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Exhibit 10.17
SEVERANCE AGREEMENT
Severance Agreement made as of April 17, 1998, between Xxxxx Labs,
Inc. (the "Company") and Xxxx X. Xxxxxxx (the "Employee").
WHEREAS, the Employee is presently employed by the Company as its
President and Chief Executive Officer;
WHEREAS, the Board of Directors of the Company (the "Board") desires
to provide this Agreement to the Employee in recognition of the extraordinary
efforts made by the Employee on behalf of the Company and as additional
compensation for the valuable services rendered and to be rendered by the
Employee to the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following
terms shall have the meanings specified in this Section unless the context
clearly otherwise requires:
(a) "Annual Base Salary" shall mean twelve times the highest monthly
base salary paid (including any base salary which has been earned but deferred
and including salary reductions under employee benefit plans) to the Employee by
the Company and its Affiliates during the twelve-month period immediately
preceding the date of the Employee's Termination of Employment.
(b) "Affiliate" shall mean any entity directly or indirectly
controlled by, controlling or under common control with the Company.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean (i) misappropriation of funds, (ii) habitual
insobriety or substance abuse while performing duties for the Company, (iii)
conviction of a felony involving moral turpitude, or (iv) gross negligence in
the performance of duties, which gross negligence has had a material adverse
effect on the business, operations or financial condition of the Company and its
Affiliates taken as a whole.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
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(f) "Company" shall mean Xxxxx Labs, Inc. and any successor to its
business or assets.
(g) "Disability" shall mean the Employee has had a continuous
illness, injury or incapacity for a period of six consecutive months that
prevents him from carrying out the responsibilities of his position with the
Company or the Board otherwise determines that the Employee has incurred a
long-term disability.
(h) "Separation Period" shall mean the two-year period beginning on
the date of the Employee's Termination of Employment.
(i) "Termination Date" shall mean the date of receipt of the Notice
of Termination described in Section 2 hereof or any later date specified
therein, as the case may be.
(j) "Termination of Employment" shall mean a termination of the
Employee's employment with the Company and its Affiliates either (x) on account
of the Employee's death or Disability or (y) under any of the following
circumstances that occur after or in connection with a substantial acquisition
by the Company, a merger or consolidation involving the Company, a liquidation
of the Company or a change of control of the Company (as determined under the
Xxxxx Labs, Inc. 1995 Stock Option Plan) after the date of this Agreement:
(A) A termination of employment initiated by the Company for
any reason other than Cause;
(B) A termination of employment, initiated by the Employee
upon one or more of the following occurrences (other than for
Cause):
(i) any failure of the Company to comply with any of the
terms of this Agreement;
(ii) any change resulting in a significant reduction by
the Company of the authority, duties, compensation or
responsibilities of the Employee;
(iii) any reduction in the Employee's base salary; or
(iv) any requirement that the Employee move his
principal place of business more than 25 miles from the
Company's headquarters as of the effective date of this
Agreement.
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2. Notice of Termination. Any Termination of Employment (other than
on account of death) shall be communicated by a Notice of Termination to the
other party hereto given in accordance with Section 14. For purposes of this
Agreement, a "Notice of Termination" means a written notice which indicates that
the Employee's employment will terminate and, if the Termination Date is other
than the date of receipt of such notice, specifies the Termination Date (which
date shall not be more than 15 days after the giving of such notice).
3. Compensation Upon Termination of Employment. In the event of the
Employee's Termination of Employment, the Company shall pay or provide to the
Employee (or, in the event of the Employee's death, to the Employee's estate),
the following:
(i) The Employee's earned but unpaid compensation as of the
Termination Date and the benefits, if any, to which the Employee is
entitled as a former employee under the employee benefit programs
and compensation plans maintained for the benefit of the Company's
officers and employees.
(ii) A lump sum cash payment on the Termination Date equal to
the Annual Base Salary the Employee would have earned if the
Employee had continued working for the Company during the Separation
Period.
(iii) Continued group hospitalization, health care and
dental care coverage for the Employee and his spouse and dependents,
if any, while living during the Separation Period, with coverage
equivalent to the coverage to which the Employee and his spouse and
dependents, if any, would have been entitled had the Employee
continued working for the Company during the Separation Period at
his Annual Base Salary, based on the Company's benefit plans in
effect at the Termination Date; provided that, in lieu of continuing
the Employee and his spouse and dependents, if any, in the Company's
benefit plans, the Company may pay to the Employee a lump sum cash
payment, on the Termination Date, equal to the cost (including tax
costs) to the Employee of acquiring and maintaining such coverage
for the Separation Period; and further provided that the COBRA
health continuation coverage period under Section 4980B of the Code
shall begin at the end of the Separation Period.
