THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is entered
into as of February 2, 2009 (the “Effective Date”)
by and between CPEX Pharmaceuticals, Inc., a Delaware corporation
(the “Employer” or “CPEX”), and Lance
Berman (the “Employee”).
The Employer
desires to employ the Employee, and the Employee desires to be
employed by the Employer, all upon the terms and provisions and
subject to the conditions set forth in this Agreement.
NOW
THEREFORE , in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree to be
legally bound as follows:
1.
Employment . The Employer
hereby agrees to employ the Employee, and the Employee hereby
accepts such employment, as Chief Medical Officer and Senior Vice
President of the Employer, upon the terms and subject to the
conditions set forth in this Agreement. The Employee shall perform
such functions as are consistent with these positions under the
supervision of the Chief Executive Officer of the Employer. The
Employee shall, without any compensation in addition to that which
is specifically provided in this Agreement, serve in such further
offices or positions with Employer or any subsidiary or affiliate
of Employer (collectively, the “Employer Group”) as
shall from time to time be reasonably requested by the Chief
Executive Officer of Employer.
2.
Term . Subject to the
termination provisions hereinafter contained, the term of this
Agreement shall be for an initial term commencing on the Effective
Date and terminating on December 31, 2009. This Agreement
shall thereafter be automatically renewed for successive one
(1) year terms, unless the Employee’s employment with
the Employer has been terminated, as hereinafter provided, or
unless either party shall have given the other party notice at
least one year before the then applicable date of expiration that
this Agreement will terminate as of its then applicable date of
expiration. The initial term of this Agreement, and any extension
thereof pursuant to this paragraph, are referred to as the
“Term”.
3.
Compensation, Reimbursement, Etc.
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a.
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Base Salary . The Employer shall pay to the
Employee as compensation for all services rendered by the Employee
a base salary of $25,000.00 per month (the “Monthly Base
Salary”), payable in accordance with the Employer’s
regular payroll practices, plus annual bonuses on a calendar year
basis as determined by the Compensation Committee of the
Employer’s Board of Directors (the “Compensation
Committee”), subject to Sections 3(d) and 3(e). If an
increase in Monthly Base Salary is determined for a calendar year
after January 1 and
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before May 31 of that year, the
increase shall be retroactive to the beginning of that year. Annual
review of the Employee’s Monthly Base Salary will be on a
calendar year basis, and the results of such review will be
provided to the Employee no later than May of the following
year.
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b.
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Expense Reimbursement.
The Employer shall
reimburse the Employee on a semi-monthly basis for all reasonable
expenses incurred by the Employee in the performance of his duties
under this Agreement; provided however, that the Employee shall
have previously furnished to the Employer an itemized account,
satisfactory to the Employer, in substantiation of such
expenditures.
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c.
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Benefits. The Employee shall be entitled to
health and other benefits on the same terms and conditions as the
Employer has made available to other senior executives of Employer,
including without limitation participation in the Employer’s
health plans. If the Employee elects not to participate in the
Employer’s health plans, Employee shall be entitled to
reimbursement for the premiums paid for an alternate plan in
amounts not to exceed the premiums that would have been paid on
behalf of the Employee for Employer’s health plan. The
Employer agrees to maintain life insurance and disability coverage
on the Employee in an amount equivalent to 24 times Monthly Base
Salary, which insurance will be payable to the Employee’s
estate or beneficiaries (as the Employee may designate) upon the
Employee’s death or to the Employee in the event of
disability as provided in Section 7(b) hereof.
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d.
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Bonuses. The Employee shall be eligible for a
bonus each year of the Term equal to up to 40% of twelve
(12) times his Monthly Base Salary, prorated for the first
year of employment, payable in cash, common stock and/or other
equity awards, and the amount of any such bonus to be paid for any
year shall be determined by the Compensation Committee in its sole
discretion. Such annual bonus will be awarded for each year as soon
as practicable after March 15, but in no event later than
June 30, of the following year.
