EXHIBIT 10.5
SEPARATION AGREEMENT AND GENERAL RELEASE
THIS SEPARATION AGREEMENT AND GENERAL RELEASE ("Agreement") is between
XXXXXXX X. XXXXXXX ("EMPLOYEE") and XXXXXX DRUG CO., INC., a corporation
("EMPLOYER").
SECTION A: PARTIES' UNDERSTANDINGS
EMPLOYEE has been employed by EMPLOYER in the capacity of Chief Executive
Officer and Chairman; and
EMPLOYEE and EMPLOYER have engaged in discussions resulting in EMPLOYEE's
termination from employment with EMPLOYER; and
EMPLOYEE and EMPLOYER wish to resolve any and all issues arising from
EMPLOYEE's employment and/or separation from employment with EMPLOYER.
SECTION B: PARTIES' AGREEMENTS
In consideration of the above and the promises set forth in this
Agreement, the parties agree as follows:
1. EMPLOYMENT TERMINATION. EMPLOYER and EMPLOYEE acknowledge that
EMPLOYEE's employment as Chief Executive Officer and Chairman has
been terminated by Employer without cause effective as of June 16,
2003 (the "Termination Date").
2. RESIGNATION FROM BOARD. Simultaneous with the execution of this
Agreement by EMPLOYEE and EMPLOYER (the "Effective Date"), EMPLOYEE
shall execute and deliver to EMPLOYER his resignation from the Board
of the Directors of EMPLOYER and all subsidiaries and affiliates
thereof, which Resignation shall be in the form of Exhibit A
attached hereto.
3. CONSIDERATION. EMPLOYER, in recognition of and in consideration for
EMPLOYEE's release of claims (as set forth in paragraph 9 of this
Agreement) and covenant not to xxx (as set forth in subparagraph 14
of this Agreement), agrees to provide the following to EMPLOYEE:
a. TERMINATION PAYMENT: In full satisfaction of Paragraph 8.6 of
the Employment Agreement executed by and between EMPLOYER and
EMPLOYEE as of March 10, 1998, as amended by the First
Amendment to Employment Agreement executed by and between the
parties as of May 24, 2000 ("Employment Agreement"), EMPLOYER
shall pay to EMPLOYEE the sum of Four Hundred Thousand Dollars
and 00/100 Dollars ($400,000.00) (the "Severance Payment").
The Severance Payment shall be payable in equal quarterly
payments of Fifty Thousand and 00/100 Dollars ($50,000), plus
interest at six percent (6%) per annum, commencing October 16,
2003 and quarterly thereafter. Interest shall
accrue on the Severance Payment from July 16, 2003. EMPLOYER
agrees that EMPLOYEE may assign to a third party the Severance
Payment and shall acknowledge and honor any such assignment,
provided EMPLOYER is provided prior written notice of any such
assignment. The obligation shall be evidenced by a promissory
note in the form of Exhibit B hereto.
In addition, EMPLOYER shall issue to EMPLOYEE warrants to
purchase one hundred fifty thousand (150,000) shares of common
stock of the EMPLOYER at 34 cents ($0.34) per share. The
warrant will be in the form of Exhibit C hereto.
b. INSURANCE BENEFITS/PERQUISITES:
i. For the period commencing on the Termination Date and
for the next 24 months, EMPLOYER shall continue
EMPLOYEE's medical insurance coverage at its full and
complete expense. EMPLOYEE shall thereafter be allowed
to continue his health insurance benefits at his full
and complete expense to the extent allowed by the
involved benefit plan and/or applicable federal law
(i.e. COBRA).
ii. EMPLOYER shall remain obligated to pay all other
benefits due EMPLOYEE under the terms of his Employment
Agreement with EMPLOYER, including the automobile
reimbursement provided for in Paragraph 5(i) of the
Employment Agreement, for a period of 24 months after
the Termination Date.
c. OPTIONS:
EXISTING STOCK OPTIONS: The parties agree that Exhibit D
hereto describes all stock option agreements and rights to
acquire shares of EMPLOYER's capital stock granted by EMPLOYER
to EMPLOYEE in existence as of the date hereof. EMPLOYER and
EMPLOYEE agree that all of the Stock Option Agreements shall
remain in full force and effect and be exercisable in
accordance with their respective terms, including as provided
for in the Employment Agreement, and that this Agreement shall
not modify or otherwise extend the term or time period
provided for exercise of the Stock Option Agreements.
d. VACATION: EMPLOYER agrees to pay EMPLOYEE on September 16,
2003 $7,692.30 in a lump sum representing the salary
equivalent of 10 vacation days, which represents all accrued
vacation earned and unused by him during calendar year 2003.
e. UNEMPLOYMENT COMPENSATION: EMPLOYER agrees that it shall not
contest on the basis of a "voluntary quit" EMPLOYEE's
application for unemployment insurance benefits.
