Employment Agreement – Bio-Technology General Corp. and Ernest L. Kelly
BIOTECHNOLOGY GENERAL CORP.
Employment Agreement
for
Ernest L. Kelly
Senior Vice President, Quality Assurance,
Quality Control and Regulatory Affairs
Contents
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Employment |
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2. Definitions |
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Position and Responsibilities |
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5. Compensation |
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6. Expenses |
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Employment Terminations |
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Control |
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9. Assignment |
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Fees and Notice |
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11. Confidentiality and Noncompetition |
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Outplacement Assistance |
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14. Governing Law |
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Employment Agreement
This Agreement is made, entered into, and is effective
as of the Effective Date, by and between the Company and the Executive.
1.1 The
Company hereby agrees to employ the Executive and the Executive hereby agrees
to serve the Company in accordance with the terms and conditions set forth
herein, for a period of three (3) years, commencing as of the Effective Date.
1.2 Commencing
on the third (3rd) anniversary of the Effective Date, and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year, unless at least ninety (90) days prior to
such anniversary, the Company or the Executive shall have given notice in
accordance with Section 10.2 hereof that it or he does not wish to extend the term
of the Agreement.
2.1 Agreement means this
Employment Agreement.
2.2 Annual
Bonus means the annual bonus to be paid to the Executive in
accordance with the Companys annual bonus program as described in Section 5.3
herein.
2.3 Base
Salary means the salary of record paid to the Executive as annual
salary, pursuant to Section 5.2, excluding amounts received under incentive or
other bonus plans, whether or not deferred.
2.4 Beneficial
Owner shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act.
2.5 Beneficiary
means the persons or entities designated or deemed designated by the Executive
pursuant to Section 13.6 herein.
2.6 Board or Board of
Directors means the Board of Directors of the Company.
2.7 Cause means:
(a) Executive materially breached any of the
terms of this Agreement and failed to correct such breach within fifteen (15)
days after written notice thereof from the Company;
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(b) Executive has been convicted of a criminal
offense involving a felony giving rise to a sentence of imprisonment;
(c) Executive has breached a fiduciary trust
for the purpose of gaining a personal profit, including, without limitation,
embezzlement; or
(d) Despite adequate warnings, Executive
intentionally and willfully failed to perform reasonably assigned duties within
the normal and customary scope of the Position.
2.8 Change in
Control or CIC of the Company shall be deemed to have occurred as
of the first day that any one or more of the following conditions is satisfied:
(a) Any consolidation or merger in which the Company
is not the continuing or surviving entity or pursuant to which shares of the
Common Stock would be converted into cash, securities, or other property, other
than (i) a merger of the Company in which the holders of the Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (ii) a
consolidation or merger which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (by being
converted into voting securities of the continuing or surviving entity) more
than 50% of the combined voting power of the voting securities of the
continuing or surviving entity immediately after such consolidation or merger and which would result in the members
of the Board immediately prior to such consolidation or merger (including for
this purpose any individuals whose election or nomination for election was
approved by a vote of at least two-thirds of such members) constituting a
majority of the Board (or equivalent governing body) of the continuing or
surviving entity immediately after such consolidation or merger;
(b) Any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all the Companys assets;
(c) The
Companys stockholders approve any plan or proposal for the liquidation or
dissolution of the Company;
(d) Any
Person shall become the Beneficial Owner of forty (40) percent or more of the
Common Stock other than pursuant to a plan or arrangement entered into by such Person
and the Company; or
(e) During
any period of two consecutive years, individuals who at the beginning of such
period constitute the entire Board of Directors shall cease for any reason to
constitute a majority of the Board unless the election or nomination for
election by the Companys stockholders of each new director was approved by a
vote of at lest two-thirds of the directors then still in office who were
directors at the beginning of the period.
2.9 CIC
Severance Benefits means the payment of severance compensation
associated with a Qualifying Termination occurring subsequent to a Change in
Control, as described in Section 8.3.
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2.10 Code means the United
States Internal Revenue Code of 1986, as amended.
2.11 Common Stock means the
common stock of the Company, $.01 par value.
2.12 Compensation
Committee means the Compensation and Stock Option Committee of the
Board, or any other committee appointed by the Board to perform the functions
of such committee.
2.13 Company
means Bio-Technology General Corp., a Delaware corporation, or any Successor
Company thereto as provided in Section 9.1 herein.
2.14 Director means any
individual who is a member of the Board of Directors of the Company.
2.15 Disability
or Disabled
means for all purposes of this Agreement, the meaning ascribed to such term in
the Companys long-term disability plan, or in any successor to such plan.
2.16 Effective Date means
January 1, 2002.
2.17 Effective Date of Termination means
the date on which a termination of the Executives employment occurs.
2.18 Employment Date means
February 5, 1996.
2.19 Executive means
Ernest L. Kelly, Ph.D. who, as of the Effective Date, resides at 159 Pine Lane,
Yardley, Pennsylvania 19067.
