Exhibit 10.9.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February 9, 2004, by
and between Pharmaceutical Resources, Inc., a Delaware corporation ("Employer"),
and Xxxxx X. Xxxxxxx ("Executive").
R E C I T A L S :
A. WHEREAS, Executive is presently employed by Employer in the capacities
of President and Chief Executive Officer of Employer and President and Chief
Executive Officer of Employer's wholly-owned subsidiary, Par Pharmaceutical,
Inc. ("Par"), and currently serves as a member of the Board of Directors of
Employer (the "Board"); and
B. WHEREAS, effective as of September 16, 2003, Employer and Executive
desire to cancel and replace Executive's existing employment agreement, dated
February 6, 2003, as modified by that certain amendment to his existing
employment agreement, dated June 18, 2003 (as amended, the "Existing Employment
Agreement"), and enter into this Agreement in order for Executive to continue to
perform the duties associated with his positions with Employer and Par on the
terms and conditions set forth herein.
In consideration of the mutual promises herein contained, the parties
hereto hereby agree as follows:
1. EMPLOYMENT.
1.1. GENERAL. Employer hereby employs Executive in the capacities of
President and Chief Executive Officer of Employer and President and Chief
Executive Officer of Par at the compensation rate and benefits set forth in
Section 2 hereof for the Employment Term (as defined in Section 3.1 hereof).
Executive hereby accepts such employment, subject to the terms and conditions
herein contained. In all such capacities, Executive shall perform and carry out
such duties and responsibilities that are reasonably consistent with Executive's
positions and responsibilities and this Agreement, and shall report to the
Executive Chairman of the Board (the "Executive Chairman"), if there shall be
one, and the Board.
1.2. TIME DEVOTED TO POSITION. Executive, during the Employment
Term, shall devote substantially all of his business time, attention and skills
to the business and affairs of Employer and Par.
1.3. CERTIFICATIONS. Whenever the Chief Executive Officer
and/or Chief Financial Officer of Employer are required by law, rule or
regulation or requested by any governmental authority or by Employer's or Par's
auditors to provide certifications with respect to Employer's or Par's financial
statements or filings with the Securities and Exchange Commission (the "SEC") or
any other governmental authority, Executive shall sign such certifications as
may be reasonably requested by Employer and/or Par, with such exceptions as
Executive deems necessary to make such certifications accurate and not
misleading.
2. COMPENSATION AND BENEFITS.
2.1. SALARY. At all times Executive is employed hereunder, Employer
shall pay to Executive, and Executive shall accept, as full compensation for any
and all services rendered and to be rendered by him during such period to
Employer in all capacities, including, but not limited to, all services that may
be rendered by him to any of Employer's subsidiaries, entities and organizations
presently existing or hereafter formed, organized or acquired by Employer,
directly or indirectly (each, a "Subsidiary" and collectively, the
"Subsidiaries"), the following: (i) a base salary at the annual rate of
$600,000, or at such increased rate as the Board (through its Compensation and
Stock Option Committee), in its sole discretion, may hereafter from time to time
grant to Executive, subject to adjustment in accordance with Section 2.2 hereof
(as so adjusted, the "Base Salary"); and (ii) any additional bonus and the
benefits set forth in Sections 2.3, 2.4 and 2.5 hereof. The Base Salary shall be
payable in accordance with the regular payroll practices of Employer applicable
to senior executives, less such deductions as shall be required to be withheld
by applicable law and regulations or otherwise.
2.2. ADJUSTMENTS IN BASE SALARY. On each October 1 during the
Employment Term, the Base Salary shall be increased by that percentage, if any,
by which the Consumer Price Index, Urban Wage Earners and Clerical Workers, for
the New York City metropolitan area, published by the United States Government
as of the month of September of such year, exceeds such Index for the
immediately preceding September.
2.3. BONUS. Subject to Section 3.3 hereof, Executive shall be
entitled to an annual bonus during the Employment Term in such amount (if any)
as determined by the Board (through its Compensation and Stock Option Committee)
in its sole discretion, based on such performance criteria as it deems
appropriate, including, without limitation, Executive's performance and
Employer's earnings, financial condition, rate of return on equity and
compliance with regulatory requirements. Subject to the preceding sentence, the
target amount of Executive's annual bonus shall be seventy-five (75%) percent of
the Base Salary.
2.4. STOCK OPTIONS. Executive shall be entitled to participate in
stock option and similar equity plans of Employer.
2.5. EXECUTIVE BENEFITS.
2.5.1. EXPENSES. Employer shall promptly reimburse Executive
for expenses he reasonably incurs in connection with the performance of his
duties (including business travel and entertainment expenses) hereunder, all in
accordance with Employer's policies with respect thereto as in effect from time
to time.
2.5.2. EMPLOYER PLANS. Executive shall be entitled to
participate in such employee benefit and welfare plans and programs as Employer
may from time to time generally offer or provide to executive officers of
Employer or its Subsidiaries, including, but not limited to, participation in
life insurance, health and accident, medical plans and programs and profit
sharing and retirement plans.
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2.5.3. VACATION. Executive shall be entitled to four (4)
weeks of paid vacation per calendar year, prorated for any partial year.
2.5.4. AUTOMOBILE. Employer shall provide Executive with an
automobile cash allowance in the amount of $1,050 (gross) per month.
