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Exhibit
10.31
EMPLOYMENT
AGREEMENT
This
Amended and Restated Employment Agreement (the “
Agreement ")
is made as of this 4th day of May, 2006, by and between DISCOVERY
LABORATORIES, INC., a Delaware corporation (the "
Company "),
and CHARLES KATZER (the "
Executive ").
WHEREAS,
the Executive is currently employed by the Company as its
Senior Vice President, Manufacturing Operations pursuant to
that certain revised and amended employment agreement dated as
of January 3, 2006, by and between the Company and the
Executive (the “
Employment Agreement ”);
and
WHEREAS,
the Company and the Executive desire to amend and restate the
Employment Agreement in its entirety as set forth
herein.
NOW,
THEREFORE, in consideration of the covenants contained herein,
and for other valuable consideration, the Company and the
Executive hereby agree to amend and restate the Employment
Agreement in its entirety to read as follows:
1.
Certain Definitions .
Certain definitions used herein shall have the meanings set forth
on Exhibit A attached hereto.
2.
Term of the Agreement .
The term (“
Term ”)
of this Agreement shall commence on the date first above written
and shall continue through December 31, 2007; provided, however,
that commencing on January 1, 2008, and on each January 1st
thereafter, the term of this Agreement shall automatically be
extended for one additional year, unless at least 90 days prior to
such January1st date, the Company or the Executive shall have given
notice that it does not wish to extend this Agreement. Upon the
occurrence of a Change of Control during the term of this
Agreement, including any extensions thereof, this Agreement shall
automatically be extended until the end of the Effective Period if
the end of the Effective Period is after the then current
expiration date of the Term. Notwithstanding the foregoing, this
Agreement shall terminate prior to the scheduled expiration date of
the Term on the Date of Termination.
3.
Executive's Duties and Obligations .
(a)
Duties .
The Executive shall continue to serve as the Company's Senior Vice
President, Manufacturing Operations. The Executive shall continue
to be responsible for all duties customarily associated with this
title. The Executive shall at all times report directly to the
Company’s Chief Executive Officer.
(b)
Location of Employment .
The Executive's principal place of business shall continue to be at
the Company's headquarters to be located within thirty (30) miles
of Doylestown, Pennsylvania; provided, that the Executive
acknowledges and agrees that the performance by the Executive of
his duties shall require frequent travel including, without
limitation, overseas travel from time to time.
(c)
Proprietary Information and Inventions Matters
.
In consideration of the covenants contained herein, and further in
consideration of the Term extension provided by this Agreement in
relation to the Employment Agreement, the Executive hereby agrees
to execute the Company's standard form of Proprietary Information
and Inventions Agreement (the "
Confidentiality Agreement "),
a copy of which is attached to this Agreement as Exhibit B. The
Executive shall comply at all times with the terms and conditions
of the Confidentiality Agreement and all other reasonable policies
of the Company governing its confidential and proprietary
information.
4.
Devotion of Time to Company's Business .
(a)
Full-Time Efforts .
During his employment with the Company, the Executive shall devote
substantially all of his time, attention and efforts to the proper
performance of his implicit and explicit duties and obligations
hereunder to the reasonable satisfaction of the
Company.
(b)
No Other Employment .
During his employment with the Company, the Executive shall not,
except as otherwise provided herein, directly or indirectly, render
any services of a commercial or professional nature to any other
person or organization, whether for compensation or otherwise,
without the prior written consent of the Executive Committee or the
Board.
(c)
Non-Competition During and After Employment
.
During the Term and for 12 months from the Date of Termination, the
Executive shall not, directly or indirectly, without the prior
written consent of the Company, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any other individual or representative
capacity (X) compete with the Company in the business of developing
or commercializing pulmonary surfactants or any other category of
compounds which forms the basis of the Company's material products
or any material products under development on the Date of
Termination, or (Y) solicit, encourage, induce or endeavor to
entice away from the Company, or otherwise interfere with the
relationship of the Company with, any person who is employed or
engaged by the Company as an employee, consultant or independent
contractor or who was so employed or engaged at any time during the
preceding six (6) months;
provided ,
that nothing herein shall prevent the Executive from engaging in
discussions regarding employment, or employing, any such employee,
consultant or independent contractor (i) if such person shall
voluntarily initiate such discussions without any such
solicitation, encouragement, enticement or inducement prior thereto
on the part of the Executive or (ii) if such discussions shall be
held as a result of or employment be the result of the response by
any such person to a written employment advertisement placed in a
publication of general circulation, general solicitation conducted
by executive search firms, employment agencies or other general
employment services, not directed specifically at any such
employee, consultant or independent contractor.
(d)
Injunctive Relief .
