugai Pharmaceutical Co., Ltd.;
WHEREAS, Chugai distributed its Gen-Probe shareholdings to its
shareholders in a "spin off" transaction on September 15, 2002;
WHEREAS, the Board of Directors of Gen-Probe (the "Board"), having
considered the proposed spin-off transaction and other circumstances, deems it
in the best interest of Gen-Probe to offer this Agreement to the Executive and
the Executive desires to enter into this Agreement.
ACCORDINGLY, the parties hereto agree as follows:
1. TERM OF EMPLOYMENT. This Agreement shall be immediately effective. This
Agreement, and Executive's employment hereunder, shall be for an
indefinite term. At any time during the term of this Agreement, either
party may terminate this Agreement, and Executive's employment, in
accordance with the provision of Sections 6 and 7 of this Agreement.
2. POSITION AND DUTIES. The Executive shall serve as President and Chief
Executive Officer of Gen-Probe, and shall have commensurate
responsibilities and authority. The Board of Directors may from time to
time particularly specify the Executive's duties and authority. The
Executive shall not engage in or perform duties for any other persons
or entities that interfere with the performance of his duties
hereunder, provided that the Executive may continue to serve on the
boards of directors and boards of trustees on which he served on the
Effective Date. Any outside board of director positions accepted by the
Executive after the Effective Date will be subject to approval by the
Board of Directors of Gen-Probe.
3. SALARY, BONUS AND BENEFITS.
(a) SALARY. During the period of the Executive's employment,
Gen-Probe shall pay him an annual base salary at the rate the
Executive is being paid as of the Effective Date. This base
salary may be increased annually by the Board, subject to the
terms of this Agreement and consistent with the Executive's
performance
and Gen-Probe's policy regarding adjustments in officer
compensation established from time to time by the Board. The
base salary shall not be decreased during the term of this
Agreement.
(b) BONUS. In addition, at the Board's discretion, the Executive
will be awarded incentive compensation, in the form of a cash
bonus for each fiscal year during his employment, based upon
performance. Executive's target bonus shall be seventy-five
percent (75%) of his base salary; however, the actual bonus
shall be set at the discretion of the Board.
(c) STOCK OPTIONS/RESTRICTED STOCK. In addition, not later than
June 30 during each year of the term on this Agreement, the
Executive will be awarded not less than 10,000 restricted
shares and not less than 50,000 options of Gen-Probe common
stock, if such options or restricted shares are then available
under an equity participation plan adopted by Gen-Probe. The
exercise price of any options granted hereunder shall be equal
to the last reported trade of Gen-Probe's common stock at the
close on the trading day preceding the effective date of the
grant. Options and restricted stock to be granted hereunder
shall fully vest within four (4) years of grant. The Board may
reasonably and in good faith adjust the minimum number of
shares or options to be granted hereunder if the Board
determines reasonably and in good faith that such an
adjustment is reasonable in light of any dividend or other
distribution, recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition
of all or substantially all of the assets of Gen-Probe, or
exchange of common stock or other securities of Gen-Probe,
issuance of warrants or other rights to purchase Common Stock
or other securities of Gen-Probe, or other similar corporate
transaction or event,
(d) LIFE INSURANCE. Gen-Probe will obtain and pay for a term life
insurance policy providing for payment of $1,000,000 in
benefits to the Executive's designated beneficiaries should
the Executive die during the term of this Agreement. (This
policy shall be in addition to any coverage provide by
Gen-Probe's group life insurance plan pursuant to subsection
(f), below.)
(e) DISABILITY INSURANCE. Gen-Probe will obtain and pay for a
long-term disability insurance policy providing for payment at
a rate of no less than $200,000 per annum to Executive should
Executive suffer a long-term disability during the term of
this Agreement. (This policy shall be in addition to any
coverage provide by Gen-Probe's group disability insurance
plan pursuant to subsection (f), below.)
(f) AD& D INSURANCE. Gen-Probe will obtain and pay for an AD&D
insurance policy providing for a benefit to Executive (or his
beneficiaries) of $400,000 (airplane) or $200,000 (automobile
or walking) should Executive suffer accidental death or
accidental disability during the term of this Agreement.
