EXHIBIT 10.22
EMPLOYMENT AGREEMENT
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AGREEMENT dated as of July 28, 1995 by and between MARSAM
PHARMACEUTICALS INC., a Delaware corporation having its principal office at
Building 00, Xxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx (the "Company"), and Xxxxxx
X. Xxxxxx, residing at 0000 Xxx Xxxxx, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (the
"Executive").
The parties are entering into this Agreement to set forth and confirm
their respective rights and obligations with respect to Executive's employment
by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto mutually agree as follows:
1. Employment and Term. (a) The Company hereby employs the Executive as
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president, chief executive officer and chief operating officer of the Company
and, as of the Acquisition Date, the Executive shall be appointed an Executive
Vice President of Schein Pharmaceutical, Inc., a Delaware corporation ("SPI")
(collectively, the "Position"). The Executive agrees to serve in the employ of
the Company in the Position for a term (the "Initial Term") which shall commence
on the date of the acquisition by SPI or a subsidiary of SPI of more than a
majority of the outstanding shares of the common stock of the Company on a
fully-diluted basis (the "Acquisition Date"), and, subject to paragraphs l(b)
and l(c) hereof, shall terminate on the fifth anniversary of the Acquisition
Date.
(b) Unless written notice terminating the term of employment is given by
either the Company or the Executive not less than one hundred eighty (180) days
in advance of the termination date of this Agreement, this Agreement shall be
automatically extended, on all of the terms and conditions hereof, for
additional periods of one-year.
(c) The Company shall have the right to terminate the Executive's
employment hereunder prior to the fifth anniversary of the Acquisition Date, but
only for cause. For purposes of this Agreement, "cause" means (i) the
Executive's willful and continued failure substantially to perform his duties
with the Company or SPI, (ii) fraud, misappropriation or intentional material
damage to the property or business of the Company or SPI or (iii) the
Executive's admission or conviction of, or plea of nolo contendere to, any
felony that, in the judgment of the Board of Directors of the Company (the
"Board"),
adversely affects the Company's reputation or the Executive's ability to carry
out his obligations under this Agreement. The Executive shall not be entitled to
any compensation under this Agreement for any period after such termination
pursuant to this paragraph 1(c) except to the extent the Executive is entitled
to receive benefits under the Plans (as defined herein) following such
termination.
(d) The Executive shall have the right to terminate his employment
hereunder at any time prior to the fifth anniversary of the Acquisition Date.
(e) Anything in this Agreement to the contrary notwithstanding, the
Company, at its option, may retain the Executive as a consultant for a period
(the "advisory period") of one year after (i) the Initial Term (or any extension
under paragraph 1(b) hereof) or (ii) a termination by the Executive pursuant to
paragraph 1(d) hereof, all on the terms and conditions hereinafter provided, in
which event, the Executive shall continue to be bound by the restrictions of
paragraph 7(b) hereof during the advisory period, as if he were an employee for
such period. During the advisory period, the Executive will provide such
advisory services concerning the business, affairs and management of the Company
as may be from time to time requested by the Company, but the Executive shall
not be required to devote more than five (5) days (up to an aggregate of forty
(40) hours) each month to such services, which shall be performed at a time
mutually convenient to both parties. The Company, at its option, may terminate
the advisory period upon not less than thirty (30) days' prior written notice;
provided, that upon termination of the advisory period, the Executive shall no
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longer be bound by the restrictions of paragraph 7(b) hereof. The Executive may,
subject to the restrictions set out in paragraph 7(b) hereof, engage in other
employment during the advisory period, and his advisory services hereunder shall
be required only at times and places consistent with his other employment and
his private activities. During the advisory period, the Company shall pay the
Executive a consulting fee in an amount equal to the Executive's base salary
immediately prior to the termination of employment, payments of such fee to be
made in accordance with the Company's standard payroll policies in effect from
time to time, and provide the Executive and his eligible dependents with health
insurance coverage and disability insurance coverage for the Executive
comparable to coverage while he was an employee hereunder or, at the Company's
option, reimburse the Executive in an amount equal to not more than 125% of the
cost to the Company thereof while an employee during the previous year;
provided, however, that, should the Executive engage in other employment, such
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consulting fee shall be reduced, on a dollar-for-dollar, basis, by an amount
equal to the compensation received by the Executive for such other employment;
and the consulting fee shall be reduced, on a dollar-for-dollar basis, by
compensation paid to the Executive by the Company under paragraph 3(d) hereof
for the
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same period of time. Without limiting the application of any other provision of
this Agreement during the advisory period, the Company expressly confirms that
the provisions of paragraph 4 hereof shall apply during the advisory period.
