EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.1
This
Executive Employment Agreement (“Agreement”)
is made effective as of April 14, 2008, (the “Effective
Date”) by and between SCOLR Pharma, Inc. (“Company”)
and Xxxxxxx X. Xxxx (“Executive”).
The
parties agree as follows:
1. Employment. Company
hereby employs Executive, and Executive hereby accepts such employment, upon the
terms and conditions set forth herein.
2. Duties.
2.1 Position. Executive
is employed as Vice President of Finance and Chief Financial Officer and shall
have the duties and responsibilities assigned by Company’s Chief Executive
Officer, both upon the Effective Date and as may reasonably be assigned from
time to time. Executive shall perform faithfully and diligently all
duties assigned to Executive. Company reserves the right to modify
Executive’s position and duties at any time in its sole and absolute discretion,
provided that the duties assigned are consistent with the position of a senior
executive and that Executive continues to report to the Chief Executive
Officer.
2.2 Best
Efforts/Full-time. Executive will expend Executive’s best
efforts on behalf of Company, and will abide by all policies and decisions made
by Company, as well as all applicable federal, state and local laws, regulations
or ordinances. Executive will act in the best interest of Company at
all times. Executive shall devote Executive’s full business time and
efforts to the performance of Executive’s assigned duties for
Company.
2.3 Work
Location. Executive’s principal place of work shall be in
Bellevue, Washington, or such other location as the parties may agree upon from
time to time.
3. At-Will
Employment Relationship. Executive’s employment with Company
is at-will and not for any specified period and may be terminated, with or
without cause, by either Executive or Company, except as otherwise specified in
Section 7 below. No
representative of Company, other than an authorized representative, has the
authority to alter the at-will employment relationship. Any change to
the at-will employment relationship must be by specific, written agreement
signed by Executive and a designated representative of
Company. Nothing in this Agreement is intended to or should be
construed to contradict, modify or alter this at-will
relationship.
4. Compensation.
4.1 Base
Salary. As compensation for Executive’s performance of
Executive’s duties hereunder, Company shall pay to Executive as an initial base
salary of Two Hundred Twenty-six Thousand Eight Hundred Dollars ($226,800) per
year (the “Base
Salary”), payable in accordance with the normal payroll practices of
Company, less required deductions for state and federal withholding tax, social
security and all other employment taxes and payroll deductions. In
the event Executive’s employment under this Agreement is terminated by either
party, for any reason, Executive will be paid the Base Salary, prorated to the
date of termination.
4.2 Incentive
Compensation. Executive will be eligible to receive annual
corporate performance bonuses in accordance with Company’s management incentive
plan, should Company adopt one, or else in accordance with the terms of this
Agreement. Executive shall be eligible to receive an
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annual
discretionary bonus of up to thirty-five percent (35%) of Executive’s Base
Salary based on the achievement of targeted corporate and individual
performance goals and objectives agreed on by Executive and
Company.
4.3 Performance
and Salary Review. Company will periodically review
Executive’s performance on no less than an annual basis. Adjustments
to Executive’s salary or other compensation, if any, will be made by Company in
its sole and absolute discretion.
5. Benefits. Executive
will be eligible for all customary benefits generally available to executive
employees of Company, subject to the terms and conditions of Company’s
applicable benefit plan documents and policies. Company reserves the
right to change or eliminate the benefits on a prospective basis, at any time,
effective upon notice to Executive.
6. Business
Expenses. Executive will be reimbursed for all reasonable,
out-of-pocket business expenses incurred in the performance of Executive’s
duties on behalf of Company. To obtain reimbursement, expenses must
be submitted promptly, with appropriate supporting documentation, in accordance
with Company’s policies.
7. Termination
of Executive’s Employment.
7.1 Voluntary
Termination by Executive. Executive may voluntarily terminate
Executive’s employment at any time on thirty (30) days’ advance written notice
to Company, provided that Company may, in its sole discretion, elect to waive
all or any part of such notice period. In the event of Executive’s
employment is terminated in accordance with this Section 7.1, Executive shall be
entitled to receive only the Base Salary then in effect, prorated to the date of
termination, and any amounts earned and payable pursuant to Sections 5 and 6,
including any accrued but unused vacation (collectively, the “Standard
Entitlements”), and no other amounts. For purposes of this
Section 7.1, “Base
Salary” means the salary, excluding any bonus or any other additional
compensation or benefits, payable to Executive for the services rendered to
Company at the time of termination. All other Company obligations to
Executive pursuant to this Agreement will become automatically terminated and
completely extinguished and Executive will not be entitled to receive the
Severance Package described in Section 7.3.