2.5.5. LIFE INSURANCE. Employer shall obtain (PROVIDED, that
Executive qualifies on a non-rated basis) a term life insurance policy, the
premiums of which shall be borne by Employer and the death benefits of which
shall be payable to Executive's estate, or as otherwise directed by Executive,
in the amount of $3 million throughout the Employment Term.
3. EMPLOYMENT TERM; TERMINATION.
3.1. EMPLOYMENT TERM. Executive's employment hereunder shall commence
as of September 16, 2003 (the "Commencement Date") and, except as otherwise
provided in Section 3.2 hereof, shall continue until the third (3rd) anniversary
of the date of this Agreement (the "Initial Term"). Thereafter, this Agreement
shall automatically be renewed for successive one-year periods commencing on the
third (3rd) anniversary of the date of this Agreement in each subsequent year
(the Initial Term, together with any such subsequent employment period(s), being
referred to herein as the "Employment Term"), unless Executive or Employer shall
have provided a Notice of Termination (as defined in Section 3.4.1 hereof) in
respect of his or its election not to renew the Employment Term to the other
party at least 180 days prior to such termination. Upon non-renewal of the
Employment Term pursuant to this Section 3.1 or termination pursuant to Sections
3.2.1 through 3.2.6 hereof, inclusive, Executive shall be released from any
duties hereunder (except as set forth in Sections 4 and 5 hereof) and the
obligations of Employer to Executive shall be as set forth in Section 3.3 hereof
only.
3.2. EVENTS OF TERMINATION. The Employment Term shall terminate upon
the occurrence of any one or more of the following events:
3.2.1. DEATH. In the event of Executive's death, the
Employment Term shall terminate on the date of his death.
3.2.2. WITHOUT CAUSE BY EXECUTIVE. Executive may terminate
the Employment Term at any time during such Term for any reason or no reason
whatsoever by giving a Notice of Termination to Employer. The Date of
Termination (as defined in Section 3.4.2) pursuant to this Section 3.2.2 shall
be thirty (30) days after the Notice of Termination is given.
3.2.3. DISABILITY. In the event of Executive's Disability (as
hereinafter defined), Employer may, at its option, terminate the Employment Term
by giving a Notice of Termination to Executive. The Notice of Termination shall
specify the Date of Termination, which date shall not be earlier than thirty
(30) days after the Notice of Termination is given. For purposes of this
Agreement, "Disability" means disability as defined in any long-term disability
insurance policy provided by Employer and insuring Executive, or, in the absence
of any such policy, the inability of Executive for 180 days in any twelve- (12)
month period to substantially perform his duties hereunder as a result of a
physical or mental illness, all as determined in good faith by the Board.
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3.2.4. CAUSE. Employer may, at its option, terminate the
Employment Term for "Cause" based on objective factors determined in good faith
by a majority of the Board as set forth in a Notice of Termination to Executive
specifying the reasons for termination and the failure of the Executive to cure
the same within ten (10) days after Employer shall have given the Notice of
Termination; PROVIDED, HOWEVER, that in the event the Board in good faith
determines that the underlying reasons giving rise to such determination cannot
be cured, then the ten- (10) day period shall not apply and the Employment Term
shall terminate on the date that the Notice of Termination is given. For
purposes of this Agreement, "Cause" shall mean (i) Executive's conviction of,
guilty or no contest plea to, or confession of guilt of, a felony or other crime
involving moral turpitude; (ii) an act or omission by Executive in connection
with his employment that constitutes fraud, criminal misconduct, breach of
fiduciary duty, dishonesty, gross negligence, malfeasance, willful misconduct or
other conduct that is materially harmful or detrimental to Employer; (iii) a
material breach by Executive of this Agreement; (iv) a continuing failure by
Executive to perform such duties as are assigned to Executive by Employer in
accordance with this Agreement, other than a failure resulting from a
Disability; (v) Executive's knowingly taking any action on behalf of Employer or
any of its affiliates without appropriate authority to take such action (the
approval of the Executive Chairman shall be deemed appropriate authority); (vi)
Executive's knowingly taking any action in conflict of interest with Employer or
any of its affiliates given Executive's position with Employer; and/or (vii) the
commission of an act of personal dishonesty by Executive in connection with
Employer that involves personal profit.
3.2.5. WITHOUT CAUSE BY EMPLOYER. Employer may, at its
option, terminate the Employment Term for any reason or no reason whatsoever
(other than for the reasons set forth elsewhere in this Section 3.2) by giving a
Notice of Termination to Executive. The Notice of Termination shall specify the
Date of Termination, which date shall not be earlier than thirty (30) days after
the Notice of Termination is given.
3.2.6. EMPLOYER'S MATERIAL BREACH. Executive may, at his
option, terminate the Employment Term upon Employer's material breach of this
Agreement and the continuation of such breach for more than ten (10) days after
written demand for cure of such breach is given to Employer by Executive (which
demand shall identify the manner in which Employer has materially breached this
Agreement). Employer's material breach of this Agreement shall mean (i) the
failure of Employer to make any payment that it is required to make hereunder to
Executive when such payment is due or within two (2) business days thereafter;
(ii) the assignment to Executive, without Executive's express written consent,
of duties inconsistent with his positions, responsibilities and status with
Employer, or a change in Executive's reporting responsibilities, titles or
offices or any plan, act, scheme or design to constructively terminate the
Executive, or any removal of Executive from his positions with Employer, except
in connection with the termination of the Employment Term by Employer for Cause,
without Cause or Disability or as a result of Executive's death or voluntary
resignation or by Executive other than pursuant to this Section 3.2.6; (iii) a
reduction by Employer in Executive's Base Salary; or (iv) a permanent
reassignment of Executive's primary work location, without the consent of
Executive, to a location more than 35 miles from Employer's executive offices in
Woodcliff Lake, New Jersey.