2. Duties. (a) Subject to the ultimate control and discretion of the
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Board, the Executive shall serve in the Position and perform all duties and
services of an executive nature commensurate with the Position which the Board
may from time to time reasonably assign to him. Except for travel normally
incidental and reasonably necessary to the business of the Company and the
duties of the Executive hereunder, the duties of the Executive shall be
performed in the Cherry Hill, New Jersey area. SPI shall also make available to
the Executive an office for his use in its corporate headquarters.
(b) The Executive shall, consistent with his position as president
and chief executive officer of the Company and executive vice president of SPI,
be responsible for the management of the Company and its organizational
structure, subject to the Board and to the provisions of this Agreement, his
authority to include, without limitation, supplier relationships and salary,
perquisites and, with respect to stock options, (subject additionally to SPI's
Board of Directors) stock options for SPI common stock for the Company's
employees.
(c) The Executive shall, consistent with his position as president
and chief executive officer of the Company and executive vice president of SPI,
be responsible for, and shall co-ordinate, all product development activities
for SPI's and the Company's parenteral products.
(d) The Executive shall, consistent with his position as president
and chief executive officer of the Company and executive vice president of SPI,
be responsible for and shall co-ordinate, all sales and marketing activities for
SPI's and the Company's hospital and home care accounts.
(e) The Executive shall devote all of the Executive's time and
attention during regular business hours to the performance of the Executive's
duties hereunder and, during the term of his employment hereunder, shall not
engage in any other business enterprise which requires the Executive's personal
time or attention, unless granted the prior permission of the Board. The
foregoing shall not prevent the Executive's purchase, ownership or sale of any
interest in, or the Executive's engaging (but not to exceed an average of five
hours per week) in, any business which does not compete with the business of the
Company or SPI or any subsidiary of the Company or SPI or the Executive's
involvement in charitable or community activities, provided, that the time and
attention which the Executive devotes to such business and activities does not
materially interfere with the performance of his duties hereunder.
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(f) The Executive shall be entitled to such personal vacations with
full compensation, and to be taken at such time or times, as the Executive and
the Company shall mutually determine.
3. Compensation. (a) For all services to be rendered by the Executive
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hereunder, the Company shall pay the Executive an annual salary at a rate of not
less than Four Hundred Thousand Dollars ($400,000) per year, plus such other
compensation as may, from time to time, be determined by the Company. Such
salary and other compensation shall be payable in accordance with the Company's
normal payroll practices as in effect from time to time. At the end of each
fiscal year, the Company shall review the Executive's salary level, and shall
increase such level for the following year to such amount as the Board may
determine.
(b) The compensation provided for in paragraph 3(a) above shall be in
addition to such rights as the Executive may have, during the Executive's
employment hereunder or thereafter, to participate in and receive benefits from
or under any bonus, stock option, pension, profit-sharing, insurance or other
employee benefit plan or plans of the Company which may exist now or hereafter
(collectively, the "Plans"). During the period ending on the first anniversary
of the Acquisition Date, the Executive shall have the right, on a basis
reasonably acceptable to the Company and SPI (such acceptance not to be
unreasonably withheld), to elect to participate (with credit to the greatest
extent possible for prior years of service with the Company), to the extent he
is eligible, and subject to applicable law, in one or more SPI benefit plans in
which senior executives of SPI participate, in lieu of one or more Company
benefit plans relating to the same type of benefit.
(c) If the Company terminates the Executive's employment hereunder,
other than in accordance with paragraph 1(c) above, the Company shall continue
to pay the Executive the salary provided in paragraph 3(a) above, in accordance
with the Company's normal payroll practices in effect from time to time, and
provide the Executive and his eligible dependents with health insurance coverage
and disability insurance coverage comparable to coverage while he was an
employee hereunder or, at the Company's option, reimburse the Executive in an
amount equal to not more than 125% of the cost to the Company thereof while an
employee during the previous year, all for the remainder of the Initial Term or
any extension thereof; and the Executive shall have no further or other rights,
and the Company no further or other liabilities or obligations, under this
Agreement.