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e.
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Equity Awards and Initial
Bonus
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i.
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Upon the Effective Date, CPEX will
grant the Employee initial awards of 45,000 nonstatutory stock
options and 11,020 restricted stock units under the
Employer’s 2008 Equity and Incentive Plan. These equity
awards shall vest one third each year over a three year period from
the initial grant date.
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ii.
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The
Company will provide an initial bonus of $50,000 in cash, payable
to the Employee upon start of his employment.
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iii.
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So
long as the Employee continues to be employed as an executive
officer of the Employer, the Employee will be eligible for periodic
equity awards (“Equity Awards”) under the
Employer’s 2008 Equity and Incentive Plan or another plan as
determined by the Compensation Committee. All Equity Awards shall
be subject to substantially the same terms and
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conditions (and, if more than one
type of award is granted, in the same proportions) as the annual
equity awards made generally to the other executive officers of the
Employer, as determined in good faith by the Compensation
Committee, which awards shall be made on the same date as when
annual equity awards are made generally to the other executive
officers of the Employer.
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f.
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Annual Review.
The Employee shall be
reviewed on an annual (calendar year) basis.
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g.
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Relocation and Relocation
Expenses. Employee agrees to relocate his
principal residence or obtain an additional residence in the area
surrounding Exeter, New Hampshire by no later than 90 days
after the Effective Date. In the interim, the Company and Employee
recognize that the Employee may need to obtain temporary living
quarters in the Exeter, New Hampshire area. In accordance with the
Employer’s Relocation Expense Policy, a copy of which is
attached as Exhibit A, Employer will reimburse Employee for
certain travel and travel related expenses, and certain interim
living expenses incurred. Reasonable extensions of time for Company
reimbursement of interim living and travel related expenses or for
obtaining a residence in the area surrounding Exeter, New Hampshire
may be requested for review and approval by management.
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4.
Duties . The Employee
will be engaged as Chief Medical Officer and Senior Vice President
of the Employer. In addition, the Employee shall have such other
duties and hold such offices as may from time to time be reasonably
assigned to him by the Chief Executive Officer of the
Employer.
5. Extent of
Services . During the
Term, the Employee shall devote his full time, energy and attention
to the benefit and business of the Employer and its affiliates and
shall not be employed by another entity, either directly or as a
consultant to or in any other capacity, except as approved in
advance by the Employer’s Board of Directors; provided,
however, that no such approval shall be required to serve as a
director, officer or trustee of any trade association or of any
civic or charitable organization so long as such service does not
significantly interfere with the Employee’s performance of
his duties at the Employer.
6.
Vacation . The Employee
may take a maximum of four weeks of paid vacation each calendar
year, at times to be determined in a manner most convenient to the
business of the Employer, as approved by the Chief Executive
Officer. A maximum of one week of unused vacation may be carried
over from one calendar year to the next.
7.
Termination Following Death or Incapacity .
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a.
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Death. All rights of the Employee under
this Agreement shall terminate upon death (other than rights
accrued prior thereto). All Equity Awards shall be exercisable for
a period of twelve (12) months from death, in accordance with
the Plan. The Employer shall pay to the estate of the Employee any
unpaid salary and
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other benefits due, as well as
reimbursable expenses accrued and owing to the Employee at the time
of his death and any term-life insurance benefit provided in
accordance with Section 3(c) above.
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b.
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Disability.
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i.
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During any period of disability,
illness or incapacity during the Term which renders the Employee at
least temporarily unable to perform the services required under
this Agreement, the Employee shall receive his salary payable under
Section 3 of this Agreement, less any benefits received by him
under any insurance carried by or provided by the Employer;
provided however, all rights of the Employee under this Agreement
(other than rights already accrued) shall terminate as provided
below upon the Employee’s permanent disability (as defined
below).
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ii.