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EMPLOYEE agrees that he has received payment from EMPLOYER of all
wages, vacation and other benefits to which he was entitled by
virtue of his past employment. EMPLOYEE also agrees that the
benefits to be provided as set forth in sub-paragraphs (a), (b), (c)
and (d) above are benefits of value to which he, as an employee or
former employee of EMPLOYER, would not ordinarily be entitled.
4. TERMINATION OF EMPLOYER OBLIGATIONS UNDER EMPLOYMENT AGREEMENT AND
OTHER AGREEMENTS. EMPLOYEE acknowledges and agrees that except for
(i) EMPLOYER's obligations under this Agreement, and (ii) EMPLOYERS
obligations the EMPLOYEE under those outstanding 5% Convertible
Senior Secured Debentures due March 31, 2006 as of the date hereof
(collectively, the "Debentures"), EMPLOYER has no further
obligations under any agreements with EMPLOYEE, whether oral or in
writing, including, without limitation, the Employment Agreement,
the Stock Option Agreements or any other agreement, arrangement or
understanding. The termination of EMPLOYER's obligations under the
Employment Agreement shall not terminate, modify, impair or
otherwise alter EMPLOYEE's obligations under Section 9 of the
Employment Agreement which shall survive the execution of this
Agreement as provided therein and in Section 13 of this Agreement.
5. STATEMENTS. EMPLOYEE and EMPLOYER agree that following the Effective
Date neither party shall, directly or indirectly, either verbally or
in writing, make any disparaging statements to third parties
(including, but not limited to, persons, corporations or any other
person or entity) , whether or not intended to damage the integrity
or reputation of EMPLOYEE or EMPLOYER, its subsidiaries or
affiliates or any of their respective officers, directors,
shareholders, debentureholders, employees, representatives, agents,
successors and assigns.
6. FUTURE EMPLOYMENT. It is acknowledged by the parties that EMPLOYER
shall be under no obligation to reinstate or reemploy EMPLOYEE and
EMPLOYEE agrees that he shall not apply for, request or otherwise
seek reemployment with EMPLOYER.
7. ATTORNEY CONSULTATION. EMPLOYEE acknowledges that (i) he has had
ample time and opportunity to review and analyze all the terms and
provisions of this Agreement, including the Exhibits hereto, (ii) he
fully understands the import of all of the terms and provisions of
this Agreement, (iii) he is not relying upon any statements or
representations (whether expressed or implied) of the EMPLOYER's
agents or attorneys, and will not raise or seek to raise any defense
against the enforcement of this Agreement based on any such
statements or representations, (iv) he has not been fraudulently
induced to enter into this Agreement, and (v) he has been advised of
his right to be represented by counsel in the negotiation of this
Agreement. EMPLOYER agrees that it will reimburse EMPLOYEE for
attorneys' fees not to exceed $6,000 incurred by EMPLOYEE in
connection with this Agreement.
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8. OPPORTUNITY TO REVIEW AND RESCIND. EMPLOYEE and EMPLOYER acknowledge
that this Agreement was presented to EMPLOYEE for review and
consideration and for purposes of consulting with an attorney and
that EMPLOYEE was allowed a period of not fewer than twenty-one (21)
days from the date of presentation of this document to consider its
terms. EMPLOYEE's decision not to sign this Agreement shall result
in this document having no force or effect and in such case EMPLOYEE
shall not be entitled to any of the rights or benefits hereof.
In the event that EMPLOYEE signs this Agreement, EMPLOYEE shall have
seven (7) days from the date of signing in which to revoke this
Agreement and this Agreement shall not become effective or
enforceable until the expiration of that seven (7) day period. In
the event that EMPLOYEE wishes to revoke this Agreement during that
seven (7) day period, EMPLOYEE agrees that he shall provide written
notice of revocation by United States Mail, postage prepaid,
addressed to the following:
Xxxxxx Drug Co., Inc.
c/o Chairman of the Board
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
In order to be effective, such notice must be mailed to EMPLOYER's
designated representative on or before the final day of the seven
(7) day revocation period.