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3.3. CERTAIN OBLIGATIONS OF EMPLOYER FOLLOWING TERMINATION OF THE
EMPLOYMENT TERM. Following termination of the Employment Term under the
circumstances described below, Employer shall pay to Executive or his estate, as
the case may be, the following compensation and provide the following benefits
in full satisfaction and final settlement of any and all claims and demands that
Executive now has or hereafter may have hereunder against Employer. In
connection with Executive's receipt of any or all monies and benefits to be
received pursuant to this Section 3.3, Executive shall not have a duty to seek
subsequent employment during the period in which he is receiving severance
payments and any Severance Amount (as defined in Section 3.3.2 hereof) shall not
be reduced solely as a result of Executive's subsequent employment by an entity
other than Employer.
3.3.1. FOR CAUSE. In the event that the Employment Term is
terminated by Employer for Cause, Employer shall pay to Executive, in a single
lump-sum, an amount equal to any unpaid but earned Base Salary through the Date
of Termination. All unexercised stock options granted by Employer to Executive
prior to the Commencement Date ("Existing Options"), whether vested or unvested,
shall not be terminated if Executive is terminated by Employer for Cause and
such options shall continue to be exercisable in accordance with their normal
vesting schedules during the period commencing on the grant dates and
terminating on the expiration dates specified in Executive's Stock Option
Agreements (defined in Section 3.3.6(a) below).
3.3.2. WITHOUT CAUSE BY EMPLOYER; MATERIAL BREACH BY
EMPLOYER; ELECTION NOT TO RENEW BY EMPLOYER. In the event that the Employment
Term is terminated by Employer pursuant to Section 3.2.5 hereof or by Executive
pursuant to Section 3.2.6 hereof or Employer elects not to renew this Agreement
at any time pursuant to Section 3.1 hereof, Employer shall pay to Executive,
subject to Executive's continued compliance with the terms of Sections 4 and 5
hereof, an amount equal to the Severance Amount. For purposes hereof, "Severance
Amount" shall mean two (2) times the Base Salary in effect at such applicable
time. Any payments made in accordance with this Section 3.3.2 shall be made in
twelve (12) equal installments over the course of one (1) year from the Date of
Termination in accordance with Employer's regular payroll practices. Each of the
payments, to be made to Executive in accordance with the immediately preceding
sentence, shall be subject to Executive's compliance with Sections 4 and 5 of
this Agreement. Nothing in this Section 3.3.2 shall limit or restrict Employer
from pursuing or obtaining any other remedies which may be available to it in
law, contract or otherwise, in addition to the remedies set forth herein, in
response to any improper conduct of Executive, or conduct in violation of the
parties' agreements.
3.3.3 WITHOUT CAUSE BY EXECUTIVE; ELECTION NOT TO RENEW BY
EXECUTIVE. In the event that the Employment Term is terminated by Executive
pursuant to Section 3.2.2 hereof or Executive elects not to renew this Agreement
at any time pursuant to Section 3.1 hereof, Employer shall pay to Executive, in
a single lump-sum, an amount equal to any unpaid but earned Base Salary through
the Date of Termination.
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3.3.4. DEATH, DISABILITY. In the event that the Employment
Term is terminated by reason of Executive's death pursuant to Section 3.2.1
hereof or by Employer by reason of Executive's Disability pursuant to Section
3.2.3 hereof, Employer shall pay to Executive, subject to, in the case of
Disability, Executive's continued compliance with the terms of Sections 4 and 5
hereof, the Severance Amount, less any life insurance and/or disability
insurance benefits received by Executive or his estate pursuant to insurance
policies provided by Employer (including pursuant to Section 2.5.5 hereof),
payable in accordance with Section 3.3.2 hereof.
3.3.5. POST-EMPLOYMENT TERM BENEFITS. In the event Executive
is terminated pursuant to Sections 3.2.1 through 3.2.6 hereof, inclusive, or
either Employer or Executive elects not to renew this Agreement pursuant to
Section 3.1 hereof, Employer shall reimburse Executive for any unpaid expenses
pursuant to Section 2.5.1 hereof and if Executive is terminated pursuant to
Sections 3.2.3, 3.2.5 or 3.2.6 hereof or Employer elects not to renew this
Agreement pursuant to Section 3.1 hereof, Employer shall pay, on behalf of
Executive, for a period equal to twenty-four (24) months from the Date of
Termination (the "Benefits Period"), subject to Executive's continued compliance
with the terms of Sections 4 and 5 hereof, all life insurance, medical, health
and accident, and disability plans and programs in which Executive was entitled
to participate immediately prior to the Date of Termination; PROVIDED, that
Executive's continued participation is legally possible under the general terms
and provisions of such plans and programs; and PROVIDED, FURTHER, that in the
event Executive is entitled to equal or comparable benefits from a subsequent
employer during the Benefits Period, Employer's obligation with respect thereto
pursuant to this Section 3.3.5 shall end as of such date. In the event that
Executive's participation in any such plan or program is barred, Employer, at
its sole cost and expense, shall use its commercially reasonable efforts to
provide Executive with benefits substantially similar to those that Executive
was entitled to receive under such plans and programs for the remainder of the
Benefits Period.
