Exhibit 10.4
AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (the “Agreement”), made this 6 th
day of November 2008, is entered into by Sepracor Inc., a
Delaware corporation with its principal place of business at 84
Waterford Drive, Marlborough, Massachusetts 01752-7231(the
“Company”), and Andrew I. Koven, residing at 10
Beechcroft Road, Short Hills, New Jersey 07078 (the
“Executive”).
The Company desires to employ the
Executive and the Executive desires to be employed by the Company,
and in connection therewith the Company and the Executive entered
into an Employment Agreement, dated March 1, 2007 (the
“Original Agreement”). The Company and the
Executive wish to amend and restate the Original Agreement as
provided for herein. In consideration of the mutual covenants
and promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties agree that the
Original Agreement is amended and restated in its entirety as
follows:
1.
Term of
Employment . The Company hereby
agrees to employ the Executive and the Executive hereby accepts
employment with the Company, upon the terms set forth in this
Agreement, for the period commencing on March 1, 2007 (the
“Commencement Date”) and ending on March 1,
2012 (the “Term”) . Notwithstanding the
foregoing, the Term shall be extended automatically without further
action by either party by one (1) additional year (added to
the end of the Term) on each succeeding anniversary of
March 1, 2012, unless either party shall have served written
notice upon the other party at least sixty (60) days preceding the
date upon which such Term would end (such period, as it may be
extended, the “Employment Period”), unless sooner
terminated in accordance with the provisions of
Section 4.
2.
Title and
Capacity . The Executive shall
serve as Executive Vice-President, General Counsel and Corporate
Secretary of the Company. Executive shall report directly to
the Chief Executive Officer of the Company and shall, except as
permitted hereby, devote all of his business time and services to
the business and affairs of the Company. Executive shall also
perform such other duties consistent with his position as Executive
Vice-President, General Counsel and Corporate Secretary as may be
reasonably assigned by the Chief Executive Officer and the Board of
Directors of the Company (the “Board”) from time to
time. The Executive agrees to abide by the rules,
regulations, instructions, personnel practices and policies of the
Company and any changes therein that may be adopted from time to
time by the Company.
Notwithstanding anything herein to
the contrary, Executive shall be entitled to engage in
(a) service on the board of directors of one company,
businesses or trade organization with prior Board approval,
(b) service on the board of directors of not-for-profit or
charitable organizations with prior Board approval, (c) other
charitable activities and community affairs and (d) managing
his personal investments and affairs, in each case to the extent
such activities do not materially interfere with the performance of
his duties and responsibilities to the Company.
3.
Compensation
and Benefits .
3.1
Salary
. During
the term of this Agreement, the Company agrees to pay to the
Executive a base salary at the annualized rate of $500,000
(“Base Salary”) commencing on the Commencement
Date. The Base Salary shall be subject to annual review by
the Board but shall not be reduced below $500,000 per annum.
Such salary shall be payable to Executive in bi-weekly installments
and in accordance with the Company’s normal payroll
procedures.
3.2
Bonus . The Executive shall
receive a one-time “Sign On” bonus of $150,000 less
applicable taxes and withholdings to be paid within thirty (30)
days of the
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Commencement Date,
provided , however , if the Executive’s
employment is terminated, within twelve (12) months of the
Commencement Date, for Cause by the Company pursuant to
Section 4.2 or at the election of the Executive pursuant to
Section 4.5, the Executive will be required to repay the
portion of the Sign On bonus retained by Executive after the
payment of all taxes. In addition, the Executive shall be
eligible for a performance-based annual bonus for each fiscal year
of the Term (the “Annual Bonus”). The Annual Bonus
shall be based upon annual quantitative and qualitative performance
targets as established by the Board in its sole discretion in
accordance with the Company’s bonus plan; provided ,
that the Executive’s annual bonus level target shall be set
at fifty percent (50%) of Base Salary. For 2007, Executive
shall be entitled to a pro rata guaranteed bonus based on an Annual
Bonus of fifty percent (50%) of his Base Salary. The Annual Bonus
is not earned until the close of business on the last business day
of the Company’s fiscal year. Any Annual Bonus payable
hereunder shall be payable, if at all, after the date of the
delivery of the audited financial statements for the applicable
fiscal year.
