EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of this 14th
day of March, 2005 ("Effective Date") between Lannett Company, Inc. ("Company")
and Xxxxx X. Xxxxxx (Executive).
RECITALS
Company wishes to employ Executive as its Vice President of Finance, Chief
Financial Officer and Treasurer; and Executive wishes to accept such employment
under the terms and conditions set forth in this Agreement
IT IS AGREED as follows:
1. EMPLOYMENT. Company hereby employs Executive as its Vice President
of Finance, Chief Financial Officer and Treasurer; and Executive accepts
such employment.
2. TERM. The term of employment under this Agreement shall commence on
the Effective Date and shall continue, unless otherwise terminated
earlier under Section 9, until the day before the third anniversary of
the Effective Date, i.e. March 14, 2008 (the "Term"), provided that on
the day before the third anniversary of the Effective Date, the Term
shall be automatically extended for successive additional one (1) year
periods unless at least ninety (90) days prior to such anniversary date,
either Company or Executive furnishes the other with written notice that
the term is not to be so extended.
3. DUTIES. Executive shall devote his full-time efforts to the proper and
faithful performance of all duties customarily discharged by a Chief
Financial Officer for a company doing the type of business engaged in by
Company and any additional duties assigned to him from time to time by
the President and/or the Chief Executive Officer of Company and/or the
Board of Directors of Company. Executive shall report directly to the
President of the Company. Executive agrees to use his best efforts and
comply with all fiduciary and professional standards in the performance
of his duties hereunder. Executive shall provide services to any
subsidiary or affiliate of Company without additional compensation and
benefits beyond those set forth in this Agreement, and any compensation
and benefits provided to Executive for such services shall be a credit
with regard to amounts due from Company under this Agreement. Executive
represents and warrants to Company that, at all times prior to the
Effective Date when he has served as Chief Financial Officer of the
Company and at all times during the Term, he has either fulfilled or
will fulfill his duty of loyalty to Company; and he has either acted or
will act in the best interests of the Company's shareholders.
4. BASE SALARY. Executive shall be paid a minimum base salary of One
Hundred Seventy Five Thousand Dollars and no cents ($175,000.00) per
annum for the Term, payable, less applicable withholdings, in
proportional monthly payments or more frequently in accordance with
Company's regular practice. Salary for a portion of any period will be
prorated. The Compensation Committee of the Board of Directors and the
President will conduct an annual performance review of Executive and, as
part of such review, will consider increases to the base salary set
forth herein based on the performance of both Executive and Company.
5. STOCK OPTIONS. Company will grant Executive an option to purchase up to
100,000 shares of Lannett common stock at the fair market value of such
stock as of the Effective Date. Such options shall vest ratably over a
36 month period beginning on the Effective Date. These shares are
guaranteed under this agreement to be provided to the Executive.
6. ANNUAL BONUS. Executive shall be eligible to participate in the
Management Incentive Bonus Plan (the "MIB") administered by the
Compensation Committee, or any successor annual bonus plan or
arrangement generally made available to the executive officers of
Company. The MIB shall provide Executive with a target bonus opportunity
for each fiscal year of Company (i.e. July 1 to June 30), regardless of
whether or not a bonus is declared for any fiscal year. Executive shall
be eligible for a pro-rata portion of his annual bonus for the portions
of the first and last fiscal years he works for the Company.
7. BENEFITS.
During the Term, Executive shall have the following benefits:
(a) Executive may participate in all Company sponsored stock option
plans, retirement plans, 401(k) plans, life insurance plans,
medical insurance plans, disability insurance plans, executive
stock ownership plans and such other benefit plans generally
available from time to time to other executive employees of
Company for which he qualifies under the terms of the plans.
Executive's participation in and benefits under any benefit plan
shall be on the terms and subject to the conditions specified in
such plan.
(b) Vacation days or personal time off (PTO) shall be granted to
Executive in accordance with the Company's published vacation or
PTO policy generally afforded to salaried management employees.
8. REIMBURSEMENT OF EXPENSES. Company will reimburse Executive for the
reasonable and necessary expenses incurred by him in the performance of
his duties under this Agreement in accordance with Company's policies in
effect from time to time.
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9. TERMINATION OF EMPLOYMENT.
(a) Executive's employment under this Agreement may be terminated at
any time by the President, Chief Executive Officer and/or the
Board of Directors of Company, with or without Cause (as defined
below). Executive's employment is "at-will."
(b) Executive's employment under this Agreement shall terminate upon
his resignation or death.
