Exhibit 10.17
SEPRACOR INC.
Executive Retention
Agreement
THIS EXECUTIVE RETENTION AGREEMENT
by and between Sepracor Inc., a Delaware corporation (the
“Company”), and Adrian Adams (the
“Executive”) is made as of March 1, 2007 (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) upon the occurrence of 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
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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.
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, or (c) if a Change in
Control has occurred during the Term, the fulfillment by the
Company of all of its obligations under Sections 4 and 5.2 and
5.3. “Term” shall mean the period commencing as
of the Effective Date and continuing in effect through
March 1, 2010; provided , however, that commencing on
March 1 ,
2010 and each
March 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 ; 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.
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) notwithstanding any
provision in any applicable option agreement to the contrary, if
Executive’s employment is terminated in connection with, in
anticipation of, or within six months after a Change in Control,
each such option shall continue to be exercisable by the Executive
(to the extent such option was exercisable on the Change in Control
Date) for a period of six months following the date of termination
of such employment.
4.2
Compensation
. If the
Change in Control Date occurs during the Term:
(a)
the Company shall
pay to the Executive in a lump sum in cash within 30 days after the
Change in Control Date the aggregate of the following
amounts:
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(i)
the sum of (1) the
Executive’s base salary through the Change in Control Date,
(2) the product of (A) the annual bonus paid or payable
(including any bonus or portion thereof which has been earned but
deferred) for the most recently completed fiscal year and
(B) a fraction, the numerator of which is the number of days
in the current fiscal year through the Change in Control Date, and
the denominator of which is 365 and (3) the amount of any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (1), (2), and (3) shall be
hereinafter referred to as the “Accrued Obligations”);
and
(ii)
the amount equal to (1) three
multiplied by (2) the sum of (A) the Executive’s
highest annual base salary during the five-year period prior to the
Change in Control Date and (B) the Executive’s highest
annual bonus during the five-year period prior to the Change in
Control Date.
(b)
for 24 months
after the Change in Control Date, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or
policy, the Company shall continue to provide benefits to the
Executive and the Executive’s family at least equal to those
provided to them immediately prior to the Change in Control Date,
in accordance with the applicable Benefit Plans in effect on the
Measurement Date or, if more favorable to the Executive and his
family, in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies;
provided , however, that if the Executive’s employment
is terminated during this period and the Executive becomes
reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from
such employer on terms at least as favorable to the Executive and
his family as those being provided by the Company, then the Company
shall no longer be required to provide those particular benefits to
the Executive and his family; and
(c)
if the
Executive’s employment is terminated during the 24-month
period following the Change in Control Date, to the extent not
previously paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive
following the Executive’s termination of employment under any
plan, program, policy, practice, contract or agreement of the
Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the “Other
Benefits”).
4.3
Taxes .
(a)
In the event that
the Company undergoes a “Change in Ownership or
Control” (as defined below), the Company shall, within 30
days after each date on which the Executive becomes entitled to
receive (whether or not then due) a Contingent Compensation Payment
(as defined below) relating to such Change in Ownership or Control,
determine and notify the Executive (with reasonable detail
regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or
otherwise) following such Change in Ownership or Control constitute
Contingent Compensation Payments, (ii) the amount, if any, of
the excise tax (the “Excise Tax”) payable pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”), by the Executive with respect to
such
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Contingent Compensation
Payment and (iii) the amount of the Gross-Up Payment (as
defined below) due to the Executive with respect to such Contingent
Compensation Payment. Within 30 days after delivery of such
notice to the Executive, the Executive shall deliver a response to
the Company (the “Executive Response”) stating either
(A) that he agrees with the Company’s determination
pursuant to the preceding sentence or (B) that he disagrees
with such determination, in which case he shall indicate which
payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to
such Contingent Compensation Payment and the amount of the Gross-Up
Payment due to the Executive with respect to such Contingent
Compensation Payment
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