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The
term “permanent disability” as used in this Agreement
shall mean the inability of the Employee, as determined by the
Board of Directors of the Employer, by reason of physical or mental
disability to perform the duties required of him under this
Agreement after a period of: (a) 120 consecutive days of such
disability; or (b) disability for at least six months during
any twelve month period. Upon such determination, the Board of
Directors may terminate the Employee’s employment under this
Agreement upon ten (10) days prior written notice. In the
event of permanent disability all Equity Awards shall vest, and be
exercisable for a period of time, in accordance with their
respective terms and the terms of the Plan.
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iii.
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If
any determination of the Board of Directors with respect to
permanent disability is disputed by the Employee, the parties
hereto agree to abide by the decision of a panel of three
physicians. The Employee and Employer shall each appoint one
member, and the third member of the panel shall be appointed by the
other two physicians. If the physicians appointed by the parties
have not agreed upon the third physician within fifteen
(15) days, either party may petition the New Hampshire Medical
Society to appoint a third physician. The Employee agrees to make
himself available for and to submit to reasonable examinations by
such physicians as may be directed by the Employer. Failure to
submit to any such exam shall constitute a material breach of this
Agreement. In the event such a panel is convened, the party whose
position is not sustained will bear all the associated
costs.
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i.
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Either the Employee or the Employer
may terminate the Employee’s employment hereunder at any time
upon written notice.
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ii.
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If
the Employee gives written notice pursuant to paragraph (i) above,
the Employer shall have the right to either (a) relieve the
Employee, in whole or in part, of his duties under this Agreement
or (b) to accelerate the date of termination of employment to
coincide with the date on which the written notice is
received.
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iii.
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Notwithstanding any provisions
hereof to the contrary, the Employer may terminate Employee’s
employment hereunder without cause at any time. If the Employer
terminates the Employee’s Employment pursuant to the
provisions of this Section 8(a), it shall pay to the Employee
as a severance benefit, in cash, an amount equal to (a) twelve
months of the Employee’s Monthly Base Salary plus
(b) the higher of the bonus target for the current year or the
bonus paid for the prior year, which amount shall be due and
payable in a lump sum within not more than ten (10) days after
such termination or such later date on which the revocation period
for the release contemplated by Section 18 expires provided,
however, that this obligation shall terminate if the release has
not been delivered and the revocation period has not expired within
sixty 60 days after such termination. Additionally, the
vesting of Equity Awards shall be accelerated on a pro rata basis
determined by the number of completed months of service during the
then current annual vesting period, the vested portions of such
Equity Awards shall be exercisable for the period of time indicated
in the terms of the Equity Award, and all other vesting of Equity
Awards shall cease unless otherwise determined by the Compensation
Committee.
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i.
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The
Employer may terminate the Employee’s employment hereunder
without notice (a) upon the Employee’s breach of any
material provision of this Agreement, or (b) for other
“good cause” (as defined below).
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ii.
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The
term “good cause” as used in this Agreement shall mean:
(a) any breach by Employee of any of Employee’s
fiduciary duties to Employer or material obligations under this
Agreement (other than as a result of incapacity due to physical or
mental illness), in each case if such breach is not cured within
ten (10) days after written notice thereof to Employee by
Employer, (b) conviction of a felony or a crime involving moral
turpitude or other commission of any act or omission of Employee
involving, fraud,
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embezzlement, theft, substance abuse
or sexual misconduct with respect to the Employer or any of its
subsidiaries or any of their employees, vendors, suppliers or
customers, (c) Employee’s substantial neglect of duties
provided that such act of neglect is not cured within ten
(10) days after written notice thereof to Employee by
Employer, (d) the Employee’s willful, knowing or
deliberate misappropriation of funds or assets of Employer or one
of its subsidiaries for personal use, or (e) the
Employee’s willful, knowing or deliberate misconduct in the
performance of Employee’s duties.
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