Exhibit 10(gg)
February 10, 1999
Xxxxxxx X. Xxx, Ph.D
c/o Chesapeake Biological Laboratories, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Dear Xxxx:
As you know, Chesapeake Biological Laboratories, Inc. (the
"Corporation") and you entered into a letter agreement dated as of December 22,
1998, amending certain provisions of your then existing employment arrangement
with the Corporation, in an effort to better position the Corporation for future
growth. Since that date, however, further discussions have ensued, and it has
been determined that the December 22, 1998 letter agreement did not fully
reflect the intentions of the parties and that certain additional modifications
to the employment arrangement by and between you and the Corporation are
warranted. Accordingly, the purpose of this letter is to set forth all of the
changes to your employment arrangement which have recently been agreed upon,
including those changes which were intended or embodied in the letter agreement
dated December 22, 1998 and the changes which have been discussed and agreed to
in principle since that date. These changes, modifications and agreements are as
follows:
1. Effective January 1, 1999, the Employment Agreement dated
July 1, 1995, by and between you and the Corporation, as amended by a letter
agreement dated November 21, 1996 (the "Employment Agreement"), shall be deemed
to be further amended as follows (all capitalized terms used herein and not
otherwise specifically defined shall have the meanings ascribed thereto in the
Employment Agreement):
(i) Paragraph 4 of the Employment Agreement is amended
and restated as follows:
At all times during the Employment Term, the Corporation
agrees to engage the Employee as Chairman of the Board of
Directors of the Corporation and the Employee agrees to
perform such services as are customarily rendered by chairmen
of the board of directors of publicly held companies
comparable to the Corporation and which consider the position
of Chairman of the Board as an officer position. In addition,
the Employee will perform such other executive services for
the Corporation as shall from time to time be reasonably
assigned to him by the Board of Directors of the Corporation,
consistent with the terms of this Agreement and the stature
and position of the Employee. Both the Employee and the
Corporation
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February 10, 1999
Page 18
acknowledge that the ability of the Employee to serve as
Chairman of the Board of the Corporation is conditioned upon
the Employee serving as a member of the Board of Directors of
the Corporation; accordingly, at all times during the
Employment Term, the Corporation, through its Board of
Directors, agrees to nominate the Employee as a member of the
Board of Directors of the Corporation, and provided the
Employee shall remain a member of the Board of Directors of
the Corporation, at all times during the Employment Term the
Board of Directors of the Corporation shall designate the
Employee as Chairman of the Board of Directors of the
Corporation. The failure of the stockholders of the
Corporation to elect the Employee as a director of the
Corporation when nominated from time to time during the
Employment Term (and assuming that the Employee agrees to
serve if so elected) will be deemed a material diminution in
the title or scope of the Employee's responsibilities within
the meaning of Paragraph 1(a)(iii) of this Agreement.
(ii) Paragraph 3 of the Employment Agreement shall
be amended such that the Renewal Term in effect as of the date hereof shall
continue from the date hereof until December 31, 1999, whereupon the
Employment Term shall be automatically extended for an indefinite number of
successive one (1) year Renewal Terms (in lieu of three (3) year Renewal
Terms as currently provided in the Employment Agreement) thereafter, unless
and until, not less than one hundred eighty (180) days prior to the last day
of the Renewal Term ending December 31, 1999 or any successive Renewal Term
then in effect, the Corporation shall have delivered to you, or you shall
have delivered to the Corporation, written notice that the term of your
employment under the Employment Agreement will not be so extended.
(iii) Your Base Salary, as provided for under
Paragraph 5 of the Employment Agreement shall be changed from $170,000 per
year as currently in effect, to $125,000 per year. All other terms currently
existing under Paragraph 5 of the Employment Agreement, including those
regarding the manner in which the Base Salary is to be paid, shall continue
to apply.
(iv) The reference to "the number two (2)" in
clause (ii) of Paragraph 12(d)(x) of the Employment Agreement shall be
amended to read "the number one (1)" in lieu of "the number two (2)", such
that any severance payment becoming due to you under paragraph 12(d)(x) of
the Employment Agreement will be reduced by one-half of the amount which
would have been payable prior to this amendment.