2.20 Good Reason shall mean,
without the Executives express written consent, the occurrence of any one or
more of the
following:
(a) Reducing the Executives Base Salary;
(b) Failing to maintain
Executives amount of benefits under or relative level of participation in the
Companys employee benefit or retirement plans, policies, practices, or
arrangements in which the Executive participates as of the Effective Date of
this Agreement, including any perquisite program; provided, however, that any
such change that applies consistently to all executive officers of the Company
or is required by applicable law shall not be deemed to constitute Good Reason;
(c) Failing to require
any Successor Company to assume and agree to perform the Companys obligations
hereunder;
(d) The occurrence of
any one or more of the following events on or after the announcement of the
transaction which leads to the CIC and up to twentyfour (24) calendar
months following the effective date of a CIC:
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(1) Requiring Executive
to be based at a location that requires the Executive to travel at least an
additional thirty-five (35) miles per day;
(2) Requiring Executive
to report to a position which is at a lower level than the highest level to
which Executive reported within the six (6) months prior to the CIC;
(3) Demoting Executive to a level lower than
Executives level in the Company as of the Effective Date.
2.21 Notice of
Termination means a written notice which shall indicate the
specific termination provision in this Agreement relied upon, and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executives employment under the provisions so
indicated, and, where applicable, shall specifically include notice pursuant to
Section 1.2 that Company has elected not to renew this Agreement.
2.22 Person shall
have the meaning ascribed to such term in Section 3(a)(9) of the
Securities Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a group as defined in Section 13(d) thereof.
2.23 Position shall have the
meaning ascribed to it in Section 3.1.
2.24 Qualifying
Termination means any of the events described in Section 8.2
herein, the occurrence of which triggers the payment of CIC Severance Benefits
hereunder.
2.25 Securities Exchange Act means
the United States Securities Exchange Act of 1934, as amended.
2.26 Service Multiple shall have
the meaning ascribed to it in Section 7.4(c).
2.27 Severance
Benefits means the payment of severance compensation as provided in
Sections 7.4 and 7.6 herein, and not payable due to a Change in Control of
the Company.
2.28 Successor Company shall
have the meaning ascribed to it in Section 9.1.
2.29 Term shall mean that period
of time commencing on the Effective Date and ending on the Effective Date of
Termination.
3. Position and Responsibilities
3.1 During
the term of this Agreement, the Executive agrees to serve as Senior Vice
President, Quality Assurance, Quality Control, and Regulatory Affairs of the
Company or in such other position which Executive shall agree to accept or to
which Executive shall be promoted during the Term and Executive shall report
directly to the President or such other position
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which is at a higher position or level in the Company
than Executive and as shall be determined by the Chief Executive Officer in his
sole discretion, and shall maintain the level of duties and responsibilities as
in effect as of the Effective Date, or such higher level of duties and
responsibilities as Executive may be assigned during the Term (the Position).
4.1 During
the term of this Agreement, the Executive agrees to devote substantially his
full time, attention, and energies to the Companys business and shall not be
engaged in any other business activity, whether or not such business activity
is pursued for gain, profit, or other pecuniary advantage unless such business
activity is approved by the Compensation Committee (or, in the event the
Compensation Committee ceases to exist, the Board). However, subject to Article 11 herein and approval by the
Compensation Committee (or the Board, as the case may be), the Executive may
serve as a director of other companies so long as such service is not injurious
to the Company.
5.1 As
remuneration for all services to be rendered by the Executive during the term
of this Agreement, and as consideration for complying with the covenants
herein, the Company shall pay and provide to the Executive those items set
forth in Sections 5.2 through 5.8.
5.2 Base Salary. The
Company shall pay the Executive a Base Salary in an amount which shall be
established from time to time by the Board of Directors of the Company or the
Boards designee; provided, however, that such Base Salary shall not be less
than TWO-HUNDRED-TWENTY-FIVE-THOUSAND DOLLARS (US$225,000) per year.
(a) This Base Salary
shall be paid to the Executive in equal installments throughout the year,
consistent with the normal payroll practices of the Company.
(b) The Base Salary
shall be reviewed at least annually following the Effective Date of this
Agreement, while this Agreement is in force, to ascertain whether, in the
judgment of the Board or the Boards designee, such Base Salary should be
increased based primarily on the performance of the Executive during the year.
If so increased, the Base Salary as stated above shall, likewise, be increased
for all purposes of this Agreement and shall not, in any event, be decreased in
any year.
