Exhibit 10.14
SEPRACOR INC.
Executive Retention
Agreement
THIS EXECUTIVE RETENTION AGREEMENT
by and between Sepracor Inc., a Delaware corporation (the
“Company”), and (the “Executive”) is
made as of February 1, 2002 (the “Effective
Date”).
WHEREAS, the Company recognizes
that, as is the case with many publicly-held corporations, the
possibility of a change in control of the Company exists and that
such possibility, and the uncertainty and questions which it may
raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and
its stockholders, and
WHEREAS, the Board of Directors of
the Company (the “Board”) has determined that
appropriate steps should be taken to reinforce and encourage the
continued employment and dedication of the Company’s key
personnel without distraction from the possibility of a change in
control of the Company and related events and
circumstances.
NOW, THEREFORE, as an inducement for
and in consideration of the Executive remaining in its employ, the
Company agrees that the Executive shall receive the severance
benefits set forth in this Agreement (including a certain
“gross up” payment originally authorized by the Board
on February 25, 1999 and set forth in Section 4.3 of this
Agreement) in the event the Executive’s employment with the
Company is terminated under the circumstances described below
subsequent to a Change in Control (as defined in
Section 1.1).
1. Key
Definitions. As used herein, the
following terms shall have the following respective
meanings:
1.1 “ Change in
Control ” means an event or occurrence set forth in any
one or more of subsections (a) through (d) below
(including an event or occurrence that constitutes a Change in
Control under one of such subsections but is specifically exempted
from another such subsection):
(a) the acquisition
by an individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”))
(a “Person”) of beneficial ownership of any capital
stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 30% or more of either
(x) the then-outstanding shares of common stock of the Company
(the “Outstanding Company Common Stock”) or
(y) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting
Securities”); provided , however, that for purposes of
this subsection (a), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly
from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting
securities of the Company, unless the Person exercising, converting
or exchanging such security acquired such security directly from
the Company or an underwriter or agent of the Company),
(ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i) and (ii) of subsection (c) of this
Section 1.1; or
(b) such time as
the Continuing Directors (as defined below) do not constitute a
majority of the Board (or, if applicable, the Board of Directors of
a successor corporation to the Company), where the term
“Continuing Director” means at any date a member of the
Board (i) who was a member of the Board on the date of the
execution of this Agreement or (ii) who was nominated or
elected subsequent to such date by at least a majority of
the
directors who were Continuing
Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a
majority of the directors who were Continuing Directors at the time
of such nomination or election; provided , however ,
that there shall be excluded from this clause (ii) any
individual whose initial assumption of office occurred as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person
other than the Board; or
(c) the
consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company
or a sale or other disposition of all or substantially all of the
assets of the Company in one or a series of transactions (a
“Business Combination”), unless, immediately following
such Business Combination, each of the following two conditions is
satisfied: (i) the beneficial owners of all or substantially
all of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding securities entitled to vote generally
in the election of directors, respectively, of the resulting or
acquiring corporation in such Business Combination (which shall
include, without limitation, a corporation which as a result of
such transaction owns the Company or substantially all of the
Company’s assets either directly or through one or more
subsidiaries) (such resulting or acquiring corporation is referred
to herein as the “Acquiring Corporation”) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring
Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 30% or more
of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the
then-outstanding securities of such corporation entitled to vote
generally in the election of directors (except to the extent that
such ownership existed prior to the Business Combination);
or
(d) approval by the
stockholders of the Company of a complete liquidation or
dissolution of the Company.
1.2 “ Change in
Control Date ” means the first date during the Term (as
defined in Section 2) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if
(a) a Change in Control occurs, (b) the Executive’s
employment with the Company is terminated prior to the date on
which the Change in Control occurs, and (c) either
(i) such termination of employment (x) was at the request
of a third party who has taken steps reasonably calculated to
effect a Change in Control or (y) otherwise arose in
connection with or in anticipation of a Change in Control, or
(ii) such termination of employment occurs following the
execution of a definitive agreement for such Change in Control,
then for all purposes of this Agreement the “Change in
Control Date” shall mean the date immediately prior to the
date of such termination of employment.
