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Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") dated as of ________ ___,
1996 by and between Xxxxxxx X. XxXxxxx ("Employee"), Oclassen Pharmaceuticals,
Inc., a Delaware corporation ("Company") and Xxxxxx Pharmaceuticals, Inc., a
Delaware corporation ("Xxxxxx"). In consideration of the mutual covenants
contained in this Agreement, the parties, intending to be legally bound, hereby
agree as follows:
1. Employment. Company hereby agrees to continue to employ Employee on
the terms and conditions set forth below for a term commencing effective as of
the date hereof, and Employee accepts such employment. Subject to the provisions
of paragraphs 5 through 8 below, there is no employment term and such employment
shall be at will. Nothing in this Agreement shall constitute a guaranteed term
of employment.
2. Position. Subject to the control and direction of Company's Board of
Directors ("Board") and the President and Chief Executive Officer of the Company
(the "President"), Employee shall perform all reasonable duties and services
incident to his position as Vice President of Sales & Marketing of Company, and
such other reasonable duties and services of an executive nature as may from
time to time be assigned to him by the Board and the President.
3. Loyalty. Employee agrees that during the period of his employment he
will devote his full time and attention during regular business hours to the
business and affairs of Company and its affiliates and will not, without the
prior permission of the Board or the President, engage in any other business
enterprise which requires the personal time or attention of Employee. The
foregoing shall not prevent (i) the purchase, ownership or sale by Employee of
investments or securities of any business which is not competitive and does not
have any business relations with Company, Xxxxxx or any of their Affiliates (as
defined herein) or (ii) the ownership of up to five percent (5%) of the issued
capital stock of any publicly traded company, provided the time or attention
devoted to such activities does not interfere with the performance of his duties
hereunder. Employee further agrees that during the period of his employment, he
will accept such directorships, executive offices and committee memberships in
Company and/or Xxxxxx and their Affiliates to which he may from time to time be
elected and will perform and render the duties and the services incidental
thereto.
4. Compensation. For the full, prompt and faithful performance of all of
the duties and services to be performed by Employee hereunder, Company agrees to
pay, and Employee agrees to accept, the amounts set forth below:
(a) Base Salary. Employee shall receive a salary in the gross
amount of $_______ per month, subject to such adjustments as the Board may, in
its sole discretion, from time to time determine ("Base Salary"). Employee's
Base Salary shall be payable (minus all lawful deductions) in accordance with
Company's and Xxxxxx'x policies regarding payment of salary to executive
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employees generally.
(b) Benefits. Employee shall also receive such other fringe
benefits as are made available to Company's or Xxxxxx'x executives generally. In
addition, Employee may participate in any retirement, profit sharing, incentive,
insurance, major medical, health and hospitalization or similar benefits which
may at any time be available to Company's or Xxxxxx'x executives and employees.
Employee's participation, including eligibility and level of benefits, in all
benefit programs shall be controlled by plan documents, where applicable, or
Company's or Xxxxxx'x policies, practices and procedures where no plan documents
exist; provided, however, that Employee shall be given full credit for
eligibility, vesting or benefit accrual for the period of Employee's service
with Company prior to the Merger (as defined below). Notwithstanding the
foregoing, for a period of six months after the date of this Agreement, Company
shall pay the insurance premiums otherwise payable by Employee with respect to
participation by Employee and his dependents in Company's major medical, health,
hospitalization and other insurance plans in effect as of the date hereof.
(c) Expenses. Company agrees to reimburse Employee for all
reasonable expenses incurred by him in providing services under this Agreement
in accordance with its policies and practices regarding expense reimbursement
then in effect.
(d) Vacation. Employee shall be entitled to four weeks vacation
per year in accordance with Company's policies applicable to its executives
generally, which shall be taken at such time or times as shall be mutually
determined by Company and Employee.
(e) Bonus. Employee may receive a bonus, the amount of which is to
be determined at the end of each calendar year during the Term in the sole
discretion of the Board ("Bonus"). Employee's Bonus, if any, shall be payable
(minus all lawful deductions) in accordance with Company's policies regarding
payment of bonuses to executive employees generally.