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(g) CLUBS. During the term of this Agreement, Gen-Probe will pay
Executive's annual dues for a membership in the Union League
Club of New York City. During the term of this Agreement,
Gen-Probe will also pay Executive's dues for a membership in
the Fairbanks Ranch Country Club. Upon termination of this
Agreement, Executive shall have own all right, title and
interest in the memberships in the Union League Club and
Fairbanks Ranch Country Club, free of any claim by Gen-Probe.
Executive shall be solely responsible for any continuing dues
or similar obligations after termination.
(h) OTHER BENEFITS. The Executive shall be entitled to participate
in the employee benefit programs (including but not limited to
medical, dental, life and disability insurance, 401K
retirement plan, and vacation program), as adopted and
maintained by Gen-Probe. Gen-Probe shall reimburse the
Executive for reasonable attorney's fees incurred in
connection with this Agreement, in an amount not in excess of
$6,000. The Executive may receive such other and additional
benefits as the Board may determine from time to time in its
sole discretion.
4. EXPENSE REIMBURSEMENT. The Executive shall be entitled to receive
prompt reimbursement for all reasonable and customary expenses incurred
by him in performing services hereunder, including all expenses of
travel and living expenses while away from home on business or at the
request of, and in the service of Gen-Probe; provided, that such
expenses are incurred and accounted for in accordance with the policies
and procedures established by Gen-Probe.
5. INDEMNIFICATION. Gen-Probe shall indemnify the Executive to the maximum
extent permitted by law, by the by-laws of Gen-Probe and by the
Indemnification Agreement dated August 19, 2002, between the Executive
and Gen-Probe, as it may be amended (the "Indemnification Agreement"),
if the Executive is made a party, or threatened to be made a party, to
any threatened or pending legal action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact
that the Executive is or was an officer, director or employee of
Gen-Probe or any subsidiary or affiliate thereof, in which capacity the
Executive is or was serving at Gen-Probe's request, against reasonable
expenses (including reasonable attorneys' fees), judgments, fines and
settlement payments incurred by him in connection with such action,
suit or proceeding.
6. TERMINATION. The Executive may terminate his employment hereunder at
any time, with or without Good Reason (as defined below) upon written
notice to Gen-Probe. If Executive contends that Good Reason exists for
his termination, such notice shall specifically and expressly state the
grounds which he contends constitute Good Reason. Gen-Probe may
terminate the Executive's employment hereunder at any time, subject to
the terms of this Agreement, with or without Cause (as defined below)
upon written notice to the Executive. If this Agreement is terminated,
all compensation and benefits other than severance benefits described
in Section 7 below, to the extent applicable, shall immediately cease,
except that the Executive will be entitled, through the date of
termination, to payment of his salary and benefits under Gen-Probe
benefit programs and plans in accordance with their terms.
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As used in this Agreement, "Good Reason" shall mean any of the
following events that are not consented to by the Executive: (i) the
removal of the Executive from his position as the Chief Executive
Officer of Gen-Probe; (ii) a substantial and material diminution in the
Executive's duties and responsibilities hereunder; (iii) a reduction of
the Executive's base salary or target bonus percentage; (iv) the
location of the Executive's assignment on behalf of Gen-Probe is moved
to a location more than 30 miles from its present location; (v) the
failure of Gen-Probe to obtain a satisfactory agreement from any
successor to Gen-Probe to assume and agree to perform this Agreement;
or (vi) a material breach by Gen-Probe of its obligations under this
Agreement after notice in writing from the Executive and a reasonable
opportunity for Gen-Probe to cure or substantially mitigate any
material adverse effect of such breach. The Executive's consent to any
event which would otherwise constitute Good Reason shall be
conclusively presumed if the Executive does not exercise his rights to
terminate this Agreement for Good Reason under this section within six
(6) months of notice of the event.
As used in this Agreement, "Cause" shall mean any of the following
events: (i) any act of gross or willful misconduct, fraud,
misappropriation, dishonesty, embezzlement or similar conduct on the
part of Executive; (ii) the Executive's conviction of a felony or any
crime involving moral turpitude (which conviction, due to the passage
of time or otherwise, is not subject to further appeal); (iii) the
Executive's misuse or abuse of alcohol, drugs or controlled substances
and failure to seek and comply with appropriate treatment; (iv) willful
and continued failure by the Executive to substantially perform his
duties under this Agreement (other than any failure resulting from
disability or from termination by the Executive for Good Reason) as
determined by a majority of the Board after written demand from the
Board of Directors for substantial performance is delivered to the
Executive, and the Executive fails to resume substantial performance of
his duties on a continuous basis within 30 days of such notice; (v) the
death of the Executive; or (vi) the Executive becoming disabled such
that he is not able to perform his usual duties for Gen-Probe for a
period in excess of six (6) consecutive calendar months.