(d) If the Executive terminates his employment hereunder prior to the
end of the Initial Term under paragraph l(d) above, the Company shall continue
to pay the Executive 50% of the salary provided for in paragraph 3(a) above, in
accordance with the Company's normal practices in effect from time to time,
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and provide the Executive and his eligible dependents with health insurance
coverage and disability insurance coverage comparable to coverage while he was
an employee hereunder or, at the Company's option, reimburse the Executive in an
amount equal to not more than 125% of the cost to the Company thereof while an
employee during the previous year, all for a period beginning on the date of
such termination and ending on the earlier of the third anniversary of the
termination or the fifth anniversary of the Acquisition Date; and the Executive
shall have no further or other rights, and the Company no further or other
liabilities or obligations, under this Agreement.
(e) During any period in which the Company is obligated to pay salary
to the Executive under this paragraph 3 or a consulting fee under paragraph l(e)
of this Agreement, the Company shall provide the Executive with an automobile
or, at the Company's option, an automobile allowance, in accordance with the
Company's policies in effect from time to time.
4. Expenses. The Company shall promptly reimburse the Executive, or
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cause the Executive promptly to be reimbursed, for all reasonable expenses paid
or incurred by the Executive in connection with the performance of the
Executive's duties and responsibilities hereunder, upon presentation of expense
vouchers or other appropriate documentation therefor.
5. Additional Covenants. During the Executive's employment under this
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Agreement, except as otherwise consented to or approved by the Executive and
SPI:
(a) (1) the Board will be comprised of seven members, three to be
designated by the Executive, three to be designated by SPI (the "SPI directors")
and one, who shall be an employee of Bayer Corporation or any of its affiliates
(other than SPI and its subsidiaries), to be designated by SPI, subject to the
approval thereof by the Executive, which approval shall not be unreasonably
withheld (the "Bayer director");
(2) the consent or approval of at least one of the SPI directors
shall be required prior to the Company taking any extraordinary corporate
actions, which, for purposes of this Agreement, shall include, without
limitation, financings; purchases or sales of assets not in the ordinary course
of business; issuances of securities; providing compensation, perquisites or
benefits beyond levels customary in the multisource industry; actions with
respect to the certificate of incorporation or by-laws; reorganizations,
recapitalizations and business combinations; encumbering of assets; and actions
that could result in a violation of agreements relating to indebtedness of SPI
or (with the additional consent or approval of the Bayer director) agreements
between SPI (or any of its affiliates) and Bayer Corporation (or any of its
affiliates);
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(3) after consultation with the other directors, the SPI
directors shall be entitled to authorize and approve, as actions of the Board,
corporate actions not inconsistent with the provisions of this paragraph 5,
including, without limitation, financings; issuances of securities; and
encumbering of assets;
(b) the Executive, having been elected a director of SPI effective
upon the Acquisition Date, shall be included in the slate of SPI's management
nominees for re-election as a director;
(c) neither the Company's name nor logo shall be modified in any way,
and the Company may continue to use its name and logo on product labelling and
the like;
(d) the headquarters of the Company shall remain in Cherry Hill, New
Jersey;
(e) the Company shall not be required to sell products to or
manufacture products for SPI or any SPI affiliate on terms less favorable to the
Company than those the Company provides to unaffiliated customers for similar
purchase quantities; and
(f) the Company shall have funds made available to it to the extent
of "Available Cash", which shall equal: cash on hand at the Company at the
Acquisition Date, plus out-of-pocket transaction costs of the Company paid in
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connection with the acquisition referred to in paragraph l(a), plus 50% of
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Operating Cash Flow (i.e., net income (after taxes, calculated on a stand-alone
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basis) plus depreciation plus amortization plus/less working capital
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decreases/increases less capital expenditures), plus interest income (at 30-day
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LIBOR), less interest expense (at SPI's cost of funds), but only in respect of
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borrowings outstanding when Available Cash is negative, less 50% of negative
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Operating Cash Flow, to the extent of Available Cash, and thereafter 100% of
negative Operating Cash Flow.
6. Indemnification. The Company shall indemnify the Executive, to the
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fullest extent permitted by law, for any and all liabilities to which the
Executive may be subject, as a result of, in connection with or arising out of
his employment by the Company hereunder, as well as the costs and expenses
(including attorneys' fees) of any legal action brought or threatened to be
brought against him or the Company as a result of, in connection with or arising
out of such employment. The Executive shall be entitled to the full protection
of any insurance policies which the Company may elect to maintain generally for
the benefit of its directors and officers.
