SEVERANCE AGREEMENT
AGREEMENT made as of the 22nd day of December, 1997 by and between
Sheffield Pharmaceuticals, Inc., a Delaware corporation with its principal
offices at 000 Xxxxx Xxxxxxxxx Xxxx, Xx Xxxxx, Xxxxxxxx 00000-0000 (the
"Company"), and Xxxxxxx Xxxx residing at 4135 Ventura, Xxxxxxx Xxxxx, Xxxxxxx
00000 (the "Employee").
RECITALS
WHEREAS, the Company entered into an employment agreement dated as of
October 1, 1995 with the Employee relating to the employment of the Employee as
an executive officer of the Company, which employment (such employment
agreement, as it may have been amended, being the Employment Agreement"); and
WHEREAS, the Company and the Employee have agreed upon the terms of the
Employee's resignation as an officer and an employee of the Company and desire
to evidence such terms in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. RESIGNATION. The Employee hereby resigns as an officer of the
Company and as Chairman of the Board of Directors of the Company effective as of
the date hereof. The Employee hereby resigns as an employee of the Company and
its subsidiaries effective as of January 1, 1998.
2. SEVERANCE. The Company shall pay the Employee severance payments
totaling $135,000 payable in six equal installments of $22,500 commencing with
the first installment to be paid on January 31, 1998 and with each subsequent
installment to be paid monthly thereafter on the last day of each calendar
month. The Company shall deduct (and shall therefor not pay to the Employee)
$2,500 from each such installment, which deducted amounts shall be applied to
reduce outstanding amounts due to the Company under the promissory note of the
Employee dated April 4, 1997 issued to the Company in the original principal
amount of $80,000 (the "$80,000 Note"). The $2,500 deductions shall be applied
first to the reduction of outstanding principal and then to the reduction of
outstanding interest and any other amounts payable under the $80,000 Note.
Company and Employee acknowledge that $80,000.00 principal amount and $ 4,593.97
of accrued interest remain outstanding under the $80,000 Note on the date
hereof. In the event of the occurrence of a Change of Control, the remaining
balance of the $135,000 in severance payments shall become immediately due and
payable by the Company. As used in this paragraph, "Change of Control" means (i)
the sale, lease, exchange
or other transfer of all or substantially all (50% or more) of the consolidated
assets of the Company to any person or entity or group of persons or entities
acting in concert as a partnership or other group (a "Group of Persons") or (ii)
the merger, consolidation or other business combination of the Company with or
into another corporation with the effect that the shareholders of the Company
immediately following the merger, consolidation or other business combination
hold 50% or less of the combined voting power of the then outstanding securities
of the surviving corporation of such merger, consolidation or other business
combination having the right to vote in the election of directors. The Employee
confirms that except as set forth in this Agreement, the Company has no
obligations to make any payments to the Employee of any nature.
3. NOTE SATISFACTION. (a) Employee agrees to tender and assign to the
Company a stock certificate representing 10,200 shares of the Company's common
stock within 10 days of the date hereof. Such certificate shall be freely
tradeable (without transfer restrictions). Such stock certificate shall be
delivered by Employee with stock powers executed in blank covering the shares
represented by such certificate. The delivery of such stock certificate by
Employee shall constitute the Employee's representation and warranty that the
shares of common stock represented by such certificate are owned by the Employee
free and clear of any liens or encumbrances. Upon the delivery of such stock
certificate, the Employee's obligations under the promissory note of the
Employee dated July 31, 1996 issued to the Company in the remaining principal
amount of $20,000 shall be deemed satisfied in full.
(b) In the event that the Company fails to pay any installment
of the severance payment when due under paragraph 2 above, the remaining amounts
of principal and interest payable under the Note will automatically be reduced
by 25% for each full ten (10) day period that such failure to timely pay
continues after such due date.
4. BOARD MEMBERSHIP. The Employee agrees not to seek election as a
director of the Company at the next annual meeting of the stockholders of the
Company. The Company acknowledges that the Employee is under no contractual
obligation to continue as a director of the Company and has the right to resign
as a director of the Company at any time.