5.3 Annual Bonus. In
addition to his Base Salary, the Executive shall be entitled to participate in
the Companys annual short-term incentive program, as such program may exist
from time to time, at a level commensurate with the Position. The percentage of Base Salary targeted as
annual short-term incentive compensation shall be established for the Position
by the Companys Compensation Committee in its sole discretion (the targeted
Annual Bonus
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award). Executive acknowledges that the amount of
annual short-term incentive, if any, to be awarded shall be at the sole discretion
of the Companys Compensation Committee, may be less or more than the targeted
Annual bonus award, and will be based on a number of factors set in advance by
the Compensation Committee for each calendar year, including the Companys
performance and the Executives individual performance. Nothing in this Section
5.3 shall be construed as obligating the Company or the Board to refrain from
changing, and/or amending the short-term incentive program, so long as such
changes are equally applicable to all executive employees in the Company.
5.4 Long-Term
Incentives. The Executive shall be eligible to
participate in the Companys long-term incentive plan, as such shall be amended
or superseded from time to time provided, however, that nothing in this Section
5.4 shall be construed as obligating the Company or the Board to refrain from
changing, and/or amending the long-term incentive plan, so long as such changes
are equally applicable to all executive employees in the Company.
5.5 Retirement
Benefits. The Company shall provide to the Executive
participation in any Company qualified defined benefit and defined contribution
retirement plans as may be established during the term of this Agreement;
provided, however, that nothing in this Section 5.5 shall be construed as
obligating the Company to refrain from changing, and/or amending the
nonqualified retirement programs, so long as such changes are equally
applicable to all executive employees in the Company.
5.6 Employee
Benefits. During the Term, and as otherwise provided
within the provisions of each of the respective plans, the Company shall
provide to the Executive all benefits to which other executives and employees
of the Company are entitled to receive, as commensurate with the Position,
subject to the eligibility requirements and other provisions of such
arrangements as applicable to executives of the Company generally.
(a) Such benefits shall
include, but shall not be limited to, group term life insurance, comprehensive
health and major medical insurance, dental and life insurance,
and short-term and long-term disability.
(b) The Executive shall
likewise participate in any additional benefit as may be established during the
term of this Agreement, by standard written policy of the Company.
5.7 Vacation. The Executive shall be entitled to such paid
vacation as is customary for the Position in corporate institutions of similar
size and character, but in any event not less than twenty (20) paid vacation
days during each calendar year; provided, however, that without prior written
approval, Executive may carry forward into the next year no more than ten (10)
unused vacation days from the current year.
5.8 Perquisites. The
Company shall provide to the Executive, at the Companys expense, all perquisites which the Board may determine
from time to time to provide; provided, however, that nothing in this
Section 5.8 shall be construed as obligating the Company or the Board to
refrain from changing, and/or amending the perquisite program, so long as such
changes are equally applicable to all executive employees in the Company.
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5.9 Right to
Change Plans. The Company shall not be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are equally applicable to
all executive employees in the Company.
6.1 Upon
presentation of appropriate documentation, the Company shall pay, or reimburse
the Executive for all ordinary and necessary expenses, in a reasonable amount,
which the Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with membership in
various professional, business, and civic associations and societies.
7. Employment Terminations
7.1 Termination
Due to Death. In the event the Executives employment is
terminated while this Agreement is in force by reason of death, the Companys
obligations under this Agreement shall immediately expire. Notwithstanding the
foregoing, the Company shall be obligated to pay to the Executive the
following:
(a) Base Salary through the Effective Date of
Termination;
(b) An amount equal to
the Executives unpaid targeted Annual Bonus award, established for
the fiscal year in which such termination is effective, multiplied by a
fraction, the numerator of which is the number of completed days in the
then-existing fiscal year through the Effective Date of Termination, and the
denominator of which is three hundred sixty-five (365);
(c) All outstanding
long-term incentive awards shall be subject to the treatment provided under the
applicable long-term incentive plan of the Company;
(d) Accrued but unused
vacation pay through the Effective Date of Termination; and
(e) All other rights
and benefits the Executive is vested in, pursuant to other plans and programs
of the Company.
(f) The benefits
described in Sections 7.1(a) and (d) shall be paid in cash to the Executive in
a single lump sum as soon as practicable following the Effective Date of
Termination, but in no event beyond thirty (30) days from such date. All other
payments due to the Executive upon termination of employment, including those
in Sections 7.1(b) and (c), shall be paid in accordance with the terms of such
applicable plans or programs.
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(g) With the exception
of the covenants contained in Articles 9 and 14 and Sections 7.1(f), 13.3,
13.5, and 13.7 herein (which shall survive such termination), the Company and
the Executive thereafter shall have no further obligations under this
Agreement.
7.2 Termination
Due to Disability. In the
event that the Executive becomes Disabled during the term of this Agreement and
is, therefore, unable to perform his duties herein for more than
one hundred eighty (180) total calendar days during any period of twelve
(12) consecutive months, or in the event of the Boards reasonable expectation
that the Executives Disability will exist for more than a period of one
hundred eighty (180) calendar days, the Company shall have the right to
terminate the Executives active employment as provided in this Agreement.
(a) The Board shall
deliver written notice to the Executive of the Companys intent to terminate
for Disability at least thirty (30) calendar days prior to the Effective Date
of Termination.
