WATSON PHARMACEUTICALS, INC. KEY EMPLOYEE AGREEMENT
Exhibit 10.1
XXXXXX PHARMACEUTICALS, INC.
This
Key Employee Agreement (“Agreement”) is entered into as of October 30, 2009, (the
“Effective Date”), by and between Xxxxxx Xxxx Xxxxx (“Executive”) and Xxxxxx Pharmaceuticals, Inc.
(the “Company”), a Nevada corporation.
Whereas, the Company desires to employ Executive to provide personal services to the
Company, and wishes to provide Executive with certain compensation and benefits in return for his
services; and
Whereas, Executive wishes to be employed by the Company and provide personal services
to the Company in return for certain compensation and benefits, including the benefits provided
under this Agreement;
Now, Therefore, in consideration of the mutual promises and covenants contained
herein, it is hereby agreed by and between the parties hereto as follows:
1. Employment by the Company. Subject to terms set forth herein, the Company agrees
to employ Executive in the position of Senior Vice President and Chief Financial Officer and
Executive hereby accepts employment effective as of the Effective Date. In this position,
Executive shall perform such duties as are assigned from time to time by the Chief Executive
Officer (“CEO”) of the Company (the “Designated Officer”). During his employment with the Company,
Executive will devote his best efforts and substantially all of his business time and attention
(except for vacation periods as set forth herein and reasonable periods of illness or other
incapacity permitted by the Company’s general employment policies) to the business of the Company.
Executive shall abide by the general employment policies and procedures of the Company, except that
wherever the terms of this Agreement may differ from or are in conflict with the Company’s general
employment policies or procedures, this Agreement shall control.
2. Compensation.
2.1 Salary. For services to be rendered hereunder, Executive shall receive a base salary as
set forth in Section 1 of the Compensation and Severance Terms Schedule, attached hereto as Exhibit
A. Executive will be considered annually for adjustments in base salary in accordance with Company
policy and subject to review and approval by the Board of Directors (the “Board”) or its
Compensation Committee (the “Compensation Committee”), as appropriate.
2.2 Bonus. Executive shall be eligible to participate in the Company’s bonus plan at the
senior executive level throughout the duration of Executive’s employment with the Company. The
Company shall have the sole discretion to determine whether Executive is entitled to any such bonus
and to determine the amount of the bonus. The amount of Executive’s bonus may be determined in
part based on Executive’s performance with respect to certain goals established by the Company and
attainment by the Company of its planned financial objectives for the bonus period.
Notwithstanding the foregoing, no bonus is guaranteed to Executive. Any
bonus is subject to the approval of the Board or the Compensation Committee, as appropriate.
The Company retains the authority to review, grant, deny or revise any bonus in its sole
discretion. To be eligible to receive a bonus, Executive must remain in employment with the
Company throughout the entire fiscal year or as otherwise required by the applicable bonus plan as
adopted by the Company from time to time. The target level of such bonus is set forth in Section 2
of Exhibit A attached hereto.
2.3 Long Term Incentive Awards. Subject to the approval of the Board or the Compensation
Committee, as appropriate, Executive shall receive the long term incentive awards (if any) set
forth in Section 3 of Exhibit A, and such additional long term incentive awards as may from time to
time be granted, pursuant to the terms and conditions set forth in the applicable award agreement
and plan documents, copies of which will be made available upon Executive’s request. For the
purposes of this Agreement, all long term incentive awards (e.g.,stock options, restricted
stock and restricted stock units) granted to Executive by the Company prior to the Effective Date,
granted hereunder, or granted in the future shall be referred to hereinafter as the “Awards.”
2.4 Paid Time Off. Executive shall be eligible to accrue paid time off (“PTO”) during the
term of this Agreement, in accordance with the Company’s standard policy regarding PTO and in an
amount commensurate with other employees at a level similar to that of the Executive.
2.5 Standard Company Benefits. Executive shall be entitled to all rights and benefits for
which he is eligible under the terms and conditions of the standard Company benefits plans (e.g.,
health and disability insurance, 401(k) retirement plan, etc.) and other benefits and incentives
which may be in effect from time to time and provided by the Company to employees at levels similar
to the Executive.
