EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into effective this 24th day
of August, 1998 by and between Xxxxxx X. Xxxxxxxxxxx (the "Employee") and XXXXXX
PHARMACEUTICAL, INC. ("Company"), a Delaware corporation.
WITNESSETH
WHEREAS, the Company wishes to employ Employee as President and Chief
Executive Officer of the Company; and
WHEREAS, Employee and the Company desire to enter into an Agreement to
provide for Employee's employment as President and Chief Executive Officer with
the Company as described in Exhibit A which is incorporated herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment; Duties. During the term of the Employment Period (as defined
in Section 2), and subject to the terms and conditions hereof, the Company shall
employ the Employee as President and Chief Executive Officer and the Employee
shall perform such duties for the Company as are incident to such position,
together with such other duties, consistent with Employee's knowledge,
experience and position with the Company, as he may be reasonably requested to
perform by the Company from time to time in connection with such employment. In
addition, the Company will undertake its best efforts to nominate and elect
Employee a Company Director to serve on the Company's Board of Directors.
Employee accepts such employment, and agrees to render the services
described herein and to devote his entire available business time, effort, skill
and attention to promote the best interests of the Company.
2. Employment Period. The term of this Agreement shall commence on the
effective date of this Employment Agreement, and shall end on the date two (2)
years after such date, unless sooner terminated pursuant to Section 5 hereof.
Thereafter, this Agreement shall automatically be renewed for successive periods
of one (1) year, unless the Company shall have given the Employee not less than
six (6) months' written notice of non-renewal and shall pay the Employee the
Severance Payments (as defined below) that would be payable if Employee's
employment were terminated in accordance with Section 5.4 hereof. The term
"Employment Period" shall mean the period of the Employee's employment with the
Company hereunder.
3. Salary. As compensation for the services to be rendered by Employee
during the Employment Period, the Company shall pay Employee the base annual
salary of $300,000, payable periodically consistent with the Company's normal
payroll practices, less such deductions and amounts to be withheld therefrom as
may be required under applicable law. The Base Salary may be increased from time
to time as agreed upon by the Company and Employee.
4. Other Benefits and Terms of Employment. During the Employment Period,
the following benefits and other terms of employment shall also apply:
(a) Expenses. The Company shall reimburse Employee for customary and
necessary expenses reasonably incurred by Employee in the course of performing
those duties which are incident to his position or which he has been requested
to perform by the Company, all in accordance with the Company's normal
reimbursement policies. In addition, at the time of commencement of employment,
the Company shall pay Employee $50,000, net of income taxes, for relocation and
housing allowance.
(b) Bonus. Employee shall receive such annual or other bonuses as may,
from time to time, be approved by the Company's Board of Directors, based upon
various factors reviewed by the Board and based on the achievement of the
objectives determined by the Board. Such bonuses are entirely within the
discretion of the Board and the Company. Employee shall also participate in such
other incentive compensation programs, if any, as the Company may establish for
key employees. The foregoing notwithstanding, for each of the Company's 1998 and
1999 fiscal years, Employee shall be entitled to a bonus of 30% of his base pay,
payable within three months of the fiscal year close, as follows:
(i) For fiscal year 1998,
the bonus will be pro-rated based upon
achievement of the following:
(x) Objectives (50%)
o Completion of a 1999 Business Plan acceptable to Board of Directors by
11/30/98 o Completion of meetings with all of Xxxxxx'x key customers by 12/31/98
o Completion of meetings with those key financial analysts who follow Xxxxxx by
12/31/98
o Improvement in Company morale demonstrated through employee turnover rate
reduction and effective Company-wide "town meetings" and
(y) Achievement of Xxxxxx'x existing 1998 EPS Plan (50%)
(ii) For fiscal year 1999,
the bonus will be upon achievement of the
Company's 1999 Business Plan, which will
include specific targets such as EPS, ANDA
submissions, and certain discrete projects
to be mutually agreed upon with the Board of
Directors
(c) Options. At the discretion of the Board of Directors, Employee
shall be eligible to receive periodic grants of stock options to purchase shares
of the Company's Common Stock. Upon commencement of employment, Employee shall
be entitled to receive options to purchase 150,000 shares at the closing price
of the shares on the effective date of this agreement. Any options to be granted
shall be subject to an appropriate option agreement in the form normally used by
the Company with respect to its key employees. The initial grant of options
shall have 37,507 shares vest on the effective date of this agreement and 4,891
shares vest monthly for each of the succeeding 23 months.
(d) Insurance, Other Benefits. Employee shall participate in employee
health, hospitalization, disability, group-term life, vacation, and other
benefit programs on the same basis as that of other Company executives. In
addition, Employee shall be entitled to such other benefits as may be generally
maintained or provided by the Company for the benefit of other employees.
