FIRST AMENDMENT TO SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.1
FIRST
AMENDMENT TO
SECOND
AMENDED AND RESTATED
This
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
(the “First Amendment”), is entered into as of September 28, 2007 (the
“Effective Date”), by and between POZEN Inc. (the “Company”) and Xxxx X.
Xxxxxxxxx (“Executive”).
WITNESSETH:
WHEREAS,
the Company and Executive previously entered into a Second Amended and Restated
Executive Employment Agreement dated March 14, 2006 (the “Employment
Agreement”); and
WHEREAS,
the Company and Executive desire to amend certain terms of the Employment
Agreement, as set forth herein, 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
receipt
and adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
1. Any
capitalized terms not defined herein shall have the meanings ascribed to
such
terms in the Employment Agreement.
2. Sections
4(b) and (c) of the Employment Agreement are hereby amended and restated
in
their entirety as follows:
“(b) Bonus. Executive
shall be eligible to receive an annual cash incentive bonus (the “Annual Bonus”)
based on performance. Executive’s annual target bonus shall be sixty-five
percent (65%) of Executive’s annual base salary with the amount of the actual
Annual Bonus anticipated to range between thirty-two and one-half percent
(32.5%) and one hundred percent (100%) of Executive’s then-current annual base
salary. Executive’s entitlement to such Annual Bonus shall be based
in part upon Executive’s achievement of certain performance goals to be mutually
agreed upon by the Executive and the Board annually (the “Performance
Goals”). The determination of the actual Annual Bonus earned, if any,
shall be determined in the discretion of the Committee and shall be based
on the
Committee’s assessment of Executive’s performance, the achievement of the
Performance Goals and other relevant factors as determined by the
Committee. Nothing in this Section 4(b) shall be construed as
granting or guaranteeing Executive a bonus in any amount. The Annual
Bonus shall be paid, in the year following the year for which it was
earned, on or before March 15 of such year.
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(c) Long-Term
Incentive Compensation. Each year during the Term, Executive
shall be eligible to participate in and to receive annual awards (the “Incentive
Award”) under a long-term incentive program with a target value of One Million
Seven Hundred Thousand Dollars $1,700,000 for the first year of the Term,
subject to annual review by the Committee. The determination of the
actual Incentive Award earned, if any, shall be determined in the discretion
of
the Committee and shall be based on the Committee’s assessment of Executive’s
overall performance, the achievement of the Performance Goals and other relevant
factors as determined by the Committee. Nothing in this Section 4(c)
shall be construed as granting or guaranteeing Executive an Incentive Award
in
any amount. Any such Incentive Awards shall be made or be paid, as
applicable, in the year following the year to which such Incentive Awards
relate, on or before March 15 of such year.
3. The
final sentence of Section 4(e) of the Employment Agreement shall be amended
and
restated in its entirety as follows:
“In
the
event that Executive does not qualify for any such life insurance, the Company
shall pay directly to Executive an amount equal to such premiums that the
Company would have paid to any insurance company to obtain such life insurance
on an annual basis, such payment to be made no later than December 31 of
each
year in which payment would otherwise have been made to the insurance
company.”
4. Sections
4(h) and 4(i) of the Employment Agreement are hereby amended and restated
in
their entirety as follows:
“(h) Disability. In
each year during the Term of this Agreement, the Company will pay Executive
as
additional compensation, payable in accordance with the Company’s standard
payroll schedule, an amount equal to the premium costs of an individual long
term disability insurance plan. The plan shall provide for a benefit
indemnity payment schedule equal to 70% of Executive’s annual Base
Salary. The Company shall also pay Executive for such long term
disability plan an amount as additional salary, payable in accordance with
the
Company’s standard payroll schedule, sufficient to cover the additional income
taxes owed on such compensation payments.
(i) Estate
Planning and Similar Costs. During the term of this Agreement,
the Company will reimburse Executive for legal fees and expenses incurred
by
Executive in connection with (A) estate and tax planning, and other legal
expenses incurred by Executive, specifically including those associated with
this Agreement, up to a maximum of $30,000 per calendar year, and (B) the
establishment and administration of a Rule 10b5-1 securities selling program,
up
to a maximum of $15,000 per calendar year. Executive shall provide
evidence of such reimbursable expenditures by no later than forty-five (45)
days
after the end of the calendar year in which such expenditures were incurred,
and
the Company shall reimburse the Executive by no later than March 15 of the
year
following the year in which such expenditures were incurred.”