(c) Executive's employment under this Agreement shall terminate upon
thirty (30) days written notice by Company to Executive of a
termination due to Disability, provided such notice is delivered
during the period of Disability. The term "Disability" shall mean,
for purposes of this Agreement, the inability of Executive, due to
injury, illness, disease or bodily or mental infirmity to engage
in the performance of his material duties of employment with
Company as contemplated by Section 3 herein for (i) any period of
ninety (90) consecutive days or (ii) a period of one hundred fifty
days (150) in any consecutive twelve (12) months, provided that if
the Executive returns to work in the consecutive 12 month period
for a period of less than ten (10) consecutive business days in
duration, such return to work shall not be deemed to interfere
with a determination of consecutive absent days if the reason for
absence before and after the interim return are the same. Benefits
to which Executive is entitled under any disability policy or plan
provided by Company shall reduce the base salary paid to Executive
during any period of Disability on a dollar-for-dollar basis.
(d) Company shall have the right to terminate Executive's employment
for Cause. The Executive shall be given written notice and an
opportunity for sixty (60) days to cure any deficiency or breach
of this Agreement. For purposes of this Agreement, "Cause" shall
consist of any of the following:
(i) Executive's willful misrepresentation in this Agreement
or otherwise or fraud, willful dishonesty or willful breach
of a fiduciary duty or duty of loyalty to Company which
directly or indirectly results in his or any person's or
entity's enrichment, economic or otherwise, at the expense
of Company;
(ii) Willful misconduct; provided, however, that conduct by
Executive in good faith and/or ordinary negligence shall
not be considered "Cause";
(iii) Willful or reckless conduct of Executive which has an
adverse impact (economic or otherwise) on Company;
(iv) Willful violation of any law, rule or regulation relating
to the operation of Company or any of its subsidiaries or
affiliates;
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(v) The order of any court or supervising governmental agency
with jurisdiction over the affairs of Company or any
subsidiary or affiliate that specifically directs the
termination of Executive
(vi) Executive's willful violation of any provision of this
Agreement, including without limitation violation of
Sections 10, 11, 12 or 13;
(vii) Executive's conviction or no contest plea to a felony
involving moral turpitude;
(viii) Abuse of illegal drugs or other controlled substances or
habitual intoxication; or
(ix) Willful violation by Executive of Company's published
business conduct guidelines, code of ethics, conflict of
interest or other similar policies.
(e) If Executive's employment terminates for Cause or for any reason
other than as set forth in Section 9(f), Company shall be
obligated only to continue to pay Executive's salary and, to the
extent earned, accrued and unpaid, annual cash bonus and long term
incentive compensation and furnish the then existing benefits
under Section 7 up to the date of termination (except as otherwise
set forth in this Agreement).
(f) If Executive's employment is terminated by Company without Cause,
if the company decides not to extend the then current term, or if
Executive terminates his employment for Good Reason (as defined
below), in addition to the amounts payable under Section 9(e),
Executive shall be entitled to receive (i) base salary for a
period of eighteen (18) months after termination date payable on
the first day of every month, (ii) insurance coverage provided to
him equal to such coverage provided to him on the date of
termination at no cost or, if ineligible for continued coverage
under Company policies, reimbursement of the cost of comparable
coverage for a period of eighteen (18) months payable on the first
day of each month, (iii) a pro rated annual cash bonus for the
then current fiscal year calculated as if all base targets and
base goals are achieved (but no other incentive compensation
beyond the date of termination) at the times and frequency
regularly paid but in no event later than two and one half months
of the later of the end of the Company's fiscal year or the
calendar year in which Executive becomes entitled to receive such
payment, and (iv) the Company shall cause all outstanding Company
stock options awarded Executive prior to termination of his
employment to be one hundred percent (100%) vested at termination.