7. Confidentiality and Non-competition. (a) The Executive shall not use
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or disclose at any time during the
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Executive's employment with the Company, or at any time thereafter, any trade
secret or proprietary or confidential information of the Company or any of its
affiliates.
(b) During the Executive's employment with the Company; during the
advisory period, if any; during the period the Company continues to make
payments under paragraph 3(c) or 3(d) above; and, in the case of termination of
employment under paragraph l(c) above, until the earlier of the sixth
anniversary of the Acquisition Date and the fourth anniversary of such
termination, the Executive shall not be engaged as an officer, director, or
employee of, or in any way be associated in a management or ownership capacity
with, any corporation, partnership or other enterprise or venture which conducts
a business which is in competition with the business of the Company or SPI or
their subsidiaries as at the time of such termination or expiration, provided,
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however, that the Executive may own not more than three percent (3%) of the
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outstanding securities, or equivalent equity interests, of any class of any
corporation or firm which is in competition with the business of the Company or
SPI or their subsidiaries, which securities are listed on a national securities
exchange or traded in the over-the-counter market. The provisions of this
paragraph shall survive the termination or expiration of this Agreement.
8. Representation and Warranty of the Executive. The
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Executive represents and warrants that he is not under any obligation,
contractual or otherwise, to any other firm or corporation, which would
prevent his entry into the employ of the Company or his performance of
the terms of this Agreement.
9. Entire Agreement: Amendment. This Agreement, the
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Compensation Continuation Agreement dated October 19, 1991 (as currently
in effect) and the Split Dollar Insurance Agreement dated March 25, 1991
(as currently in effect) (which Compensation Continuation Agreement and
Split Dollar Insurance Agreement shall continue in effect in accordance
with their terms unless surrendered by the Executive under the last
sentence of paragraph 3(b) hereof) contain the entire agreement between
the Company and the Executive with respect to the subject matter hereof,
and may not be amended, waived, changed, modified or discharged except
by an instrument in writing executed by the parties hereto and SPI.
10. Assignability. The services of the Executive hereunder are
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personal in nature, and neither this Agreement nor the rights or
obligations of the Company hereunder may be assigned by the Company,
whether by operation of law or otherwise, without the Executive's prior
written consent. This Agreement shall be binding upon, and inure to the benefit
of, the Company and its permitted successors and assigns hereunder. This
Agreement shall not be assignable by the Executive, but shall inure to the
benefit of the Executive's heirs, executors, administrators and legal
representatives.
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11. Notice. Any notice which may be given hereunder shall be in writing
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and be deemed given when hand delivered and acknowledged or, if mailed, one day
after mailing by registered or certified mail, return receipt requested, to
either party hereto at their respective addresses stated above, or at such other
address as either party may be similar notice designate.
12. Specific Performance. The parties agree that irreparable damage
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would occur in the event that any of the provisions of paragraph 5 or 7 above
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of paragraph 5 or 7 above and to
enforce specifically the terms and provisions of paragraph 5 or 7 above, this
being in addition to any other remedy to which they are entitled at law or in
equity.
13. No Third Party Beneficiaries. Nothing in this Agreement, express or
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implied, is intended to confer upon any person or entity other than the parties
(and the Executive's heirs, executors, administrators and legal representatives
as provided in paragraph 10 hereof) and SPI any rights or remedies of any nature
under or by reason of this Agreement.
14. Construction. This Agreement shall be governed by and construed in
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accordance with the internal laws of the State of New Jersey, without giving
effect to principles of conflict of laws. All headings in this Agreement have
been inserted solely for convenience of reference only, are not to be considered
a part of this Agreement and shall not affect the interpretation of any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
MARSAM PHARMACEUTICALS INC.
By
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Authorized Signatory
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Xxxxxx X. Xxxxxx
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Schein Pharmaceutical, Inc. hereby agrees, commencing on the Acquisition
Date, to be bound by the provisions of Paragraphs 1, 2(a), 2(b), 2(c), 2(d),
3(b), 5(a), 5(b), 5(c), 5(d), 5(e) and 5(f), to the extent they refer to SPI, of
the foregoing Employment Agreement and to cause the Company to perform the
obligations of the Company under the foregoing Employment Agreement.
SCHEIN PHARMACEUTICAL, INC.
By
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Authorized Signatory