Employee has been given copies of the Company's current insurance and employee
benefit plans.
5. Termination.
5.1 General. The Employment Period shall terminate prior to its
scheduled expiration set forth in Section 2 upon the earliest of the following:
(i) the Employee's death, (ii) a determination that Employee has become
disabled, as defined in Section 5.2, (iii) termination "for cause" under the
provisions of Section 5.3, or (iv) termination without cause as provided in
Section 5.4.
5.2 Disability. Employee shall be regarded as "disabled" for purposes
of this Agreement if s/he has been unable to render the services required for
him/her hereunder, in a manner consistent with past practice, for a period of
four (4) consecutive months or for any period in the aggregate of eight (8)
months in any twelve (12) month period because of a serious and continuing
health impairment; provided, however, that thirty (30) days' prior notice of
termination for disability shall be given to Employee.
If the Employee dies during the Employment Period (without regard to the
Company's right to terminate this Agreement thereupon), or if the Company
exercises its right to terminate the Employee under this Section 5.2, then in
each such case the Employee or his estate shall be entitled to the same payments
and other benefits as are provided in the event of termination pursuant to
Section 5.4 (including without limitation the acceleration of Employee's stock
options as provided in Section 5.4).
In the event that there should be any dispute between Employee and the
Company as to whether Employee is "disabled" within the meaning of this
Agreement or as to whether Employee has recovered from any such disability, such
matter shall be conclusively determined by the written report of a physician
acceptable to the Board and Employee (or, if they cannot reach agreement, by a
physician chosen by the Company's doctor and the Employee's doctor), who shall
set forth in his report the nature and seriousness of the impairment suffered by
Employee and the likely effect of such impairment on Employee's future ability
to render the services required hereunder. Employee agrees to submit to
examination by any such physician to the extent reasonably requested by the
Board for the purpose of ascertaining the extent of Employee's disability or
recovery therefrom and the parties agree that any determination with respect to
Employee's disability may be conclusively resolved in the sole judgment of the
Board if Employee should fail to comply with any reasonable request by the Board
to submit to such an examination.
5.3 For Cause. The Company may terminate the Employment Period and
discharge Employee for cause upon giving thirty (30) days (five (5) days in the
case of sub-paragraph (iv) below) written notice to Employee of such
termination. Regardless of any broader definition of "cause" which might
otherwise apply under applicable law, the term "for cause" as used herein shall
be defined to include only one or more of the following grounds: (i)
misappropriation by Employee of any material amounts of money or other assets or
property (tangible or intangible) of the Company; (ii) the Employee's willful
refusal to perform reasonable assignments given to Employee commensurate with
such Employee's status, functions or responsibilities as a key employee,
provided, that (x) such refusal is material and repetitive, and (y) the Employee
shall have been given reasonable notice and explanation of such refusal, and
reasonable opportunity to cure such refusal, and no cure has been effected
within a reasonable time after notice; (iii) conviction of Employee of a felony;
or (iv) a breach of any of the provisions of Section 6 hereof, provided the
Employee shall have been given reasonable notice and explanation of such
refusal, and reasonable opportunity to cure such refusal, and no cure has been
effected within a reasonable time after notice.
5.4 At the Election of the Company for Reasons Other
than For Cause. The Company may terminate the Employee's employment hereunder at
any time during the term of this Agreement without cause by giving ninety (90)
days' advance written notice to the Employee of an election to terminate.
In the event the Company exercises its right to terminate the Employee
under this Section 5.4, the Company agrees to pay the Employee (i) a lump sum
severance or termination payment equal to the greater of (x) one year's Base
Salary at the then current rate or (y) the Base Salary payable for the remaining
term under this Agreement, (ii) medical and other health insurance benefits for
the severance period set forth in (i) above; and (iii) the pro rata portion of
any bonus to which the Employee is otherwise entitled (the "Severance
Payments"). Such Severance Payments shall be payable on the Employee's last date
of employment hereunder and shall be subject to all applicable federal and state
withholding and other taxes.
In addition, notwithstanding anything to the contrary contained in any
stock option agreement between the Employee and the Company, if the Company
exercises its right to terminate the Employee under this Section 5.4, then all
stock options then held by the Employee shall automatically accelerate and
become fully exercisable as of the date on which the Employee receives notice of
termination. Such stock options shall remain fully exercisable until the close
of business on the 60th day after the last day of the Employee's employment with
the Company hereunder. The Company shall take any and all actions necessary to
effect the provisions of this paragraph.
It shall be deemed to be a termination "without cause" if the Employee's
responsibilities and executive authority are reduced or diluted in any material
respect without the Employee's consent (which reduction or dilution is not
corrected by the Company within 30 days following written notification by
Employee to the Company that Employee intends to terminate his employment for
such reason) or the Employee is relocated to another Company office or facility
more than 50 miles from Canton, Massachusetts without the Employee's consent.
