Employment Agreement between
Xxxx Xxxxxxx ("Executive") and
IGI, Inc. ("Corporation")
1. Position: Executive is to serve as President and Chief Operating Officer of
corporation. Executive will also be nominated, as a director of the
Corporation at the earliest time in the future deemed appropriate by the
Board of Directors. Upon the retirement of the current Chief Executive
Officer of the Corporation, Executive will be the principal candidate for
the position of Chief Executive Officer.
2. Term: The Initial term of this agreement is one year, commencing May 1,
1998, (the "effective date") and continuing through April 30, 1999 and,
unless either party gives written notice to the other on or before February
28, 1999 or February 29, 2000 that the term will not be extended, the term
will be extended automatically through April 30, 2000 and April 30, 2001,
respectively.
3. Base Salary: Executive's Initial base salary will be $200,000 per year,
with review for possible merit increases, not less than annually, and with
no reduction permitted.
4. Cash Bonuses:
(a) Executive will receive bonuses at the end of 1998 and 1999 in amounts
equal to 20% of the base salary for each year with no reduction
permitted.
(b) Executive will receive additional annual performance bonuses for 1998
and each subsequent year based upon the terms of the Corporation' s
annual management performance bonus plan, which is to contain
reasonable terms developed promptly by the Compensation Committee of
the Corporation in consultation with Executive.
Group/Executive Benefits: Executive and his family may participate on terms
no less favorable to Executive than the terms provided to other senior
executives of the Corporation, (with all waiting periods waived) in any
group and/or executive life, hospitalization or disability insurance plan,
health program, pension, profit sharing, ESOP, 401(k) and similar benefit
plans (qualified, non-qualified and supplemental) or other fringe benefits
of the Corporation, including not more than four weeks of vacation
annually, and a monthly vehicle allowance.
The company will pay all healthcare premiums for the Executive and his
immediate family.
5. Equity Based Incentive Compensation:
(a) Executive is to receive as of the Effective Date, a grant of a
ten-year option to purchase 100,000 shares of the Corporation which
shall vest on the date which is six months after the Effective Date;
and, an additional option for 100,000 shares which shall be made on
January 5, 1999 and which shall vest on the first anniversary of the
Effective Date. The exercise price for the shares will be $2.00 per
share.
(b) Executive will receive additional option grants (and perhaps other
equity awards) in subsequent years consistent with the Corporation's
then-current policies and practices (which policies and practices will
be developed promptly by the Compensation Committee of the Corporation
in consultation with Executive which approval will not be withheld
unreasonably).
(c) All equity-based awards will fully vest upon a Change of Control (as
defined in paragraph 11, below).
6. Automobile Allowance: Executive shall receive an automobile allowance in
the amount of $600.00 per month.
7. Relocation:
(a) The Corporation will pay all reasonable temporary living expenses for
Executive in a location near the headquarters of the Corporation. If
Executive elects to relocate his family's residence to be closer to
the headquarters of the Corporation, the Corporation will pay up to
$50,000 to cover all reasonable costs of such relocation
8. Termination: Employment under the agreement may be terminated:
(a) By Executive's death or disability,
(b) By the Corporation, upon written notice to Executive if for Cause (as
described in paragraph 9, below), or by giving at least 15 days'
written notice to Executive if not for Cause, or
(c) By Executive, with or without Good Reason (as described in paragraph
10, below), without liability to the Corporation, by giving at least
15 days' written notice to the Corporation.
9. Cause for Termination by the Corporation: "Cause" for the Corporation to
terminate Executive's employment shall mean:
(a) Executive's commission of an act materially and demonstrably
detrimental to the interests (including the goodwill) of the
Corporation or any of its subsidiaries, including violation of any
statutory or regulatory requirements applicable to the business of the
Corporation or any of its subsidiaries, which act constitutes willful
misconduct by Executive in the performance of his material duties to
the Corporation or any of its subsidiaries, or
(b) Executive's commission of any material act of dishonesty or breach of
trust resulting or intended to result in material personal gain or
enrichment of Executive at the expense of the Corporation or any of
its subsidiaries, or
(c) Executive's conviction of a felony involving moral turpitude, but
specifically excluding any conviction based entirely on vicarious
liability.
No act or failure to act will be considered "willful" unless it is done, or
omitted to be done, by Executive in bad faith or without reasonable belief that
his action or omission was in the best interests of the Corporation.
10. Good Reason for Termination by Executive: "Good Reason" for Executive to
terminate his employment shall mean:
(a) The failure to re-elect Executive as President and Chief Operating
Officer, or as a member of the Board of Directors as provided in
paragraph 1.
(b) Assignment of duties inconsistent with Executive's position,
authority, duties or responsibilities, or any other action by the
Corporation which results in a substantial diminution of such
position, authority, duties or responsibilities, including any such
diminution resulting from a sale or other disposition of a substantial
portion of the assets of the corporation,
(c) Any substantial breach by the Corporation of any of the provisions of
Executive's employment agreement, or
(d) The Corporation giving notice to Executive that the term will not be
extended beyond April 30, 1999 or April 30, 2000 respectively.
In addition, termination by Executive for any reason during the 60-day
period immediately after a Change of Control shall be deemed to be a
termination for Good Reason.