(b) Such Disability to
be determined by the Board of Directors of the Company upon receipt of and in
reliance on competent medical advice from one (1) or more individuals, selected
by the Board, who are qualified to give such professional medical advice.
(c) A termination for
Disability shall become effective upon the end of the thirty (30) day notice
period. Upon the Effective Date of Termination, the Companys obligations under
this Agreement shall immediately expire.
(d) Notwithstanding the
foregoing, the Company shall be obligated to pay to the Executive the following:
(1) Base Salary through
the Effective Date of Termination;
(2) An amount equal to
the Executives unpaid targeted Annual Bonus award, established for
the fiscal year in which the Effective Date of Termination occurs,
multiplied by a fraction, the numerator of which is the number of completed
days in the then-existing fiscal year through the Effective Date of
Termination, and the denominator of which is three hundred sixty-five (365);
(3) All outstanding
long-term incentive awards shall be subject to the treatment provided under the
applicable long-term incentive plan of the Company;
(4) Accrued but unused
vacation pay through the Effective Date of Termination; and
(5) All other rights
and benefits the Executive is vested in, pursuant to other plans and programs
of the Company.
(e) The benefits
described in Sections 7.2(d)(1) and (d)(4) shall be paid in cash to the
Executive in a single lump sum as soon as practicable following the Effective
Date of Termination, but in no event beyond thirty (30) days from such date.
All other payments due to the Executive upon termination of employment,
including those in Sections
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7.2(d)(2) and (d)(3),
shall be paid in accordance with the terms of such applicable plans or program.
(f) With the
exception of the covenants contained in Articles 8, 9, 11, and 14 and Sections
7.2(e), 13.3, 13.5, and 13.7 herein (which shall survive such termination), the
Company and the Executive thereafter shall have no further obligations under
this Agreement.
7.3 Voluntary
Termination by the Executive. The Executive may terminate this
Agreement at any time by giving Notice of Termination to the Board of Directors
of the Company, delivered at least fourteen (14) calendar days prior to the
Effective Date of Termination.
(a) The termination
automatically shall become effective upon the expiration of the fourteen (14)
day notice period. Notwithstanding the foregoing, the Company may waive the
fourteen (14) day notice period; however, the Executive shall be entitled to
receive all elements of compensation described in Sections 5.1 through 5.6
for the fourteen (14) day notice period, subject to the eligibility and
participation requirements of any qualified retirement plan.
(b) Upon the Effective
Date of Termination, following the expiration of the fourteen (14) day notice
period, the Company shall pay the Executive his full Base Salary and accrued
but unused vacation pay, at the rate then in effect, through the Effective Date
of Termination, plus all other benefits to which the Executive has a vested
right at that time (for this purpose, the Executive shall not be paid any
Annual Bonus with respect to the fiscal year in which voluntary termination
under this Section occurs).
(c) With the exception
of the covenants contained in Articles 8, 9, 11, and 14 and Sections 13.3,
13.5, and 13.7 herein (which shall survive such termination), the Company and
the Executive thereafter shall have no further obligations under this
Agreement.
7.4 Involuntary
Termination by the Company without Cause. At all times during the
Term, the Board may terminate the Executives employment for reasons other than
death, Disability, or for Cause, by providing to the Executive a Notice of
Termination, at least sixty (60) calendar days (ninety (90) calendar days when
termination is due to non-renewal of this Agreement by the Company pursuant to
Section 1.2) prior to the Effective Date of Termination; provided, however,
that such notice shall not preclude the Company from requiring Executive to
leave the Company immediately upon receipt of such notice.
(a) Such Notice of
Termination shall be irrevocable absent express, mutual consent of the parties.
(b) Upon the Effective
Date of Termination (not a Qualifying Termination), following the expiration of
the sixty (60) day notice period (90 days in the case of non-renewal), the
Company shall pay and provide to the Executive:
(1) An amount equal to
the Service Multiple times the Executives annual Base Salary established for
the fiscal year in which the Effective Date of Termination occurs;
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(2) An amount equal to
the Service Multiple times the Executives targeted Annual Bonus award
established for the fiscal year in which the Effective Date of Termination
occurs; provided, however, that no payment shall be made under this Section
7.4(b)(2) if the Effective Date of Termination is less than twelve (12) months
after the Employment Date;
(3) A continuation of
the welfare benefits of health care, life and accidental death and
dismemberment, and disability insurance coverage (or if continuation under the
Companys then current plans is not allowed, then provision at the Companys
expense but subject to payment by Executive of those payments which Executive
would have been obligated to make under the Companys then current plan, of
substantially similar welfare benefits from one or more third party providers)
after the Effective Date of Termination for a number of months equal to the
Service Multiple times twelve (12). These benefits shall be provided to the
Executive at the same coverage level as in effect as of the Effective Date of
Termination, and at the same premium cost to the Executive which was paid by
the Executive at the time such benefits were provided. However, in the event
the premium cost and/or level of coverage shall change for all employees of the
Company, or for management employees with respect to supplemental benefits, the
cost and/or coverage level, likewise, shall change for the Executive in a
corresponding manner. The continuation of these welfare benefits shall be
discontinued if prior to the expiration of the period, the Executive has
available substantially similar benefits at a comparable cost to the Executive
from a subsequent employer, as determined by the Compensation Committee (or, in
the event the Compensation Committee ceases to exist, the Board);
(4) All outstanding
long-term incentive awards shall be subject to the treatment provided under the
applicable long-term incentive plan of the Company;
(5) An amount equal to
the Executives unpaid Base Salary and accrued but unused vacation pay through
the Effective Date of Termination; and
(6) All other benefits
to which the Executive has a vested right at the time, according to the
provisions of the governing plan or program.