5. SATISFACTION OF EMPLOYMENT AGREEMENT. The Employee acknowledges that
the Company has no further obligations to Employee under the Employment
Agreement.
6. AMENDMENT AND RESTATEMENT OF NOTE. Upon the execution of this
Agreement by the Employee and the delivery of the stock certificate representing
10,200 shares of the Company's common stock pursuant to paragraph 3 above, the
Company agrees to the
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amendment and restatement of the $80,000 Note, effective as of the date hereof,
to provide (a) for the payment of the outstanding principal amount thereof
(after the deductions from the severance payments pursuant to paragraph 2 above)
in six equal installments on the last day of each March, June, September and
December commencing September 30, 1998, together with accrued interest, with any
remaining outstanding principal and accrued interest on the $80,000 Note
becoming due and payable on December 31, 1999 (b) for default interest upon the
failure to timely repay any amount payable by the Employee under the amended and
restated $80,000 Note at an interest rate of 15% per annum and (c) prepayment of
the $80,000 Note without prepayment penalty or premium. Except as provided in
the preceding sentence, the $80,000 Note will remain unchanged. The Company
agrees to promptly prepare and deliver to the Employee for his execution amended
and restated $80,000 Note reflecting the above-mentioned amendments and the
Employee agrees to promptly execute and return to the Company such amended and
restated $80,000 Note.
7. PLEDGE OF STOCK. Within 15 days of the date hereof, Employee will
transfer 30,000 shares of freely tradeable (without transfer restrictions)
common stock of the Company to an account with Xxxxxxx Xxxxx. At the time of
such transfer, such shares shall be owned by the Employee free and clear of any
liens or encumbrances. The Employee will execute a letter in the form attached
hereto as Exhibit A, will cause an authorized representative of Xxxxxxx Xxxxx to
execute such letter and shall deliver such letter (executed by the Employee and
by an authorized officer on behalf of Xxxxxxx Xxxxx) within 15 days of the date
hereof.
8. CONFIDENTIALITY. (a) The Employee agrees to hold in a fiduciary
capacity for the benefit of the Company and its subsidiaries all information
developed or originated by the Company (or by the Employee on behalf of the
Company) concerning the Company that is confidential or proprietary, including
without limitation, financial, technology development and other business
information, contracts, trade secrets and patent and trademark information
("Confidential Information"), and he shall not, at any time during the two year
period following the date of this Agreement, use, disclose or divulge any
Confidential Information to any person, firm, corporation or other entity other
than to the Company and its subsidiaries or their respective designees.
(b) Notwithstanding anything to the contrary
contained herein, the Employee's obligations under paragraph 8(a) hereof shall
not apply to any information which:
(i) is or becomes available to the public other than as a
result of wrongful disclosure by the Employee;
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(ii) becomes available to the Employee subsequent to his
employment by the Company on a nonconfidential basis from a source
other than the Company or its agents which source has a right to
disclose such information; or
(iii) results from research and development and/or commercial
operations at any time by or on behalf of any person, company or other
entity with which or with whom the Employee shall become associated (in
a manner consistent with the terms of this Agreement) subsequent to his
employment by the Company or its agents totally independent from any
disclosure from the Company or its agents.
(c) Notwithstanding anything to the contrary
contained in this paragraph 8, in the event that the Employee becomes legally
compelled to disclose any Confidential Information, the Employee will provide
the Company with prompt notice so that the Company may seek a protective order
or other appropriate remedy. In the event that such protective order or other
remedy is not obtained, the Employee shall furnish only such Confidential
Information which is legally required to be disclosed.
9. INDEMNITY. The Company agrees to indemnify the Employee in the event
that he is a party or is threatened to be made a party to any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that the Employee was an
officer or director of the Company against all out-of-pocket expenses (including
reasonable attorney's fees and disbursements), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the Employee in connection
with the action or proceeding, PROVIDED that his actions did not involve willful
misconduct or gross negligence. The Employee shall not settle any action or
proceeding subject to indemnification under this paragraph 9 without the prior
written consent of the Company, which consent shall not be unreasonably
withheld.