3.3.6. STOCK OPTIONS.
(a) Subject to Section 3.3.6(b) hereof, notwithstanding
anything to the contrary contained in Executive's stock option agreements
(collectively, the "Stock Option Agreements"), which set forth the terms of all
stock options granted to Executive by Employer, all Existing Options, whether
vested or unvested, shall not be terminated for any reason and such options
shall continue to be exercisable in accordance with their normal vesting
schedules during the period commencing on the grant dates and terminating on the
expiration dates specified in Executive's Stock Option Agreements. For purposes
of clarity, subject only to Section 3.3.6(b) hereof, this Section 3.3.6(a) would
be applicable to Executive's Existing Options even if, for example, the
Employment Term were to be terminated by Employer for Cause (pursuant to Section
3.2.4 hereof) or by Executive without cause (pursuant to Section 3.2.2 hereof).
(b) If the Board determines, in good faith, that Executive
breached his obligations under Section 4 or 5 hereof, all unexercised stock
options (except for the Existing Options) granted by Employer to Executive,
whether vested or unvested, shall terminate immediately and be of no further
force or effect. The Existing Options shall not be terminated for any reason and
such options shall continue to be exercisable in accordance with their normal
vesting schedules during the period commencing on the grant dates and
terminating on the expiration dates specified in Executive's Stock Option
Agreements.
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(c) In the event the present Executive Chairman resigns or is
otherwise removed and a new Executive Chairman is selected that is not
acceptable to Executive at the time of the selection, and Executive terminates
the Employment Term as a result thereof, then Employer's Compensation and Stock
Option Committee shall consider whether to accelerate all of Executives unvested
stock options.
3.4. DEFINITIONS.
3.4.1. "NOTICE OF TERMINATION" DEFINED. "Notice of
Termination" means a written notice that indicates the specific termination
provision relied upon by Employer or Executive and, except in the case of
termination pursuant to Sections 3.2.1, 3.2.2 or 3.2.5 hereof, that sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employment Term under the termination provision so indicated.
3.4.2. "DATE OF TERMINATION" DEFINED. "Date of Termination"
means such date as the Employment Term expires if not renewed or terminated in
accordance with Sections 3.1 or 3.2 hereof.
4. PROTECTION OF CONFIDENTIAL INFORMATION AND TRADE SECRETS;
NON-COMPETITION; NO SOLICITATION.
4.1. "CONFIDENTIAL INFORMATION" DEFINED. "Confidential Information"
means any and all information (oral or written) relating to Employer or any
Subsidiary or any entity controlling, controlled by, or under common control
with Employer or any Subsidiary or any of their respective affiliates,
including, but not limited to, information relating to: technology, research,
test procedures and results; machinery and equipment; manufacturing processes;
financial information; products; identity and description of materials and
services used; purchasing; costs; pricing; customers and prospects; advertising,
promotion and marketing; and selling, servicing and information pertaining to
any governmental investigation, except such information which becomes public,
other than as a result of a breach of the provisions of Section 4.2 hereof.
Without limiting the foregoing, Confidential Information shall also include all
information related to products targeted for development by Employer, subjects
of research and development, projected launch dates, the United States Food and
Drug Administration ("FDA") protocols, projected dates for regulatory filings,
consumer studies, market research, clinical research, business plans, content of
the New Product Planning Committee meetings, planned expenditures, profit
margins, strategic evaluation plans and initiatives, and those commissioned by
Employer through outside vendors or consultants, such as IBM, Cap Gemini and
LEK, and the content of all business and strategic planning conducted with or
through Third Party Relationships (as defined in Section 4.4 hereof).
Executive's obligation not to disclose Confidential Information shall be as set
forth in Section 4.2 of this Agreement, and shall include but not be limited to
his obligation not to place himself in any business position in which use or
disclosure of Employer's confidences would be likely, expected or inevitable,
for his own benefit or the benefit of any other person or entity.
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4.2. EMPLOYER'S PROTECTIBLE INTEREST IN ITS CONFIDENTIAL INFORMATION.
Executive shall not at any time (other than as may be required or appropriate in
connection with the performance by him of his duties hereunder), directly or
indirectly, use, communicate, disclose or disseminate any Confidential
Information in any manner whatsoever (except as may be required under legal
process by subpoena or other court order). Executive acknowledges that he has
been employed by Employer in executive and chief executive capacities since
1998. Executive acknowledges that, in those fiduciary capacities, he has been
afforded unimpeded access to Employer's trade secrets, intellectual property,
business opportunities, confidences, business and strategic plans, methods of
operation, formulas and formulations, research and development programs, and all
other confidential, internal and proprietary information of Employer upon which
Employer's business is premised, and which Executive acknowledges is essential
for Employer's business success. Executive further acknowledges that such
Confidential Information includes and constitutes trade secrets and information
not readily available to the general public, which would not have been disclosed
to or learned of by Executive had he not been employed by Employer in executive
capacities and positions of trust. Executive acknowledges that the Confidential
Information is a protectible interest of Employer under applicable law.