(c) For purposes of
this Section 7.4, the term Service Multiple shall be equal to the quotient
resulting from a formula the numerator of which is the lesser of (a) full
number of completed months that have elapsed since the Employment Date (but not
less than 6 months) and (b) eighteen (18) and the denominator of which is
twelve (12);
(d) In the event that
the Board terminates the Executives employment without Cause on or after the
date of the announcement of the transaction which leads to a CIC, the Executive
shall be entitled to the CIC Severance Benefits as provided in Section 8.3
in lieu of the Severance Benefits outlined in this Section 7.4.
(e) Payment of all of
the benefits described in Section 7.4(b)(1) shall be paid in cash to the
Executive in equal bi-weekly installments over a period of consecutive months
equal to
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the Service Multiple times twelve (12) and beginning
on the fifteenth day of the month following the month in which the Effective
Date of Termination occurs.
(f) Payment of all
but forty thousand dollars ($40,000) of the benefits described in
Section 7.4(b)(2) shall be paid in cash to the Executive in a single lump
sum as soon as practicable following the Effective Date of Termination, but in
no event beyond thirty (30) days from such date. The forty thousand dollars ($40,000) which was withheld shall be
paid in cash to the Executive in a single lump sum at the end of the twelve
(12) month restrictive period set forth in Sections 11.2 and 11.3 of this
Agreement.
(g) Except as
specifically provided in Section 7.4(e) and (f), all other payments due to the
Executive upon termination of employment shall be paid in accordance with the
terms of such applicable plans or programs.
(h) With the exception
of the covenants contained in Articles 8, 9, 10, 11, 12 and 14 and Sections
7.4, 13.3, 13.5, and 13.7 (which shall survive such termination), the Company
and the Executive thereafter shall have no further obligations under this
Agreement.
(i) Notwithstanding
anything herein to the contrary, the Companys payment obligations under this
Section 7.4 shall be offset by any amounts that the Company is required to pay
to the Executive under a national statutory severance program applicable to
such Executive.
7.5 Termination
for Cause. Nothing in this Agreement shall be construed to prevent
the Board from terminating the Executives employment under this Agreement for
Cause.
(a) To be effective,
the Notice of Termination must set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination for Cause.
(b) In the event this
Agreement is terminated by the Board for Cause, the Company shall pay the
Executive his Base Salary and accrued vacation pay through the Effective Date
of Termination, and the Executive shall immediately thereafter forfeit all
rights and benefits (other than vested benefits) he would otherwise have been
entitled to receive under this Agreement. The Company and the Executive
thereafter shall have no further obligations under this Agreement with the
exception of the covenants contained in Articles 9, 10, 11, and 14 and Sections
13.3, 13.5, and 13.9 herein (which shall survive such termination).
7.6 Termination
for Good Reason. Except where Section 2.20(d) is
applicable, this Section 7.6 shall only become effective when at least twelve
(12) months have elapsed since the Employment Date. Prior to this Section 7.6 becoming effective, any notice of
termination by Executive may only be given pursuant to Section 7.3. The Executive shall have sixty (60) days
from the date he learns of action taken by the Company that allows the
Executive to terminate his employment for Good Reason to provide the Board with
a Notice of Termination.
(a) The Notice of
Termination must set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such Good Reason termination.
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(b) The Company shall
have thirty (30) days to cure such Company action following receipt of the
Notice of Termination.
(c) The Executive is
required to continue his employment for the sixty (60) day period following the
date in which he provided the Notice of Termination to the Board. The Company
may waive the sixty (60) day notice period; however, the Executive shall be
entitled to receive all elements of compensation described in Sections 5.1
through 5.6 for the sixty (60) day notice period, subject to the eligibility
and participation requirements of any qualified retirement plan.
