FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.5
FIRST
AMENDMENT TO
This
FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (the “First Amendment”), is
entered into as of September 28, 2007, by and between POZEN Inc. (the “Company”)
and Xxxxxxx X. Xxxxxx (“Executive”).
WITNESSETH:
WHEREAS,
the Company and Executive entered into that certain Executive Employment
Agreement dated August 3, 2004 (the “Original Agreement”); and
WHEREAS,
the Company and Executive desire to amend certain terms of the Original
Agreement, as set forth below, in order to facilitate compliance with Section
409A of the Internal Revenue Code of 1986, as amended.
NOW,
THEREFORE, in consideration of the foregoing and the provisions and mutual
promises herein contained and other good and valuable consideration, the parties
hereby agree as follows:
1. All
capitalized terms that are not defined herein shall have the meanings ascribed
to such terms in the Original Agreement.
2. Section
4(b) of the Original Agreement is hereby amended and restated in its entirety
as
follows:
“(b) Bonus. Executive
shall be eligible to receive an annual cash incentive bonus of up to forty
percent (40%) of Executive’s annual base salary as may be set by the Committee
by March 31 of each year. The determination of the actual bonus
earned, if any, shall be at the sole discretion of the Committee and shall
be
based upon the Committee’s assessment of Executive’s performance and the
achievement of certain objectives which shall be set by the Committee from
time
to time. Executive’s performance shall be evaluated by the Committee on an
annual basis, and the Committee shall adjust Executive’s salary in its sole
discretion. Nothing in this section shall be construed as
guaranteeing Executive a bonus in any amount. If an annual bonus is
awarded, it shall be paid in the year following the year in which such bonus
was
earned, on or before March 15 of such following year.”
3. Section
5(c) of the Original Agreement is hereby amended and restated in its entirety
as
follows:
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“(c) Obligations
upon Certain Terminations. Upon voluntary termination of this
Agreement, or termination of Executive’s employment by the Company for Cause (as
defined above) or upon Executive’s death or disability, or termination by
Executive for other than Good Reason (as defined below), the Company shall
have
no further obligations hereunder other than the payment of all compensation
and
other benefits payable to Executive through the date of such
termination. Such amounts shall be paid on the Company’s next
regularly scheduled payroll date unless any such amount is not then calculable,
in which case payment of such amount shall be made on the first regularly
scheduled payroll date after the amount is calculable but no later than March
15
of the year following the year in which the Executive’s employment
terminated.”
4. Section
5(d) of the Original Agreement is amended and restated in its entirety as
follows:
“(d) Severance.
(i) In
the event of termination of Executive’s employment (A) by the Company for
reasons other than Cause or Executive’s death or disability, or (B) by Executive
for Good Reason, and provided Executive executes and does not revoke a Release
and Settlement Agreement (the “Release”) in a form acceptable to the
Company, Executive shall receive a severance benefit, subject to any applicable
taxes and withholdings, in an amount equal to one (1) year’s base salary (the
“Salary Benefit”) plus the average annual bonus awarded Executive over the
previous two (2) years (the “Bonus”, and, together with the Salary Benefit, the
“Severance Benefit”). Subject to Section 5(d)(ii) below, the Company shall pay
the Salary Benefit, in monthly installments, on the fifth business day of each
month commencing with the second month following the month in which Executive’s
termination of employment occurred. The Company shall pay the Bonus in a lump
sum payment within ninety (90) days of the date of termination of Executive’s
employment (the “Termination Date”), but in no event later than March 15 of the
year following the year in which such termination of employment occurred, or
in
the event of termination pursuant to Section 5(e)(iv), no later than March
15 of
the year following the year in which the Change of Control
occurred. Executive shall also continue to be entitled to receive all
Company nontaxable health and other nontaxable employee benefits to which
Executive was entitled as of the Termination Date, subject to the terms of
all
applicable benefit plans and to the extent such benefits can be provided to
non-employees (or to the extent such benefits cannot be provided to
non-employees, then the amount the Company was paying for those benefits
immediately prior to the Termination Date), at the same average level and on
the
same terms and conditions which applied immediately prior to the Termination
Date, for the shorter of (i) one year following the Termination Date or (ii)
until Executive obtains comparable coverage from another employer (the
“Continuing Benefits”).
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(ii) Notwithstanding
the foregoing, if Executive is on the termination date a “specified employee”
(as defined in Section 409A of the Internal Revenue Code, as amended (the
“Code”), and the regulations promulgated under such Section 409A (“Code Section
409A”) and as determined in accordance with the permissible method then in use
by the Company, or, if none, in accordance with the applicable default
provisions of Code Section 409A, relating to “specified employees”), then if and
to the extent required in order to avoid the imposition on Executive of any
excise tax under Code Section 409A, the payment of any Severance Benefit,
Continuing Benefits or other payments under this Section 5 shall not commence
until, and shall be made on, the first business day after the date that is
six
(6) months following the Termination Date, and in such event the initial payment
shall include a catch-up amount covering amounts that would otherwise have
been
paid during the six-month period following the Termination Date.”