As a condition to the salary, insurance continuation, under this
Section 9(f), Executive must first execute and deliver to Company,
in a form prepared by Company, a release of all claims against
Company and other appropriate parties, excluding Company's
performance under this Section 9(f) and Executive's
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vested rights under Company sponsored retirement plans, 401(k)
plans and stock ownership plans. The obligation of Company to pay
Executive's salary as required by Subsection (i) of this Section
9(f) shall not be subject to offset for earnings from Executive's
subsequent employment. If the payment of any amount to Executive
under this paragraph results in the imposition of penalties,
interest or additional taxes on Executive pursuant to Section 409A
of the Internal Revenue Code, and all amendments thereto, then the
Company will enter into an agreement with Executive during a
period when such payments are still subject to a substantial risk
of forfeiture to provide for the payment of such amounts at a time
and manner which will avoid the imposition of such penalties,
interest or additional taxes on Executive or Company will gross up
the amount of such payments to Executive so as to provide him with
the same economic benefit as if he were not subject to such
penalties, interest or additional taxes pursuant to Section 409A
of the Internal Revenue Code or any amendments thereto. For
purpose of this paragraph, the term Good Reason shall mean
(i) Executive's being assigned by Company duties or to a
position inconsistent in any material respect with the
position of Vice President of Finance, Chief Financial
Officer and Treasurer of Company;
(ii) a change without Executive's consent in the principal
location of his office to an office that is more than forty
(40) miles from his current residence, such consent not to
be unreasonably withheld;
(iii) Company's failure to pay Executive his compensation or
benefits when due, a reduction of Executive's salary, annual
bonus earning opportunity or benefits, any other material
breach by Company of its obligations under this Agreement;
or
(iv) Executive's death or disability;
provided that in any case (other that item (iv) hereof)
Executive provides Company with written notice of his
intention to terminate his employment for Good Reason, and
gives Company an opportunity for sixty (60) days to cure.
(g) The termination of Executive's employment with Company, for any
reason and irrespective as to whether initiated by Executive or
Company, shall be considered a contemporaneous resignation by
Executive from the position of Company's Chief Financial Officer
and shall be deemed a termination from employment with all
entities related to Company.
(h) The Executive may terminate his employment hereunder at any time
for any Reason by giving the Company prior written notice not less
than thirty
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(30) days prior to such termination. Termination by the Executive
pursuant to this Clause shall be deemed a termination entitling
the Executive to compensation pursuant to Section 9(e) above.
10. CONFIDENTIAL INFORMATION. During Executive's employment with Company and at
all times after the termination of such employment, regardless of the reason for
such termination, Executive shall hold all Confidential Information relating to
Company in strict confidence and in trust for Company and shall not disclose or
otherwise communicate, provide or reveal in any manner whatsoever any of the
Confidential Information to anyone other than Company without the prior written
consent of Company. "Confidential Information" includes, without limitation,
financial information, related trade secrets (including, without limitation,
Company's business plan, methods and/or practices) and other proprietary
business information of Company which may include, without limitation, market
studies, customer and client lists, referral lists and other items relative to
the business of Company. "Confidential Information" shall not include
information which is or becomes in the public domain through no action by
Executive or information which is generally disclosed by Company to third
parties without restrictions on such third parties.
11. SOLICITATION OF CUSTOMERS. During his employment with Company and for a
period of eighteen (18) months after the termination of Executive's employment,
regardless of the reason for the termination (the "Non-Competition Period"),
Executive shall not, whether directly or indirectly, for his own benefit or for
the benefit of any other person or entity, or as a partner, stockholder, member,
manager, officer, director, proprietor, employee, consultant, representative,
agent of any entity other than Company, solicit, directly or indirectly, any
customer of Company, or induce any customer of Company to terminate any
association with Company, in connection with those certain products being
offered for sale by Company or in its research and development pipeline on the
date of termination of Executive's employment (The "Restricted Products") or
otherwise attempt to provide services to any customer of Company in connection
with the Restricted Products. Executive shall prevent such solicitation to the
extent he has authority to prevent same and otherwise shall not interfere with
the relationship between Company and its customers. This provision shall not be
interpreted to prohibit, prevent or otherwise impair the Executive's ability and
right to seek and obtain employment from a competitor of the Company, even if
said competitor is currently selling products to the Company's customers that
are the same as Company's products. While the Executive shall be unrestricted in
seeking to sell products to the Company's customers that are different than the
Company's products, it is the intent of this paragraph to preclude the Executive
from having said competitor replace the Company as a supplier of a product or
otherwise take existing sales from the Company for the period in question.
12. SOLICITATION OF EXECUTIVES AND OTHERS. During his employment with Company
and during the Non-Competition Period, Executive shall not, whether directly or
indirectly, for his own benefit or for the benefit of any other person or
entity, or as a partner, stockholder, member, manager, officer, director,
proprietor, employee, consultant,
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representative, agent of any entity other than Company, solicit, for purposes of
employment or association, any Executive or agent of Company ("Solicited
Person"), or induce any Solicited Person to terminate such employment or
association for purposes of becoming employed or associated elsewhere, or hire
or otherwise engage any Solicited Person as an Executive or agent of an entity
with whom Executive may be affiliated or permit such, or otherwise interfere
with the relationship between Company and its employees and agents. For purposes
of this Agreement, an employee or agent of Company shall mean an individual
employed or retained by Company during the Term and/or who terminates such
association with Company within a period of six (6) months after the termination
of Executive's employment with Company.