3. Proprietary Information and Inventions.
Executive has executed the Employee Proprietary Information and Inventions Agreement (the
“Inventions Agreement”) attached hereto as Exhibit C. Executive acknowledges that the Inventions
Agreement remains in full force and effect and is made a part hereof by this reference.
4. Outside Activities.
4.1 Activities. Except with the prior written consent of the CEO or the Board, as
appropriate, Executive will not during his employment with the Company undertake or engage in any
other employment, occupation or business enterprise, other than ones in which Executive is a
passive investor. Executive may engage in civic and not-for-profit activities so long as such
activities do not materially interfere with the performance of his duties hereunder. Executive
will not during his employment with the Company publicly disparage the Company or any of its
subsidiaries, or their respective past or present products, officers, directors, employees or
agents.
4.2 Investments and Interests. During his employment by the Company, Executive agrees not to
acquire, assume or participate in, directly or indirectly, any position, investment or interest
known by him to be adverse to or in conflict with the interest of the
Company, its business or prospects, financial or otherwise. By way of clarification, nothing
contained in this Agreement shall prevent Executive from holding, for investment purposes only, no
more than one percent (1%) of the capital stock of any publicly traded company.
4.3 Non-Competition. During his employment by the Company, except on behalf of the Company,
Executive will not directly or indirectly, whether as an officer, director, stockholder, partner,
proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business connection with any other person,
corporation, firm, partnership or other entity whatsoever known by him to compete directly with the
Company, anywhere in the world, in any line of business engaged in (or planned to be engaged in) by
the Company.
5. Other Agreements.
Executive represents and warrants that his employment by the Company will not conflict with
and will not be constrained by any prior agreement or relationship with any third party. Executive
represents and warrants that he will not disclose to the Company or use on behalf of the Company
any confidential information governed by any agreement with any third party except in accordance
with an agreement between the Company and any such third party. During Executive’s employment by
the Company, Executive may use, in the performance of his duties, all information generally known
and used by persons with training and experience comparable to his own and all information which is
common knowledge in the industry or otherwise legally in the public domain.
6. Termination Of Employment.
6.1 At-Will Employment. Executive’s relationship with the Company is at-will. The Company
shall have the right to terminate Executive’s employment with the Company at any time with or
without Cause and with or without notice.
6.2 Termination by Company for Cause. If the Company terminates Executive’s employment at any
time for Cause, Executive’s salary shall cease on the date of termination; and Executive will not
be entitled to severance pay, pay in lieu of notice or any other such compensation.
(a) Definition of “Cause.” For purposes of this Agreement, “Cause” shall mean (i) Executive’s
conviction of any felony; (ii) Executive’s gross misconduct, material violation of Company policy,
or material breach of Executive’s duties to the Company, which Executive fails to correct within
thirty (30) days after Executive is given written notice by the CEO or the Designated Officer; or
(iii) Executive’s failure to relocate his principal residence by August 1, 2010, to a location in
reasonable day-to-day proximity to the Company’s commercial headquarters located in New Jersey.
6.3 Termination by Company Without Cause. If the Company terminates Executive’s employment at
any time without Cause, Executive shall be entitled to severance benefits as set forth in Section
4.1 of the Compensation and Severance Terms Schedule, attached hereto as Exhibit A.
6.4 Executive’s Voluntary Resignation. Executive may terminate his employment with the
Company at any time, with or without Good Reason, and with or without notice. In the event
Executive voluntarily terminates his employment other than for Good Reason, he will not be entitled
to severance pay, pay in lieu of notice or any other such compensation.
6.5 Executive’s Resignation for Good Reason. Executive may resign his employment for Good
Reason so long as Executive tenders his resignation to the Company within sixty (60) days after the
occurrence of the event which forms the basis for his termination for Good Reason. If Executive
terminates his employment for Good Reason, Executive shall be eligible for severance benefits as
set forth in Section 4.2 of Exhibit A, attached hereto.
