Exhibit 10.5
AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (the “Agreement”), made this 6 th
day of November 2008 (the “Effective Date”), 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 Richard
Ranieri, residing at 7910 Entrada De Luz , San Diego, CA 92127 (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 August 18, 2008 (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 agrees to
be employed by the Company, upon the terms set forth in this
Agreement, for the period commencing on August 19, 2008 (the
“Commencement Date”) and ending on the fifth
anniversary of the Commencement Date (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 the
Commencement Date, 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
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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, Human Resources and
Administration 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, Human Resources and
Administration 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 two companies,
businesses or trade organizations with prior Board approval,
(b) service on the board of directors for a not-for-profit or
charitable organization 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 continue to pay
the Executive a base salary at the annualized rate of $405,000
(“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 $ 405,000 per annum.
Such salary shall be payable
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to Executive in
bi-weekly installments and in accordance with the Company’s
normal payroll procedures.
3.2
Bonus . 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%) or more of Base Salary. For 2008,
Executive shall be entitled to a guaranteed Annual Bonus in an
amount equal to 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. In addition, 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
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 payment of
all taxes.
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”), 40,000 shares of
restricted stock ( the “Initial Stock Grant”) and an
option to purchase 55,000 shares of Company stock (the
“Initial Option Grant”). The terms and
conditions
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of the Initial Stock Grant
and the Initial Option 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
Initial Stock Grant shall vest in three equal installments on each
of the first three anniversaries of the Commencement Date.
The Initial Option Grant shall vest in five equal installments on
each of the first five anniversaries of the Commencement 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, attached hereto as
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 until December 31,
2008 and throughout his employment with the Company 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 San Diego, California and the Company’s offices, upon
presentation by the Executive of documentation, expense statements,
vouchers and/or such other
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supporting information as
the Company may request. All reimbursement payments made
pursuant to this Section 3.5 shall be made on a fully tax
grossed-up basis.
3.6
Housing
Expenses . The Company
understands that the Executive intends to maintain his primary
residence outside the Massachusetts area until December 31,
2008 and then intends to relocate to the Massachusetts area. Until
December 31, 2008, the Company agrees to provide the Executive
with a housing allowance of $3,750 per month, which payments shall
be increased on a fully tax grossed-up basis. The Company
also will reimburse the Executive and his spouse for reasonable
travel, meals and lodging expenses incurred by them 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.
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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
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
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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 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
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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..
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
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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 (24) month period, an
amount equal in the aggregate to 1.5 times the average Annual
Bonus earned for the two years prior to the date of his termination
(in the event the 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)).; and (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 to 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
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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.
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
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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
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
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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, 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
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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 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
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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, or has plans, during the
Term, to do business.
(e)
The Executive
agrees to provide a copy of this Agreement to all persons and
entities with whom the Executive seeks to be hired or do business
before accepting employment or engagement with any of
them.
(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
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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, 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.
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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, developm
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