3.3
Stock and
Option Grant . At the first meeting
of the Compensation Committee of the Board of Directors following
the Executive’s first day of employment, the Company shall
grant to the Executive, under the Company’s 2000 Stock
Incentive Plan (the “Stock Plan”), 30,000 shares of
restricted stock and an option to purchase 70,000 shares of Company
stock (the “Initial Grant”). The terms and
conditions of the Initial Grant (other than the exercise price per
share, which shall be equal to the closing price of the
Company’s stock on the grant date) shall be set forth in the
award agreements attached hereto as Schedules A and B. The
stock option portion of the Initial Grant shall vest in five equal
installments on each of the first five anniversaries of the grant
date, and the restricted stock award portion of the Initial Grant
shall vest in three equal installments on each of the first three
anniversaries of the grant
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date. The Board, in
its sole discretion, may grant further incentive compensation
awards to the Executive from time to time. The Company
represents and warrants to Executive that the Company has full
power and authority, subject to Compensation Committee approval,
and shares available under the Stock Plan to make the Initial
Grant.
3.4
Benefits
. The
Executive shall be entitled to participate in all bonus and benefit
programs that the Company establishes and makes available to its
employees, to the extent that the Executive is eligible under (and
subject to the provisions of) the plan documents governing those
programs. The Executive shall be entitled to no less than
four weeks paid vacation per year, subject to the other terms of
the Company’s standard vacation policy (Schedule
C).
3.5
Reimbursement
of Expenses . The Company shall
reimburse the Executive for all reasonable travel (which shall be
deemed to include first class airfare), entertainment and other
expenses incurred or paid by the Executive in connection with, or
related to, the performance of his duties, responsibilities or
services under this Agreement or in connection with
Executive’s commuting to and from his personal residence in
New Jersey and the Company’s offices, upon presentation by
the Executive of documentation, expense statements, vouchers and/or
such other supporting information as the Company may
request.
3.6
Housing
Expenses . The Company
understands that the Executive intends to maintain his primary
residence outside the Massachusetts area for up to eighteen (18)
months and then intends to relocate to the Massachusetts area.
Until the Executive relocates to the Massachusetts area, the
Company agrees to provide the Executive with a housing allowance of
$3,750 per month, related to the rental or purchase of a home,
within suitable distance to the Company’s headquarters, which
payments shall be made on a fully tax grossed-up basis.
The
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Company also will reimburse
the Executive for reasonable travel, meals and lodging expenses
incurred by him for up to two trips for the purpose of securing
such house or apartment within a suitable distance to the
Company’s headquarters. Executive shall be entitled to
relocation benefits afforded by the Company to other Company
executives if and when Executive decides to permanently relocate
his primary residence to the Massachusetts area.
3.7
Executive’s Legal
Fees. The Company agrees to
pay the Executive’s reasonable legal costs and expenses in
connection with negotiating and drafting this Agreement up to a
maximum of $15,000.
3.8
Automobile.
The
Company agrees to provide the Executive with an automobile
allowance or a leased automobile with a retail value of up to
$60,000, which payments shall be made on a fully tax grossed-up
basis. In addition, the Company agrees to pay all insurance,
maintenance, fuel and other customary costs associated with
operating the automobile.
3.9
Withholding
. All
salary, bonus and other compensation payable to the Executive shall
be subject to applicable withholding taxes.
4.
Employment
Termination . The employment of the
Executive under this Agreement shall terminate upon the occurrence
of any of the following:
4.1
On the expiration
date of the Employment Period.