13. NON-COMPETITION. Without the written consent of the President or the Chief
Executive Officer, during his employment with Company and during the
Non-Competition Period, Executive shall not directly or indirectly, as an
officer, director, shareholder, member, partner, joint venturer, Executive,
independent contractor, consultant, or in any other capacity:
(i) Engage, own or have any interest in;
(j) Manage, operate, join, participate in, accept employment with,
render advice to, or become interested in or be connected with;
(k) Furnish consultation or advice to; or
(l) Permit his name to be used in connection with;
Any person or entity engaged in a business in the United States or Canada which
is engaged in the manufacture, distribution or sale of the Restricted Products
or which otherwise competes with the business of Company as it exists from time
to time and, in the case of termination of this Agreement, as it exists on the
termination date. Notwithstanding the foregoing, holding one percent (1%) or
less of an interest in the equity, stock options or debt of any publicly traded
company shall not be considered a violation of this Section 12. The Non
Competition period shall extend for a period of twenty four (24) months post the
Executive's departure. Non-Competition in addition to the above is defined as
employment with any generic drug company whether directly or as a consultant
that competes within the USA market.
14. DISCLOSURE AND OWNERSHIP OF WORK PRODUCT AND INFORMATION.
(a) Executive agrees to disclose promptly to Company all ideas, inventions
(whether patentable or not), improvements, copyrightable works of original
authorship (including but not limited to computer programs, compilations
of information, generation of data, graphic works, audio-visual materials,
technical reports and the like), trademarks, know-how, trade secrets,
processes and other intellectual property, developed or discovered by
Executive in the course of his employment relating to the business of
Company, or to the prospective business of Company, or which utilizes
Company's information or staff services (collectively, "Work product").
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(b) Work product created by Executive within the scope of Executive's
employment, on Company time, or using Company resources (including but not
limited to facilities, staff, Information, time and funding), belongs to
Company and is not owned by Executive individually. Executive agrees that
all works of original authorship created during his employment are "works
made for hire" as that term is used in connection with the U.S. Copyright
Act. To the extent that, by operation of law, you retain any intellectual
property rights in any Work product, Executive hereby assigns to Company
all right, title and interest in all such Work product, including
copyrights, patents, trade secrets, trademarks and know-how.
(c) Executive agrees to cooperate with Company, at Company's expense, in
the protection of Company's information and the securing of Company's
proprietary rights, including signing any documents necessary to secure
such rights, whether during or after your employment with Company, and
regardless of the fact of any employment with a new company.
15. ENFORCEMENT OF AGREEMENT; INJUNCTIVE RELIEF; ATTORNEYS' FEES AND EXPENSES.
Executive acknowledges that violation of this Sections 10, 11, 12 and 13 of this
Agreement will cause immediate and irreparable damage to Company, entitling it
to injunctive relief. Executive specifically consents to the issuance of
temporary, preliminary, and permanent injunctive relief to enforce the terms of
this Agreement. In addition to injunctive relief, Company is entitled to all
money damages available under the law. If Executive violates this Agreement, in
addition to all other remedies available to Company at law, in equity, and under
contract, Executive agrees that Executive is obligated to pay all Company's
costs of enforcement of this Agreement, including attorneys' fees and expenses.
Company acknowledges that violation of this Agreement will cause immediate and
irreparable damage to Executive, entitling him to injunctive relief. Company
specifically consents to the issuance of temporary, preliminary, and permanent
injunctive relief to enforce the terms of this Agreement. In addition to
injunctive relief, Executive is entitled to all money damages available under
the law. If Company violates this Agreement, in addition to all other remedies
available to Executive at law, in equity, and under contract, Company agrees
that Company is obligated to pay all Executive's costs of enforcement of this
Agreement, including attorneys' fees and expenses.
16. SEVERABILITY AND SAVINGS. Each provision in this Agreement is separate. If
necessary to effectuate the purpose of a particular provision, the Agreement
shall survive the termination of Executive's employment with Company. If any
provision of this Agreement, in whole or in part, is held to be invalid or
unenforceable, the parties agree that any such provision shall be deemed
modified to make such provision enforceable to the maximum extent permitted by
applicable law. As to any provision held to be invalid or unenforceable, the
remaining provisions of this Agreement shall remain in effect.
17. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the
benefit of Company and its successors and assigns. This Agreement shall be
binding upon and
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inure to the benefit of Executive, his heirs and personal representatives. This
Agreement is not assignable by Executive.