(f) Stock Options. Employee shall receive a stock option grant
under the Xxxxxx Pharmaceuticals, Inc. 1991 Stock Option Plan (the "Plan") of
30,000 shares, such grant to be made on the effective date of the merger of
Oclassen Pharmaceuticals, Inc. with Opalacq, Co., a wholly owned subsidiary of
Xxxxxx (the "Merger"), at a price equal to the fair market value of Company's
stock on the date of the grant. Such options shall vest ratably over a five-year
period, subject to certain change-of-control provisions contained in the option
agreement(s). Employee may receive any such additional stock option grants as
are determined by the Compensation Committee of the board of directors of Xxxxxx
in accordance with its policies regarding stock option grants to executive
employees generally.
5. Termination for Death, Disability or Cause. Company may terminate this
Agreement and Employee's employment as follows:
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(a) Death. In the event of the death of Employee, this Agreement
shall terminate as of the date of death, and Company's sole obligation will be
to pay to the estate of Employee Employee's Base Salary then unpaid through his
last day worked.
(b) Disability. In the event that Employee shall, because of
physical or mental illness or incapacity, be unable to perform the duties and
services to be performed by him under this Agreement for a consecutive period of
three months or such shorter periods aggregating three months in any 12-month
period ("Disability"), Company shall not be obligated to pay to Employee any
compensation or benefits beyond the date of Disability or may, in its sole
discretion, terminate this Agreement without any further obligation other than
to pay Base Salary through the date of Disability.
(c) Termination for Cause. Company may terminate Employee's
employment for Cause. In the event Company elects to terminate Employee's
employment for Cause, Company will pay Employee only him then current Base
Salary then unpaid, computed to the last day worked.
"Cause" shall mean:
(i) willful or gross failure by Employee to substantially perform
his reasonable duties as assigned by Company;
(ii) willful misconduct by Employee which is materially injurious
to Company, monetarily or otherwise; or
(iii) The material violation of a federal or state law or
regulation applicable to the business of Company.
(d) Other Termination. In the event Company terminates Employee
for reasons other than death, Disability or Cause, and such termination is not
related to a Change in Control (as defined below), Company will provide to
Employee severance pay by continuing his Base Salary as of his last day worked
for a period of one month for each year Employee has been employed by Company,
to be paid minus all lawful deductions.
6. Voluntary Termination by Employee. Employee may voluntarily terminate
this Agreement and his employment as follows:
(a) Retirement. Termination of Employee's employment based on
"Retirement" shall mean termination in accordance with Company's retirement
policy, including early retirement, generally applicable to its salaried
employees (or, if there is none, the retirement policy of Xxxxxx generally
applicable to its salaried employees).
(b) Resignation. In the event Employee resigns his employment
other than for "Good Reason" as defined below, Company shall only be responsible
for paying Employee Base Salary and fringe benefits through Employee's last day
worked.
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7. Termination Relating To A Change in Control or For Good Reason. In the
event that Employee's employment is terminated due to a Change in Control (as
defined below) or if Employee terminates his employment for Good Reason (as
defined below), Company shall pay Employee the Change in Control Payment (as
defined below).
(a) Termination for Good Reason. Termination by Employee of his
employment for "Good Reason" shall mean (i) a requirement that Employee
relocate, except for office relocations that would not increase Employee's
one-way commute distance by more than twenty-five (25) miles from the most
recent principal residence selected by Employee prior to notice of relocation
and except for required travel on Company and/or Xxxxxx business if such travel
is substantially consistent with Employee's business travel obligations prior to
the date hereof, or (ii) a termination by Employee, within twelve (12) months
after a Change in Control, based on the occurrence, without Employee's express
written consent, of any of the following events:
(A) Any reduction by Company in Employee's Base Salary as in
effect immediately prior to the Change in Control;
(B) The failure by Company or Xxxxxx to continue in effect any
bonus, benefit or compensation plan or arrangement, stock ownership plan,
stock purchase plan, stock option plan, life insurance plan, medical,
health, dental, accident and disability plan in which Employee is
participating at the time of the Change in Control, or plans providing
Employee with substantially similar benefits (collectively, the "Benefit
Plans"), or the taking of any action by Company or Xxxxxx which would
adversely affect Employee's participation in or materially reduce
Employee's benefits under any of such Benefit Plans; provided, however,
that the amendment, modification or termination of any Benefit Plan as in
effect at the time of a Change in Control on a basis which does not
discriminate against Employee, or a class of employees of which Employee
is a member (as opposed to all participants in such Benefit Plan), shall
not constitute "Good Reason" for the termination by Employee of his
employment pursuant to the terms of this paragraph 7;
(C) Any material breach by Company or Xxxxxx of any provision of
this Agreement; or
(D) The failure by Company or Xxxxxx to obtain the assumption of
this Agreement by any successor or assign of Company or Xxxxxx, as the
case may be.