4.2
At the election
of the Company, for Cause (as defined below), immediately upon
written notice by the Company to the Executive, which notice shall
identify the Cause upon which termination is based. For the
purposes of this Section 4.2, Cause for termination shall
mean: (a) the Executive’s willful and continued
failure to substantially perform his reasonable assigned duties
(other than any such failure resulting from incapacity due
to
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physical or mental illness
or any failure after the Executive gives notice of termination for
Good Reason and Good Reason exists), which failure is not cured
within 30 days after a written demand for substantial performance
is received by the Executive from the Board of Directors of the
Company which specifically identifies the manner in which the Board
of Directors believes the Executive has not substantially performed
the Executive’s duties; (b) the Executive’s
willful engagement in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company; or (c) a
material breach of Section 6 or 7 of this Agreement by
the Executive. For purposes of this Section 4.2, no act
or failure to act by the Executive shall be considered
“willful” unless it is done, or omitted to be done, in
bad faith and without reasonable belief that the Executive’s
action or omission was in the best interests of the
Company.
4.3
Upon the death or
disability of the Executive. As used in this Agreement, the
term “disability” shall mean the Executive’s
absence from the full-time performance of the Executive’s
duties with the Company for one hundred eighty (180) consecutive
calendar days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or the Executive’s legal
representative.
4.4
At the election
of the Executive for Good Reason as defined herein. The
Executive may terminate his employment for Good Reason at any time,
following 30-days prior written notice of such termination to the
Company. Such notice shall provide factual details of the basis
behind such termination and the Company shall have a thirty (30)
day period thereafter to cure such matter. As used herein,
the term “Good Reason” shall mean: (a) a
material breach by the Company of the terms of this Agreement,
including the failure to pay Base Salary or any Annual Bonus when
due; or (b) any material adverse change by the Company in
Executive’s
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titles, authorities, duties,
responsibilities or lines of reporting inconsistent with the terms
hereof or the assignment to Executive by the Company of titles,
authorities, duties, responsibilities or lines of reporting
inconsistent with the terms hereof, or (c) a relocation of the
offices of the Company where the Executive is working to an area
more than forty (40) miles from the location of such offices as of
the date hereof.
4.5
At the election
of the Executive without Good Reason, upon not less than sixty (60)
calendar days prior written notice of termination by the Executive
to the Company; provided , however , that the Company
may, in its sole discretion, determine that the termination of the
Executive shall become effective immediately and in which case the
termination shall still be considered at the election of the
Executive without Good Reason.
4.6
At the election
of the Company, without Cause, upon not less than sixty (60) days
written notice to Executive.
4.7
At the election
of the Company or the Executive in connection with a Change in
Control, as set forth in the Executive Retention Agreement between
the Company and the Executive (the “ERA”), dated as of
the date hereof. “Change in Control” shall have
the meaning set forth in the ERA.
5.
Effect of
Termination .
5.1
Non-Renewal,
Termination Without Good Reason By the Executive or Termination For
Cause By the Company . In the event the
Executive’s employment is terminated by non-renewal pursuant
to Section 4.1, for Cause by the Company pursuant to
Section 4.2, or at the election of the Executive pursuant to
Section 4.5, the Company shall pay to the Executive the
compensation and benefits otherwise payable to him under
Section 3 through the last calendar day of his actual
employment by the Company.
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5.2
Termination
for Death or Disability . In the event the
Executive’s employment is terminated by death or because of
disability pursuant to Section 4.3, the Company shall pay to
the estate of the Executive or to the Executive, as the case may
be, (A) within thirty (30) days of the date of the
Executive’s death or determination of disability, the
compensation which would otherwise be payable to the Executive up
to the end of the month in which the termination of his employment
because of death or disability occurs; and (B) an annual
bonus, payable when bonuses are paid for that year, in an amount
equal to the total bonus he would be paid for such year, if any,
multiplied by a fraction, the numerator of which is the number of
days in the year that have elapsed since January 1 and the
denominator of which is 365 (a “Pro Rata Bonus”).
In addition, the Company shall permit Executive or
Executive’s estate or representative to exercise the vested
stock option portion of the Initial Grant for a period of no less
than one year after any such termination of employment.