(a) Definition of “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean any
one of the following events which occurs on or after the Effective Date: (i) after a Change of
Control (as defined in Section 7.1), any material reduction of the Executive’s then existing annual
base salary, except to the extent the annual base salary of all other executive officers at levels
similar to Executive is similarly reduced (provided such reduction does not exceed fifteen percent
(15%) of Executive’s then existing annual base salary); (ii) after a Change of Control, any
material reduction in the package of benefits and incentives, taken as a whole, provided to the
Executive (except that employee contributions may be raised to the extent of any cost increases
imposed by third parties) or any action by the Company which would materially and adversely affect
the Executive’s participation or reduce the Executive’s benefits under any such plans, except to
the extent that such benefits and incentives of all other executive officers at levels similar to
Executive are similarly reduced; (iii) after a Change of Control, any material diminution of the
Executive’s duties and responsibilities, taken as a whole, excluding for this purpose an isolated,
insubstantial or inadvertent action not taken in bad faith which is remedied by the Company
immediately after notice thereof is given by the Executive; (iv) after a Change of Control, a
requirement that the Executive materially relocate to a work site that would increase the
Executive’s one-way commute distance by more than thirty-five (35) miles from his then principal
residence, unless the Executive accepts such relocation opportunity; (v) any material breach by the
Company of its obligations under this Agreement; or (vi) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the Company; provided, however, that the
Executive may not resign his employment for Good Reason unless: (A) the Executive has provided the
Company with at least 30 days prior written notice of the Executive’s intent to resign for Good
Reason (which notice must be provided within 60 days following the occurrence of the event(s)
purported to constitute Good Reason); and (B) the Company has not remedied the alleged violation(s)
within 30-days following its receipt of the written notice of intent to resign for Good Reason.
6.6 Termination for Death or Disability. Executive’s employment with the Company will be
terminated in the event of Executive’s death, or any illness, disability or other incapacity in
such a manner that Executive is physically rendered unable regularly to perform his duties
hereunder for a period in excess of one hundred eighty (180) consecutive days or more than one
hundred eighty (180) days in any consecutive twelve (12) month period. The determination regarding
whether Executive is physically unable regularly to perform his duties shall be made by the Board.
Executive’s inability to be physically present on the Company’s premises shall not constitute a
presumption that Executive is unable to perform such duties. In
the event that Executive’s employment with the Company is terminated for death or disability
as described in this Section 6.6, Executive or Executive’s heirs, successors, and assigns shall not
receive any compensation or benefits other than payment of accrued salary and PTO and such other
benefits as expressly required in such event by applicable law or the terms of applicable benefit
plans.
6.7 Cessation. If Executive violates any provision of Section 8 of this Agreement or the
Employee Proprietary Information and Inventions Agreement and Executive fails to correct such
violation within ten (10) days after Executive is given written notice by the CEO or the Designated
Officer, then any severance payments or other benefits being provided to Executive will cease
immediately, and Executive will not be entitled to any further compensation from the Company.
7. Change of Control.
7.1 Definition. For purposes of this Agreement, Change of Control means the occurrence of any
of the following:
(a) a sale of assets representing fifty percent (50%) or more of the net book value and of the
fair market value of the Company’s consolidated assets (in a single transaction or in a series of
related transactions);
(b) a liquidation or dissolution of the Company;
(c) a merger or consolidation involving the Company or any subsidiary of the Company after the
completion of which: (i) in the case of a merger (other than a triangular merger) or a
consolidation involving the Company, the shareholders of the Company immediately prior to the
completion of such merger or consolidation beneficially own (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
comparable successor rules), directly or indirectly, outstanding voting securities representing
less than fifty percent (50%) of the combined voting power of the surviving entity in such merger
or consolidation, and (ii) in the case of a triangular merger involving the Company or a subsidiary
of the Company, the shareholders of the Company immediately prior to the completion of such merger
beneficially own (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rules), directly or indirectly, outstanding voting securities representing
less than fifty percent (50%) of the combined voting power of the surviving entity in such merger
and less than fifty percent (50%) of the combined voting power of the parent of the surviving
entity in such merger;
(d) an acquisition by any person, entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act or any comparable successor provisions), other than any employee benefit
plan, or related trust, sponsored or maintained by the Company or an affiliate of the Company and
other than in a merger or consolidation of the type referred to in clause “(c)” of this sentence,
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rules) of outstanding voting securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company (in a single transaction or series
of related transactions); or
(e) in the event that the individuals who, as of the Effective Date, are members of the Board
(the “Incumbent Board”), cease for any reason to constitute at least fifty percent (50%) of the
Board. (If the election, or nomination for election by the Company’s shareholders, of any new
member of the Board is approved by a vote of at least fifty percent (50%) of the Incumbent Board,
such new member of the Board shall be considered as a member of the Incumbent Board.)