1.3 “ Cause
” means:
(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
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Company which specifically
identifies the manner in which the Board of Directors believes the
Executive has not substantially performed the Executive’s
duties; or
(b) the
Executive’s willful engagement in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this
Section 1.3, 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.
1.4 “ Good
Reason ” means the occurrence, without the
Executive’s written consent, of any of the events or
circumstances set forth in clauses (a) through (f) below.
Notwithstanding the occurrence of any such event or circumstance,
such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of
Termination (each as defined in Section 3.2(a)) given by the
Executive in respect thereof, such event or circumstance has been
fully corrected and the Executive has been reasonably compensated
for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first
Notice of Termination for Good Reason given by the
Executive).
(a) the assignment
to the Executive of duties inconsistent in any material respect
with the Executive’s position (including status, offices,
titles or reporting requirements), authority or responsibilities in
effect immediately prior to the earliest to occur of (i) the
Change in Control Date, (ii) the date of the execution by the
Company of the initial written agreement or instrument providing
for the Change in Control or (iii) the date of the adoption by
the Board of Directors of a resolution providing for the Change in
Control (with the earliest to occur of such dates referred to
herein as the “Measurement Date”), or any other action
or omission by the Company which results in a material diminution
in such position, authority or responsibilities;
(b) a reduction in
the Executive’s annual base salary or bonus eligibility as in
effect on the Measurement Date or as the same was or may be
increased thereafter from time to time;
(c) the failure by
the Company to (i) continue in effect any material
compensation or benefit plan or program (including without
limitation any life insurance, medical, health and accident or
disability plan and any vacation or automobile program or policy)
(a “Benefit Plan”) in which the Executive participates
or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan or program, (ii) continue the Executive’s
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, in terms of the amount of
benefits provided, than the basis existing immediately prior to the
Measurement Date or (iii) award cash bonuses to the Executive
in amounts and in a manner substantially consistent with past
practice in light of the Company’s financial
performance;
(d) a change by the
Company in the location at which the Executive performs his
principal duties for the Company to a new location that increases
the Executive’s daily commute by more than 40 miles (as
measured immediately prior to the Measurement Date); or a
requirement by the Company that the Executive travel on Company
business to a substantially greater extent than required
immediately prior to the Measurement Date;
(e) the failure of
the Company to obtain the agreement from any successor to the
Company to assume and agree to perform this Agreement, as required
by Section 6.1; or
(f) any failure of
the Company to pay or provide to the Executive any portion of the
Executive’s compensation or benefits due under any Benefit
Plan within seven days of the
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date such compensation or benefits
are due, or any material breach by the Company of this Agreement or
any employment agreement with the Executive.
The Executive’s right to
terminate his employment for Good Reason shall not be affected by
his incapacity due to physical or mental illness.
1.5 “
Disability ” means the Executive’s absence from
the full-time performance of the Executive’s duties with the
Company for 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.
2. Term of
Agreement. This Agreement, and all
rights and obligations of the parties hereunder, shall take effect
upon the Effective Date and shall expire upon the first to occur of
(a) the expiration of the Term (as defined below) if a Change
in Control has not occurred during the Term, (b) the
termination of the Executive’s employment with the Company
prior to the Change in Control Date, (c) the date
24 months after the Change in Control Date, if the Executive
is still employed by the Company as of such later date (unless the
Company has provided notice of termination of Executive’s
employment within such 24 month period in which case the
Agreement shall expire on the termination of the Executive’s
employment with the Company), or (d) the fulfillment by the
Company of all of its obligations under Sections 4 and 5.2 and 5.3
if the Executive’s employment with the Company terminates
within 24 months (or after 24 months if the Company
provides notice to the Executive of termination of his employment
within such 24 month period) following the Change in Control
Date. “Term” shall mean the period commencing as of the
Effective Date and continuing in effect through March 31,
2007; provided , however, that commencing on April 1
, 2007 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later
than 90 days prior to the scheduled expiration of the Term (or
any extension thereof), the Company shall have given the Executive
written notice that the Term will not be extended.