10. RELEASES. (a) The Employee hereby releases and discharges the
Company and all of its directors, officers, employees, agents, subsidiaries and
affiliates and its successors and assigns from any and all claims, actions,
suits, debts, accounts, contracts, agreements, damages, judgments and demands
whatsoever, in law or equity, that the Employee ever had, now has or hereafter
can, shall or may, have for, upon, or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the date of this Agreement.
Notwithstanding the foregoing, this release shall not apply to any rights that
the Employee has under this Agreement. This release is irrevocable and may not
be changed orally.
(b) The Company hereby releases and discharges the Employee
and his successors and assigns from any and all claims,
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actions, suits, debts, accounts, contracts, agreements, damages, judgments and
demands whatsoever, in law or equity, that the Company ever had, now has or
hereafter can, shall or may, have for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the date of this
Agreement. Notwithstanding the foregoing, this release shall not apply to (i)
any rights that the Company has under (i) this Agreement, (ii) the $80,000 Note
and (iii) the Pledge Agreement dated April 4, 1997 made by the Employee to the
Company. This release is irrevocable and may not be changed orally.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
12. MISCELLANEOUS. (a) The Company confirms that there are currently
outstanding stock options evidenced by written agreements that provide the
Employee with the right to acquire 500,000 shares of the Company's common stock,
which agreements provide for a term of exercise of such options ending in 2002.
(b) The Employee confirms that he has consulted with his own
attorney regarding his rights and obligations under this Agreement prior to
executing this Agreement.
(c) If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any court of competent jurisdiction, the
remaining provisions of this Agreement shall remain in full force and effect
provided that the economic and legal substance of the transactions contemplated
is not affected in any manner adverse to any party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
SHEFFIELD PHARMACEUTICALS, INC.
By:
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Xxxxx X. Xxxxxxxx, CEO
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XXXXXXX X. XXXX
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Exhibit A to Severance
Agreement
SHEFFIELD PHARMACEUTICALS,INC.
000 XXXXXXXXX XXXX, XXXXX 000
XX. XXXXX, XXXXXXXX 00000-0000
(000) 000-0000
[Date]
[XXXXXXX XXXXX]
[Address]
Attention: __________
You are hereby advised that Xxxxxxx X. Xxxx ("Xxxx") has
granted Sheffield Pharmaceuticals, Inc. ("Sheffield") a first priority security
interest in 30,000 shares of common stock, par value $.01 per share, of
Sheffield ("Common Stock") held in his name in account no. ______________ (the
"Xxxx Account") at [Xxxxxxx Xxxxx] ("Xxxxxxx Xxxxx") as security for a loan made
by Sheffield to Xxxx.
By signing below, (i) you acknowledge that Xxxxxxx Xxxxx is a
licensed broker-dealer and that Xxxxxxx Xxxxx holds at least ___________ shares
of Common Stock in the Xxxx Account and that such shares are not, to your
knowledge, subject to any lien or security interest (other than the security
interest granted to Sheffield), (ii) you agree to evidence Sheffield's security
interest in such 30,000 shares of Common Stock by appropriate notation in your
books and records (iii) you agree not to sell or otherwise transfer such shares
without prior written approval of Sheffield and (iv) you agree to transfer such
shares upon receipt of written instructions of Sheffield in connection with
Sheffield's enforcement of its security interest, which instructions shall state
that Sheffield is exercising its rights in connection with a default by Xxxx in
his obligation to repay certain indebtedness owed to Sheffield.
Very truly yours,
SHEFFIELD PHARMACEUTICALS, INC.
By:
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Xxxx Xxxxxx Xxxxxxx
Vice President and CFO
ACKNOWLEDGED AND AGREED:
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Xxxxxxx X. Xxxx
ACKNOWLEDGED AND AGREED:
[XXXXXXX XXXXX]
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Name:
Title: