Exhibit 10.3
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”), made this 1st day of March 2007, is
entered into by Sepracor Inc., a Delaware corporation with its
principal place of business at 84 Waterford Drive, Marlborough,
Massachusetts 01752-7231(the “Company”), and Andrew I.
Koven, residing at
(the “Executive”).
The Company desires to employ the
Executive and the Executive desires to be employed by the
Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties agree as
follows:
1.
Term of
Employment . The Company hereby
agrees to employ the Executive and the Executive hereby accepts
employment with the Company, upon the terms set forth in this
Agreement, for the period commencing on March 1, 2007 (the
“Commencement Date”) and ending on March 1, 2010
(the “Term”) . Notwithstanding the
foregoing, the Term shall be extended automatically without further
action by either party by one (1) additional year (added to the end
of the Term) on each succeeding anniversary of March 1, 2010,
unless either party shall have served written notice upon the other
party at least sixty (60) days preceding the date upon which such
Term would 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
serve as Executive Vice-President, General Counsel and Corporate
Secretary of the Company. 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. Executive shall also
perform such other duties consistent with his position as Executive
Vice-President, General
Counsel and
Corporate Secretary as may be reasonably assigned by the Chief
Executive Officer and the Board of Directors of the Company (the
“Board”) from time to time. 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.
Notwithstanding anything herein to
the contrary, Executive shall be entitled to engage in (a) service
on the board of directors of one company, businesses or trade
organization with prior Board approval, (b) service on the board of
directors of not-for-profit or charitable organizations with prior
Board approval, (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 $500,000
(“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 $500,000 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
receive a one-time “Sign On” bonus of $150,000 less
applicable taxes and withholdings to be paid within thirty (30)
days of the Commencement Date, provided , however ,
if the Executive’s employment is terminated, within twelve
(12) months of the Commencement Date, for Cause by the Company
pursuant to Section 4.2 or at the election of the Executive
pursuant to Section 4.5, the Executive will be required to repay
the portion of the Sign On bonus retained by Executive after the
payment of all taxes. In addition, the Executive shall be
eligible for a performance-based annual bonus for each
fiscal
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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 fifty
percent (50%) of Base Salary. For 2007, Executive shall be
entitled to a pro rata guaranteed bonus based on an Annual Bonus of
fifty percent (50%) of 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”), 30,000 shares of restricted
stock and an option to purchase 70,000 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.
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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 no less than
four weeks paid vacation per year, subject to the other terms of
the Company’s standard vacation policy (Schedule
C).
3.5
Reimbursement
of Expenses . The Company shall
reimburse the Executive for all reasonable travel (which shall be
deemed to include first class airfare), 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
New Jersey 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 for up to eighteen (18)
months and then intends to relocate to the Massachusetts area.
Until the Executive relocates to the Massachusetts area, the
Company agrees to provide the Executive with a housing allowance of
$3,750 per month, related to the rental or purchase of a home,
within suitable distance to the Company’s headquarters, which
payments shall be made on a fully tax grossed-up basis. The
Company also will reimburse the Executive for 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. Executive shall
be entitled to relocation
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benefits afforded
by the Company to other Company executives if and when Executive
decides to permanently relocate his primary residence to the
Massachusetts area.
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
$60,000, 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 . The employment of the
Executive under this Agreement shall terminate upon the occurrence
of any of the following:
4.1
On the expiration
date of the Employment Period.
4.2
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 4.2, 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 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
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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 of this Agreement by the
Executive. For purposes of this Section 4.2, 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.
4.3
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.
4.4
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 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 principal offices of
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the Company to an
area more than forty (40) miles from the location of such offices
as of the date hereof.
4.5
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.
4.6
At the election
of the Company, without Cause, upon not less than sixty (60) days
written notice to Executive.
4.7
At the election
of the Company or the Executive in connection with a Change in
Control, as set forth in the Executive Retention Agreement between
the Company and the Executive (the “ERA”), dated as of
the date hereof. “Change in Control” shall have
the meaning set forth in the ERA.
5.
Effect of
Termination .
5.1
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 4.1, for Cause by the Company pursuant to Section 4.2,
or at the election of the Executive pursuant to Section 4.5, 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.
5.2
Termination
for Death or Disability . In the event the
Executive’s employment is terminated by death or because of
disability pursuant to Section 4.3, the Company shall pay to the
estate of the Executive or to the Executive, as the case may be,
(A) within thirty
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(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 end of the month in which the termination of his
employment because of death or disability occurs; and (B) an annual
bonus, payable when bonuses are paid for that year, 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 (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.
5.3
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 4.4 or by the Company without Cause
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. In addition, 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 D hereto, the Company shall (a) continue to pay the Executive
the Base Salary for eighteen (18) months in accordance with the
Company’s regular payroll practices; (b) pay the Executive a
Pro Rata Bonus; (c) pay the Executive, in bi-weekly
installments, over an eighteen-month period, an amount equal in the
aggregate to 1.5 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
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bonus amount));
(d) provide to the Executive for 18 months 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 (e) 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.
5.4
Termination
Following a Change in Control . In the event the
Executive’s employment is terminated pursuant to Section 4.7
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.
5.5
Six Month
Delay . If any payment,
compensation or other benefit provided to the Executive in
connection with his employment termination is determined, in whole
or in part, to constitute “nonqualified deferred
compensation” within the meaning of Section 409A and the
Executive is a specified employee as defined in Section
409A(a)(2)(B)(i), no part of such payments shall be paid before the
day that is six (6) months plus one (1) day after the date of
termination (the “New Payment Date”). In the case
of welfare benefit continuation, the Company shall use its best
efforts to enable Executive to obtain such benefits at
Executive’s expense prior to the New Payment Date. The
aggregate of any payments that otherwise would have been paid to
the Executive (or on Executive’s behalf) during the period
between the date of termination and the New Payment Date shall be
paid to the Executive in a lump sum on such New Payment Date.
Thereafter, any payments that remain outstanding as of the day
immediately
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following the New
Payment Date shall be paid without delay over the time period
originally scheduled, in accordance with the terms of this
Agreement.
6.
Non-Competition and
Non-Solicitation .
(a)
While the
Executive is employed by the Company and for a period of twelve
(12) months following the Executive’s termination or
cessation of such employment for any reason, the Executive will not
directly or indirectly:
(i)
Engage in any
business or enterprise (whether as an owner, partner, officer,
employee, director, investor, lender, consultant, independent
contractor or otherwise, except as the holder of not more than 5%
of the combined voting power of the outstanding stock of a publicly
held company) that (A) is competitive with the Company’s
business and (B) develops, designs, produces, markets, sells
or renders any product or service competitive with any product
developed, produced, marketed, sold or rendered by the Company
while the Executive was employed by the Company;
(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 to 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.
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(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 breach of this
Agreement will cause the Company substantial and irrevocable damage
and therefore, in the event of any such 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.
(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.
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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 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
Chief Executive Officer, 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
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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.
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
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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 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 Chief Executive Officer 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 Chief Executive Officer 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
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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 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 t
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