(v) The definition of "Change in Control of the
Corporation" as set forth in subparagraph (d) of Paragraph 1 of the Agreement
shall be modified to include, in addition to the events otherwise described
therein as constituting the occurrence of a change in control of the
Corporation, a merger, sale of substantially all of the assets of the
Corporation, share exchange, consolidation or other business combination (as
defined in the Maryland General Corporation Law) of the Corporation and any
other person, entity or group of persons or entities acting in concert, as a
result of which the Corporation's common stock becomes exchangeable for other
securities or property or cash.
2. In consideration for your agreement to the modifications to
your Employment Agreement
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Xxxxxxx X. Xxx, Ph.D
February 10, 1999
Page 19
as described herein above, the Corporation agrees to pay you the sum of
$170,000, and to grant to you options under the Corporation's Fourth Incentive
Stock Option Plan, on the following terms and conditions:
(i) The sum of $50,000 will be paid to you on January
4, 1999, without condition; and the Company agrees to pay you an additional
$120,000, in two equal installments of $60,000 each, payable on the fifteenth
day of the first calendar month and the fifteenth day of the second calendar
month, respectively, following the fiscal quarter of the Corporation during
which a Qualifying Event (as defined below) occurs.
For purposes hereof, a "Qualifying Event" shall
mean the first to occur of either (a) receipt by the Corporation at any time
or from time to time hereafter of one or more equity investments or loans of
new money (but not refinancing of existing loans) or any other infusion of
capital, whether through the sale of common or preferred stock of the
Corporation or otherwise, in an amount equal to or exceeding, in the
aggregate, $3,000,000 or (b) in any fiscal quarter of the Corporation, the
Corporation shall have gross revenues which exceed $3,200,000; or (c) there
shall occur any Change in Control of the Corporation, as such term is defined
in the Employment Agreement.
It is expressly acknowledged that your right to
receive payment of the sums which will become due and owing to you upon the
occurrence of the Qualifying Event shall not be conditioned upon your
continued employment or any other continuing relationship with the
Corporation, but shall be an obligation of the Corporation to you independent
of your continuing status as an employee, officer or director.
(ii) In addition, the Corporation agrees to grant
to you an incentive stock option under the Corporation's Fourth Incentive
Stock Option Plan, pursuant to which you will be entitled to purchase up to
125,000 shares of the Corporation's Class A Common Stock at an exercise price
equal to the closing "ask" price as quoted on the NASDAQ National Market on
the date hereof. The option will be evidenced by an option agreement typical
for options of this type, and will provide that the option shall be for a
term of ten (10) years and exercisable in whole or in part at any time and
from time to time during the term thereof.
3. It is understood and agreed that, notwithstanding the date
hereof, it is the intention of you and the intention of the Corporation that the
agreements set forth herein be effective as of December 22, 1998. In addition,
it is understood and agreed that this letter shall supercede in its entirety the
letter agreement previously executed and delivered by and between you and the
Corporation, dated December 22, 1998.
Provided that the terms set forth above are acceptable to you,
we ask that you execute the enclosed counterpart of this letter, and that you
return one fully executed counterpart to me, whereupon this letter
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Xxxxxxx X. Xxx, Ph.D
February 10, 1999
Page 20
will constitute a legally binding agreement between you and the Corporation, and
the provisions set forth in Paragraph 1 above will constitute an amendment to
your Employment Agreement. As noted above, this letter agreement will supercede
in its entirety the letter agreement dated as of December 22, 1998.
Very truly yours,
Chesapeake Biological Laboratories, Inc.
By: /s/ XXXXXX X. XXXXX
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Xxxxxx X. Xxxxx
Vice President
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February 10, 1999
Page 21
The foregoing terms and conditions are hereby accepted and agreed to by
the undersigned on this 10th day of February, 1999, with an effective date as of
December 22, 1998, as hereinabove provided.
By: /s/ XXXXXXX X. XXX, PH.D.
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Xxxxxxx X. Xxx, Ph.D.
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