7.2 Termination After a Change of Control. In the event Executive’s employment with the
Company is terminated without Cause, or Executive resigns for Good Reason, within ninety (90) days
prior to or twenty-four (24) months following a Change of Control (a “Change of Control
Termination”), then Executive shall be eligible for severance benefits as set forth in Section 4.3
of Exhibit A, attached hereto.
7.3 Parachute Payments. In the event that it shall be determined under this Section 7.3 that
any payment or benefit to Executive or for the benefit of Executive or on Executive’s behalf
(whether paid or payable or distributed or distributable) pursuant to the terms of this Agreement
or any other agreement, arrangement or plan with the Company or any Affiliate (as defined below)
(including, without limitation, the severance benefits as set forth in Section 4.3 of Exhibit A,
attached hereto) (individually, a “Payment” and collectively, the “Payments”) would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”), or any successor provision thereto (the “Excise Tax”), then Executive shall be entitled to
receive from the Company one or more additional payments (individually, a “Gross-Up Payment” and
collectively, the “Gross-Up Payments”) in an aggregate amount such that the net amount of the
Payments and the Gross-Up Payments retained by Executive after the payment of all Excise Taxes (and
any interest and penalties imposed with respect to such Excise Taxes) on the Payments and all
federal, state and local income tax, employment taxes and Excise Taxes (including any interest and
penalties imposed with respect to such taxes and Excise Taxes) on the Gross-Up Payments provided
for in this Section 7.3, and taking into account any lost or reduced tax deductions on account of
the Gross-Up Payments, shall be equal to the Payments. For purposes of this Section 7.3, an
“Affiliate” shall mean any successor to all or substantially all of the business and/or assets of
the Company, any person acquiring ownership or effective control of the Company or ownership of a
substantial portion of the assets of the Company’s assets, or any other person whose relationship
to the Company, such successor or such person acquiring ownership or control is such as to require
attribution between the parties under Section 318(a) of the Code.
(a) All determinations required to be made under this Section 7.3, including whether and when
any Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be
utilized in arriving at such determinations, shall be made by the Accountants (as defined below),
which shall provide Executive and the Company with detailed supporting calculations with respect to
such Gross-Up Payment within thirty (30) days of the receipt of notice from Executive or the
Company that Executive has received or will receive a Payment. For the purposes of this Section
7.3, the “Accountants” shall mean the Company’s independent certified public accounting firm
serving immediately prior to the Change of Control (or other change in ownership or effective
control, or change in ownership of a substantial portion of the assets, of a corporation, as
defined in Section 280G of the Code) with respect to which such determination is being made. In
the event that the Accountants are also serving as the accountants, auditors or consultants for the
individual, entity or group effecting the Change of Control (or other change in ownership or
effective control, or change in ownership of a substantial portion of the assets, of a corporation,
as defined in Section 280G of the Code), the Company shall appoint another nationally recognized
independent certified public accounting firm, reasonably acceptable to Executive, to make the
determinations required hereunder (which accounting firm shall then be referred to as the
“Accountants” hereunder). All fees and expenses of the Accountants shall be borne solely by the
Company.
(b) For the purposes of determining whether any of the Payments will be subject to the Excise
Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within
the meaning of section 280G of the Code, and all “parachute payments” in excess of the “base
amount” (as defined under Section 280G(b)(3) of the Code) of Executive shall be treated as subject
to the Excise Tax, unless and except to the extent that, in the opinion of the Accountants, such
Payments (in whole or in part) either do not constitute “parachute payments” or represent
reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4) of
the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to
such Excise Tax.
(c) For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed
to pay federal income taxes at the highest applicable marginal rate of federal income taxation for
the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and
local income taxes at the highest applicable marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from the deduction of such state or local taxes if paid in such year
(determined without regard to limitations on deductions based upon the amount of Executive’s
adjusted gross income); and to have otherwise allowable deductions for federal, state and local
income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up
Payment in Executive’s adjusted gross income.
(d) Any determination by the Accountants shall be binding upon the Company and Executive. As
a result of uncertainty in the application of Section 4999 of the Code at the time of the initial
determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have
been an amount less than the Company should have paid pursuant to this Section 7.3 (the
“Underpayment”). In the event that the Company exhausts its
remedies pursuant to Section 7.3(f) and Executive is required to make a payment of any Excise
Tax, the Underpayment shall be promptly paid by the Company to or for Executive’s benefit.