7.2 Termination
for Cause by Company. Company may terminate Executive’s
employment immediately at any time for Cause (as defined below). In
the event that Executive’s employment is terminated for Cause, Executive shall
be entitled to receive only the Standard Entitlements, and no other
amounts. For purposes of this Section 7.2, “Base
Salary” means the salary, excluding any bonus or any other additional
compensation or benefits, payable to Executive for the services rendered to
Company at the time of termination. All other Company obligations to
Executive pursuant to this Agreement will become automatically terminated and
completely extinguished and Executive will not be entitled to receive the
Severance Package described in Section 7.3.
For
purposes of this Agreement, “Cause”
is defined as: (a) Executive’s conviction (or plea of guilty or nolo
contendere) of fraud, embezzlement, misappropriation, or any felony or any other
act of moral turpitude; (b) acts or omissions constituting gross
negligence, recklessness or willful misconduct on the part of the Executive with
respect to Executive’s obligations to Company or otherwise relating to the
business of Company; (c) Executive’s failure or inability to perform the
essential functions of the position, with or without reasonable accommodation,
due to a mental or physical disability; (d) Executive’s willful neglect of
duties as determined in the sole and exclusive discretion of Company;
(e) Executive’s death; (f) Executive’s material breach of this
Agreement, Company’s Code of Conduct or Company’s Proprietary Information and
Invention Agreement; or (g) any similar or related act or failure to act
which is materially adversely injurious to Company.
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For
purposes of this Agreement, the “Severance
Package” shall include the following:
(a) a
severance payment equal to (i) 87.5% of Executive’s annual Base Salary in effect
on the date of termination, plus (ii) thirty-five percent (35%) of Executive’s
annual Base Salary in effect on the date of termination, less required
deductions, payable in lump sum on the first Company payday following the
satisfaction of the Severance Conditions;
(b)
payment of the premiums required to continue Executive’s group health care
coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986
(“COBRA”)
for a period of twelve (12) months following the date of termination, provided
Executive elects to continue and remains eligible for such benefits and does not
become eligible for health coverage through another employer during this period;
and
(c) 100%
acceleration of vesting, as of the termination date, of all of the then-unvested
equity awards under any employee benefit plan of Company held by Executive at
the time of such termination or resignation for Good Reason (as defined
below).
7.4 Voluntary
Resignation by Executive for Good Reason Following a Change in
Control. In the event that in connection with or within twelve
(12) months following a Change of Control (as defined below) Executive resigns
for Good Reason (as defined below), following thirty (30) days’ advance written
notice to Company, provided that Company may, in its sole discretion, elect to
waive all or any part of such notice period, Executive will be entitled to
receive the Standard Entitlements and the Severance Package, contingent on the
satisfaction of the Severance Conditions. As long as Executive
provides the required notice, Executive will be paid the Standard Entitlements
for the duration of the required notice period, even if Company elects to
relieve Executive of Executive’s duties at an earlier time. All other
Company obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished.
Executive
will be deemed to have resigned for “Good
Reason” if Executive resigns within ninety (90) days after any of the
following have occurred, without Executive’s written consent: (a) Company
reduces the level of Executive’s responsibilities or changes Executive’s duties
so that Executive’s duties are no longer consistent with the position of a
senior executive; (b) Company reduces Executive’s Base Salary by more than
ten percent (10%), unless such reduction is made as part of, and is generally
consistent with, a general reduction of senior executives’ compensation;
(c) Company relocates Executive’s principal place of work to a location
more than fifty (50) miles from the location specified in Section 2.3; or (d)
Company fails to assign the terms of this Agreement to any successors
contemplated in Section 16.1. Notwithstanding the foregoing,
Executive’s resignation as a result of any of the foregoing conditions shall be
considered a Voluntary Termination by Executive (as described in Section 7.1)
unless Executive shall have provided written notification to Company of the
condition(s) allegedly constituting Good Reason and Company shall have failed to
correct such condition(s) within ten (10) days after Company’s receipt of such
notice.
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(a) 280G/Limitation
of Payments and Benefits. If, due to the benefits
provided under Sections 7.5 or 7.4, as
applicable, Executive is subject to any excise tax due to characterization of
any amounts payable under such sections as excess parachute payments pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (collectively, the “Code”),
the amounts payable under such sections will be reduced (to the least extent
possible) in order to avoid any “excess parachute payment” under
section 280G(b)(1) of the Code.