7. SEVERANCE BENEFITS IN CERTAIN EVENTS. If Gen-Probe terminates the
Executive's employment for reasons other than Cause, or if the
Executive terminates his employment for Good Reason, the Executive
shall be entitled to receive the following severance benefits:
(a) SALARY. The Executive shall continue to receive his base
salary, at the rate in effect at the time of his termination
of employment, in monthly installments commencing the first
day of the first month following termination and continuing
for an aggregate period of twenty-four (24) months (the
"Salary Continuation Period"); provided, however, that if
termination under this Section 7 occurs in connection with a
Change in Control, then the Executive shall receive a single
lump sum payment, payable within 10 days of termination, equal
to thirty-six (36) months' base salary.
For purposes of this Agreement, "Change in Control" shall have
the meaning set forth on Attachment "1" to this Agreement
(hereby incorporated by reference). For purposes of this
Agreement, a termination shall be "in connection with" a
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Change in Control if termination occurs within the period six
(6) months prior to or eighteen (18) months after a Change in
Control.
(b) BONUS. The Executive shall be entitled to receive a pro rata
portion of the bonus provided in Section 3(b) for the year in
which his employment terminates. The Executive shall also be
entitled to receive, in addition to the salary payment
described in Section 7(a), above, an amount equal to two times
the Executive's targeted level bonus in the year of the
termination; provided, however, that if termination under this
Section 7 occurs in connection with a Change in Control, then
the Executive shall be entitled to receive an amount equal to
three times the Executive's targeted level bonus in the year
of the termination. The amount payable hereunder shall be paid
in the same manner as and on the same schedule as the salary
compensation paid under subsection (a) above.
(c) HEALTH CARE AND LIFE INSURANCE COVERAGE. Continued health care
coverage under Gen-Probe's medical plan will be provided,
without charge, to the Executive and his eligible dependents
until the earlier of (i) Executive's sixty-fifth (65th)
birthday or (ii) the first date that the Executive is covered
under another employer's health benefit program providing
substantially the same or better benefit options to the
Executive without exclusion for any pre-existing medical
condition. The period of time medical coverage continues under
this Agreement will be counted as coverage time under COBRA.
Such coverage may be provided at Gen-Probe's option either by
payment directly to Gen-Probe's health insurance carrier,
through Gen-Probe's own employee medical expense plan if
Gen-Probe is self-insured, or through reimbursement of
Executive's COBRA premiums upon submission of reasonable
substantiation. As to life insurance, Gen-Probe will pay the
premium for continued life insurance coverage, if any, that
the Executive may have elected under Gen-Probe's Life
Insurance and Supplemental Life Insurance plan, subject to
payment by the Executive of the portion of such premium not
contributed by Gen-Probe under such plan, during the Salary
Continuation Period. After Executive reaches age 65, Gen-Probe
will provide for up to $10,000.00 per year in medical
reimbursement to cover medical or prescription expenses
incurred but not covered by either Medicare Part A and B or
Medicare Supplemental Insurance mentioned in the following
sentence. The Executive is expected to carry Supplemental
Medicare Insurance and to comply with the Insurance Plan
restrictions to maximize coverage.
(d) 401(k) PLAN. The Executive's interest in any unvested
contributions made by Gen-Probe to the Executive's 401(k)
account shall vest as of the date of termination.
(e) OUTPLACEMENT SERVICES. Gen-Probe agrees to provide Executive
with outplacement services during the first six months of the
Salary Continuation Period at a level not lower than the
services provided to senior officers of Gen-Probe prior to the
Effective Date.
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(f) TAX MATTERS. All compensation described in this Agreement will
be subject to Gen-Probe's collection of all applicable
federal, state and local income and employment withholding
taxes.
(g) RELEASE OF CLAIMS. Gen-Probe's obligation to make the payments
and provide the benefits hereunder shall be conditioned upon
Executive's execution of a release of all claims that he then
may have other than claims under Section 5 or the
Indemnification Agreement, in standard form and content. The
release shall be mutual and shall also be signed on behalf of
Gen-Probe.
