EXHIBIT 10.3
NON-COMPETITION AND SEVERANCE AGREEMENT
This Agreement is made and entered into as of this 31st day of May,
1995 by and between Chattem, Inc., a Tennessee corporation (the "Company")
and B. XXXXXXX XXXXX (the "Executive").
WITNESSETH:
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WHEREAS, the Company is desirous of assuring itself of continuity of
management through the retention of certain key Executives, and to xxxxxx
their unbiased and analytical assessment of any offer to acquire control of
the Company; and
WHEREAS, the Company desires to impose upon the Executive
obligations of confidentiality and to restrict his ability to obtain
employment with certain competitors of the Company; and
WHEREAS, the Executive is willing to accept obligations of
confidentiality and non-competition in exchange for specified severance
benefits;
NOW, THEREFORE, the Company and the Executive do hereby agree as
follows:
1. TERM. The Term of this Agreement shall commence as of the
day and year first above written and continue indefinitely thereafter for a
period ending two (2) years after the termination of the Executive's
employment with the Company.
2. CONFIDENTIALITY OBLIGATIONS. During the term of this
agreement the Executive agrees to maintain all confidential information and
trade secrets obtained during the course of his employment with the Company
as confidential and to disclose the same to no one, other than in the
furtherance of the Company's
business in the normal course or to a fellow employee with a reasonable need
to know, unless the Executive can demonstrate by documentary evidence that
such information was (1) known to him prior to his employment with the
Company; (2) Subsequently became part of the public domain through no fault
of his own; or (3) was subsequently disclosed to him by a third party not in
violation of any obligation of confidentiality and non-use with the Company.
3. NON-COMPETE. In the event of a Change in Control (as
hereinafter defined) while Executive is employed by the Company and during
the term of this Agreement, Executive will not accept compensation or
anything of value from, nor offer or provide any services, including
consulting services, to any person, company, partnership, joint venture or
other entity which has or does a significant business involving, in whole or
in part, health and beauty aid products sold over-the-counter. This provision
applies only to entities selling the above specified products in competition
with the Company in the United States.
4. SEVERANCE BENEFITS. If the Company Discharges or
Constructively Discharges the Executive during the term of this Agreement
within twenty-four (24) months after the occurrence of a Change in Control,
he shall receive a Severance Benefit. These terms are hereby defined as
follows:
A. "Change in Control":
(i) Change of one-third (1/3) or more of any directors
of the Company within any twelve (12) month period;
or
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(ii) Change of one-half (1/2) or more of the directors of
the Company within any twenty-four (24) month
period; or
(iii) Acquisition by any person of the ownership or right
to vote of thirty-five (35%) percent or more of the
Company's outstanding voting shares. "Person" shall
mean any person, corporation, partnership, or any
entity and any affiliate or associate thereof.
"Affiliate" and "associate" shall have the meanings
assigned to them in Rule 12(b)(2) of the General
Rules and Regulations under the Securities Exchange
Act of 1934.
B. "Discharges": terminates the Executive for any reason
other than indictment or conviction for a felony or other
crime involving substantial moral turpitude, disability,
death, alcoholism, drug addiction or the gross, active
misfeasance of the Executive with regard to his duties with
the Company.
C. "Constructively Discharges": changes location or reduces
the Executive's status, duties, responsibilities or direct
or indirect compensation, (including future increases
commensurate with those given other managers
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of the Company), or so alters the style or philosophy of
the conduct of the Company's business, in the opinion of
the Executive, as to cause it to be undesirable to the
Executive to remain in the employ of the Company.
D. "Severance Benefit": a payment equal to two hundred (200%)
percent of the Executive's average annual includible
compensation from the Company during the five (5) most
recently completed taxable years before the date on which
the Change in Control occurs. Any partial taxable years
shall be annualized. In the event that the Executive's
employment is less than five (5) years, the average annual
compensation should be calculated based on the rate of
compensation for the actual term of employment.
5. PAYMENT. The Severance Benefit shall be paid to the Executive
in a lump sum or, at the Executive's election, in two (2) equal installments
with the first to be made not later than thirty (30) days after discharge or
constructive discharge and the second installment one (1) year after the
first installment was paid. No interest shall be due upon the Severance
Benefit unless it is not paid when due and in which case interest shall
accrue thereon at the applicable Federal rate used to determine present value
under Section 280(G) of the Internal Revenue Code of 1986 as amended.
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6. CONTINUATION OF BENEFITS. The Company shall continue to
provide to the Executive at its cost and expense health, medical and life
insurance benefits at substantially the same level of benefits as the
Executive has at the date he becomes entitled to the Severance Benefit in
accordance with Section 4 hereof for a period of two (2) years following the
date the Executive becomes entitled to such Severance Benefit.
7. ARBITRATION OF ALL DISPUTES. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof, shall be settled
by arbitration in the City of Chattanooga in accordance with the laws of the
State of Tennessee by three (3) arbitrators, one of whom shall be appointed
by the Company, one by the Executive and the third of whom shall be appointed
by the first two arbitrators. If the first two arbitrators cannot agree on
the appointment of a third arbitrator, then the third arbitrator shall be
appointed by the American Arbitration Association. The arbitrations shall be
conducted in accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event that it shall
be necessary or desirable for the Executive to retain legal counsel and/or
incur other costs and expenses in connection with the enforcement of any and
all of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be)
his reasonable attorneys' fees and costs and expenses in connection with the
enforcement of his said rights (including the enforcement of any arbitration
award in court), regardless of
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the final outcome, unless the arbitrators shall determine that under the
circumstances recovery by the Executive of all or a part of any such fees and
costs and expenses would be unjust.
8. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in
writing and if sent by registered or certified mail to the Executive at the
last address he has filed in writing with the Company or, in the case of the
Company, at its principal executive offices addressed to the President.
9. NO-ALIENATION. The Executive shall not have any right to
pledge, hypothecate, anticipate or in any way create a lien upon any amounts
provided under this Agreement; and no benefits payable hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary
acts, or by operation of law. Notwithstanding the foregoing provisions, in
the event that the Executive dies following discharge or constructive
discharge after a Change in Control, but before receiving all of his
Severance Benefit, the unpaid Severance Benefit shall be paid to his estate
in accordance with the terms of this Agreement.
10. GOVERNING LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Tennessee.
11. AMENDMENT. This Agreement may not be amended or canceled except
by the mutual agreement of the parties in writing.
12. SUCCESSORS TO THE COMPANY. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
Company and any successor of the Company.
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13. SEVERABILITY. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reasons, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, all as
of the day and year first above written.
___________________________
B. XXXXXXX XXXXX
ATTEST: CHATTEM, INC.
___________________________ By ________________________
Secretary Xxxxxx X. Xxxxxxxx
Executive Vice President
(SEAL)