(b) A
“Change of
Control” is defined as any one of the following occurrences:
(i) any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange
Act”)), other than a trustee or other fiduciary holding securities of
Company under an employee benefit plan of Company, becomes the “beneficial
owner” (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of the securities of Company representing more than 50%
of (A) the outstanding shares of common stock of Company or (B) the combined
voting power of the Company’s then-outstanding securities;
(ii) the
sale or disposition of all or substantially all of Company’s assets (or any
transaction having similar effect is consummated);
(iii) Company
is party to a merger or consolidation that results in the holders of voting
securities of Company outstanding immediately prior thereto failing to continue
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the
dissolution or liquidation of Company.
7.6 Conditions
to Receive and Payment of Severance Package. The Severance
Package pursuant to Sections 7.3 and 7.4, as applicable, will be paid provided
Executive satisfies all of the following conditions (the “Severance
Conditions”):
(a) Executive
complies with all surviving provisions of this Agreement as specified in Section
11.9; and
(b) Executive
executes, at the time of Executive’s termination of employment and within the
same taxable year, or, if later, before the expiration of any applicable
statutory revocation period, a full general release, releasing all claims, known
or unknown, Executive may have against Company arising out of or any way related
to Executive’s employment or termination of employment with
Company.
7.7 Section
409A Compliance. The parties intend for this Agreement either
to satisfy the requirements of Section 409A or to be exempt from the application
of Section 409A, and this Agreement shall be construed and interpreted
accordingly. If this Agreement either fails to satisfy the
requirements of Section 409A or is not exempt from the application of Section
409A, then the parties hereby agree to amend or to clarify this Agreement in a
timely manner so that this Agreement either satisfies the requirements of
Section 409A or is exempt from the application of Section 409A.
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(b) To
ensure satisfaction of the requirements of Section 409A(b)(3) of the Code,
assets shall not be set aside, reserved in a trust or other arrangement, or
otherwise restricted for purposes of the payment of amounts payable under this
Agreement.
(c) Company
hereby informs Executive that the federal, state, local and/or foreign tax
consequences (including without limitation those tax consequences implicated by
Section 409A) of this Agreement are complex and subject to
change. Executive hereby acknowledges that Company has advised
Executive that Executive should consult with Executive’s own personal tax or
financial advisor in connection with this Agreement and its tax
consequences. Executive understands and agrees that Company has no
obligation and no responsibility to provide Executive with any tax or other
legal advice in connection with this Agreement. Executive agrees that
Executive shall bear sole and exclusive responsibility for any and all adverse
federal, state, local and/or foreign tax consequences (including without
limitation those tax consequences implicated by Section 409A) of this
Agreement, and fully indemnifies and holds Company harmless
therefor.
7.8 Taxes and
Withholdings. Company may withhold from any amounts payable
under this Agreement, including any benefits or severance pay, such federal,
state, local or international taxes as may be required to be withheld pursuant
to applicable law or regulations.
8. No Conflict
of Interest. During Executive’s employment with Company,
Executive must not engage in any work, paid or unpaid, that creates a conflict
of interest with Company. Such work shall include, but is not limited
to, directly or indirectly competing with Company in any way, or acting as an
officer, director, employee, consultant, stockholder, volunteer, lender, or
agent of any business enterprise of the same nature as, or which is in direct
competition with, the business in which Company is now engaged or in which
Company becomes engaged during Executive’s employment with Company, as may be
determined by Company in its sole discretion. If Company believes
such a conflict exists during Executive’s employment with Company, Company may
take corrective action, which may include asking Executive to choose either to
discontinue the other work or voluntarily resign from employment with
Company.
9. No
Violation of Rights of Third Parties. Executive represents
that Executive’s performance of this Agreement does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by Executive prior to Executive’s employment with
Company. Executive agrees not to disclose to Company, or induce
Company to use, any confidential or proprietary information or material
belonging to any previous employers or others. Executive warrants
that Executive is not a party to any other agreement that will interfere with
his full compliance with this Agreement. Executive further agrees not
to enter into any agreement, whether written or oral, in conflict with the
provisions of this Agreement while such provisions remain
effective.
10. Confidentiality
and Proprietary Rights. Executive represents that Executive
has executed and agrees to abide by Company’s Employee Proprietary Information
and Invention Agreement, which is incorporated herein by reference.