(d) Upon a termination
of the Executives employment for Good Reason during the Term, and following
the expiration of the sixty (60) day notice period, the Company shall pay and
provide to the Executive the following:
(1) An amount equal to
one-and-one-half (1.5) times the Executives annual Base Salary established for
the fiscal year in which the Effective Date of Termination occurs;
(2) An amount equal to
one-and-one-half (1.5) times the Executives targeted Annual Bonus award
established for the fiscal year in which the Effective Date of Termination
occurs;
(3) A continuation of
the welfare benefits of health care, life and accidental death and dismemberment,
and disability insurance coverage for one-and-one-half (1.5) years after the
Effective Date of Termination (or if continuation under the Companys then
current plans is not allowed, then provision at the Companys expense but
subject to payment by Executive of those payments which Executive would have
been obligated to make under the Companys then current plan, of substantially
similar welfare benefits from one or more third party providers). These
benefits shall be provided to the Executive at the same coverage level, as in
effect as of the Effective Date of Termination and at the same premium cost to
the Executive which was paid by the Executive at the time such benefits were
provided. However, in the event the premium cost and/or level of coverage shall
change for all employees of the Company, or for management employees with
respect to supplemental benefits, the cost and/or coverage level, likewise,
shall change for the Executive in a corresponding manner. The continuation of
these welfare benefits shall be discontinued prior to the end of the
one-and-one-half (1.5) year period in the event the Executive has available
substantially similar benefits at a comparable cost to the Executive from a
subsequent employer, as determined by the Compensation Committee (or, in the
event the Compensation Committee ceases to exist, the Board);
(4) All outstanding
long-term incentive awards shall be subject to the treatment provided under the
applicable long-term incentive plan of the Company;
(5) An amount equal to
the Executives unpaid Base Salary and accrued but unused vacation pay through
the Effective Date of Termination; and
(6) All other benefits
to which the Executive has a vested right at the time, according to the
provisions of the governing plan or program.
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(e) In the event of
termination of Executives employment for Good Reason on or after the date of
the announcement of the transaction which leads to the CIC and up to
twenty-four (24) months following the date of the CIC, the Executive shall be
entitled to the CIC Severance Benefits as provided in Section 8.3 in lieu
of the Severance Benefits outlined in this Section 7.6.
(f) The Executives
right to terminate employment for Good Reason shall not be affected by the
Executives incapacity due to physical or mental illness unless such incapacity
is determined to constitute a Disability as provided herein.
(g) Payment of all but
forty thousand dollars ($40,000) of the benefits described in
Section 7.6(d)(1) and payment of all of the benefits described in Section
7.6(d)(2) shall be paid in cash to the Executive in a single lump sum as soon
as practicable following the Effective Date of Termination, but in no event
beyond thirty (30) days from such date. The forty thousand dollars ($40,000)
which was withheld shall be paid in cash to the Executive in a single lump sum
at the end of the twelve (12) month restrictive period set forth in
Sections 11.2 and 11.3 of this Agreement.
(h) Except as specifically
provided in Section 7.6(g), all other payments due to the Executive upon
termination of employment shall be paid in accordance with the terms of such
applicable plans or programs.
(i) Notwithstanding
anything herein to the contrary, the Companys payment obligations under this
Section 7.6 shall be offset by any amounts that the Company is required to pay
to the Executive under a national statutory severance program applicable to
such Executive.
(j) With the
exceptions of the covenants contained in Articles 8, 9, 10, 11, 12 and 14 and
Sections 7.6, 13.3, 13.5, and 13.7 (which shall survive such termination)
herein, the Company and the Executive thereafter shall have no further
obligations under this Agreement.
8.1 Employment
Termination Following a Change in Control. The Executive shall be
entitled to receive from the Company CIC Severance Benefits if a Notice of
Termination for a Qualifying Termination of the Executive has been delivered;
provided, that:
(a) The Executive shall
not be entitled to receive CIC Severance Benefits if he is terminated for Cause
(as provided in Section 7.5 herein), or if his employment with the Company ends
due to death, or Disability, or due to voluntary termination of employment by
the Executive without Good Reason.
(b) CIC Severance
Benefits shall be paid in lieu of all other benefits provided to the Executive
under the terms of this Agreement.
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8.2 Qualifying
Termination. The occurrence of any one or more of the
following events on or after the date of the announcement of the transaction
which leads to the CIC and up to twenty-four (24) months following the date of
the CIC shall trigger the payment of CIC Severance Benefits to the Executive
under this Agreement:
(a) An involuntary
termination of the Executives employment by the Company for reasons other than
Cause, death, or Disability, as evidenced by a Notice of Termination delivered
by the Company to the Executive;
(b) A voluntary
termination by the Executive for Good Reason as evidenced by a Notice of
Termination delivered to the Company by the Executive;
(c) Failure to renew
this Agreement (if the Agreement would expire unless renewed within such
period), as evidenced by a Notice of Termination delivered by the Company to
the Executive; or
(d) The Company or any
Successor Company materially breaches any material provision of this Agreement
and does not cure such breach within thirty (30) days of receiving a written
notice from the Executive with such notice explaining in reasonable detail the
facts and circumstances claimed to provide a basis for the Executives claim.
