This Employment
Agreement (“Agreement”), dated as of
is entered into between Noven Pharmaceuticals, Inc., a Delaware
corporation (the “ Company ”), and
(the “ Executive ”).
The Board of
Directors of the Company (the “ Board ”), has
determined that it is in the best interests of the Company and its
shareholders to assure that the company will have the continued
dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined in
Section 2) of the Company. The Board believes it is imperative
to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive’s
full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control and to provide
the Executive with compensation and benefits arrangements upon a
Change of Control which promote continued service of the Executive
to the Company, thereby potentially enhancing the value received by
shareholders in the Change of Control, and which are competitive
with those of other corporations. Therefore, in order to accomplish
these objectives, the Board has caused the Company to enter into
this Agreement.
In consideration
of the foregoing and the mutual promises contained below, and in
consideration of the Executive’s entry into non-competition
covenants under the Confidentiality and Invention Agreement or any
other separate agreement with the Company, Executive and the
Company agree as set forth below.
(a) “
Effective Date ” shall mean the first date during the
Change of Control Period (as defined in Section 1(b)) on which
a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Executive’s employment with the Company is terminated prior
to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect the Change of Control
or (ii) otherwise arose in connection with or in anticipation of
the Change of Control, then for all purposes of this Agreement the
“Effective Date” shall mean the date immediately prior
to the date of such termination of employment.
(b) “
Change of Control Period ” shall mean the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof shall be
hereinafter referred to as the “ Renewal Date ”)
the Change of Control Period may be extended by the Company so as
to terminate three years from such Renewal Date by the Company
giving notice to the Executive that the Change of Control Period
shall be so extended.
2.
Change of Control . For the purpose of this Agreement, a
“ Change of Control ” shall mean the occurrence
of one of the following events after the date of this
Agreement:
(a) Any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934), (an “ Acquiring Person ”) shall acquire
voting securities of the Company and immediately thereafter is a
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of 40% or more of either
(i) the then outstanding shares of common stock of the Company
or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the “ Outstanding Company Voting
Securities ”); provided, however, that an Acquiring
Person shall not include the Company, any of its affiliated
companies (as defined in Section 4(b)(i) hereof), any employee
benefit plan of the Company or its affiliated companies, or any
person or entity organized, appointed or established by the Company
or its affiliated companies for or pursuant to the terms of any
such plan); or
(b) During
any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director who is a representative or nominee of an
Acquiring Person) whose election by the Board or nomination for
election by the Company’s shareholders was approved by a vote
of at least a majority of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority of the Board;
or
(c) The
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, and the merger or
consolidation has been consummated, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
corporation (within the meaning of Section 424(e) of the Internal
Revenue Code of 1986, as amended (the “ Code ”))
of such surviving entity) at least a majority of the Outstanding
Company Voting Securities, such surviving entity or the parent
corporation of such surviving entity outstanding immediately after
such merger or consolidation; or
(d) the
shareholders of the Company approve a plan of reorganization (other
than a reorganization under the United States Bankruptcy Code) or
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company’s assets, and the Company has taken the first
substantive step pursuant to the plan of reorganization or complete
liquidation or the sale or disposition has been consummated;
provided, however , that a Change of Control shall not be
deemed to have occurred in the event of: (i) a sale or
conveyance in which the Company continues as the ultimate parent
holding company of an entity or entities that conduct all or
substantially all of the business or businesses formerly conducted
by the Company, or (ii) any transaction undertaken for the
purpose of incorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the
beneficial ownership of the Company’s capital
stock.
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3.
Employment Period . The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for the period
commencing on the Effective Date and ending on the second
anniversary of such date (the “ Employment Period
”). The foregoing notwithstanding, it shall not constitute a
breach of this Section 3 for the employment of the Executive
to terminate in accordance with Section 5 prior to the end of
the Employment Period.
(a)
Position and Duties .
(i) During
the Employment Period, (A) the Executive’s position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date and (B) the
Executive’s services shall be performed at the location where
the Executive was employed immediately preceding the Effective Date
or any office which is the headquarters of the Company and is less
than 35 miles from such location. For purposes of this Agreement,
if Executive has authority, duties and responsibilities that relate
to the Company’s status as a publicly held company
immediately preceding the Effective Date, the Executive’s
authority, duties and responsibilities shall be deemed commensurate
only if they continue to relate to the ultimate parent corporation
(whether or not that company is a publicly held
company).
(ii) During
the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees
to devote substantially full attention and time during normal
business hours to the business and affairs of the Company and, to
the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive’s reasonable
best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments,
so long as such activities do not significantly interfere with the
performance of the Executive’s responsibilities as an
employee of the Company (or as a director of the Company, if
serving as such), in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive’s
responsibilities to the Company.
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(i)
Base Salary . During the Employment Period, the
Executive shall receive an annual base salary (“ Annual
Base Salary ”), which shall be paid in equal installments
on a monthly or more frequent basis, at least equal to twelve times
the highest monthly base salary paid or payable to the Executive by
the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be
substantially consistent with increases in base salary generally
awarded in the ordinary course of business to other Peer Executives
(as defined below) of the Company and its affiliated companies. Any
increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. Annual
Base Salary shall not be reduced after any such increase and the
term Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased. As used in this Agreement,
the term “ affiliated companies ” shall include
any company controlled by, controlling or under common control with
the Company.
