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 initially serve as President and Chief Operating Officer of the Company and in that capacity 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.  The Company acknowledges that it is the present expectation of the Board and the parties hereto that Executive will be elected to the position of Chief Executive Officer within six months of the Commencement Date.  At such time as the Executive is elected to the position of Chief Executive Officer, he shall report directly to the Board and shall assume the duties and responsibilities inherent in such position and such other duties and responsibilities as the Board shall from time to time reasonably assign to him.

 

Executive shall also perform such other duties consistent with his position at such time as may be reasonably assigned by the Chief Executive Officer (if Executive does not then hold such position) and/or the Board of Directors of the Company (the “Board”) from time to time.  Executive shall serve on the Board and may also serve as a director or officer of any of the Company’s operating subsidiaries if the Executive shall be elected to such position, for no additional compensation or benefits.  The Executive hereby accepts such service and agrees to undertake the duties and responsibilities inherent in such positions.  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.

 

2

 

Notwithstanding anything herein to the contrary, Executive shall be entitled to engage in (a) service on the board of directors of a no more than three other companies, businesses or trade organizations, provided , that , the Executive shall provide the Company prior written notice of his intention to join any such board and provided   further that he shall not serve on the board of any entity that competes with the Company, (b) service on the board of directors of not-for-profit or charitable organizations, (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 $800,000 (“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 $800,000 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 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 one hundred percent (100%) of Base Salary.  For fiscal year 2007, the Executive shall be entitled to a pro rata guaranteed bonus based on an Annual Bonus of one hundred percent (100%) of

 

3

 

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”), 125,000 shares of restricted stock and an option to purchase 500,000 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 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 four (4) weeks

 

4

 

paid vacation per year, accruing at a rate of 1.67 days per month during the Employment Period and to be taken at such times as may be reasonably determined by Executive consistent with his duties.

 

3.5           Reimbursement of Expenses .  The Company shall reimburse the Executive for all reasonable travel (which shall be deemed to include first class airfare or reimbursement or equivalent to a first class airfare ticket in the event Executive uses his personal time-share aircraft), 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 the Philadelphia area 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.  The Company agrees to provide the Executive with a housing allowance for reasonable housing and living expenses of $5,600 per month, related to the rental or purchase of a home, within suitable distance to the Company’s headquarters, which payment shall be made on a fully tax grossed-up basis.  The Company also will reimburse the Executive for (i) 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 and (ii) reasonable moving expenses in relocating his belongings from his residence in Florida to such house or apartment.

 

5

 

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 $75,000, 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 .  This Agreement and the employment of the Executive under this Agreement shall terminate upon the occurrence of any of the following:

 

4.1           At the election of the Executive if the Company fails to name him Chief Executive Officer of the Company within six (6) months from the Commencement Date, on the date of such election.

 

4.2           On the expiration date of the Employment Period.

 

4.3           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 4.3, 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

 

6

 

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 this Agreement by the Executive.  For purposes of this Section 4.3, 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.

 

4.4           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.

 

4.5           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

 

7

 

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.

 

4.6           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.

 

4.7           At the election of the Company, without Cause, upon not less than sixty (60) days written notice to Executive.

 

4.8           At the election of the Company or the Executive in connection with a Change in Control of the Company as set forth in the Executive Retention Agreement between the Company and the Executive (the “ERA”), dated as of the date hereof.  For purposes of this Agreement, “Change in Control” shall have the meaning set forth in the ERA.

 

5.             Effect of Termination .

 

5.1           Termination For Failing To Name Executive CEO .  In the event the Company fails to name Executive to the position of Chief Executive Officer of the

 

8

 

Company within six (6) months from the Commencement Date, and he elects to terminate his employment, 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 C hereto (the “Separation Agreement”), the Company shall pay or cause to be paid to Executive, within thirty (30) days of the date of his termination: (1) a lump-sum payment of two million dollars ($2,000,000); and (2) the amount of any accrued but unpaid Base Salary, unused vacation and unreimbursed business, housing and automobile expenses and the Company thereafter shall have no further obligation to Executive under this Agreement, other than for payment of any other amounts or benefits accrued and vested under any applicable benefit plan or otherwise in accordance with applicable law.

 

5.2           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 4.2, for Cause by the Company pursuant to Section 4.3, or at the election of the Executive 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.

 

5.3           Termination for Death or Disability .  In the event the Executive’s employment is terminated by death or because of disability pursuant to Section 4.4, 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

 

9

 

end of the month in which the termination of his employment because of death or disability occurs; and (B) an annual bonus 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, payable when bonuses are paid for that year (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.

 

5.4           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 4.5 or by the Company without Cause pursuant to Section 4.7, 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 the Separation Agreement, the Company shall: (1) continue to pay the Executive the Base Salary for twenty-four (24) months in accordance with the Company’s regular payroll practices; (2) pay the Executive a Pro Rata Bonus; (3) pay the Executive, in bi-weekly installments, over a twenty-four month period, an amount equal in the aggregate to two (2) times the average Annual Bonus earned for the 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)); (4) provide to the Executive for two (2) years

 

10

 

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 (5) 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.

 

5.5           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 5.4(4) or the period referred to in Section 4.2(b) 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           Termination Following a Change in Control .  In the event the Executive’s employment is terminated pursuant to Section 4.8 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.

 

11

 

5.7           Payments Subject to Section 409A .

 

(a)           Subject to this Section 5.7, 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

 

12

 

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 5.7 (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.

 

13

 

(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 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 material breach of this Agreement will cause the Company substantial and irrevocable damage and therefore, in the event of any such material 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.

 

15

 

(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.

 

(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

 

16

 

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 Board of Directors or a designee of the Board of Directors, 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.

 

17

 

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”).

 

(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

 

18

 

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 Executive Vice President of Research and Development or the General Counsel of the Company shall be entitled to execute any such papers as the agent and the attorney-in-fact of the Executive, and the Executive hereby irrevocably designates and appoints the Executive Vice President of Research and Development or the General Counsel 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 conditions described in this sentence.

 

7.3           United States Government Obligations .  The Executive acknowledges that the Company from time to time may have agreements with other parties or with the United States Government, or agencies thereof, which impose

 

19

 

obligations or restrictions on the Company regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work.  The Executive agrees to be bound by all such obligations and restrictions that are made known to the Executive and to take all action necessary to discharge the obligations