5.3
Termination By
the Executive With Good Reason or By the Company Without
“Cause”. In the event the
Executive’s employment is terminated by the Executive with
Good Reason pursuant to Section 4.4 or by the Company without
Cause pursuant to Section 4.6, the Company shall pay to the
Executive the compensation and benefits otherwise payable to him
under Section 3 through the last calendar day of his actual
employment by the Company. In addition, provided the
Executive executes and does not revoke a Separation Agreement and
Release of Claims for the benefit of the Company substantially in
the form set forth on Schedule D hereto, the Company shall
(a) continue to pay the
Executive the Base Salary for twenty four (24) months in accordance
with the Company’s regular payroll practices; (b) pay
the Executive a Pro Rata Bonus; (c) pay the Executive, in
bi-weekly installments, over a twenty four-month period, an amount
equal in the aggregate to 1.5 times the average Annual Bonus
earned for the
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two years prior to the date
of his termination (in the event Executive has not been employed
for a sufficient period to earn two such bonuses, such calculation
shall be made assuming Executive earned a bonus for any such year
at a target level of performance (taking into account any minimum
bonus amount)); (d) provide to the Executive for 24 months
following the date of his termination payment of COBRA premiums for
medical, dental, and vision benefits pursuant to plans maintained
by the Company under which Executive and/or Executive’s
family is eligible to receive benefits; provided, however, that,
notwithstanding the foregoing, the benefits described in this
subsection may be discontinued prior the end of the period, but
only to the extent, that Executive receives substantially similar
benefits from a subsequent employer; and (e) permit Executive
to exercise the stock option portion of the Initial Grant for a
period of no less than six months after the date of
termination.
5.4
Termination
Following a Change in Control . In the event the
Executive’s employment is terminated pursuant to
Section 4.7 by the Company or by the Executive within 24
months following the Change in Control Date as defined in the ERA,
the Executive will be entitled to the benefits set forth in the ERA
in accordance with the terms of the ERA.
5.5
Participation
in Executive Retirement Health Benefit Program
.
Following the date of the Executive’s termination, for any
reason whatsoever, and, if applicable, the twenty- four (24) month
period referred to in Section 5.3(d) or the period
referred to in Section 4.2(a)(ii) of the ERA, in the
event the Executive elects to participate in the Company’s
executive retiree health benefit program set forth on
Exhibit A hereto (the “Program”), he will
reimburse the Company with respect to his participation in the
Program at the lesser of (a) the actual cost to the Company of
the employee’s participation and (b) the rate applicable
to former employees of the Company to elect COBRA health
coverage.
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5.6
Payments
Subject to Section 409A .
(a)
Subject to this
Section 5.6, payments or benefits under Section 5
shall begin only upon the date of a “separation from
service” of the Executive (determined as set forth below)
which occurs on or after the termination of the Executive’s
employment. The following rules shall apply with respect
to distribution of the payments and benefits, if any, to be
provided to the Executive under Section 5, as
applicable:
(i)
It is intended
that each installment of the payments and benefits provided under
Section 5 shall be treated as a separate
“payment” for purposes of Section 409A of the Code
and the guidance issued thereunder
(“Section 409A”). Neither the Company nor
the Executive shall have the right to accelerate or defer the
delivery of any such payments or benefits except to the extent
specifically permitted or required by
Section 409A.
(ii)
If, as of the
date of the “separation from service” of the Executive
from the Company, the Executive is not a “specified
employee” (within the meaning of Section 409A), then
each installment of the payments and benefits shall be made on the
dates and terms set forth in Section 5.
(iii)
If, as of the
date of the “separation from service” of the Executive
from the Company, the Executive is a “specified
employee” (within the meaning of Section 409A),
then:
(1)
Each installment
of the payments and benefits due under Section 5 that, in
accordance with the dates and terms set forth herein, will in all
circumstances, regardless of when the separation from service
occurs, be paid within the Short-Term Deferral Period (as
hereinafter defined) shall be treated as a short-term deferral
within the meaning of Treasury Regulation
Section 1.409A-1(b)(4) to the maximum extent
permissible
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under
Section 409A. For purposes of this Agreement, the
“Short-Term Deferral Period” means the period ending on
the later of the 15 th day of the third month following
the end of the Executive’s tax year in which the separation
from service occurs and the 15 th day of the third month
following the end of the Company’s tax year in which the
separation from service occurs; and
(2)
Each installment
of the payments and benefits due under Section 5 that is not
described in Section 5.6 (a)(iii)(1) and that would,
absent this subsection, be paid within the six-month period
following the “separation from service” of the
Executive from the Company shall not be paid until the date that is
six months and one day after such separation from service (or, if
earlier, the Executive’s death), with any such installments
that are required to be delayed being accumulated during the
six-month period and paid in a lump sum on the date that is six
months and one day following the Executive’s separation from
service and any subsequent installments, if any, being paid in
accordance with the dates and terms set forth herein;
provided , however , that the preceding provisions of
this sentence shall not apply to any installment of payments and
benefits if and to the maximum extent that that such installment is
deemed to be paid under a separation pay plan that does not provide
for a deferral of compensation by reason of the application of
Treasury Regulation 1.409A-1(b)(9)(iii) (relating to
separation pay upon an involuntary separation from service).