In the event that the Executive breaches any provisions of Section
4(c) or of the Confidentiality Agreement or there is a threatened
breach thereof, then, in addition to any other rights which the
Company may have, the Company shall be entitled, without the
posting of a bond or other security, to injunctive relief to
enforce the restrictions contained therein. In the event that an
actual proceeding is brought in equity to enforce the provisions of
Section 4(c) or the Confidentiality Agreement, the Executive shall
not urge as a defense that there is an adequate remedy at law nor
shall the Company be prevented from seeking any other remedies
which may be available.
(e)
Reformation .
To the extent that the restrictions imposed by Section 4(c) are
interpreted by any court to be unreasonable in geographic and/or
temporal scope, such restrictions shall be deemed automatically
reduced to the extent necessary to coincide with the maximum
geographic and/or temporal restrictions deemed by such court not to
be unreasonable.
5.
Compensation and Benefits .
(a)
Base Compensation .
During the Term, the Company shall pay to the Executive (i) base
annual compensation ("
Base Salary ")
of at least $215,000, payable in accordance with the Company's
regular payroll practices and less all required withholdings and
(ii) additional compensation, if any, and benefits as hereinafter
set forth in this Section 5. The Base Salary shall be reviewed at
least annually for the purposes of determining increases, if any,
based on the Executive's performance, the performance of the
Company, inflation, the then prevailing salary scales for
comparable positions and other relevant factors;
provided ,
however ,
that any such increase in Base Salary shall be solely within the
discretion of the Company.
(b)
Bonuses .
During the Term, the Executive shall be eligible for such year-end
bonus, which may be paid in either cash or equity, or both, as is
awarded solely at the discretion of the Compensation Committee of
the Board after consultation with the Company’s Chief
Executive Officer,
provided ,
that the Company shall be under no obligation whatsoever to pay
such discretionary year-end bonus for any year. Any such equity
bonus shall contain such rights and features as are typically
afforded to other Company employees of similar level in connection
with comparable equity bonuses awarded by the Company.
(c)
Benefits .
During the Term, the Executive shall be entitled to participate in
all employee benefit plans, programs and arrangements made
available generally to the Company's senior executives or to its
employees on substantially the same basis that such benefits are
provided to such executives or employees (including, without
limitation profit-sharing, savings and other retirement plans
(e.g., a 401(k) plan) or programs, medical, dental,
hospitalization, vision, short-term and long-term disability and
life insurance plans or programs, accidental death and
dismemberment protection, travel accident insurance, and any other
employee welfare benefit plans or programs that may be sponsored by
the Company from time to time, including any plans or programs that
supplement the above-listed types of plans or programs, whether
funded or unfunded);
provided ,
however ,
that nothing in this Agreement shall be construed to require the
Company to establish or maintain any such plans, programs or
arrangements. Anything contained herein to the contrary
notwithstanding, throughout the Term, Executive shall be entitled
to receive life insurance on behalf of Executive’s named
beneficiaries in the amount of Executive’s then current
annual salary for the Term of this Agreement at no cost to the
Executive, except the Company shall have no liability whatsoever
for any taxes (whether based on income or otherwise) imposed upon
or incurred by Executive in connection with any such
insurance.
(d)
Vacations .
During the Term, the Executive shall be entitled to 20 days paid
vacation per year, to be earned ratably throughout the year, 5 days
of which may be carried over from year to year (
provided ,
that in no event shall the aggregate number of such vacation days
carried over to any succeeding year exceed 10 days).
(e)
Reimbursement of Business Expenses .
The Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement
and the Company shall reimburse him for all such expenses, in
accordance with reasonable policies of the Company.
6.
Change of Control Benefits.
(a)
Bonus .
The Executive shall be awarded an annual cash bonus for each fiscal
year of the Company ending during the Effective Period at least
equal to the Highest Annual Bonus.
(b)
Options .
Notwithstanding any provision to the contrary in the
Company’s Amended and Restated 1998 Stock Incentive Plan or
any stock option or restricted stock agreement between the Company
and the Executive, all shares of stock and all options to acquire
Company stock held by the Executive shall accelerate and become
fully vested and, with respect to restricted stock, all
restrictions shall be lifted upon the Change of Control Date. In
the case of any Change of Control in which the Company’s
common stockholders receive cash, securities or other consideration
in exchange for, or in respect of, their Company common stock, (i)
the Executive shall be permitted to exercise his options at a time
and in a fashion that will entitle him to receive, in exchange for
any shares acquired pursuant to any such exercise, the same per
share consideration as is received by the other holders of the
Company’s common stock, and (ii) if the Executive shall elect
not to exercise all or any portion of such options, any such
unexercised options shall terminate and cease to be outstanding
following such Change of Control, except to the extent assumed by a
successor corporation (or its parent) or otherwise expressly
continued in full force and effect pursuant to the terms of such
Change of Control.
7.
Termination of Employmen
t .
(a)
Termination by the Company for Cause or Termination by the
Executive without Good Reason, Death or Disability
.