(e) Executive shall notify the Company in writing of any claim by the Internal Revenue Service
or other taxing authority that, if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon as practicable after Executive is
informed in writing of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes, interest and/or
penalties with respect to such claim is due). If the Company notifies Executive in writing prior
to the expiration of such period that the Company desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, engaging legal representation
with respect to such claim by an attorney selected by the Company and reasonably acceptable to
Executive; (iii) cooperate with the Company in good faith in order to effectively contest such
claim; and (iv) permit the Company to participate in any proceedings relating to such claims;
provided, however, that the Company shall bear and pay directly all costs and expenses, including
attorneys’ fees (including additional interest and penalties) incurred in connection with such
contest and shall indemnify Executive for and hold Executive harmless from, on an after-tax basis,
any Excise Tax or income, employment or other taxes (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of all related costs and expenses.
(f) Without limiting the foregoing provisions of this Section 7.3, the Company shall control
all proceedings taken in connection with such contest and, at the Company’s sole option, may pursue
or forgo any and all administrative appeals, proceedings, hearings and conferences with the
Internal Revenue Service or other taxing authority in respect of such claim and may, at the
Company’s sole option, either direct Executive to pay the amount claimed and xxx for a refund or
contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that if the Company
directs Executive to pay such claim and xxx for a refund, the Company shall advance the amount of
such payment to Executive, on an interest-free basis, and shall indemnify Executive for and hold
Executive harmless from, on an after-tax basis, any Excise Tax or income, employment or other taxes
(including interest or penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance (including as a result of any
forgiveness by the Company of such advance); provided, further, that any extension of the statute
of limitations relating to the payment of taxes, interest and penalties for the taxable year of
Executive with respect to which such contested amount is claimed to be due shall be limited solely
to such contested amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(g) The Gross-Up Payments provided for in this Section 7.3 shall be paid to Executive as soon
as practicable after the Accountants have determined the amount of such payments, but not earlier
than the date the severance benefits are due to Executive under Section 4.4 of the Compensation and
Severance Terms Schedule, attached hereto as Exhibit A and in no event later than the later of (i)
the end of the calendar year following the date of termination and (ii) the third calendar month
following the date of termination, as permitted under Code Section 409(A); provided, however, that
if the amounts of such Gross-Up Payments cannot be finally determined by the Accountants before the
end of this period, the Company shall pay to Executive as of the last day of the period described
above an estimate, as determined in good faith by the Company, of the amount of such Gross-Up
Payments. In the event that the amount of the estimated payments exceeds the amount subsequently
determined by the Accountants to have been due to the Executive, such excess shall constitute a
loan by the Company to Executive, payable not later than 30 days after such determination and
demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
8. Nonsolicitation. While employed by the Company, and for one (1) year following
the termination of Executive’s employment with the Company, Executive agrees not to solicit,
attempt to solicit, induce, or otherwise cause any employee or independent contractor of the
Company to terminate his or her employment or contractual relationship in order to become an
employee or independent contractor to or for Executive or any other person or entity.
9. Release. In exchange for the severance compensation and benefits provided under
this Agreement to which Executive would not otherwise be entitled, Executive shall enter into and
execute a release substantially in the form attached hereto as Exhibit B, as may be revised and
updated as determined to be appropriate by the Company (the “Release”). Unless the Release is
executed by Executive following termination of employment, delivered to the Company within
twenty-one (21) days after the Release has been provided to Executive (or forty-five (45) days
following Executive’s receipt of the informational package required in the event of a group
termination), and not revoked, Executive shall not receive any severance benefits provided under
this Agreement, any vesting acceleration of Executive’s Awards as provided in this Agreement shall
not apply, and Executive’s Awards in such event shall vest or, in the case of stock options, be
exercisable following the date of Executive’s termination only to the extent provided under their
original terms in accordance with the applicable plan and Award agreements.
10. General Provisions.
10.1 Notices. Any notices provided hereunder must be in writing and shall be deemed effective
upon personal delivery (including, personal delivery by facsimile transmission) or the third day
after mailing by first class mail, to the Company at its primary office location and to Executive
at his address as listed on the Company payroll (which address may be changed by written notice).