8. EXCISE TAX ON PARACHUTE PAYMENTS.
(a) GROSS-UP PAYMENT. If it is determined that any payment or
distribution of any type to the Executive or for his benefit
by Gen-Probe, any of its affiliates, any person who acquires
ownership or effective control of Gen-Probe or ownership of a
substantial portion of Gen-Probe's assets (within the meaning
of section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder) or any
affiliate of such person, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Total Payments"), would be
subject to the excise tax imposed by section 4999 of the Code
or any interest or penalties with respect to such excise tax
(such excise tax and any such interest or penalties are
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount calculated to ensure that
after the Executive pays all taxes (and any interest or
penalties imposed with respect to such taxes), including any
Excise Tax, imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Total Payments.
(b) DETERMINATION BY ACCOUNTANT. All determinations and
calculations required to be made under this Section 8 shall be
made by an independent accounting firm selected by Gen-Probe
from among the largest four (4) accounting firms in the United
States (the "Accounting Firm"). The Accounting Firm shall
provide its determination (the "Determination"), together with
detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matter, to the
Executive and Gen-Probe within five (5) days after the
Executive or Gen-Probe made a request (if the Executive
reasonably believes that any of the Total Payments may be
subject to the Excise Tax). If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written statement that it has
concluded that no Excise Tax is payable (including the reasons
therefor) and that the Executive has substantial authority not
to report any Excise Tax on his federal income tax return. If
a Gross-Up Payment is determined to be payable, it shall be
paid to the Executive within five (5) days after the
Determination has been delivered to him or Gen-Probe. Any
determination by the Accounting Firm shall be binding upon
Gen-Probe and the Executive, absent manifest error.
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(c) OVER- AND UNDERPAYMENTS. As a result of uncertainty in the
application of section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments not made by Gen-Probe should
have been made ("Underpayment") or that Gross-Up Payments will
have been made by Gen-Probe that should not have been made
("Overpayment"). In either event, the Accounting Firm shall
determine the amount of the Underpayment or Overpayment that
has occurred. In the case of an Underpayment, Gen-Probe shall
promptly pay the amount of such Underpayment to the Executive
or for his benefit. In the case of an Overpayment, the
Executive shall, at the direction and expense of Gen-Probe,
take such steps as are reasonably necessary (including the
filing of returns and claims for refund), follow reasonable
instructions from, and procedures established by, Gen-Probe,
and otherwise reasonably cooperate with Gen-Probe to correct
such Overpayment, provided, however, that (i) the Executive
shall in no event be obligated to return to Gen-Probe an
amount greater than the net after-tax portion of the
Overpayment that the Executive has retained or has recovered
as a refund from the applicable taxing authorities and (ii)
this provision shall be interpreted in a manner consistent
with the intent of Subsection (a) above, which is to make the
Executive whole, on an after-tax basis, from the application
of the Excise Tax, it being understood that the correction of
an Overpayment may result in the Executive's repaying to
Gen-Probe an amount that is less than the Overpayment.
(d) LIMITATION ON PARACHUTE PAYMENTS. Any other provision of this
Section 8 notwithstanding, if the Excise Tax could be avoided
by reducing the Total Payments by $10,000 or less, then the
Total Payments shall be reduced to the extent necessary to
avoid the Excise Tax and no Gross-Up Payment shall be made. If
the Accounting Firm determines that the Total Payments are to
be reduced under the preceding sentence, then Gen-Probe shall
promptly give the Executive notice to that effect and a copy
of the detailed calculation thereof. The Executive may then
elect, in his sole discretion, which and how much of the Total
Payments are to be eliminated or reduced (as long as after
such election no Excise Tax shall be payable), and the
Executive shall advise Gen-Probe in writing of his election
within ten (10) days of receipt of notice. If the Executive
make no such election within such ten (10)-day period, then
Gen-Probe may elect which and how much of the Total Payments
are to be eliminated or reduced (as long as after such
election no Excise Tax shall be payable), and it shall notify
the Executive promptly of such election.