(b) Change in Control. For purposes of this Agreement, a "Change
in Control" shall mean the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended [the "Exchange Act"]) (collectively, a "person") of
Beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of twenty (20%)
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percent or more of the then outstanding shares of common stock of Xxxxxx
(collectively, the "Outstanding Common Stock"); provided, however, that
the following shall not constitute a Change of Control:
(A) Any acquisition directly from Xxxxxx (excluding an
acquisition by virtue of the exercise of a conversion privilege);
(B) Any acquisition by an Underwriter (as such term is
defined in Section 2(11) of the Securities Act of 1933, as
amended) for the purpose of making a public offering;
(C) Any acquisition by Xxxxxx; or
(D) Any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Company or Xxxxxx or any
corporation controlled by Company or Xxxxxx;
(ii) The liquidation of all or substantially all of the assets of
Company or Xxxxxx; or
(iii) If within two (2) years of:
(A) The completion of a tender offer or exchange offer
for the voting stock of Xxxxxx (other than a tender offer or
exchange offer by Xxxxxx) or a proxy contest in connection with
the election of members of the Board;
(B) A merger, consolidation, transfer or sale of twenty
percent (20%) of the book value of the gross assets of Xxxxxx
measured at the time of such merger, consolidation, transfer or
sale in one (1) or more transactions;
(C) The acquisition by any person, directly or
indirectly, of the Beneficial Ownership of securities of Xxxxxx
representing twenty percent (20%) of the Outstanding Common Stock;
or
(D) Any combination of the foregoing;
Xx. Xxxxx Xxxx is not a member of the Board of Directors of Xxxxxx and a
majority of the Board of Directors of Xxxxxx shall not consist of:
(I) Persons who were directors of Xxxxxx on
the date hereof; or
(II) Persons who were elected or nominated
for election as
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directors with the approval of a majority of the persons referred
to in paragraph 7(e)(iii)(D)(I) above or persons theretofore
elected in accordance with this paragraph 7(e)(iii)(D)(II).
(c) Change in Control Payment. If Employee's employment shall be
terminated by Company (other than for Cause, Disability, Retirement or death)
due to a Change in Control or by Employee for Good Reason, then Employee shall
be entitled to a lump sum payment in a gross amount equal to Employee's Base
Salary for a period of one month for each year Employee has been employed by
Company (minus all lawful deductions).
(d) No Mitigation. Employee shall not be required to mitigate the
amount of any payment contemplated by this paragraph 7 (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that Employee may receive from any other source.
(e) Oclassen Merger. Notwithstanding the foregoing, paragraph 7 of
this Agreement shall not apply as a result of the merger between Company and
Opalacq Co. ("Opalacq") pursuant to the terms of an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of the date hereof, among Xxxxxx, Company and
Opalacq.