10.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity or unenforceability will not
affect any other provision or any other jurisdiction, and such invalid or unenforceable provision
shall be reformed, construed and enforced in such jurisdiction so as to render it valid and
enforceable consistent with the intent of the parties insofar as possible.
10.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he
or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or
any other provision of this Agreement.
10.4 Entire Agreement. This Agreement, together with the Employee Proprietary Information and
Inventions Agreement, constitute the final, complete, and exclusive embodiment of the entire
agreement between Executive and the Company regarding the subject matter hereof and supersede any
prior agreement, promise, representation, or statement, written or otherwise, between Executive and
the Company with regard to this subject matter. Without limiting the foregoing, the parties
expressly agree that the certain Key Employee Agreement between Company and Executive dated
December 21, 2000, as amended, is of no further force or effect, and is superseded in its entirety
by this Agreement. This Agreement is entered into without reliance on any promise, representation,
statement or agreement other than those expressly contained or incorporated herein, and it cannot
be modified or amended except in a writing signed by Executive and a duly authorized officer of the
Company.
10.5 Counterparts. This Agreement may be executed in separate counterparts, any one of which
need not contain signatures of more than one party, but all of which taken together will constitute
one and the same Agreement.
10.6 Headings. The headings of the sections hereof are inserted for convenience only and
shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
10.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of
and be enforceable by Executive, the Company and their respective successors, assigns, heirs,
executors and administrators, except that Executive may not assign any of his duties hereunder and
he may not assign any of his rights hereunder without the written consent of the Company, which
shall not be withheld unreasonably.
10.8 Attorneys’ Fees. If either party hereto brings any action to enforce his or its rights
hereunder, the prevailing party in any such action shall be entitled to recover his or its
reasonable attorneys’ fees and costs incurred in connection with such action.
10.9 Arbitration. To provide a mechanism for rapid and economical dispute resolution,
Executive and the Company agree that any and all disputes, claims, or causes of action, in law or
equity, arising from or relating to this Agreement (including the Release) or its enforcement,
performance, breach, or interpretation, will be resolved, to the fullest extent permitted by law,
by final, binding, and confidential arbitration held in Orange County, California and conducted by
Judicial Arbitration & Mediation Services/Endispute (“JAMS”), under its then-existing Rules and
Procedures. Nothing in this Section 10.9 or in this Agreement
is intended to prevent either Executive or the Company from obtaining injunctive relief in
court to prevent irreparable harm pending the conclusion of any such arbitration.
10.10 Remedies. Executive’s duties under Section 8 and the Employee Proprietary Information
and Inventions Agreement shall survive termination of Executive’s employment with the Company.
Executive acknowledges that a remedy at law for any breach or threatened breach by Executive of the
provisions of these sections and the Employee Proprietary Information and Inventions Agreement
would be inadequate, and that such a breach would cause irreparable harm to the Company; and
Executive therefore agrees that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
10.11 Governing Law. All questions concerning the construction, validity and interpretation
of this Agreement will be governed by the law of the State of California as applied to contracts
made and to be performed entirely within California.
10.12 Section 409A. Notwithstanding anything contained in this Agreement to the contrary, to
the maximum extent permitted by applicable law, severance amounts payable pursuant to this
Agreement shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans)
or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). For this purpose each installment
payment to which Executive is entitled under the severance pay provisions of this Agreement shall
be considered a separate and distinct payment. In addition, (i) Subject to Section 9 of this
Agreement, all severance payments payable pursuant this Agreement shall commence within sixty (60)
days after the Executive’s Separation from Service, (ii) no amount deemed deferred compensation
subject to Section 409A shall be payable pursuant to the severance pay provisions of this Agreement
unless your termination of employment constitutes a Separation from Service, and (ii) if you are
deemed at the time of your separation from service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the
termination benefits to which you are entitled under this Agreement is required in order to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of your
termination benefits shall not be provided to you prior to the earlier of (A) the expiration of the
six-month period measured from the date of your Separation from Service with the Company or (B) the
date of your death. Upon the earlier of such dates, all payments deferred pursuant to this
paragraph shall be paid in a lump sum to you, and any remaining payments due under this Agreement
shall be paid as otherwise provided herein. For purposes of this Agreement, Separation from Service
shall mean a “separation from service” within the meaning of Treasury Regulation Section
1.409A-1(h). The determination of whether you are a “specified employee” for purposes of Section
409A(a)(2)(B)(i) of the Code as of the time of your separation from service shall be made by the
Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder
(including without limitation Treas. Reg. Section 1.409A-1(i) and any successor provision thereto).