4.3. INTELLECTUAL PROPERTY. Executive acknowledges that, as part of
Employer's confidences and trust reposed in him, he has been afforded unimpeded
access to Employer's Intellectual Property. As used herein "Intellectual
Property" shall mean and include all research and development, patent
applications, patent research and development strategies and planning, protocols
for design and approval of products, development plans for manufacturing, sites
and raw materials, and all other or related intellectual property of Employer or
generated on Employer's behalf or for its benefit with or through others.
Executive further acknowledges that all such Intellectual Property is valuable
property of Employer, not of Executive, and constitutes Confidential Information
and trade secrets in which Employer has a protectible interest under applicable
law.
4.4. BUSINESS RELATIONSHIPS WITH THIRD PARTIES. Executive
acknowledges that, in significant part, Employer conducts its business and
intends to conduct future business through business relationships with third
parties such as agents, contractors, vendors, business partners or affiliates,
or joint-venturers ("Third Parties") who, with Employer or on its behalf or for
its benefit, engage, inter alia, in research and development, patent strategy or
applications, manufacturing, distribution, or similar business enterprises
significant to Employer's business ("Third Party Relationships"). Executive
agrees that the work product and content of Employer's business plans,
relationships, financial arrangements, product development and business
confidences involved in the Third Party Relationships, and those planned for or
engaged in the future, are Confidential Information in which Employer has a
protectible interest under applicable law.
4.5. UNIQUE CHARACTER OF EXECUTIVE'S POSITION. Executive further
acknowledges that his duties for Employer in his executive capacities are and
were of a special, unique, extraordinary and intellectual character which placed
him in a position of trust and responsibility with Employer in relation to its
specialized business, including, without limitation, trust and responsibility
relating to conceptualization and/or implementation of Employer's marketing and
sales strategies, business relationships developed by Executive with the clients
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and potential clients of Employer, public and investor communications, strategic
plans, business targets, projects, partners, and product developments in the
unique aspects of the pharmaceutical and generic pharmaceutical business
conducted by Employer. Therefore, Executive acknowledges that each of the
restrictions set forth in Section 4.7 below are reasonable and necessary to
protect Employer from unfair competition by any party using or seeking to use
the Employer's Confidential Information and trade secrets, or using or seeking
to use Executive's unique skills and knowledge acquired with and for Employer,
or his position of trust with Employer, to Employer's disadvantage.
4.6. NATIONAL AND INTERNATIONAL SCOPE OF BUSINESS. Executive
acknowledges that Employer's business includes the manufacture, distribution
and/or sale of its products on its own behalf and through Third Party
Relationships, is nation-wide in scope among the fifty United States, and also
includes Israel and other locations or markets in which Employer has or is
developing a Market Presence (as defined in Section 4.7.1 hereof). Accordingly,
Executive acknowledges that the restrictions set forth in Sections 4.7 and 4.7.1
below are reasonable in their national and international scope and geographic
territory.
4.7. COVENANT NOT TO COMPETE. Executive agrees that, at all times
during his employment by Employer, and for a period of not less than one (1)
year following the Date of Termination (the "Non-competition Period"),
irrespective of the reason for the termination of the employment relationship,
Executive shall not, directly or indirectly, on his own behalf or for his own
benefit, or on behalf of or for the benefit of another (other than the
Employer), own, operate, manage, engage in, participate in, be employed by,
affiliate with, or provide material assistance to, contract for services for or
with, render advice or services to or otherwise assist in any capacity, directly
or indirectly (whether as an officer, director, partner, agent, investor,
consultant, contractor, employee, equityholder, lender, counselor, or otherwise)
any Competitive Enterprise, as defined in Section 4.7.1 below. Notwithstanding
the foregoing, so long as Executive refrains from participating in any of the
business affairs of a Competitive Enterprise that relate to a Competitive
Product (as defined in Section 4.7.1 below), Executive shall be able to provide
any other type of assistance to such Competitive Enterprise during the
Non-competition Period. In addition, this Section 4.7 shall not apply if
Executive's Employment Term is terminated (i) without cause by Employer pursuant
to Section 3.2.5 or (ii) upon Employer's material breach of this Agreement
pursuant to Section 3.2.6. Furthermore, nothing herein shall prevent Executive
from owning up to 2% of publicly traded securities in a Competitive Enterprise.
4.7.1. DEFINITION OF COMPETITIVE ENTERPRISE AND GEOGRAPHIC
TERRITORY COVERED. As used herein, the term "Competitive Enterprise" means and
includes any person, association, business, or entity: (a) that manufactures,
markets, licenses, distributes, contracts for the sale of, or sells (or causes
to be manufactured, marketed, licensed, distributed, contracted for or sold
through others) any product that competes with, or is developing any product
that is intended to compete with (i) any product manufactured, marketed,
distributed, licensed, contracted for sale or sold by Employer or through its
Third Party Relationships, or (ii) any product which the Employer has developed,
targeted for development, or is developing for manufacture, marketing, license,
distribution, contract, or sale and which is projected to reach the wholesale or
retail market within five (5) years of the date of this Agreement (each, a
"Competitive Product"); or (b) that obtains finished goods, source materials, or
research and development (i) from any source or supplier with whom Employer
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regularly does business ("Employer Source"), or (ii) to formulate any
Competitive Product. The geographic territory covered by the term "Competitive
Enterprises" includes any such person, association, business or entity (a) doing
business in the United States or in Israel or any other location or market in
which Employer has a Market Presence (defined as more than DE MINIMUS gross
revenue as to any product line or business of Employer as of the Date of
Termination), whether or not through a Third Party Relationship, or (b)
obtaining finished goods, source materials, or resources and development for a
Competitive Product in any location or market in which Employer does so, or from
any Employer Source, wherever located; and includes any person, association,
business or entity, (c) outside the United States or Israel which manufactures,
markets, licenses, contracts for, distributes or sells (or causes to be
manufactured, marketed, licensed, contracted for, distributed or sold through
others) any Competitive Product, or engages in the development of any
Competitive Product intended to be manufactured, distributed, licensed,
contracted for or sold in the United States, Israel or any other location or
market in which Employer has a Market Presence.