In the event that Employee would, except for the remainder of this Section,
be subject to a tax pursuant to Section 4999 of the Internal Revenue Code of
1986, as amended, (the "Code") or any successor provision that may be in effect,
as a result of "parachute payments" (as that term is defined in Section 280G(b)
(2) (A) and (d) (3) of the Code) made pursuant to this Agreement, or a deduction
would not be allowed to the Company for all or any part of such payments by
reason of Section 280G(a) of the Code, or any successor provision that may be in
effect, such payments shall be reduced, eliminated, or postponed in such amounts
as are required to reduce the aggregate "present value" (as that term is defined
in Section 280G(d)(4) of the Code) of such payments to one dollar less than an
amount equal to three times Employee's base amount," (as that term is defined in
Section 280G(b)(3)(a) and (d)(1) and (2) of the Code) to the end that Employee
is not subject to tax pursuant to such Section 4999 and no deduction is
disallowed by reason of such Section 280G (a). To achieve such required
reduction in aggregate present value, Employee in his sole discretion shall
determine what item(s) constituting the parachute payments shall be reduced,
eliminated or postponed, the amount of each such reduction, elimination or
postponement, and the period of each such postponement. To enable Employee to
make such determination, the Company shall be required to provide Employee with
such information as is reasonably necessary for such determination.
Prior to the making of any payment under this Section, either party may
request a determination as to whether such payment would constitute a "parachute
payment," and, if so, the amount by which the payment must be reduced in
accordance herewith. If such a determination is requested, it shall be made
promptly, at the Company's expense, by independent tax counsel selected by the
Employee and approved by the Company (which approval shall not unreasonably be
withheld), and such determination shall be conclusive and binding on the
parties. The Company shall provide such information as such counsel may
reasonably request, and such counsel may engage accountants or other experts at
the Company's expense to the extent that they deem necessary or advisable to
enable them to reach a determination.
5.5 Effect of Termination. Notwithstanding any termination of the
Employment Period, the Company shall promptly pay Employee any amounts due to
Employee with respect to all accrued but unpaid salary and accrued but unused
vacation time to the date of termination. If Employee is deceased, such payments
shall be made to such individual or entity as Employee may have designated in
writing submitted to the Company or, in the absence of such written designation,
to Employee's estate.
6. Covenants of the Employee. In consideration of the Employee's continued
employment with the Company, Employee hereby agrees that:
6.1 Noncompetition Covenant. During the Employment Period and for one
additional year thereafter the Employee will not, whether alone or as a partner,
officer, director, consultant, principal, distributor, representative, agent,
employee or stockholder of any company or other commercial enterprise, engage in
any business or other commercial activity which is competitive with the
products, services being marketed, distributed or developed by the Company. The
foregoing prohibition shall not prevent employment or engagement by any company
or business organization not engaged in such business as long as the activities
of any such employment or engagement, in any capacity, do not involve work on
matters directly or indirectly related to the products, services or strategy
being developed, manufactured or marketed by the Company. Ownership of less than
five percent (5%) of the outstanding shares of a company whose stock is publicly
traded shall not be a violation of this provision. If the Employee is terminated
without "cause" (as defined herein), the provisions of this Section 6.1 shall
not apply unless the Company shall have promptly made the payments required to
be made by it pursuant to Section 5.4 hereof.
6.2 Nonsolicitation. During the Employment Period and for one
additional year thereafter the Employee will not, directly or indirectly, either
for himself or for any other commercial enterprise, solicit, or attempt to
solicit, any of the Company's customers, business or prospective customers. For
the purpose of this Agreement, "prospective customers" shall include those
customers who have been solicited by the Company within one year before the date
Employee's employment with the Company terminated. Furthermore, during such
period, the Employee will not solicit any employee of the Company for the
retention of such Company employee for any commercial enterprise, other than for
the Company, nor recruit, solicit, attempt to recruit or solicit, hire, or
attempt to hire any such Company employee for any other commercial enterprise,
whether or not such enterprise may be a competitor of the Company.
6.3 Nondisclosure Obligation. The Employee will not at any time,
whether during or after the term of this Agreement, and regardless of any early
termination thereof, for any reason whatsoever (other than to promote and
advance the business of the Company), reveal to any person or entity (both
commercial and non-commercial) any of the trade secrets, proprietary rights or
confidential business information concerning the Company, including but not
limited to its research and development activities, product designs, prototypes,
technical specifications, processes, formulae, inventions, methods and
memoranda, know-how and know-how, marketing plans and strategies, pricing and
costing policies, customer and supplier lists and accounts, and business,
finances or financial information of the Company so far as they have come and
may come to the Employee's knowledge, except as may be required in the ordinary
course of performing his/her duties as an Employee. These restrictions shall not
apply to: (i) information that may be disclosed generally or is in the public
domain through no default of the Employee; (ii) information received from a
third party who has not violated its own confidentiality obligation to the
Company; (iii) information approved for release by written authorization of the
Company; or (iv) information that may be required by law or an order of any
court, agency or proceeding to be disclosed. The Employee shall keep secret all
matters of such nature entrusted to him/her and shall not use or disclose any
such information in any manner which causes loss to the Company.