9. RELEASE OF CLAIMS. EMPLOYEE understands and agrees that he would not
receive some of the benefits specified in Section 3 of this
Agreement, except for EMPLOYEE's execution of this Agreement and
that the fulfillment of promises contained herein and the benefits
provided in Section 3 hereof are in full settlement and satisfaction
for the full release and discharge of all actions, claims,
grievances, complaints, administrative claims and demands whatsoever
that EMPLOYEE had or now has against the EMPLOYER, its subsidiaries
and affiliates and all of their respective agents, directors,
employees, officers, shareholders, debentureholders, attorneys,
partners, contractors, consultants, successors and assigns
(collectively, the "Releasees") and EMPLOYEE does hereby release,
acquit, satisfy and forever discharge the EMPLOYER and all Releasees
and their successors and assigns from all manner of actions, causes
of actions, suits, debts, sums of money, agreements, damages,
judgments, and claims and demands whatsoever, known and unknown,
absolute or contingent, in law or equity, that EMPLOYEE ever had or
now has, against EMPLOYER, the Releasees and their successors and
assigns, including, but not limited to, any claims under the
Employment Agreement and the Stock Option Agreements, and any claims
of unused vacation time, severance pay, wrongful discharge, or
claims of discrimination on the basis of age, race, sex, color,
national origin, handicap or disability, religion, ancestry, marital
status and status upon discharge from the military service. Included
within the provisions of this Agreement, and without limitation,
EMPLOYEE acknowledges and waives any and all claims against the
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EMPLOYER and Releasees under the following laws, as amended to the
date hereof:
a. Rehabilitation Act of 1973;
b. Employee Retirement Income Security Act;
c. Civil Rights Act of 1964, including Title VII thereof;
d. Americans with Disabilities Act;
e. 42 United States Code, Sections 1981, 1983 and/or 1985;
f. Illinois Wage Payment and Collection Act;
g. Illinois Personnel Record Review Act;
h. Older Workers' Benefit Protection Act;
i. Civil Rights Act of 1991;
j. Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended;
k. Illinois Minimum Wage Law;
l. Fair Labor Standards Act;
m. Family and Medical Leave Act of 1993;
n. Illinois Workers' Compensation Act;
o. Age Discrimination in Employment Act;
p. Illinois Human Rights Act;
q. New York Law on Human Rights; and
r. New York City Law on Human Rights.
EMPLOYEE also waives and releases the Released Parties from all
claims based upon statutes or laws other than those listed above,
from any and all claims based upon contract or tort theories
(including, but not limited to, claims of breach of contract,
wrongful and/or retaliatory discharge, defamation, misrepresentation
and/or intentional or negligent infliction of emotional distress)
and from any and all claims of whatever type or origin, whether
known or unknown, arising from or in connection with EMPLOYEE's
employment or separation from employment with EMPLOYER up through
and including the Effective Date.
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If this Agreement is signed by EMPLOYEE, the release and waiver set
forth above is made on his own behalf and on behalf of his heirs,
administrators, successors, agents and legal representatives.
10. EMPLOYEE REPRESENTATIONS. EMPLOYEE further represents, acknowledges
and agrees that: (i) this Agreement supercedes any and all other
agreements, and any other matter either oral or in writing between
EMPLOYER and EMPLOYEE; (ii) all discussion, negotiations, proposals,
correspondence and/or agreements by and between the parties have not
been revealed by EMPLOYEE to any third-party other than counsel; and
(iii) no suit, action, claims or agency proceedings of any kind has
been filed by EMPLOYEE or his agent or designated representative
concerning or arising out of EMPLOYEE's employment with the
EMPLOYER, the Employment Agreement, the Stock Option Agreements or
otherwise relating to the subject matter of this Agreement, and that
EMPLOYEE will not do so at any time hereinafter based upon the
dealings with EMPLOYER and EMPLOYEE up to the date of this
Agreement.