8. Severance Arrangements. If Employee's employment is terminated by
Company (other than for Cause, Disability or death) or by Employee for Good
Reason and the date of such termination occurs prior to December 14, 1999,
Company and Employee shall enter into a consulting agreement (the "Consulting
Agreement") pursuant to which (a) all options granted to Employee prior to the
Merger and assumed by Xxxxxx in connection with the Merger shall continue to
vest in accordance with the terms thereof, (b) all unvested options granted to
Employee pursuant to Section 4(f) hereof shall terminate in accordance with the
terms of the Plan, (c) Employee shall agree to provide up to 10 hours per month
of consulting services to Company or Xxxxxx without charge during the term of
the Consulting Agreement, and (d) Employee may provide additional consulting
services to Company or Xxxxxx on terms (including payment terms) and at times
agreed upon by Employee and Company or Xxxxxx, as the case may be. The
Consulting Agreement will terminate on December 14, 1999.
9. Inventions. Employee will, during the period of his employment,
disclose to Company promptly and fully all Inventions made or conceived by him
(either solely or jointly with others) including but not limited to Inventions
which relate to the business of Company and Xxxxxx or Company's and Xxxxxx'x
actual or anticipated research or development, or result from any work performed
by him for Company or Xxxxxx. All Inventions and all records related to
Inventions, whether or not patentable, shall be and remain the sole and
exclusive property of Company. "Inventions" means all inventions, discoveries,
processes, improvements, developments and ideas, and all know-how related
hereto. Employee hereby assigns and agrees to assign to Company all his rights
to Inventions and any patents, trademarks, or copyrights which may be issued in
respect to Inventions. Employee acknowledges that all work shall be work made
for hire. During and
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after his employment, Employee will assist Company and Xxxxxx, as the case may
be, without charge to Company or Xxxxxx but at either of their request and
expense, to obtain and retain rights in Inventions, and will execute all
appropriate documents at the request of Company or Xxxxxx.
Employee understands that this paragraph 9 shall not apply to any
invention for which no equipment, supplies, facilities, trade secret, or other
confidential information of Company or Xxxxxx was used and which was developed
entirely on his own time, and does not relate to the business of Company, its
actual or anticipated research, and does not result from any work performed by
him for Company or Xxxxxx.
10. Non-Solicitation. Employee agrees that during the Term of his
employment under this Agreement, and thereafter until the later of (i) the
termination of the Consulting Agreement described in Section 8 hereof or (ii)
nine months after termination of Employee's employment with Company, he will
not, directly or indirectly:
(i) Employ, hire, engage or be associated with any employee or
other person then or during any part of the preceding twelve (12) months
connected with Company, Xxxxxx or any of their Affiliates (as defined
herein);
(ii) Induce any person connected with or employed by Company,
Xxxxxx or any of its Affiliates to leave the employ of such entities; or
(iii) Solicit the employment of any such person on his own behalf
or on behalf of any other business enterprise.
The provisions of this paragraph 10 shall survive the termination
or expiration of this Agreement.
11. Non-Competition. As an inducement for Xxxxxx to enter into the Merger
Agreement, issue shares of common stock of Xxxxxx in exchange for all of the
shares of capital stock of Company owned by Employee and in consideration of
Xxxxxx entering into this Agreement, including, without limitation, the
provisions relating to severance benefits contained in paragraphs 5, 7 and 8
hereof, Employee agrees that:
(a) from and after the date hereof and continuing for the lesser
of (i) the longest time permitted by applicable law, or (ii) the later of
(1) the termination of the Consulting Agreement described in Section 8
hereof or (2) nine months after termination of Employee's employment with
Company and/or Xxxxxx (the "Restrictive Period"), Employee shall not do
any one or more of the following, directly or indirectly:
(A) anywhere in the United States, its territories or
possessions or any other country in the world where Company has
sold products within the twelve (12)
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month period prior to the date hereof, engage or participate in,
or assist, advise or be connected with (including as an owner,
partner, shareholder, consultant, director, officer or employee or
(without limitation by the specific enumeration of the foregoing)
otherwise) any person, entity or business enterprise involved in
the development, manufacture, sale or marketing of dermatological
products for the treatment of skin disease; provided, however,
that the ownership of up to five percent (5%) of the issued
capital stock of any publicly traded company by itself shall not
constitute a violation of any provision of this paragraph 11; or
(B) solicit, attempt to solicit or aid in the
solicitation of any customer of Company which has been a customer
of Company during the Restrictive Period or within the twelve (12)
month period prior to the date hereof, to purchase from any source
other than Company, Xxxxxx or their Affiliates any product or
service which could be supplied or performed, as the case may be,
by Company, Xxxxxx or any of their Affiliates.