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5. Sections
5(d)(iv), (v) and (vii) of the Employment Agreement are hereby amended and
restated in their entirety as follows:
“(iv) A
reduction in Executive’s then Base Salary or a material reduction of any
material employee benefit or perquisite enjoyed by him (other than as consented
to by Executive or as part of an across-the-board change or reduction applicable
to all senior executives of the Company); provided such reduction continues
uncorrected for a period of thirty (30) calendar days after the Company shall
have received written notice from Executive stating the nature of such
reduction;
(v) Failure
of the Company to obtain the assumption in writing of its obligation to perform
this Agreement by any purchaser of all or substantially all of the assets
of the
Company within fifteen (15) calendar days after a sale or transfer of such
assets; provided such failure continues uncorrected for a period of thirty
(30) calendar days after receipt of written notice of same from
Executive;
(vii) A
relocation of Executive’s office location, as assigned to him by the Company, to
a location more than fifty (50) miles from the current location of the Company
in Chapel Hill, North Carolina, unless corrected within thirty (30) calendar
days after the Company shall have received written notice from Executive
notifying the Company of same. In the event that Executive elects not to
terminate his employment under this Subsection 5(d)(vii), the Company shall,
within thirty (30) days after receipt from Executive of evidence of such
reimbursable expenses but in no event later than March 15th of the
year
following the year in which such expenses were incurred, reimburse Executive
for
the reasonable expenses he incurs in relocating from his then-current location
to the location of his new office, including, without limitation, all moving
expenses, reasonable legal expenses and commissions associated with selling
his
primary residence and all closing costs relating to his acquisition of a
residence in the area of his new office.”
6. Section
5(g) of the Employment Agreement is hereby amended and restated in its entirety
as follows:
“(g) Change
of Control. For purposes of this Agreement, a “Change of Control”
shall be deemed to have occurred as of the first day any one or more
of the
following shall have occurred:
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(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
(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. Sections
6(a) and (b) of the Employment Agreement are hereby amended and restated
in
their entirety as follows:
“(a) Accrued
Compensation and Benefits. Upon termination of Executive’s
employment by either party for any reason, Executive (or his heirs, successors,
personal representatives or assigns) will receive from the
Company: (i) payment for any accrued, unpaid Base Salary through the
termination date; (ii) payment for any accrued, unpaid vacation time through
the
termination date; (iii) reimbursement for any previously incurred
unreimbursed expenses in accordance with the Company’s policies; and (iv)
participation in any Company benefit plans or programs through the termination
date. 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.
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(b) Termination
by the Company Without Cause or by Executive for Good Reason. In
addition to the compensation and benefits described in Section 6(a) hereof,
if
the Company terminates Executive’s employment without Cause during the Term
(other than due to Executive’s death or disability) or if Executive terminates
his employment for Good Reason (except pursuant to Section 5(d)(ii)), and,
subject to Executive’s executing and not revoking a general release in a form
acceptable to the Company (the “Release”), the Company will provide the
following severance benefits to Executive, to be paid when and as described
below, subject in each case to Section 6(g) hereof:
(i) The
Company will make a lump sum payment equal to two (2) times the average of
the
Annual Bonuses actually awarded to Executive over the previous two years,
less
any required taxes and withholdings, with payment to be made within ninety
(90)
calendar days of the termination date; provided, however, that such payment
shall in no event be made later than March 15 of the year following the year
in
which Executive’s employment terminated, or in the event of termination pursuant
to Section 5(d)(ii), by no later than March 15 of the year following the
year in
which the Change of Control occurred;
(ii) The
Company will continue paying Executive his annual Base Salary at the rate
in
effect on the termination date, less any required taxes and withholdings,
for a
period of twenty-four (24) months after the termination date. Such
Base Salary shall be paid, subject to Section 6(g), on the fifth business
day of
each month commencing with the second month following the month in which
Executive’s termination of employment occurred;
(iii) The
Company will continue Executive’s participation in the Company’s health benefits
at the same level as in effect on the termination date for a period of eighteen
(18) months after the termination date or until Executive is eligible for
equivalent health benefits from another employer, whichever is
sooner. If the Company’s health benefit plans or programs do not
allow for Executive’s continued participation in such plans or programs after
termination of employment, the Company agrees to reimburse Executive for
continuing coverage under the Consolidated Omnibus Budget Reconciliation
Act of
1985 (“COBRA”); provided, however, that such reimbursement will be
conditioned upon Executive’s timely election of continued coverage under COBRA
and payment of all such reimbursements shall be made to Executive within
the
applicable COBRA period; and
(iv) Executive
will be entitled to twelve (12) months acceleration of the vesting of all
shares
subject to any stock option, such that all options will be exercisable
and vested on Executive’s termination date as if Executive’s termination date
were twelve (12) months later. After giving effect to the
acceleration provided for in the preceding sentence, any unvested shares
will be
forfeited as of the termination date.