4.8. COVENANT NOT TO SOLICIT SUPPLIERS AND OTHERS. Executive shall
not, while employed by Employer and for a period of one (1) year following the
Date of Termination, directly or indirectly solicit or divert (or seek to
divert) or entice away, for the benefit of Executive or any other person or
entity, or cause (or attempt to cause) or persuade in any manner to cease doing
business with Employer or reduce its level of business with Employer, any Third
Party Relationship, client, supplier, vendor, contractor, business partner,
licensee, licensor, agent or investor, or supplier of source materials or
finished goods, product lines or research, who was doing business with Employer
at any time within twelve (12) months prior to the Date of Termination, or who
was actively engaged in discussions in contemplation of any such business
relationship during such period. During the above-referenced one- (1) year
period, Executive may not accept business from any of the above-referenced
entities where doing so would have the effect of diverting Employer's existing
business, or would have the effect of reducing its existing level of business
with such entities.
4.9. COVENANT NOT TO HIRE OR SOLICIT EMPLOYEES. Except with the
express written permission of Employer, Executive shall not, while employed by
Employer and for a period of two (2) years following the Date of Termination,
directly or indirectly hire, retain or engage, or offer to hire, retain or
engage, or solicit for employment or other retention or engagement of services,
or otherwise induce to leave Employer, for the benefit of Executive or any other
person or entity, any employee, consultant or contractor who is then employed by
or engaged by Employer or was so employed or engaged as of the Date of
Termination.
4.10. TOLLING DURING PERIODS OF VIOLATION. The parties agree that, in
the event Executive violates any of the provisions of Sections 4.7, 4.8 or 4.9
hereof during the time periods of restriction set forth respectively therein,
any such period of restriction shall be tolled for the duration of such
violation, and the applicable period of restriction shall not expire, and shall
be extended for a period of time commensurate with the duration of the
violation.
4.11. GOODWILL. Executive acknowledges that, through and solely as a
result of his employment by Employer, he has acquired a continuing equity stake
in the Employer's business in the form of substantial and valuable stock options
granted by Employer, portions of which grants have been exercised by Executive
10
to his significant economic advantage. Accordingly, solely for purposes of
enforcement of the covenants contained in this Section 4, Executive agrees to be
deemed and regarded under applicable legal precedent as if he were in the same
position as a seller of a business interest and goodwill appurtenant thereto.
4.12. APPLICATION IRRESPECTIVE OF REASON FOR TERMINATION OF
EMPLOYMENT. In light of the acknowledgements set forth in this Section 4, the
parties agree that the provisions of this Section 4 shall apply in the event of
Executive's termination from employment, whether by Employer or Executive,
whether for Cause or without Cause, or for any other reason or asserted reasons.
4.13. EMPLOYER DEFINED. For purposes of Section 4 hereof, "Employer"
shall mean and include Employer, Par, FineTech Laboratories Ltd., and any parent
corporations, affiliates, subsidiaries and joint ventures.
4.14. PROPERTY RIGHTS; ASSIGNMENT OF INVENTIONS. With respect to
information, inventions and discoveries or any interest in any copyright and/or
other property right developed, made or conceived of by Executive, either alone
or with others, at any time during his employment by Employer and whether or not
within working hours, arising out of such employment or pertinent to any field
of business or research in which, during such employment, Employer is engaged or
(if such is known to or ascertainable by Executive) is considering engaging,
Executive hereby agrees:
(a) that all such information, inventions and discoveries or
any interest in any copyright and/or other property right, whether or not
patented or patentable, shall be and remain the exclusive property of Employer;
(b) to disclose promptly to an authorized representative of
Employer all such information, inventions and discoveries or any copyright
and/or other property right and all information in Executive's possession as to
possible applications and uses thereof;
(c) not to file any patent application relating to any such
invention or discovery except with the prior written consent of an authorized
officer of Employer (other than Executive);
(d) that Executive hereby waives and releases any and all
rights Executive may have in and to such information, inventions and
discoveries, and hereby assigns to Employer and/or its nominees all of
Executive's right, title and interest in them, and all Executive's right, title
and interest in any patent, patent application, copyright or other property
right based thereon. Executive hereby irrevocably designates and appoints
Employer and each of its duly authorized officers and agents as his agent and
attorney-in-fact to act for him and on his behalf and in his stead to execute
and file any document and to do all other lawfully permitted acts to further the
prosecution, issuance and enforcement of any such patent, patent application,
copyright or other property right with the same force and effect as if executed
and delivered by Executive; and
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(e) at the request of Employer, and without expense to
Executive, to execute such documents and perform such other acts as Employer
deems necessary or appropriate, for Employer to obtain patents on such
inventions in a jurisdiction or jurisdictions designated by Employer, and to
assign to Employer or its designee such inventions and any and all patent
applications and patents relating thereto.