11. CONFIDENTIAL TERMS. EMPLOYEE and EMPLOYER acknowledge that they will
keep confidential the terms of this Agreement and the disposition of
this matter (except in connection with financial or tax reporting,
seeking legal advice, pursuant to legal process or legal action to
enforce the terms of this Agreement or as otherwise required by law)
and will not disclose to or discuss with any third party or
publicize the terms of this Agreement other than to state that the
matter has been resolved to the mutual satisfaction of the parties;
provided, however, that notwithstanding the foregoing, EMPLOYER may
disclose the terms of this Agreement to the extent necessary to
comply with its reporting obligations under United States Securities
Laws and the regulations promulgated thereunder and the rules and
regulations of any exchange or over-the-counter market on which
EMPLOYER's shares may be listed or admitted for trading. Provided
further, however, that any prohibited disclosure, discussion or
publication of the terms of this Agreement will not affect the
validity of the release and covenant not to xxx established through
this Agreement.
12. NO ADMISSION. EMPLOYEE and EMPLOYER agree that this Agreement and
any obligations under this document do not constitute an admission
by EMPLOYEE, EMPLOYER or any Releasee of any violation of any
federal, State or local statute, law, rule or regulation, or of any
liability under contract and/or tort theories.
13. SURVIVAL OF EMPLOYEE'S OBLIGATIONS UNDER SECTION 9 OF THE EMPLOYMENT
AGREEMENT.
A. Notwithstanding anything to the contrary contained in this
Agreement, except as otherwise provided in Paragraph B of this
Section 13, EMPLOYEE's obligations under Section 9 of the
Employment Agreement shall survive and continue to be binding
on EMPLOYEE in accordance with the terms thereof, including
Section 9.1, Secrecy, Section 9.2, Return
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of Memoranda, Section 9.4, Injunctive Relief, 9.5, Expenses of
Enforcement of Covenants, and Section 9.6, Non-Solicitation.
B. Notwithstanding the provisions of Section 9.3 of the
Employment Agreement, the parties hereby agree that EMPLOYEE
shall not at any time prior to April 30, 2005 own, manage,
operate, be a director or an officer, or a consultant to any
business, firm, corporation, partnership, limited liability
company or other entity which is conducting any business in
the pharmaceutical industry and which operates a Competing
Business in the United States. For purposes of this Section
13, a "Competing Business" shall mean a business which at the
Effective Date or at any time though April 30, 2005, is
engaged (i) in the API production of opiate based products or
(ii) in the research, development and/or commercialization of
any pharmaceutical product involving any anti-abuse platform
developed or in development while EMPLOYEE was employed by
EMPLOYER. Notwithstanding the term of the restrictions
provided in this Section 13, EMPLOYEE acknowledges and
confirms his secrecy obligations under Section 9.1 of the
Employment Agreement, which secrecy obligations will continue
to survive the execution of this Agreement in accordance with
subparagraph A above.
If any provisions of this Section 13, or any part thereof, it
is held to be unenforceable because of the duration of such
provision, the area covered thereby or the type of conduct
restricted therein, the parties agreed that the court making
such determination shall have the power to modify the
duration, geographic area and/or other terms of such
provisions, and as so modified, said provision shall then be
enforceable. In the event that the courts of any one or more
jurisdictions shall hold such provisions wholly or partially
unenforceable by reason of the scope thereof or otherwise, it
is the intention of the parties hereto that such determination
not bar or in any way affect EMPLOYER's right to relief
provided for herein in the court of any other jurisdictions as
to breaches or threatened breaches of such provisions in such
other jurisdictions, the above provisions as they relate to
each jurisdiction being, for this purposes, severable into
diverse and independent covenants.
14. COVENANT NOT TO XXX.
A. EMPLOYEE on the one part and EMPLOYER and Releasees on the other
part, agree not to xxx, institute or cause to be instituted any
lawsuit or claim in any federal, State or local court or agency
against each other arising from or attributable in any way or manner
to EMPLOYEE's employment or separation from employment with EMPLOYER
except with respect to the enforcement of this Agreement or any
Debentures executed by EMPLOYER in favor of EMPLOYEE. This Agreement
may be pleaded as a complete bar to the enforcement of any claim
which EMPLOYEE on the one part and EMPLOYER and Releasees on the
other
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part may have against each other. If any party violates the release
or covenant contained herein, the prevailing party shall be entitled
to collect from him reasonable attorneys' fees in connection with
the enforcement of this Agreement.