The payment of any reimbursement of any expense under this Agreement (including without
limitation, any Gross-Up Payments pursuant to Section 7.3 of this Agreement) shall be made no later
than December 31 of the year following the year in which the expense was incurred. The amount of
expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any
subsequent year. The payment of any bonus earned pursuant to this Agreement shall be made no later
than two and one-half months following the end of the fiscal year in which such bonus was earned.
In Witness Whereof, the parties have executed this Agreement effective as of the
Effective Date above written.
Xxxxxx Pharmaceuticals, Inc.
By: |
/s/ Xxxxx X. Xxxxxx | |||
| Title: Senior Vice President and General Counsel | ||||
Executive:
/s/ R. Xxxx Xxxxx |
Exhibit A
COMPENSATION AND SEVERANCE TERMS SCHEDULE
1. BASE SALARY
For services to be rendered under this Agreement, Executive shall receive an initial
base salary at an annualized rate of $425,000, payable in accordance with the Company’s
standard payroll practices, and subject to increases as set forth in the Agreement.
2. BONUS
Executive’s annual bonus, if granted, shall be at a target level of 50% or greater of
the Executive’s then current base salary.
3. LONG TERM INCENTIVE AWARDS
As of the Effective Date, Executive shall be awarded 6,800 shares of restricted stock
in the Company.
The terms of the restricted stock award, including the applicable vesting periods of
such Awards, shall be set forth in the applicable award agreements and shall otherwise be
subject to the terms and conditions of the applicable plan documents.
4. SEVERANCE BENEFITS
4.1 Termination By Company without Cause. If the Company terminates Executive’s
employment at any time without Cause, the Company shall provide to Executive, within thirty
(30) days after the Effective Date of the Release attached hereto as Exhibit B (as
“Effective Date” is defined in the Release), as the only severance compensation and benefits
all of the following:
(a) A lump sum severance payment, subject to standard withholdings or deductions, in an
amount equal to the sum of: (i) twenty-four (24) months of Executive’s then base salary;
(ii) two times Executive’s target bonus to be earned for the year in which termination
occurs or two times the bonus amount paid to the Executive in the prior year, whichever is
greater; and (iii) Executive’s prorated bonus for the year in which the termination occurs,
at the Company’s discretion.
(b) Continued group health insurance benefits (e.g., medical, dental, vision, etc.) at
the Company’s expense for Executive and Executive’s eligible dependents for a period of up
to eighteen (18) months under COBRA; provided, however, that in any event the Company’s
obligation to provide any health benefits pursuant to this sentence ends when Executive
becomes eligible for health insurance with a new employer or otherwise becomes eligible for
health insurance subsidized by a third party (and
Executive agrees to promptly notify the Company in writing of any such event of
eligibility). To satisfy its obligations hereunder, the Company, at its election, shall
either (i) arrange commercial health care coverage for Executive and Executive’s eligible
dependents (which is (x) comparable to the health benefits provided to Executive and his
eligible dependents immediately prior to commencement of such commercial health care
coverage, (y) subject to change if such coverage is no longer available, and (z) mutually
agreeable to the Company and Executive), (ii) provide Executive and his eligible dependents
continued coverage under the Company’s health plans, or (iii) upon Executive’s election of
COBRA benefits, make a lump sum payment to Executive in an amount equal to the amount
Executive would incur to enroll in COBRA for a period of eighteen (18) months.
(c) Outplacement services for one year with a nationally recognized service selected by
the Company.
4.2 Executive’s Resignation for Good Reason. If Executive terminates his employment
with the Company for Good Reason in the absence of a Change of Control, the Company shall
provide to Executive, within thirty (30) days after the Effective Date of the Release
attached hereto as Exhibit B (as “Effective Date” is defined in the Release), as the only
severance compensation and benefits, the same severance compensation and benefits provided
in Section 4.1 hereof.