As used herein, an "Affiliate" shall mean and include any person or entity which
controls a party, which such party controls or which is under common control
with such party. "Control" means the power, direct or indirect, to direct or
cause the direction of the management and policies of a person or entity through
voting securities, contract or otherwise. The provisions of this paragraph 11
shall survive the termination of this Agreement.
12. Confidential Information. Employee recognizes and acknowledges that
various kinds of confidential and proprietary information and trade secrets,
including but not limited to product specifications and lists of Company's and
Xxxxxx'x customers and vendors, as they may exist from time to time, are
valuable, special and unique assets of Company's and Xxxxxx'x business. Employee
will not, during or after his employment, except in accordance with his
employment by Company and Xxxxxx, disclose or cause or permit to be disclosed
any confidential or proprietary information or trade secrets of Company or
Xxxxxx to any person, firm, corporation, association or other entity for any
reason or purpose whatsoever without the prior written consent of Company or as
otherwise be required by law or legal process. The provisions of this paragraph
12 shall survive the termination of this Agreement.
13. Remedies. In the event that Employee shall violate any provision of
paragraphs 9, 10, 11 or 12 above, then Employee hereby agrees that Company
and/or Xxxxxx shall be entitled to a temporary or permanent injunction against
him by any court of competent jurisdiction prohibiting him from violating such
provision. In any proceeding for an injunction and upon any motion for a
temporary or permanent injunction, Employee agrees that his ability to answer in
damages shall not be a bar or interposed as a defense to the granting of such
temporary or permanent injunction against Employee. Employee further agrees that
Company and/or Xxxxxx will not have an adequate remedy at law in the event of
any breach by Employee hereunder and that Company and/or Xxxxxx will suffer
irreparable damage and injury if Employee breaches any of the provisions of
paragraphs 9 through 12 above. The provisions of this paragraph 13 shall survive
the termination or expiration of this Agreement.
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14. Notices. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
received at the address specified herein. In the case of Employee, notices shall
be delivered to him at the home address which he has most recently communicated
to Company in writing. In the case of Company or Xxxxxx, notices shall be
delivered to Xxxxxx'x corporate headquarters, and all notices shall be directed
to the attention of its Chairman.
15. Modification and Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by Employee and by an authorized officer of
Company (other than Employee) and Xxxxxx. No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
16. Complete Agreement. This Agreement supersedes all previous agreements
between Xxxxxx and Company, on one hand, and Employee, on the other hand, with
respect to the subject matter hereof. No agreements, representations or
understandings (whether oral or written and whether expressed or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
17. No Assignment. No right, benefit or interest hereunder, shall be
subject to anticipation, alienation, sale, assignment, encumbrance, charge,
pledge, hypothecation, or set-off in respect of any claim, debt or obligation,
or to execution, attachment, levy or similar process, or assignment by operation
of law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
18. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with and subject to, the laws of the State of California
applicable to Agreements made and to be performed entirely within such State, as
to all matters governed by state law or, if controlling, by applicable federal
law.
19. Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
20. Guarantee. Xxxxxx hereby agrees to guarantee all payments due to
Employee hereunder by Company.
21. Arbitration. Except as otherwise provided above, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Orange County, California. Selection of the
arbitrator and conduct of the arbitration shall be in accordance with the
commercial arbitration rules of the American Arbitration Association then in
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effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded. Each party shall bear its
own costs and legal fees in any arbitration. The cost of the arbitrator and
related expenses shall be shared equally by the parties.
22. Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes, unless specifically set forth herein
to the contrary.
23. 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 (1) and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of Company by its duly authorized officer, as of the day and year first
above written.
XXXXXX PHARMACEUTICALS, INC. OCLASSEN PHARMACEUTICALS, INC.
By: ______________________________ By:________________________________
Its:______________________________ Its:________________________________
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Xxxxxxx X. XxXxxxx
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