9. MISCELLANEOUS.
(a) ARBITRATION. Executive and Gen-Probe agree that any and all
claims or disputes that in any way relate to or arise out of
Executive's employment with Gen-Probe or the termination of
such employment (including but not limited to claims under
this Agreement or any other contract, tort claims, and
statutory claims of employment discrimination, retaliation or
harassment) shall be resolved exclusively through final and
binding arbitration in San Diego, California. Executive and
Gen-Probe waive any rights to a jury trial in connection with
such
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claims or disputes. The costs of the arbitration, including
the fees of the arbitrator, shall be borne exclusively by
Gen-Probe. Any such arbitration shall take place in San Diego,
California and shall be conducted by a single neutral
arbitrator who shall be a retired federal or state judge, to
be appointed by Judicial Arbitration and Mediation Services
("JAMS") in accordance with JAMS rules. The applicable
procedural rules of JAMS shall govern the arbitration. The
arbitrator's decision shall be delivered in writing and shall
disclose the essential findings and conclusion on which the
arbitrator's decision is based. The parties shall be permitted
to conduct adequate discovery to allow for a full and fair
exploration of the issues in dispute in the arbitration
proceeding. The arbitrator may grant any relief which
otherwise would have been available to the parties in a court
proceeding. The decision and award of the arbitrator shall be
final and binding, and judgment upon the arbitrator's award
may be entered by any court of competent jurisdiction.
(b) GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with and be governed by the laws of the State of
California.
(c) ENTIRE AGREEMENT. This Agreement and the Indemnification
Agreement set forth the entire agreement and understanding
between the Executive and Gen-Probe on the subject matter
hereof, and supersede any other negotiations, agreements,
understandings, oral agreements, representations and past or
future practices, whether written or oral, on the subject
matter hereof. No provision of this Agreement may be amended,
supplemented, modified, cancelled, or discharged unless such
amendment, supplement, modification, cancellation or discharge
is agreed to, in writing, signed by the Executive and a duly
authorized officer of Gen-Probe (other than the Executive);
and no provisions hereof may be waived, except in writing, so
signed by or on behalf of the party granting such waiver.
(d) VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity
or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
(e) NOTICES. For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have duly given
when personally delivered or mailed by United States certified
or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Xxxxx X. Xxxxxxxx
If to Gen-Probe:
Vice President, Administration
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Gen-Probe Incorporated
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
With a copy to:
General Counsel
Gen-Probe Incorporated
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
(f) SUCCESSORS. Gen-Probe will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all the business and/or
assets of Gen-Probe, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same
extent that Gen-Probe would be required to perform it if no
such succession had taken place. This Agreement and all rights
under the Agreement shall be binding upon and shall inure to
the benefit of and be enforceable by the party's personal or
legal representatives, executors, administrators, heirs, and
successors.
(g) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing herein shall be
construed as giving the Executive any rights to continued
employment with Gen-Probe, and Gen-Probe shall continue to
have the right to terminate the Executive's employment at any
time, with or without cause, subject to the provisions of this
Agreement.
In witness whereof, the parties have executed this Agreement.
Executive: Gen-Probe Incorporated:
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxxx
---------------------------- By -------------------------------
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxx
Vice President, Administration
/s/ R. Xxxxxxx Xxxxx
By -------------------------------
R. Xxxxxxx Xxxxx
Vice President and General Counsel
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ATTACHMENT "1"
DEFINITION OF "CHANGE IN CONTROL"
Change in Control.
"Change in Control" shall mean a change in ownership or control of Gen-Probe
effected through any of the following transactions:
(a) any person or related group of persons (other than Gen-Probe
or a person that, prior to such transaction, directly or indirectly controls, is
controlled by, or is under common control with, Gen-Probe) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of Gen-Probe's outstanding securities by means of
any transaction or series of transactions; or
(b) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a majority of
the Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or
nomination was approved by the Board; or
(c) the stockholders of Gen-Probe approve a merger or
consolidation of Gen-Probe with any other corporation (or other entity), other
than a merger or consolidation which would result in the voting securities of
Gen-Probe outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity or another entity) more than 66-2/3% of the combined voting
power of the voting securities of Gen-Probe or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization of Gen-Probe (or
similar transaction) in which no person acquires more than 25% of the combined
voting power of Gen-Probe's then outstanding voting securities shall not
constitute a Change in Control; or
(d) the stockholders of Gen-Probe ap-prove a plan of complete
liquidation of Gen-Probe or an agreement for the sale or disposition by
Gen-Probe of all or substantially all of Gen-Probe's assets.