8.3 Severance
Benefits Paid upon a Qualifying Termination. In the event the Executive
becomes entitled to receive CIC Severance Benefits, the Company shall pay to
the Executive and provide him the following:
(a) An
amount equal to two (2) times the Executives annual Base Salary
established for the fiscal year in which the Effective Date of Termination
occurs;
(b) An
amount equal to two (2) times the Executives targeted Annual
Bonus award established for the fiscal year in which the Executives Effective
Date of Termination occurs;
(c) An
amount equal to the Executives unpaid Base Salary and accrued but unused
vacation pay through the Effective Date of Termination;
(d) All
outstanding long-term incentive awards shall be subject to the treatment
provided under the applicable long-term incentive plan of the Company;
(e) A
continuation of the welfare benefits of health care, life and accidental death
and dismemberment, and disability insurance coverage for two (2) full
years after the Effective Date of Termination (or if continuation under the
Companys then current plans is not allowed, then provision at the Companys
expense but subject to payment by Executive of those payments which Executive
would have been obligated to make under the Companys then current plan, of
substantially similar welfare benefits from one or more third party providers).
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(1) These
benefits shall be provided to the Executive at the same coverage level, as in
effect as of the Effective Date of Termination or, if greater, as in effect
sixty (60) days prior to the date of the Change in Control, and at the same
premium cost to the Executive which was paid by the Executive at the time such
benefits were provided.
(2) In
the event the premium cost and/or level of coverage shall change for all
employees of the Company, or for management employees with respect to
supplemental benefits, the cost and/or coverage level, likewise, shall change
for the Executive in a corresponding manner.
(3) The
continuation of these welfare benefits shall be discontinued prior to the end
of the two
year period in the event the Executive has available substantially similar
benefits at a comparable cost to the Executive from a subsequent employer, as
determined by the Compensation Committee (or, in the event the Compensation
Committee ceases to exist, the Board).
8.4 Form and
Timing of Severance Benefit. Payment of all of the benefits
described in Sections 8.3(a) through (c) shall be paid in cash to the Executive
in a single lump sum as soon as practicable following the Effective Date of
Termination, but in no event beyond thirty (30) days from such date. All other
payments due to the Executive upon termination of employment shall be paid in
accordance with the terms of such applicable plans or programs.
8.5 Excise Tax.
In the event that a Change in Control occurs, and a determination is made by
the Company pursuant to Section 280G and 4999 of the Code that a golden
parachute excise tax is due, the benefits provided to the Executive under this
Agreement that are classified as parachute payments (as such term is defined
in Section 280G of the Code), shall be limited to the amount just necessary to
avoid the excise tax.
(a) This limitation
shall be applied if, and only if, such a limitation results in a greater net
(of excise tax) cash benefit to the Executive than he would receive had the
benefits not been capped and an excise tax been levied.
8.6 With
the exceptions of the covenants contained in Articles 8, 9, 10, 11, 12 and 14
and Sections 13.3, 13.5, and 13.7 (which shall survive such termination) herein,
the Company and the Executive thereafter shall have no further obligations
under this Agreement.
9.1 Assignment
by Company. This Agreement may and shall be assigned
or transferred to, and shall be binding upon and shall inure to the benefit of
any Successor Company, with Successor Company for purposes of this Agreement
being defined as a company that (i) acquires greater than fifty percent (50%)
of the assets of the Company or (ii) acquires greater than fifty percent (50%)
of the outstanding stock of the Company, or (iii) is the surviving entity in
the event of a CIC.
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(a) Any such Successor
Company shall be deemed substituted for all purposes of the Company under the
terms of this Agreement.
(b) Failure of the
Company to obtain the agreement of any Successor Company to be bound by the
terms of this Agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement, and shall immediately entitle the Executive to
benefits from the Company in the same amount and on the same terms as the
Executive would be entitled to receive in the event of a termination of
employment for Good Reason as provided in Section 7.7 (failure not related to a
Change in Control) or Section 8.3 (if the failure of assignment follows or is
in connection with a Change in Control).
(c) Except as herein
provided, this Agreement may not otherwise be assigned by the Company.
9.2 Assignment
by Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executives personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees.
(a) If the Executive
dies while any amount would still be payable to him pursuant to this Agreement
had he continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement, to the
Executives Beneficiary.
(b) If the Executive has
not named a Beneficiary, then such amounts shall be paid to the Executives
devisee, legatee, or other designee, or if there is no such designee, to the
Executives estate.
Article 10. Legal Fees and Notice
10.1 Payment of
Legal Fees. To the
extent permitted by law, the Company shall pay all legal fees, costs of
litigation, prejudgment interest, and other expenses incurred by Executive in
contesting a termination, if Executive prevails.
10.2 Notice. Any
notices, requests, demands, or other communications provided 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 offices to the
attention of the General Counsel.
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11. Confidentiality and Noncompetition
11.1 Disclosure
of Information. The Executive recognizes that he has
access to and knowledge of confidential and proprietary information of the
Company that is essential to the performance of his duties under this
Agreement.