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11.1 Consideration
For Promise To Refrain From Competing. Executive agrees that
Executive’s services are special and unique, that Company’s disclosure of
confidential, proprietary information and specialized training and knowledge to
Executive, and that Executive’s compensation and benefits and severance, as
applicable, are partly in consideration of and conditioned upon Executive not
competing with Company. Executive acknowledges that such
consideration for Executive’s services under this Agreement is adequate
consideration for Executive’s promises contained within this
Section 11.
11.2 Promise To
Refrain From Competing. In exchange for the consideration
described in Section 11.1, Executive agrees that for the period of one (1) year
following the date Executive ceases to render services to Company, Executive
will not, in any capacity, either directly or indirectly, whether as a owner,
director, officer, manager, consultant, agent or employee: (i) be employed in
any enterprise which
is engaged
in the business of developing, licensing, or selling technology, products or
services which are directly competitive with the Business of the Company (as
described in Part I, Item 1 of the Company’s Annual Report on Form 10-K filed
with the U.S. Securities and Exchange Commission prior to the termination date,
which is incorporated herein by reference) or with any technology, products or
services being actively developed, with the bona fide intent to market same, by
the Company at the termination date or
engaged in any business that is directly competitive with the Business of the
Company, or with any business in
which,
to Executive’s knowledge, the Company is preparing
to engage, at the time the Executive’s employment with Company terminates
(“Restricted Business”). Notwithstanding the foregoing, it shall not
be a violation of this paragraph if Executive performs services for a Restricted
Business that in no way relates to the Company’s primary focus on methods of
oral drug delivery; or (ii) make or hold any investment in any Restricted
Business, whether such investment be by way of loan, purchase of stock or
otherwise, provided that there shall be excluded from the foregoing the
ownership of not more than 1% of the listed or traded stock of any publicly held
corporation. For purposes of this Section 11, the term “Company”
shall mean and include Company, any subsidiary or affiliate of Company, any
successor to the business of Company (by merger, consolidation, sale of assets
or stock or otherwise) and any other corporation or entity of which Executive
may serve as a director, officer or employee at the request of Company or any
successor of Company.
11.3 Reasonableness
of Restrictions. Executive represents and agrees that the
restrictions on competition, as to time, geographic area, and scope of activity,
required by this Section 11 are reasonable, do not impose a greater
restraint than is necessary to protect the goodwill and business interests of
Company, and are not unduly burdensome to Executive. Executive
expressly acknowledges that Company competes on a nationwide basis and that the
geographical scope of these limitations is reasonable and necessary for the
protection of Company’s trade secrets and other confidential and proprietary
information.
11.4 Reformation
if Necessary. In the event a court of competent jurisdiction
determines that the geographic area, duration, or scope of activity of any
restriction under this Section 11 and its subsections is unenforceable, the
restrictions under this section and its subsections shall not be terminated but
shall be reformed and modified to the extent required to render them valid and
enforceable.
12. Non-Solicitation. Executive
agrees that during the term of this Agreement and for a period of one
(1) year after the termination of this Agreement, Executive will not,
either directly or indirectly, separately or in association with others,
interfere with, impair, disrupt or damage Company’s
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business
by soliciting, encouraging or recruiting any of Company’s employees or causing
others to solicit or encourage or recruit any of Company’s employees to
discontinue their employment with Company.
13. Nondisparagement. Upon
termination of Executive’s employment relationship hereunder, Company and
Executive agree that, unless otherwise legally required to do so, they will each
at all times thereafter refrain from discussing the circumstances relating to
such termination and from disparaging, or describing in a derogatory light, the
performance, capabilities, services, business practices, or ethics of the other
(or of the officers, directors or controlling shareholders of the other). This
provision does not apply to statements made by Executive to Executive’s
immediate family or attorneys, or to statements made by either party in legal
proceedings in conjunction with legal actions to pursue rights and/or remedies
under this Agreement, or as otherwise required by law.
14. Right To
Injunction/ Costs Of Enforcement. Executive acknowledges that
Company will suffer immediate and irreparable harm that will not be compensable
by damages alone in the event Executive repudiates or breaches Sections 9,10 11,
12 or 13 or threatens or attempts to do so. In the event of any such
breach or any threatened or attempted breach, Executive agrees that Company, in
addition to and not in limitation of any other rights, remedies or damages
available to it at law or in equity, shall be entitled to obtain temporary,
preliminary and permanent injunctions to prevent or restrain any such breach,
and Company shall not be required to post a bond as a condition for the granting
of such relief.