11. Change of Control: A "Change of Control" will be deemed to have occurred
if:
(a) Any "person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), excluding for
this purpose the Corporation or any subsidiary of the Corporation, or
any employee benefit plan of the Corporation or any subsidiary of the
Corporation, or any person or entity organized, appointed or
established by the Corporation for or pursuant to the terms of such
plan which acquires beneficial ownership of voting securities of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly of securities of
the Corporation representing thirty-five percent (35%) or more of the
combined voting power of the Corporation's then outstanding
securities; provided, however, that no Change of Control will be
deemed to have occurred as a result of a change in ownership
percentage resulting solely from an acquisition of securities by the
Corporation; and provided further that no Change of Control will be
deemed to have occurred if a person inadvertently acquires an
ownership interest of 35% or more but then promptly reduces that
ownership interest below 35%;
(b) During any period of two (2) consecutive years (not including any
period prior to the execution of this Agreement), individuals who at
the beginning of such two-year period constitute the Board of
Directors of the Corporation and no new director(s) (except for a
director designated by a person who has entered into an agreement with
the Corporation to effect a transaction described elsewhere in this
paragraph 11) whose election by the Board or nomination for election
by the Corporation's shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously approved, cease for any reason
to constitute at least a majority thereof; or
(c) The shareholders of the Corporation approve a plan of complete
liquidation of the Corporation, an agreement for the sale of
disposition of the Corporation or all or substantially all of the
Corporation's assets, or a plan of merger or consolidation of the
Corporation with any other corporation, except for a merger or
consolidation in which the security owners of the Corporation
immediately prior to the merger or consolidation continue to own at
least sixty-five percent (65%) of the voting securities of the new (or
continued) entity immediately after such merger or consolidation.
12. Benefits Upon Termination of Employment:
(a) If Executive's employment is terminated by death, disability,
discharge by the Corporation for Cause, or resignation by Executive
without Good Reason, Executive will be entitled to receive his base
salary through the date of termination, any bonus or incentive or
deferred compensation accrued as of the date of termination, and all
other benefits which have accrued as of the date of termination.
(b) If Executive's employment is terminated by death or disability,
Executive will be entitled to receive, in addition to the compensation
and benefits described in paragraph (a), above, the following
benefits:
(i) Immediate full vesting of all of Executive's otherwise unvested
options to purchase shares of the Corporation, which options will
be exercisable for a period of at least 2 years after the date of
termination of employment, and
(ii) Immediate vesting of all other equity or incentive compensation
awards to Executive, which are not otherwise vested.
(c) If, prior to May 1, 1999, Executive's employment is terminated by the
Corporation other than for Cause of disability or is terminated by
Executive for Good Reason, Executive will be entitled to receive, in
addition to the compensation and benefits described in paragraphs (a)
and (b), above, the following severance benefits:
(i) Payment in a lump sum of an amount equal to Executive's twelve
months Base Salary as in effect prior to the termination,
(ii) Payment in a lump sum of the pro rata portion of Executive's Base
Salary, guaranteed Cash Bonus, and target annual performance
bonus as defined in sections 4(a) and 4(b) for the year of
termination; and,
(iii) Payment in a lump sum of an amount equal to Executive's target
annual performance bonus for the year of termination,
(iv) Continuation, for a period of twelve months after the date of
termination , of Benefits and senior executive perquisites,
including automobile allowance, at least equal to those which
would have been provided if Executive's employment had continued
for that time, including auto allowance and
(v) Outplacement services, at the expense of the Corporation, from a
provider reasonably selected by Executive.
Provided, however if Executive's employment is terminated after April 30,
1999 by the Corporation other than for Cause disability or by Executive for
Good Reason, the compensation and benefits described above will be modified
in that the lump sum payments for base salary and bonuses will be one and
one half times the respective amounts described in subparagraphs (i) and
(iii), above, and the Benefits and perquisites described in subparagraph
(iv), above, will be continued for a period of eighteen months.
(d) If any Change of Control severance agreement between the Corporation
and any other senior executive of the Corporation provides for any
additional type of compensation or benefit, or a higher level of a
particular type of compensation or benefit, compared to the
compensation and benefits otherwise provided for Executive by his
employment agreement in the event of the termination of Executive's
employment after a Change of Control, Executive will also receive that
additional type of, or higher level of, severance compensation or
benefit.
13. No Duty to Mitigate: Any severance benefits payable to Executive will not
be subject to reduction for any compensation received from other
employment.
14. Gross-Up Payment for Golden Parachute Taxes: If it is determined that any
payment by the Corporation to or for the benefit of Executive, under his
employment agreement otherwise, would be subject to the federal excise
taxes imposed on golden parachute payments, the Corporation will make an
additional payment to Executive (the "Gross-Up Payment") in an amount
sufficient to cover (a) any golden parachute excise tax payable by
Executive, (b) all taxes on the Gross-Up Payment, and (c) all interest
and/or penalties imposed with respect to such taxes.
15. Fees and Expenses:
The Corporation will pay all reasonable legal, accounting and other
professional fees and related expenses incurred by Executive in connection
with the negotiation and preparation of his employment agreement with the
Corporation, up to $2500.00
16. Indemnification: To the full extent permitted by law, and by the bylaws of
the Corporation, the Corporation will indemnify Executive (including the
advancement of expenses) for any judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, incurred by
Executive in connection with the defense of any lawsuit or other claim to
which he is made a party by reason of being an officer, director or
employee of the Corporation or any of its subsidiaries. The Corporation
will maintain reasonable director and officer liability insurance coverage
for all acts or omissions of Executive during his employment with the
Corporation.
17. Binding of Successors: The Corporation will be required to have any
successor to all or substantially all of its business and/or assets
expressly assume and agree to perform Executive's employment agreement in
the same manner and to the same extent that the Corporation would be
required to perform if no such succession had taken place.
18. Completeness of Disclosure: The Corporation represents and warrants that it
has disclosed to Executive, prior to entering into his employment
agreement, all material facts regarding the financial condition of the
Corporation and the future conduct of business by the Corporation.
/s/ Xxxxxx X. Xxxxx 4/6/99
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IGI Inc. Date
/s/ Xxxx Xxxxxxx 4/6/99
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Executive Date