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Notwithstanding
the foregoing, if Executive terminates his employment for Good Reason pursuant
to Section 5(d)(ii), then Executive shall be entitled to the compensation
and
benefits described in Section 6(a) hereof, payable when and as described
in
Section 6(a), and, provided that Executive executes and does not revoke the
Release, all of the benefits specified in Section 6(b), payable when and
as
described in Section 6(b), except that (i) he shall only be entitled to a
lump
sum payment equal to one (1) times the average of the Annual Bonus actually
awarded to Executive over the previous two years and (ii) the Company shall
continue paying his annual Base Salary at the rate in effect on the termination
date (less any required taxes and withholdings) for a period of twelve (12)
months after the termination date.
All
compensation and benefits to which Executive is entitled upon termination
of
employment pursuant to the succeeding subsections of this Section 6 shall
be
paid at such time and in such manner as is described in Section 6(a) or Section
6(b), as applicable.”
8. Section
6(g) of the Employment Agreement is hereby amended and restated in its entirety
as follows:
“(g) Excise
Tax. Notwithstanding the foregoing provisions of this Section 6,
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,
the
payment of any severance or other payments under Sections 5 or 6 shall not
commence until, and shall be made on, the first business day after the date
that
is six (6) months following the date of Executive’s termination of employment,
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 Executive’s termination date.”
9. Section
7(d) of the Employment Agreement is hereby amended and restated in its entirety
as follows:
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“(d) Any
Gross-Up Payment, as determined pursuant to this Section 7, shall be paid
by the Company to Executive as and when the Excise Tax is incurred on a 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 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 6(g). As a result
of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 7(e) and Executive thereafter is required to
make a
Payment of any Excise Tax, the Accounting Firm shall determine the amount
of the
Underpayment that has occurred and any such Underpayment shall be paid by
the
Company to or for the benefit of Executive within thirty (30) days after
such
determination, 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.”
10. Section
7(e) of the Employment Agreement is hereby amended to add the following sentence
as the last sentence of such section:
“Any
payments required to be made pursuant to the Company’s indemnification
obligations as set forth in this Section 7(e) shall be paid as and when any
such
Excise Tax or income or other tax is incurred, 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 or income or other tax to the IRS and any applicable
state
taxing authorities.”
11. Except
as herein amended, the terms and provisions of the Employment Agreement shall
remain in full force and effect as originally executed.
12. 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.
13. This
First Amendment may be executed in any number of counterparts, each of which
shall constitute one agreement binding on all parties hereto.
14. This
First Amendment and the Employment 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
Second
Amended and Restated Executive Employment Agreement and affixed their seals
as
of the day and year first above written.
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EMPLOYER:
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POZEN
INC.
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By:
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/s/ Xxxxxxx X. Xxxxxx | |
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Name:
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Xxxxxxx X. Xxxxxx | |
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Title:
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Sr. Vice President & Chief Financial Officer | |
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EXECUTIVE:
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/s/
Xxxx X. Xxxxxxxxx
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Xxxx
X. Xxxxxxxxx, Pharm.D.
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