18. STATUTE OF LIMITATIONS. Executive and Company agree not to initiate any
action or suit relating directly or indirectly to Executive's employment with
Company or the termination of such employment more than one (1) year after the
effective date of termination of employment. Executive and Company expressly
waive any other longer statute of limitations. However, Executive and Company
agree that any shorter statute(s) of limitations remain in effect. For claims
which arise after the termination of Executive's employment, Executive and
Company agree not to initiate any action or suit against the other more than one
(1) year after the date such party knew or should have known of such claim.
19. INDEMNIFICATION. To the fullest extent permitted by applicable law, the
Company shall indemnify, defend and hold harmless the Executive from and against
any and all claims, demands, actions, causes of action, liabilities, losses,
judgments, fines, excise taxes, costs and expenses (including reasonable
attorneys' fees and settlement expenses) arising from or relating to his service
or status as an officer, director, employee, agent or representative of the
Company or any affiliate of the Company or in any other capacity in which the
Executive serves or has served at the request of, or for the benefit of, the
Company or its affiliates. The Company's obligations under this section shall be
in addition to, and not in derogation of, any other rights the Executive may
have against the Company to indemnification or advancement of expenses, whether
by statute, contract or otherwise, and the Company's obligations pursuant to
this Section 19 shall survive termination of the Executive's employment. To the
fullest extent permitted by applicable law, the Company shall pay directly on
Executive's behalf or advance to Executive the amount of all judgments, fines,
costs and expenses (including reasonable attorneys' fees and settlement
expenses) incurred by Executive in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, in which
Executive is made, or threatened to be made, a party, or a witness by reason of
the fact of his service to, at the request of or for the benefit of Company.
20. INSURANCE. Company agrees to maintain a policy of directors and officers
liability insurance in a reasonable amount for the benefit of Executive. The
provisions of this Section shall survive termination of executive's employment.
21. MISCELLANEOUS.
(a) No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and
signed by Company and Executive. The waiver or non enforcement by Company
of a breach by Executive of any provision of this Agreement shall not be
construed as a waiver of any subsequent breach by Executive. This
Agreement is the parties' entire agreement relating to the subject matter
hereof and any and all prior
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agreements, representations or promises, oral or otherwise, express or
implied, are superseded by and/or merged into this Agreement.
(b) Notices and all other communications provided for in this Agreement
shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid,
or sent by facsimile or prepaid overnight courier to the parties at the
addresses set forth below (or such other addresses as shall be specified
by the parties by like notice): To Company, Lannett Company, Inc., 0000
Xxxxx Xxxx, Xxxxxxxxxxxx, XX 00000 Attn.: President; To the Executive:
Xxxxx X. Xxxxxx, 000 Xxxxxxxx Xxxx, Xxxxxxxxxx, XX 00000, with a copy to
Xxxxxxx Xxxxx, Cozen X'Xxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000.
All notices shall be deemed effective upon receipt. The failure to accept
mail forwarded through the U.S. Postal Service, certified, return receipt
requested, shall be deemed received as of the earlier of the first date
such delivery is refused or, alternatively, if notices are provided of
attempts to deliver, the date on which said first notice was provided to
the Company.
(c) This Agreement shall be governed by the laws of the State of
Pennsylvania.
(d) Although this Agreement was drafted by Company, the parties agree that
it accurately reflects the intent and understanding of each party and
should not be construed against Company for the sole reason that it was
the drafter if there is any dispute over the meaning or intent of any
provisions.
(e) Executive agrees that unless and until the provisions of this
Agreement are disclosed publicly by Company, this Agreement is
confidential and Executive will not disclose the terms and conditions of
this Agreement to any Company employee or other third party, other than
Executive's attorney, accountant, professional advisors and members of his
immediate family, except as may be permitted by applicable law.
(f) This Agreement may be executed in counterparts, which together shall
constitute one Agreement.
(g) Executive agrees that this Agreement is the sole Employment Agreement
between Company and Executive and supersedes any and all prior Employment
Agreements, Letters of Understandings, Verbal understandings or
commitments.
(h) By their signatures below, the parties acknowledge that they have had
sufficient opportunity to read and consider, and that they have carefully
read and considered, each provision of this Agreement and that they are
voluntarily signing this Agreement. The parties have executed this
Agreement as of the Effective Date.
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WITNESS:
/s/ Xxxxxxxx Xxxxxxx /s/ Xxxxx X. Xxxxxx
------------------------------- ----------------------------
Xxxxxxxx Xxxxxxx Xxxxx X. Xxxxxx
/s/ Xxxxxxxx Xxxxxxx LANNETT COMPANY, INC.
-------------------------------
Xxxxxxxx Xxxxxxx By /s/ Xxxxxx Xxxxxxxxx
-------------------------
Xxxxxx Xxxxxxxxx
Its: President
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