Any installments that qualify for the exception under Treasury
Regulation Section 1.409A-1(b)(9)(iii) must be paid no
later than the last day of the Executive’s second taxable
year following his taxable year in which the separation from
service occurs.
(b)
The determination
of whether and when a separation from service of the Executive from
the Company has occurred shall be made and in a manner consistent
with,
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and based on the
presumptions set forth in, Treasury Regulation
Section 1.409A-1(h). Solely for purposes of this
Section 5.6 (b), “Company” shall include all
persons with whom the Company would be considered a single employer
under Section 414(b) and 414(c) of the
Code.
(c)
All
reimbursements and in-kind benefits provided under the Agreement
shall be made or provided in accordance with the requirements of
Section 409A to the extent that such reimbursements or in-kind
benefits are subject to Section 409A.
6.
Non-Competition and
Non-Solicitation .
(a)
While the
Executive is employed by the Company and for a period of twelve
(12) months following the Executive’s termination or
cessation of such employment for any reason, the Executive will not
directly or indirectly:
(i)
Engage in any
business or enterprise (whether as an owner, partner, officer,
employee, director, investor, lender, consultant, independent
contractor or otherwise, except as the holder of not more than 5%
of the combined voting power of the outstanding stock of a publicly
held company) that (A) is competitive with the Company’s
business and (B) develops, designs, produces, markets, sells
or renders any product or service competitive with any product
developed, produced, marketed, sold or rendered by the Company
while the Executive was employed by the Company;
(ii)
Either alone or
in association with others, recruit or solicit, any person who was
employed by the Company at any time during the period of the
Executive’s employment with the Company, except for an
individual whose employment with the Company has been terminated
for a period of six months or longer; and
(iii)
Either alone or
in association with others, solicit, divert or take away, or
attempt to divert or to take away, the business or patronage of any
of the
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clients,
customers or accounts, or prospective clients, customers or
accounts, of the Company which were contacted, solicited or served
by the Executive while he was employed by the Company.
(b)
If any
restriction set forth in this Section 6 is found by any court
of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range
of activities or geographic area as to which it may be
enforceable.
(c)
The Executive
acknowledges that the restrictions contained in this Agreement are
necessary for the protection of the business and goodwill of the
Company and are considered by the Executive to be reasonable for
such purpose. The Executive agrees that any breach of this
Agreement will cause the Company substantial and irrevocable damage
and therefore, in the event of any such breach, in addition to such
other remedies which may be available, the Company shall have the
right to seek specific performance and injunctive relief without
posting a bond.
(d)
The geographic
scope of this Section shall extend to anywhere the Company or
any of its subsidiaries is doing business during the Term or has
plans, during the Term, to do business.
(e)
The Executive
agrees to provide a copy of this Agreement to all person and
Entities with whom the Executive seeks to be hired or do business
before accepting employment or engagement with any of
them.
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(f)
If the Executive
violates the provisions of this Section, the Executive shall
continue to be held by the restrictions set forth in this Section,
until a period equal to the period of restriction has expired
without any violation.
7.
Proprietary
Information and Developments .
7.1
Proprietary
Information .