4.3 Change of Control Termination. In the event of a Change of Control Termination or
if the Executive resigns for Good Reason within ninety (90) days prior to or twenty-four
(24) months following a Change of Control, the Company shall provide to Executive, within
thirty (30) days after the Effective Date of the Release attached hereto as Exhibit B (as
“Effective Date” is defined in the Release), as the only severance compensation and
benefits, (a) the same benefits set forth in paragraphs 4.1 of this Exhibit A; and (b) any
unvested Awards held by Executive shall have their vesting accelerated in full so as to
become one hundred percent (100%) vested and immediately exercisable in full as of the date
of such termination.
Exhibit B
RELEASE AGREEMENT
I understand that my position with Xxxxxx Pharmaceuticals, Inc. (the “Company”) terminated
effective (the “Separation Date”). The Company has agreed that if I choose to sign
this Release, the Company will, within thirty (30) days after the Effective Date of this Release,
pay me certain severance benefits (minus the standard withholdings and deductions) pursuant to the
terms of the Key Employee Agreement (the “Agreement”) entered into as of ,
between myself and the Company, and any agreements incorporated therein by reference. I understand
that I am not entitled to such severance benefits unless I sign this Release. I further understand
that, regardless of whether I sign this Release, the Company will pay me all of my accrued salary
and paid time off through the Separation Date, to which I am entitled by law.
In consideration for the severance benefits I am receiving under the Agreement, I hereby release
the Company and its officers, directors, agents, attorneys, employees, shareholders, parents,
subsidiaries, and affiliates (“Releasees”) from any and all claims, liabilities, demands, causes of
action, attorneys’ fees, damages, or obligations of every kind and nature, whether they are now
known or unknown, arising at any time prior to the date I sign this Release. This general release
includes, but is not limited to: all federal and state statutory and common law claims, claims
related to my employment or the termination of my employment or related to breach of contract,
tort, wrongful termination, discrimination, harassment, defamation, fraud, wages or benefits, or
claims for any form of equity or compensation. Notwithstanding the release in the preceding
sentence, I am not releasing any right of indemnification I may have for any liabilities and costs
of defense (including without limitation reasonable attorneys’ fees) arising from my actions within
the course and scope of my employment with the Company.
In releasing claims unknown to me at present, I am waiving all rights and benefits under Section
1542 of the California Civil Code, and any law or legal principle of similar effect in any
jurisdiction: “A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.”
If I am forty (40) years of age or older as of the Separation Date, I acknowledge that I am
knowingly and voluntarily waiving and releasing any rights I may have under the federal Age
Discrimination in Employment Act of 1967, as amended (“ADEA”). I also acknowledge that the
consideration given for the waiver in the above paragraph is in addition to anything of value to
which I was already entitled. I have been advised by this writing, as required by the ADEA that:
(a) my waiver and release do not apply to any claims that may arise after my signing of this
Release; (b) I should consult with an attorney prior to executing this Release; (c) I have
twenty-one (21) days (forty-five (45) days in the event of a group termination) within which to
consider this Release (although I may choose to voluntarily execute this Release earlier); (d) I
have seven (7) days following the execution of this release to revoke the Release; and (e) this
Release will not be effective until the eighth day after this Release has been signed both by me
and by the Company (“Effective Date”).
I acknowledge that I remain bound by the Employee Proprietary Information and Invention Agreement
which I signed in connection with my employment (“Invention Agreement”) and that the provisions of
the Invention Agreement shall remain in full force and effect. In accordance with my existing and
continuing obligations under the Invention Agreement, I have returned to the Company all materials
required to be returned pursuant to the Invention Agreement, as well as any other Company property
in my possession. In consideration for the severance benefits I am receiving hereunder, I agree
that I will reasonably cooperate with the Company after the Separation Date to assure the smooth
transition of pending matters and to answer questions which may arise from time to time regarding
my former duties and responsibilities. Effective as of the Separation Date, I resign any and all
offices and directorships with the Company and any of its affiliates, and will execute all
documents reasonably requested by the Company or its affiliates to effectuate such resignations.
Further, I agree that I will not hereafter disparage the Company or any of the Releasees, either
orally or in writing, to any person or entity. The Company agrees that its officers and directors
will not disparage me, either orally or in writing, to any person or entity.
Agreed:
Date
|
[Employee] | |||
Date
|
XXXXXX PHARMACEUTICALS, INC. |
Exhibit C
EMPLOYEE PROPRIETARY INFORMATION AND INVENTION AGREEMENT