5. CONTINUED COOPERATION; RETURN OF DOCUMENTS AND PROPERTY; INJUNCTIVE
RELIEF; NON-EXCLUSIVITY AND SURVIVAL.
5.1. CONTINUED COOPERATION. Executive shall, during and after the
conclusion of his employment relationship for any reason, cooperate fully with
Employer with respect to any internal or external agency or legal investigation
(whether conducted by the FDA, SEC, or otherwise), lawsuits, financial reports,
or with respect to other matters within his knowledge, responsibilities or
purview. Employer will pay a reasonable per diem for post-termination services
rendered by Executive in compliance herewith, based on Executive's Base Salary
(in effect at such applicable time) and time reasonably expended by him.
Executive shall execute all lawful documents reasonably necessary for Employer
to secure or maintain its Intellectual Property, Confidential Information, or
other business requirements.
5.2. RETURN OF DOCUMENTS AND PROPERTY. Executive shall, upon the
conclusion of the employment relationship for any reason, participate in an exit
interview, and shall deliver promptly to Employer all documents, records, files,
customer or client materials, computer files or discs, and Confidential
Information fixed in any tangible medium of expression, together with all
computers and harddrives, employee identification cards, Employer credit cards,
keys, and any other physical property of Employer.
5.3. INJUNCTIVE RELIEF. The parties hereby acknowledge and agree that
(a) Employer will be irreparably injured in the event of a breach by Executive
of any of his obligations under Sections 4 and 5 hereof; (b) monetary damages
will not be an adequate remedy for any such breach; (c) Employer will be
entitled to injunctive relief, in addition to any other remedy which it may
have, in the event of any such breach; and (d) the existence of any claims that
Executive may have against Employer, whether under this Agreement or otherwise,
will not be a defense to the enforcement by Employer of any of its rights under
Sections 4 and 5 hereof. All of the parties' covenants and Employer's rights to
specific enforcement, injunctive relief, and other remedies as set forth herein
shall apply in the event of any breach or threatened breach by Executive of any
of the provisions of Sections 4 and 5 hereof, without the requirement of posting
a bond or other security in connection with any such application for specific
performance or injunctive relief, which is hereby waived. The parties further
agree that any action concerning alleged breach of Sections 4 and 5 hereof shall
not be brought or addressed in arbitration, and the existence of any demand for
arbitration or pendency of any dispute in arbitration under this Agreement shall
not be a basis to delay or defer adjudication by a court of any demand for
specific performance, injunctive relief, or other remedies in relation to any
alleged breach of Sections 4 and 5 hereof.
5.4. NON-EXCLUSIVITY AND SURVIVAL. The covenants of Executive
contained in Sections 4 and 5 hereof are in addition to, and not in lieu of, any
obligations that Executive may have with respect to the subject matter hereof,
whether by contract, as a matter of law or otherwise, and such covenants and
12
their enforceability shall survive any termination of the Employment Term by
either party and any investigation made with respect to the breach thereof by
Employer at any time.
6. MISCELLANEOUS PROVISIONS.
6.1. SEVERABILITY. If, in any jurisdiction, any term or provision
hereof is determined to be invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired; (b) any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction; and (c) the invalid or
unenforceable term or provision shall, for purposes of such jurisdiction, be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
6.2. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the two parties hereto in separate counterparts,
each of which shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement (and all signatures need not appear
on any one counterpart), and this Agreement shall become effective when one or
more counterparts has been signed by each of the parties hereto and delivered to
each of the other parties hereto.
6.3. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given upon receipt when
delivered by hand, overnight delivery or facsimile (with confirmed delivery), or
three (3) business days after posting, when delivered by registered or certified
mail or private courier service, postage prepaid, return receipt requested, as
follows:
If to Employer, to:
Pharmaceutical Resources, Inc.
000 Xxxx Xxxxxxxxx
Xxxxxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. X'Xxxxxx, Vice President - Finance and
Administration
Telecopy No.: (000) 000-0000
E-mail: xxxxxxxx@xxxxxxxx.xxx
Copy to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
E-mail: xxxxxxxxxxx@xx.xxx
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If to Executive, to:
Xxxxx X. Xxxxxxx
c/o Pharmaceutical Resources, Inc.
000 Xxxx Xxxxxxxxx
Xxxxxxxxx Xxxx, Xxx Xxxxxx 00000
or to such other address(es) as a party hereto shall have designated by like
notice to the other parties hereto.
6.4. AMENDMENT. No provision of this Agreement may be modified,
amended, waived or discharged in any manner except by a written instrument
executed by both Employer and Executive.
6.5. ENTIRE AGREEMENT. This Agreement and, with respect to Section
3.3.6 hereof, Executive's Stock Option Agreements and the governing stock option
plans constitute the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings of
the parties hereto, oral or written, including, but not limited to, the Existing
Employment Agreement and that certain Trade Secret, Non-Disclosure and
Restrictive Covenant Agreement, dated as of October 19, 1999 (the "Restrictive
Covenant Agreement"), with respect to the subject matter hereof. Executive and
Employer hereby agree that each of the Existing Employment Agreement and the
Restrictive Covenant Agreement is hereby superseded and of no further force and
effect, and that this Agreement shall be effective as of the date hereof. In the
event of any conflict between Section 3.3.6 hereof and Executive's Stock Option
Agreements, Section 3.3.6 shall govern. Employer and Executive shall execute and
deliver all such further documents as may be necessary to carry out the intent
of the preceding sentence.