5. Section
5(f) of the Original Agreement is hereby amended and restated in its entirety
as
follows:
“(f) Tax
Gross-Up for Parachute Payments.
(A) If
at any time or from time to time it shall be determined that any payment to
Executive pursuant to this Agreement or any other payment or benefit hereunder
or under any other plan or agreement or otherwise (“Potential Parachute
Payment”) would constitute an “excess parachute payment” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and
thus would be subject to the excise tax imposed by Section 4999 of the Code,
or
any similar tax payable under any United States federal, state, local, foreign
or other law (“Excise Tax”), then Executive shall receive and the Company shall
pay or cause to be paid a Tax Gross-Up Payment with respect to all Taxes as
defined below. The Tax Gross-Up Payment is intended to compensate
Executive for all such excise taxes and federal, state, local, foreign or other
income, employment or excise taxes or other taxes (“Taxes”) payable by Executive
with respect to the Tax Gross-Up Payment and shall be in an amount such that
after payment of Taxes on such amount there remains a balance sufficient to
pay
the taxes being reimbursed. For purposes of determining the amount of
the Tax Gross-Up Payment, Executive shall be deemed to pay federal income tax
and employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Tax Gross-Up Payment
is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of Executive’s residence (or, if greater, the
state and locality in which Executive is required to file a nonresident income
tax return with respect to the Potential Parachute Payment), net of the maximum
reduction in federal income taxes that may be obtained from the deduction of
such state and local taxes.
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(B) The
determinations to be made under this Section 5(f) shall be made by the Company’s
independent public accountants (the “Accounting Firm”), which firm shall provide
its determinations and any supporting calculations both to the Company and
to
Executive. Any such determination by the Accounting Firm shall be
binding upon the Company and Executive. All fees and expenses of the
Accounting Firm in performing the determinations referred to in this Section
5(f) shall be borne solely by the Company, and the Company shall indemnify
and
hold harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting therefrom, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting
Firm.
(C) Any
Tax Gross-Up Payment, as determined pursuant to this Section 5(f), shall be
paid
by the Company to Executive as and when the Excise Tax is incurred on a
Potential Parachute Payment, or at such later date as mutually agreed by the
parties hereto, but in no event later than the end of Executive’s taxable year
next following the taxable year in which Executive remits the applicable Excise
Tax to the IRS and any applicable state taxing authorities. The Tax Gross-Up
Payment shall be paid in accordance with Code Section 409A, to the extent
applicable, including, to the extent applicable, subject to and in compliance
with Section 5(d)(ii).”
6. Section
5(h) of the Original Agreement is hereby amended and restated in its entirety
as
follows:
“(h) Change
of Control. For purposes of this Agreement, a “Change of Control”
shall be deemed to have occurred:
(i) If
any person (as such term is used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company
or any trustee or fiduciary holding securities under an employee benefit plan
of
the Company) becomes a beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 50% of the voting power of the then outstanding securities of the
Company; provided that a Change of Control shall not be deemed to occur as
a
result of a transaction in which the Company becomes a subsidiary of another
corporation and in which the stockholders of the Company, immediately prior
to
the transaction, will beneficially own, immediately after the transaction,
shares entitling such stockholders to more than 50% of all votes to which all
stockholders of the parent corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote); or
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(ii) Upon
the consummation of (A) a merger or consolidation of the Company with another
corporation where the stockholders of the Company, immediately prior to the
merger or consolidation, will not beneficially own, immediately after the merger
or consolidation, shares entitling such stockholders to more than 50% of all
votes to which all stockholders of the surviving corporation would be entitled
in the election of directors (without consideration of the rights of any class
of stock to elect directors by a separate class vote), or (B) a sale or other
disposition of all or substantially all of the assets of the
Company.”
7. Except
as
herein amended, the terms and provisions of the Original Agreement shall remain
in full force and effect as originally executed.
8. This
First Amendment shall be governed by and construed and enforced in accordance
with the laws of the State of North Carolina, without reference to the choice
of
law provisions of such laws.
9. This
First Amendment may be executed in any number of counterparts, each of which
shall constitute one agreement binding on all parties hereto.
10. This
First Amendment and the Original Agreement, as amended and modified by this
First Amendment, shall constitute and be construed as a single
agreement.
[Signature
page follows]
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IN
WITNESS WHEREOF, the parties hereto have executed this First Amendment to
Executive Employment Agreement as of the day and year first above
written.
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COMPANY:
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POZEN
INC.
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By:
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/s/
Xxxx X. Xxxxxxxxx
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Xxxx
X. Xxxxxxxxx, Pharm.D.
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Chairman,
President and CEO
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EXECUTIVE:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx
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