(i)
In the event of a termination of the Executive’s employment
by the Company for Cause, a termination by the Executive without
Good Reason, or in the event this Agreement terminates by reason of
the death or Disability of the Executive, the Executive shall be
entitled to any unpaid compensation accrued through the last day of
the Executive's employment, a lump sum payment in respect of all
accrued but unused vacation days (
provided ,
that in no event shall the aggregate number of such accrued
vacation days exceed 10 days) at his Base Salary in effect on the
date such vacation was earned, and payment of any other amounts
owing to the Executive but not yet paid. The Executive shall not be
entitled to receive any other compensation or benefits from the
Company whatsoever (except as and to the extent the continuation of
certain benefits is required by law).
(ii)
In the case of a termination due to death or disability,
notwithstanding any provision to the contrary in any stock option
or restricted stock agreement between the Company and the
Executive, all shares of stock and all options to acquire Company
stock held by the Executive shall accelerate and become fully
vested upon the Date of Termination (and all options shall
thereupon become fully exercisable), and all stock options shall
continue to be exercisable for the remainder of their stated
terms.
(b)
Termination by the Company without Cause or by the Executive for
Good Reason .
If (x) the Executive’s employment is terminated by the
Company other than for Cause, death or Disability (i.e., without
Cause) or (y) the Executive terminates employment with Good Reason,
then the Executive shall be entitled to receive the following from
the Company:
(i)
The amounts set forth in Section 7(a)(i);
(ii)
Within 10 days after the Date of Termination, a lump sum cash
payment equal to the Highest Annual Bonus multiplied by the
fraction obtained by dividing the number of days in the year
through the Date of Termination by 365;
(iii)
Within 10 days after the Date of Termination, a lump sum cash
payment in an amount equal to fifty percent (50%) of the sum of (A)
the Executive’s Base Salary then in effect (determined
without regard to any reduction in such Base Salary constituting
Good Reason) and (B) the Highest Annual Bonus;
(iv)
For six months from the Date of Termination, the Company shall
either (A) arrange to provide the Executive and his dependents, at
the Company’s cost (except to the extent such cost was borne
by the Executive prior to the Date of Termination, and further, to
the extent that such post-termination coverages are available under
the Company’s plans), with life, disability, medical and
dental coverage, whether insured or not insured, providing
substantially similar benefits to those which the Executive and his
dependents were receiving immediately prior to the Date of
Termination, or (B) in lieu of providing such coverage, pay to the
Executive no less frequently than quarterly in advance an amount
which, after taxes, is sufficient for the Executive to purchase
equivalent benefits coverage referred to in clause (A);
provided ,
however ,
that the Company’s obligation under this Section 7(b)(iv)
shall be reduced to the extent that substantially similar coverages
(determined on a benefit-by-benefit basis) are provided by a
subsequent employer;
(v)
Any other additional benefits then due or earned in accordance with
applicable plans and programs of the Company; and
(vi)
The Company will provide out-placement counseling assistance in the
form of reimbursement of the reasonable expenses incurred for such
assistance within the 12-month period following the Date of
Termination. Such reimbursement amount shall not exceed
$40,000.
(c)
Termination in connection with a Change of Control
.
If the Executive’s employment is terminated by the Company
other than for Cause or by the Executive for Good Reason during the
Effective Period, then the Executive shall be entitled to receive
the following from the Company:
(i)
All amounts and benefits described in Section 7(a)(i)
above;
(ii)
Within 10 days after the Date of Termination, a lump sum cash
payment equal to the Highest Annual Bonus multiplied by the
fraction obtained by dividing the number of days in the year
through the Date of Termination by 365;
(iii)
Within 10 days after the Date of Termination, a lump sum cash
payment in an amount equal to the sum of (A) the Executive’s
Base Salary then in effect (determined without regard to any
reduction in such Base Salary constituting Good Reason) and (B) the
Highest Annual Bonus;
(iv)
For one year from the Date of Termination, the Company shall either
(A) arrange to provide the Executive and his dependents, at the
Company’s cost (except to the extent such cost was borne by
the Executive prior to the Date of Termination, and further, to the
extent that such post-termination coverages are available under the
Company’s plans), with life, disability, medical and dental
coverage, whether insured or not insured, providing substantially
similar benefits to those which the Executive and his dependents
were receiving immediately prior to the Date of Termination, or (B)
in lieu of providing such coverage, pay to the Executive no less
frequently than quarterly in advance an amount which, after taxes,
is sufficient for the Executive to purchase equivalent benefits
coverage referred to in clause (A);
provided ,
however ,
that the Company’s obligation under this Section 7(c)(iv)
shall be reduced to the extent that substantially similar coverages
(determined on a benefit-by-benefit basis) are provided by a
subsequent employer;
(v)
Notwithstanding any provision to the contrary in any stock option
or restricted stock agreement between the Company and the
Executive, all shares of stock and all options to acquire Company
stock held by the Executive shall accelerate and become fully
vested upon the Date of Termination (and all options shall
thereupon become fu
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