6.6. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey applicable to
contracts made and to be wholly performed therein.
6.7. HEADINGS. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
6.8. BINDING EFFECT; SUCCESSORS AND ASSIGNS. Executive may not
delegate any of his duties or assign his rights hereunder. This Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective heirs, legal representatives and beneficiaries, successors and
permitted assigns. Employer shall require any successor (whether direct or
indirect and whether by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Employer, by an agreement in
form and substance reasonably satisfactory to Executive, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
Employer would be required to perform if no such succession had taken place.
6.9. WAIVER, ETC. The failure of either of the parties hereto to at
any time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
14
validity of this Agreement or any provision hereof or the right of either of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No waiver of any breach of any of the provisions of this Agreement shall be
construed or deemed to be a waiver of any other or subsequent breach.
6.10. CAPACITY, ETC. Each of Executive and Employer hereby represents
and warrants to the other that, as the case may be: (a) he or it has full power,
authority and capacity to execute and deliver this Agreement, and to perform his
or its obligations hereunder; (b) such execution, delivery and performance shall
not (and with the giving of notice or lapse of time or both would not) result in
the breach of any agreements or other obligations to which he or it is a party
or he or it is otherwise bound or violate the law; and (c) this Agreement is his
or its valid and binding obligation enforceable in accordance with its terms.
6.11. ENFORCEMENT; JURISDICTION. If any party institutes legal action
to enforce or interpret the terms and conditions of this Agreement, the
prevailing party shall be awarded reasonable attorneys' fees at all trial and
appellate levels, and the expenses and costs incurred by such prevailing party
in connection therewith. Subject to Section 6.12 hereof, any legal action, suit
or proceeding, in equity or at law, arising out of or relating to this Agreement
shall be instituted exclusively in the State or Federal courts located in the
State and County of New York and each party agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, suit or proceeding, any
claim that such party is not subject personally to the jurisdiction of any such
court, that the action, suit or proceeding is brought in an inconvenient forum,
that the venue of the action, suit or proceeding is improper or should be
transferred, or that this Agreement or the subject matter hereof may not be
enforced in or by any such court. Each party further irrevocably submits to the
jurisdiction of any such court in any such action, suit or proceeding. Any and
all service of process and any other notice in any such action, suit or
proceeding shall be effective against any party if given personally or by
registered or certified mail, return receipt requested or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such party as
herein provided. Nothing herein contained shall be deemed to affect or limit the
right of any party to serve process in any other manner permitted by applicable
law.
6.12. ARBITRATION.
(a) Any dispute under Section 3 hereof, including, but not
limited to, the determination by the Board of a termination for Cause pursuant
to Section 3.2.4 hereof, or in respect of the breach thereof shall be settled by
arbitration in the Borough of Manhattan, City of New York. The arbitration shall
be accomplished in the following manner. Either party may serve upon the other
party written demand that the dispute, specifying the nature thereof, shall be
submitted to arbitration. Within ten (10) days after such demand is given in
accordance with Section 6.3 hereof, each of the parties shall designate an
arbitrator and provide written notice of such appointment upon the other party.
If either party fails within the specified time to appoint such arbitrator, the
other party shall be entitled to appoint both arbitrators. The two (2)
arbitrators so appointed shall appoint a third arbitrator. If the two
arbitrators appointed fail to agree upon a third arbitrator within ten (10) days
after their appointment, then an application may be made by either party hereto,
upon written notice to the other party, to the American Arbitration Association
(the "AAA"), or any successor thereto, or if the AAA or its successor fails to
15
appoint a third arbitrator within ten (10) days after such request, then either
party may apply, with written notice to the other, to the Supreme Court of the
State of New York, New York County, for the appointment of a third arbitrator,
and any such appointment so made shall be binding upon both parties hereto.
(b) The decision of the arbitrators shall be final and binding
upon the parties. The party against whom the award is rendered (the
"non-prevailing party") shall pay all fees and expenses incurred by the
prevailing party in connection with the arbitration (including fees and
disbursements of the prevailing party's counsel), as well as the expenses of the
arbitration proceeding. The arbitrators shall determine in their decision and
award which of the parties is the prevailing party, which is the non-prevailing
party, the amount of the fees and expenses of the prevailing party and the
amount of the arbitration expenses. The arbitration shall be conducted, to the
extent consistent with this Section 6.12, in accordance with the then prevailing
rules of commercial arbitration of the AAA or its successor. The arbitrators
shall have the right to retain and consult experts and competent authorities
skilled in the matters under arbitration, but all consultations shall be made in
the presence of both parties, who shall have the full right to cross-examine the
experts and authorities. The arbitrators shall render their award, upon the
concurrence of at least two of their number, not later than thirty (30) days
after the appointment of the third arbitrator. The decision and award shall be
in writing, and counterpart copies shall be delivered to each of the parties. In
rendering an award, the arbitrators shall have no power to modify any of the
provisions of this Agreement, and the jurisdiction of the arbitrators is
expressly limited accordingly. Judgment may be entered on the award of the
arbitrators and may be enforced in any court of competent jurisdiction.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
PHARMACEUTICAL RESOURCES, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman of the Compensation and
Stock Option Committee
/s/ Xxxxx X. Xxxxxxx
---------------------------------------------
Xxxxx X. Xxxxxxx
17