(a) The Executive will
not, during and for five (5) years after the term of his employment by the
Company, in whole or in part, disclose such information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever,
nor shall he make use of any such information for his own purposes, so long as
such information has not otherwise been disclosed to the public or is not
otherwise in the public domain except as required by law or pursuant to
administrative or legal process.
11.2 Covenants
Regarding Other Employees. During the term of this Agreement, and
for a period of twelve (12) months following the Executives termination of
employment for any reason, the Executive agrees not to actively solicit any
employee of the Company to terminate his or her employment with the Company or
to interfere in a similar manner with the business of the Company.
11.3 Noncompete
Following a Termination of Employment. From the Effective Date of this
Agreement until six (6) months following the Executives Effective Date of
Termination for any reason, the Executive will not: (a) directly or indirectly
own any equity or proprietary interest in (except for ownership of shares in a publicly
traded company not exceeding three percent (3%) of any class of outstanding
securities), or be an employee, agent, director, advisor, or consultant to or
for any competitor of the Company, whether on his own behalf or on behalf of
any person; or (b) undertake any action to induce or cause any customer or
client to discontinue any part of its business with the Company.
11.4 Waiver of Covenants Upon a Change in Control. Upon the occurrence of a Change in
Control, the Executive shall be released from each of the covenants set forth
in Section 11.2 and 11.3, if such Executive is terminated by the Company
without Cause or if the Executive terminates his employment with the Company
for Good Reason.
12. Outplacement Assistance
12.1 Following a termination of employment, other than
for Cause, the Executive shall be reimbursed by the Company for the costs of
all outplacement services obtained by the Executive within the two (2) year
period after the Effective Date of Termination; provided, however, that the
total reimbursement shall be limited to an amount equal to twenty percent (20%)
of the Executives Base Salary as of the effective date of termination.
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13.1 Entire
Agreement. With the exception of the Companys
Proprietary Information and Inventions Agreement previously executed by Executive, this Agreement supersedes any
prior agreements (specifically, the prior employment agreement executed by the
Executive as of January 29, 1996, and
any and all amendments thereto), or understandings, oral or written, between
the parties hereto or between the Executive and the Company, with respect to
the subject matter hereof, and constitutes the entire agreement of the parties with
respect thereto.
13.2 Modification. This
Agreement shall not be varied, altered, modified, canceled, changed, or in any
way amended except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.
13.3 Severability. In
the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and
effect.
13.4 Counterparts. This
Agreement may be executed in one (1) or more counterparts, each of which shall
be deemed to be an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax
Withholding. The Company may withhold from any benefits
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
13.6 Beneficiaries. To
the extend allowed by law, any payments or benefits hereunder due to the
Executive at the time of his death shall nonetheless be paid or provided and
the Executive may designate one or more persons or entities as the primary
and/or contingent beneficiaries of any amounts to be received under this
Agreement. Such designation must be in the form of a signed writing acceptable
to the Board or the Boards designee. The Executive may make or change such
designation at any time.
13.7 Payment
Obligation Absolute. Absent actions deliberately or willfully taken
by the Executive to materially injure the Company, the Companys obligation to
make the payments and the arrangement provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else.
(a) All amounts payable
by the Company hereunder shall be paid without notice or demand. Subject to the
provisions set forth in Sections 7.4 and 7.6, and Article 11, each and
every payment made hereunder by the Company shall be final, and the Company
shall not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reasons whatsoever.
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(b) With the exception
of the Companys willful material breach of its payment obligations under
Articles 7 and 8 of this Agreement (provided, however, that no such breach
shall be deemed to have occurred until the Executive has provided the Board
with written notice of such breach and a reasonable opportunity for cure), the
restrictive covenants contained in Article 11 are independent of any other
contractual obligations in this Agreement or otherwise owed by the Company to
the Executive. Except as provided in this paragraph, the existence of any claim
or cause of action by Executive against the Company, whether based on this
Agreement or otherwise, shall not create a defense to the enforcement by the
Company of any restrictive covenant contained herein.
(c) The Executive shall
not be obligated to seek other employment in mitigation of the amounts payable
or arrangements made under any provision of this Agreement, and the obtaining
of any such other employment shall in no event effect any reduction of the
Companys obligations to make the payments and arrangements required to be made
under this Agreement.
14.1 To the
extent not preempted by federal law, the provisions of this Agreement shall be
construed and enforced in accordance with the laws of the state of New Jersey.
IN WITNESS WHEREOF, the Company, through
its duly authorized representative, and the Executive have executed this
Agreement as of the Effective Date.
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Executive: |
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/s/ Ernest L. Kelly |
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Ernest L. Kelly, Ph.D. |
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Company: |
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Bio-Technology General Corp. |
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By: |
/s/ Sim Fass |
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Sim Fass |
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Chairman & CEO |
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