15. Agreement
to Arbitrate. In the event of any dispute or claim relating to
or arising out of the employment relationship between Company and Executive or
the termination of that relationship (including, but not limited to, any claims
of wrongful termination or age, sex, race, disability or other discrimination),
Executive and Company agree that all such disputes shall be fully and finally
resolved by binding arbitration conducted before a single neutral arbitrator in
Seattle, Washington pursuant
to the rules for arbitration of employment disputes by the American Arbitration
Association (available at xxx.xxx.xxx). This agreement to arbitrate
is subject to the Federal Arbitration Act. The arbitrator shall
permit adequate discovery and is empowered to award all remedies otherwise
available in a court of competent jurisdiction. Any judgment rendered
by the arbitrator may be entered by any court of competent
jurisdiction. The arbitrator shall issue an award in writing and
state the essential findings and conclusions on which the award is
based. By executing this Agreement, Executive and Company are both
waiving the right to a jury trial with respect to any such
disputes. Company shall bear the costs of the arbitrator, forum and
filing fees. Each party shall bear its own respective attorneys’ fees
and all other costs, unless otherwise provided by law and awarded by the
arbitrator. This arbitration agreement does not include claims that,
by law, may not be subject to mandatory arbitration.
16. General
Provisions.
16.1 Successors
and Assigns. The rights and obligations of Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Company. Executive shall not be entitled to assign any
of Executive’s rights or obligations under this Agreement.
16.2 Waiver. Either
party’s failure to enforce any provision of this Agreement shall not in any way
be construed as a waiver of any such provision, or prevent that party thereafter
from enforcing each and every other provision of this Agreement.
16.3 Severability. In
the event any provision of this Agreement is found to be unenforceable by an
arbitrator or court of competent jurisdiction, such provision shall be deemed
modified to the extent necessary to allow enforceability of the provision as so
limited, it being intended that the parties shall receive the benefit
contemplated herein to the fullest extent permitted by law. If a
deemed modification is not satisfactory in the judgment of such arbitrator or
court, the unenforceable
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16.4 Interpretation;
Construction. The headings set forth in this Agreement are for
convenience only and shall not be used in interpreting this
Agreement. This Agreement has been drafted by legal counsel
representing Company, but Executive has participated in the negotiation of its
terms. Furthermore, Executive acknowledges that Executive has had an
opportunity to review and revise the Agreement and have it reviewed by legal
counsel, if desired, and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
16.5 Governing
Law. This Agreement will be governed by and construed in
accordance with the laws of the United States and the State of
Washington. Each party consents to the jurisdiction and venue of the
state or federal courts in King County, Washington, if applicable, in any
action, suit, or proceeding arising out of or relating to this
Agreement.
16.6 Notices. Notices
and all other communications contemplated by this Agreement shall be in writing
and shall be deemed to have been duly given (i) by personal delivery when
delivered personally; (ii) by overnight courier upon written verification of
receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of
receipt of electronic transmission; or (iv) by certified or registered mail,
return receipt requested, upon verification of receipt. In the case
of Executive, mailed notices shall be addressed to the home address which
Executive most recently communicated to Company in writing. In the
case of Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of the Board of
Directors.
16.7 Survival. Sections
7 (“Termination of Executive’s Employment”), 9 (“No Violation of Rights of Third
Parties”), 10 (“Confidentiality and Proprietary Rights”), 11 (“Post-Termination
Non-Competition”), 12 (“Non-Solicitation”), 13 (“Nondisparagement”), 14 (“Right
to Injunction/ Costs of Enforcement” ), 15 (“Agreement to Arbitrate”), 16
(“General Provisions”) and 17 (“Entire Agreement”) of this Agreement shall
survive Executive’s employment by Company.
17. Entire
Agreement. This Agreement, including Company’s Employee
Proprietary Information and Invention Agreement incorporated herein by
reference, constitutes the entire agreement between the parties relating to this
subject matter and supersedes all prior or simultaneous representations,
discussions, negotiations, and agreements, whether written or
oral. This Agreement may be amended or modified only with the written
consent of Executive and an authorized representative of Company. No
oral waiver, amendment or modification will be effective under any circumstances
whatsoever.
[SIGNATURE
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THE PARTIES TO THIS EMPLOYMENT
AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY
PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT
ON THE DATES SHOWN BELOW.
Dated: April
14, 2008 /s/ Xxxxxxx X. Xxxx
Xxxxxxx
X. Xxxx
Dated: April
14, 2008 By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X.
Xxxxx
Its:
President
&
CEO
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