(a)
The Executive
agrees that all information, whether or not in writing, of a
private, secret or confidential nature concerning the
Company’s business, business relationships or financial
affairs (collectively, “Proprietary Information”) is
and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may
include discoveries, inventions, products, product improvements,
product enhancements, processes, methods, techniques, formulas,
compositions, compounds, negotiation strategies and positions,
projects, developments, plans (including business and marketing
plans), research data, clinical data, financial data (including
sales, costs, profits and pricing methods), personnel data,
computer programs (including software used pursuant to a license
agreement), customer and supplier lists, and contacts at or
knowledge of customers or prospective customers of the
Company. Except as required by applicable law, the Executive
will not disclose any Proprietary Information to any person or
entity other than employees of the Company or use the same for any
purposes (other than in the performance of his duties as an
employee of the Company) without prior written approval from the
Chief Executive Officer, either during or after his employment with
the Company, unless and until such Proprietary Information has
become public knowledge without fault by the Executive.
(b)
The Executive
agrees that all files, documents, letters, memoranda, reports,
records, data, sketches, drawings, methods, laboratory notebooks,
program listings,
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computer equipment or
devices, computer programs or other written, photographic, or other
tangible material containing Proprietary Information, whether
created by the Executive or others, which shall come into his
custody or possession, shall be and are the exclusive property of
the Company and are to be used by the Executive only in the
performance of his duties for the Company. All such materials
or copies thereof and all tangible property of the Company in the
custody or possession of the Executive shall be delivered to the
Company upon the earlier of (i) a request by the Company or
(ii) termination of his employment. After such delivery,
the Executive shall not retain any such materials or copies thereof
or any such tangible property.
(c)
The Executive
agrees that his obligation not to disclose or to use information
and materials of the types set forth in subsections (a) and
(b) above, and his obligation to return materials and tangible
property set forth in subsection (b) above, also extends to
such types of information, materials and tangible property of
customers of the Company or suppliers to the Company or other third
parties who may have disclosed or entrusted the same to the Company
or to the Executive.
7.2
Developments.
(a)
The Executive
will make full and prompt disclosure to the Company of all
inventions, creations, improvements, discoveries, trade secrets,
secret processes, technology, know-how, copyrightable materials,
methods, developments, software, and works of authorship or other
creative works, whether patentable or not, which are created, made,
conceived or reduced to practice by him or under his direction or
jointly with others during his employment by the Company, whether
or not during normal working hours or on the premises of the
Company (all of which are collectively referred to in this
Agreement as “Developments”).
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(b)
The Executive
agrees to assign and does hereby assign to the Company (or any
person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents,
patent applications, copyrights and copyright applications.
However, this subsection (b) shall not apply to Developments
that do not relate to any business or research and development
conducted or planned to be conducted by the Company at the time
such Development is created, made, conceived or reduced to practice
and that are made and conceived by the Executive not during normal
working hours, not on the Company’s premises and not using
the Company’s tools, devices, equipment or Proprietary
Information. The Executive understands that, to the extent
this Agreement shall be construed in accordance with the laws of
any state that precludes a requirement in an employee agreement to
assign certain classes of inventions made by an employee, this
subsection (b) shall be interpreted not to apply to any
invention that a court rules and/or the Company agrees falls
within such classes. The Executive also hereby waives all
claims to moral rights in any Developments.
(c)
The Executive
agrees to cooperate fully with the Company and to take such further
actions as may be necessary or desirable, both during and after his
employment with the Company, with respect to the procurement,
maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and foreign
countries) relating to Developments. The Executive shall sign
all papers, including, without limitation, copyright applications,
patent applications, declarations, oaths, formal assignments,
assignments of priority rights and powers of attorney, that the
Company may deem necessary or desirable in order to protect its
rights and interests in any Development. The Executive
further agrees that if the Company is unable, after reasonable
effort, to secure the signature of the Executive on any such
papers, the Chief Executive Officer of the Company shall be
entitled to execute any such
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papers as the agent and the
attorney-in-fact of the Executive, and the Executive hereby
irrevocably designates and appoints the Chief Executive Officer of
the Company as his agent and attorney-in-fact to execute any such
papers on his behalf and to take any and all actions as the Company
may deem necessary or desirable in order to protect its rights and
interests in any Development under the
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