6.4 Assignment of Inventions. It is expressly understood and agreed
that any and all right, title and interest of the Employee in any inventions,
discoveries and patent rights conceived or developed by the Employee during the
term of this Agreement (and thereafter if Employee remains an employee of the
Company) which relate to or arise out of his employment services rendered to the
Company are "works for hire" and are hereby assigned to the Company by the
Employee and shall be the sole and exclusive property of the Company.
6.5 Reformation of Agreement. In the event that any of the covenants
contained in this Section 6 may be found by a court of competent jurisdiction to
be invalid or unenforceable as against public policy or otherwise, the parties
hereto expressly authorize such court to exercise its discretion in reforming
any such covenant to the end that Employee shall be subject to the greatest
extent permissible to confidentiality and noncompetition covenants that are
reasonable under the circumstances enforceable by the Company, and consistent
with the Company's legitimate interests (acknowledged by the parties) in
protecting the Company's goodwill associated with the experience, skills, and
loyalty of Employee and with protecting the value of the business and assets of
the Company.
6.6 Injunctive Relief. In the event of a breach or threatened breach by
Employee of any of the covenants contained in this Section 6, Employee agrees
that the Company shall be entitled to injunctive relief in a court of
appropriate jurisdiction to remedy any such breach or threatened breach.
7. Indemnification. The Company hereby agrees to defend and indemnify
Employee to the maximum extent permitted by applicable law against all costs,
charges, and expenses incurred or sustained by him in connection with any
action, suit, or other proceeding to which he may be a party by reason of his
being an employee of the Company or by reason of any action taken or omitted to
be taken in good faith by Employee in such capacity, to the extent that
Employee's actions or omissions are consistent with and not in breach of the
provisions of this Agreement. The provisions of this Section 7 shall not be
interpreted to limit any right to indemnification that the Employee may have
under the Certificate of Incorporation or By-laws of the Company, by contract or
otherwise or under applicable law.
8. Nonassignability. This Employment Agreement may not be assigned by
either Company or Employee, except that, with the Employee's consent (which may
not be unreasonably withheld), the Company may assign its rights under this
Agreement to any affiliated corporation by means of assignment, merger, or
otherwise; and no such assignment shall impair the rights or obligations of the
parties as provided herein.
9. Miscellaneous.
9.1 Notices. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given when delivered by hand, sent by overnight courier service or facsimile
transmission, or dispatched by certified mail to the parties at the following
addresses or to such other address for a party as such party may have designated
to the other in a prior notice given in accordance herewith:
(a) If to the Company, to:
Xxxxxx Pharmaceutical, Inc.
00 Xxxx Xxxx
Xxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
(b) If to Employee, to:
Xx. Xxxxxx X. Xxxxxxxxxxx
c/x Xxxxxx Pharmaceutical, Inc.
00 Xxxx Xxxx
Xxxxxx, XX 00000
9.2 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto concerning the subject matter hereof and
supersedes any prior understandings and agreements relating to the terms of the
Employee's employment by the Company.
9.3 Amendments; Waivers. This Agreement may be amended, modified,
superseded, or canceled and the terms or covenants hereof may be waived, only by
a written instrument specifically referring to this Agreement and executed by
both of the parties hereto, or, in the case of a waiver, by the party entitled
to the benefit of such provision. The failure of the Company at any time or from
time to time to require performance of any Employee's obligations under this
Agreement shall in no manner affect the Company's right to enforce any
provisions of this Agreement at a subsequent time; and the waiver by the Company
of any right arising out of any breach shall not be construed as a waiver of any
right arising out of any subsequent breach.
9.4 Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance, should, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Agreement should
not be affected thereby.
9.5 Governing Laws; Disputes. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts made and to be performed entirely within such
Commonwealth. The Company consents to personal jurisdiction in the State of
California and agrees not to raise a defense of forum non conviens. In any
dispute between the Company and the Employee, the prevailing party shall be
entitled to recover its attorney's fees and expenses.
9.6 Headings. The section headings contained in this Agreement are
intended solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the parties have duly executed this Agreement on this
date first written above, effective as of such date.
EMPLOYEE:
---------------------------------
Xxxxxx X. Xxxxxxxxxxx
Social Security # XXXXXX PHARMACEUTICAL, INC.
By: _____________________________
Title: __________________________