(iv) All options to purchase stock of the Company that are
held by the Employee and that have not previously vested shall be
fully vested as of the Employee's Termination of Employment. The
Employee's outstanding stock options may be exercised during the
three-year period following the date on which the Employee is no
longer an employee or a
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member of the Board (or, in the case of options granted under the
Xxxxx Labs, Inc. 1995 Stock Option Plan, such longer period as may
be specified in the Plan in the case of retirement approved by the
Company, if the Employee is eligible for retirement), but not later
than the expiration of the option term.
(v) The Company shall reimburse the Employee for the cost of $10,000
of outplacement services, or the Employee may elect to receive an
immediate $10,000 cash payment from the Company at or after the
Termination Date in lieu of such outplacement services. As an
alternative, the Employee may elect to receive a combination of
reimbursement for outplacement services and a cash payment, with the
total value of the reimbursement and payment equaling $10,000. All
reimbursements and payments under this subsection (v) shall be
accompanied by an additional cash payment from the Company in an
amount that covers the federal, state, local and other taxes imposed
on the Employee as a result of the reimbursements and payments under
this subsection (v).
4. Other Payments. The severance compensation due under Section 3
shall be in addition to and not in lieu of any payments or benefits due to the
Employee under any other plan, policy or program of the Company, except that no
payments shall be due to the Employee under the Company's severance pay plan
then in effect for employees, if any.
5. Term of Agreement. The term of this Agreement shall be for five
years from the date of this Agreement and shall be automatically renewed for
successive one-year periods unless the Company notifies the Employee in writing
that this Agreement will not be renewed at least 60 days prior to the end of the
then current term; provided, however, that (a) in the event of a Termination of
Employment, this Agreement shall remain in effect until all of the obligations
of the Company hereunder are satisfied or have expired, and (b) this Agreement
shall terminate if the Employee's employment with the Company and its Affiliates
shall terminate for any reason other than a Termination of Employment.
6. Enforcement.
(a) In the event that the Company shall fail or refuse to make
payment of any amounts due the Employee under this Agreement within the time
periods provided therein, the Company shall pay to the Employee, in addition to
the payment of any other sums provided in this Agreement, interest, compounded
daily, on any amount remaining unpaid from the date payment is required under
this Agreement, until paid to the Employee, at the rate from time to time
announced by First Union Bank as its "prime rate"
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plus 2%, each change in such rate to take effect on the effective date of the
change in such prime rate.
(b) It is the intent of the parties that the Employee not be
required to incur any expenses associated with the enforcement of his rights
under this Agreement by arbitration, litigation or other legal action because
the cost and expense thereof would substantially detract from the benefits
intended to be extended to the Employee hereunder. Accordingly, the Company
shall pay the Employee on demand the amount necessary to reimburse the Employee
in full for all expenses (including without limitation all attorneys' fees and
legal expenses) incurred by the Employee in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in or rights
under any benefit, bonus, incentive or other plan or program provided by the
Company or any of its Affiliates and for which the Employee may qualify, except
as provided in Section 4 above.
9. No Set-Off. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others.
10. Taxes. Any payment required under this Agreement shall be
subject to all requirements of applicable law with regard to federal, state,
local and other withholding of taxes.
11. Parachute Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the Company shall pay the Employee an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Employee, after deduction of any excise tax imposed under Section 4999 of
the Code, and any federal, state and local income and employment tax and excise
taxes imposed upon the Gross-Up Payment, shall be equal to the Payment.
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For purposes of determining the amount of the Gross-Up Payment, the Employee
shall be deemed to pay federal income tax and employment taxes at the highest
marginal rate of federal income and employment taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Employee's
residence on the Termination Date, net of the maximum reduction in federal
income taxes that may be obtained from the deduction of such state and local
taxes.
(b) The Employee may have an independent public accountant selected
by the Employee (the "Accounting Firm") determine whether and to what extent the
excise tax under Section 4999 of the Code is applicable to any Payment. If the
Accounting Firm determines that an excise tax is payable, the Company shall pay
to the Employee such amounts as are then due to the Employee under this Section
11, based on the Accounting Firm's determination. Payment shall be made within
five days after the Employee notifies the Company of the Accounting Firm's
determination and requests payment.