(ii)
Annual Bonus . In addition to Annual Base Salary, the
Executive (A) shall be awarded, for the fiscal year during which
the Change of Control occurred and the next following fiscal year
during the Employment Period, an annual bonus (the “
Annual Bonus ”) in cash at least equal to the average
annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by
the Company for less than twelve full months) bonus paid or
payable, including by reason of any deferral, to the Executive by
the Company and its affiliated companies in respect of the three
fiscal years immediately preceding the fiscal year in which the
Effective Date occurs (the “ Recent Average Bonus
”), and (B) shall be provided an opportunity to earn an
Annual Bonus, for any fiscal year beginning during the Employment
Period after the end of the fiscal years covered by clause (A),
with the following terms:
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(a)
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Target bonus payable for performance
at a designated target level which shall be a percentage of Annual
Base Salary not less than the percentage of Executive’s then
annual base salary represented by Executive’s highest target
bonus amount established prior to the Change of Control and with
respect to the year in which the Change of Control occurred or, if
no annual bonus was established for that year, with respect to the
immediately preceding year
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(b)
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Bonus payable at amounts in excess
of the target bonus for performance at designated levels in excess
of the designated target level, consistent with the bonus program
as in effect prior to the Change of Control
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(c)
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Minimum bonus payable for
performance at a designated threshold level will equal 50% of
target bonus, with bonus amounts payable interpolated for
performance between threshold and target
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(d)
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No
bonus will be payable for performance below the designated
threshold level
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(e)
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The
Board or its compensation committee shall determine the performance
requirements, but such requirements must be reasonably related to
the Company’s business plan, with the target performance
level determined by the Board or its compensation committee to be
reasonably likely to be attained (taking into account the business
plan) and not more difficult to attain than the target level of
performance applicable to annual bonus opportunities of other
senior executives for that fiscal year, and the above-target
performance requirements and threshold performance requirements
being specified for the same type of performance and with levels
that vary in difficulty of attainment from the level of target
performance by customary increments based on the most favorable
terms of the Company’s annual bonus program in effect in the
three fiscal years beginning immediately before the Change of
Control.
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(f)
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Each such Annual Bonus shall be paid
no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such
Annual Bonus.
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(iii)
Incentive, Savings and Retirement Plans . During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other Peer Executives of the
Company and its affiliated companies, but in no event shall such
plans, practice, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company
and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during
the 90-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any
time after the Effective Date to other Peer Executives of the
Company and its affiliated companies.
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(iv)
Welfare Benefit Plans . During the Employment Period,
the Executive and/or the Executive’s family, as the case may
be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other Peer Executives of the
Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective
Date to other Peer Executives of the Company and its affiliated
companies.
(v)
Expenses . During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable employment expenses incurred by the Executive in
accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other Peer Executives of the Company and its affiliated
companies.
(vi)
Fringe Benefits . During the Employment Period, the
Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Executive at
any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other Peer
Executives of the Company and its affiliated companies.
(vii)
Office and Support Staff . During the Employment
Period, the Executive shall be entitled to an office or offices of
a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided to the Executive by
the Company and its affiliated companies at any time during the
90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time
thereafter with respect to other Peer Executives of the Company and
its affiliated companies.
(viii)
Vacation . During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the Executive
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other Peer
Executives of the Company and its affiliated companies.
(ix)
“ Peer Executives .” For purposes of this
Agreement, references to “peer executives of the Company and
its affiliated companies” shall refer only to Executives
based in the United States.
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5.
Termination of Employment .
(a)
Death or Disability . The Executive’s employment
shall terminate automatically upon the Executive’s death
during the Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in
accordance with Section 12(b) of its intention to terminate the
Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the “
Disability Effective Date ”), provided that, within
the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive’s duties.
For purposes of this Agreement, “ Disability ”
shall mean the absence of the Executive from the Executive’s
duties with the Company on a full-time basis for 180 consecutive
business 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 (such
agreement as to acceptability not to be withheld
unreasonably).
(b)
Cause . The Company may terminate the Executive’s
employment during the Employment Period for Cause. For purposes of
this Agreement, “Cause” shall only mean (i) any
material act or acts of personal dishonesty taken by Executive
which is either (x) at the expense of the Company, or
(y) reasonably likely to bring significant disrepute to the
Company, (ii) subject to the following sentences, any
violation by Executive of Executive’s material obligations
under this Agreement (other than as a result of incapacity due to
physical or mental illness) which is demonstrably willful and
deliberate on Executive’s part and which is not remedied
within ten business days after receipt of written notice from the
Company, (iii) the conviction of Executive for any criminal
act which is a felony or a misdemeanor in each case involving moral
turpitude, or (iv) a material breach of Executive’s
Confidentiality and Invention Agreement with the Company. The
requirement of written notice from the Company specifying the
breach is mandatory, and shall provide at least ten days for such
breach to be remedied.
(c)
Good Reason . The Executive’s employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, “ Good Reason
” shall mean:
(i) the
assignment to the Executive of any duties inconsistent in any
respect with the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) or
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