3. Employment Status;
Termination Following Change in Control.
3.1 Not an Employment
Contract. The Executive acknowledges
that this Agreement does not constitute a contract of employment or
impose on the Company any obligation to retain the Executive as an
employee and that this Agreement does not prevent the Executive
from terminating employment at any time. If the Executive’s
employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall
not be entitled to any benefits hereunder except as otherwise
provided pursuant to Section 1.2.
3.2 Termination of
Employment.
(a) If the Change
in Control Date occurs during the Term, any termination of the
Executive’s employment by the Company or by the Executive
within 24 months following the Change in Control Date (other
than due to the death of the Executive) shall be communicated by a
written notice to the other party hereto (the “Notice of
Termination”), given in accordance with Section 7. Any
Notice of Termination shall: (i) indicate the specific
termination provision (if any) of this Agreement relied upon by the
party giving such notice, (ii) to the extent applicable, set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment
under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment
termination (the “Date of Termination”) shall be the
close of business on the date specified in the Notice of
Termination (which date may not be less than 15 days or more
than 45 days after the date of delivery of such Notice of
Termination), in the case of a termination other than one due to
the Executive’s death, or the date of the Executive’s
death, as the case may be. In the event the Company fails to
satisfy the requirements of Section 3.2(a) regarding a
Notice of Termination, the purported termination of the
Executive’s employment pursuant to such Notice of Termination
shall not be effective for purposes of this Agreement.
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(b) The failure by
the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting any such fact or
circumstance in enforcing the Executive’s or the
Company’s rights hereunder.
(c) Any Notice of
Termination for Cause given by the Company must be given within
90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any
Notice of Termination for Cause being given (and prior to any
termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company
at which he may, at his election, be represented by counsel and at
which he shall have a reasonable opportunity to be heard. Such
hearing shall be held on not less than 15 days prior written
notice to the Executive stating the Board of Directors’
intention to terminate the Executive for Cause and stating in
detail the particular event(s) or circumstance(s) which
the Board of Directors believes constitutes Cause for
termination.
(d) Any Notice of
Termination for Good Reason given by the Executive must be given
within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good
Reason.
4. Benefits to
Executive.
4.1 Stock
Acceleration. If the Change in Control
Date occurs during the Term, then, effective upon the Change in
Control Date, (a) each outstanding option to purchase shares
of Common Stock of the Company held by the Executive shall vest and
become immediately exercisable in full and shares of Common Stock
of the Company received upon exercise of any options will no longer
be subject to a right of repurchase by the Company, (b) each
outstanding restricted stock award shall be deemed to be fully
vested and will no longer be subject to a right of repurchase by
the Company and (c) if the Executive’s employment is
thereafter terminated for any reason (other than by the Company for
Cause), then each such option (or any option into which such option
is converted, exchanged or substituted in connection with the
Change in Control) shall continue to be exercisable by the
Executive (to the extent such option was exercisable on the Date of
Termination) for a period of six months following the Date of
Termination, notwithstanding any provision in any applicable option
agreement to the contrary; provided however that if stock options
held generally by employees of the Company under the stock option
or stock incentive plan under which Executive’s stock option
was granted terminate or expire if not exercised upon, immediately
prior to or otherwise in connection with the Change in Control,
such stock option held by Executive shall likewise terminate or
expire.
4.2 Compensation
If the Change in Control Date occurs during
the Term and the Executive’s employment with the Company
terminates within 24 months following the Change in Control
Date, the Executive shall be entitled to the following
benefits:
(a)
Termination Without Cause or for Good
Reason. If the Executive’s
employment with the Company is terminated by the Company (other
than for Cause, Disability or Death) or by the Executive for Good
Reason within 24 months following the Change in Control Date,
then the Executive shall be entitled to the following
benefits:
(i) the
Company shall pay to the Executive in a lump sum in cash within
30 days after the Date of Termination the