(c) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Payment or Gross-Up
Payment, a change is finally determined to be required in the amount of taxes
paid by the Employee, the Company shall pay to the Employee a sufficient amount
(or the Employee shall reimburse the Company for the amount of any overpayment,
if an overpayment shall have been made by the Company) such that the net amount
which is payable to the Employee after taking into account the provisions of
Section 4999 of the Code shall reflect the intent of the parties as expressed in
subsection (a) above. The Accounting Firm shall determine the amount of any such
payment to be made, and the payment shall be made within five days after the
Employee or the Company (as the case may be) requests payment. The payment shall
include, without limitation, any interest and penalties imposed on the Employee
as a result of the imposition of tax under Section 4999 of the Code.
(d) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in subsections (b) and (c) above shall
be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Arbitration; Expenses.
(a) In the event of any dispute under the provisions of this
Agreement, either party shall have the right to have such dispute, controversy
or claim to be settled by arbitration in Bucks County, Pennsylvania, in
accordance with the commercial arbitration rules then in effect of the American
Arbitration Association, before a panel of three
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arbitrators, one of whom shall be selected by the Company, one of whom shall be
selected by the Employee, and the third of whom shall be selected by the other
two arbitrators. Any award entered by the arbitrators shall be final, binding
and nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable. The party or parties bringing the
challenge under this Agreement shall in all circumstances have the burden of
proof.
(b) In the event of an arbitration or lawsuit by either party to
enforce the provisions of this Agreement, Employee shall be entitled to recover
reasonable costs, attorney's fees and other expenses from the Company pursuant
to Section 6(b).
13. Successor Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Employee, to acknowledge expressly
that this Agreement is binding upon and enforceable against the Company in
accordance with the terms hereof, and to become jointly and severally obligated
with the Company to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effective date of any such succession shall be a breach of this Agreement. As
used in this Agreement, the Company shall mean the Company as hereinbefore
defined and any such successors to its business or assets, jointly and
severally.
14. Notice. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
If to the Company, to:
Xxxxx Labs, Inc.
Attn: Chairman of the Compensation Committee
0 Xxxxx Xxxxx
Xxxxxxx, XX 00000
If to the Employee, to:
Xxxx X. Xxxxxxx
0000 Xxxxx Xxxx
Xxxxxxxx, XX 00000
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or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party in the manner specified in
this Section; provided, however, that if no such notice is given by the Company,
notice at the last address of the Company or to any successor pursuant to
Section 13 shall be deemed sufficient for the purposes hereof. Any such notice
shall be deemed delivered and effective when received in the case of personal
delivery, five days after deposit, postage prepaid, with the U.S. Postal Service
in the case of registered or certified mail, or on the next business day in the
case of overnight express courier service.
15. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania without giving
effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties with respect to the subject matter
hereof and cannot be changed, modified, extended or terminated except upon
written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by the Chairman of the Compensation Committee
of the Board. The provisions of this Agreement may provide for payments to the
Employee under certain compensation or benefit plans or agreements under
circumstances where such plans or agreements would not provide for payment
thereof. It is the specific intention of the parties that the provisions of this
Agreement shall supersede any provisions to the contrary in such plans or
agreements, and such plans or agreements shall be deemed to have been amended to
correspond with this Agreement without further action by the Company or the
Board.
(b) Nothing in this Agreement shall be construed as giving the
Employee any right to be retained in the employ of the Company.
(c) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, representatives, successors and assigns of the parties hereto, except
that the duties and responsibilities of the Employee and the Company hereunder
shall not be assignable in whole or in part by the Company. Any payments to be
made to the Employee after his death shall be made to the personal
representative of his estate.
17. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
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18. Remedies Cumulative; No Waiver. No right conferred upon the
Employee by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, including, without limitation, any delay by the
Employee in requesting payment under Section 11 or any delay by the Employee in
delivering a Notice of Termination pursuant to Section 2 after an event has
occurred which would, if the Employee had resigned, have constituted a
Termination of Employment pursuant to Section 1(j) of this Agreement.
19. Miscellaneous. All section headings are for convenience only.
This Agreement may be executed in several counterparts, each of which is an
original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
Attest: XXXXX LABS, INC.
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxxxxxxx X. Xxxxxxx
__________________________ By: ________________________________________
Secretary Chairman, Compensation Committee
of the Board of Directors
__________________________
Date
/s/ Xxxx X. Xxxxxxx
__________________________ ____________________________________________
Witness Xxxx X. Xxxxxxx
__________________________
Date
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