B. If any provision of this Agreement or the application thereof is
found to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this
Agreement which can be given effect without the invalid or
unenforceable provision. In the event that the release provisions of
this Agreement are found by a Court and/or agency of competent
jurisdiction to be invalid or unenforceable, EMPLOYEE agrees that he
shall return to EMPLOYER all of the Severance Payment and the
Severance Option and the value of the other benefits provided him
pursuant to the provisions of paragraph 3 above.
C. Neither this Agreement nor any term hereof may be orally changed,
waived, discharged or terminated. On the contrary, this Agreement
may only be changed, waived, discharged or terminated by means of a
written agreement signed by each of the parties.
15. DEBENTURES UNAFFECTED. Notwithstanding any provision herein to the
contrary, any and all Debentures in existence as of the Effective
Date, executed by EMPLOYER in favor of EMPLOYEE, shall remain in
full force and effect following the Effective Date.
16. RETURN OF EMPLOYER PROPERTY. Simultaneous with the execution of this
Agreement, EMPLOYEE shall return all confidential information and
EMPLOYER's property in his possession to the EMPLOYER, including any
EMPLOYER credit cards (if applicable). EMPLOYER agrees that EMPLOYEE
may retain his laptop computer and that all other property of
EMPLOYER has previously been returned by EMPLOYEE.
17. GOVERNING LAW. Except as provided in the promissory note attached
hereto as Exhibit B, the terms of this Agreement shall be
interpreted under the laws of the State of New York. Each of the
parties hereto hereby irrevocably and unconditionally submits, to
the non-exclusive jurisdiction of any New York State court or United
States Federal court sitting in New York City, and any appellant
court from any thereof, in any action or proceeding arising out of
or relating to this Agreement, or for recognition or enforcement of
any judgment, and each of the parties hereto unconditionally agrees
that all claims in respect of any such action or proceeding may be
heard and determined in any such New York State court or, to the
fullest extent permitted by law, in such United States Federal
court. Each of the parties hereto agree that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
any other jurisdictions by suit on the right that any party may
otherwise have to bring any action or proceeding relating to this
Agreement in the courts of any other jurisdiction. Each of the
parties hereto further and unconditionally waive, to the fullest
extent as it
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may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or
proceeding arising out of or in relation to this Agreement in any
such New York State or United State Federal court sitting in New
York City. Each of the parties hereto hereby waives, to the fullest
extent permitted by law, the defense of any inconvenient forum to
the maintenance of such action or proceeding in any such court.
18. INTERPRETATION. This AGREEMENT is a result of negotiations between
the parties, none of whom have acted under any duress or compulsion,
whether legal, economic or otherwise. Accordingly, the parties
hereby waive the application of any rule or law that otherwise would
be applicable in connection with the construction of this AGREEMENT
that ambiguous or conflicting terms or provisions should be
construed against the party who (or whose attorney) prepared the
executed AGREEMENT or any earlier draft of the same. The section
titles and other headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. PLAIN LANGUAGE. EMPLOYEE and EMPLOYER acknowledge that each of them
has read this Agreement, that each of them fully understands the
meaning of the Agreement, that the Agreement is written in a manner
calculated to be understood by EMPLOYEE, that they have had the
opportunity to confer with their attorneys regarding the terms and
meanings of the Agreement, that no representation has been made to
either of them by the other party except as set forth herein, and
that each of them KNOWINGLY and VOLUNTARILY enters into this
Agreement and agrees to comply with its terms.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which
taken together shall constitute one and the same instrument.
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
XXXXXXX X. XXXXXXX
I, XXXXXXX X. XXXXXXX, knowingly and voluntarily enter into and agree to
the terms of the above "Separation Agreement and General Release" this 18th day
of September, 2003. I acknowledge that before signing this Agreement I was given
a twenty-one (21) day period in which to consider this document and I was
informed of my right to consult with an attorney. I further acknowledge that I
have been informed of my right to revoke this Agreement within seven (7) days of
my signing of this Agreement.
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
XXXXXXX X. XXXXXXX
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SUBSCRIBED AND SWORN BEFORE
ME ON THIS 18th DAY OF SEPTEMBER
SEPTEMBER, 2003.
_________________________________
NOTARY PUBLIC
XXXXXX DRUG CO., INC.,
a New York corporation
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President and Chief Financial
Officer
Date: September 18, 2003
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