EXHIBIT 10.7
EMPLOYMENT
AGREEMENT , dated
December 27, 2007, by and between HI-TECH PHARMACAL CO., INC., a
Delaware corporation with offices at 369 Bayview Avenue,
Amityville, New York 11701 ( the “Corporation”),
and BRYCE M. HARVEY, an individual residing at 1049 Merrywood Drive
Pike Road, Alabama 36064 (“Employee”).
WITNESSETH
WHEREAS , the Corporation desires to secure the services
of Employee upon the terms and conditions hereinafter set forth;
and
WHEREAS , Employee desires to render services to the
Corporation upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE , the parties mutually agree as
follows:
Section
1.
Employment . The Corporation hereby employs
Employee and Employee hereby accepts such employment, as an
employee of the Corporation, subject to the terms and conditions
set forth in this Agreement.
Section
2. Duties
. Employee shall serve as President of the division of
the Corporation which markets and distributes the products acquired
from Midlothian Laboratories, LLC (the
“Division”). Employee’s
responsibilities shall include without limitation, management of
the daily operations of the Division and identification and
introduction to the market of new product opportunities in a timely
manner. Employee shall further properly perform such
other duties as may be assigned to him from time to time by the
Chief Executive Officer and/or Board of Directors of the
Corporation. During the term of this Agreement, Employee
shall devote substantially all of his available business time to
the performance of his duties hereunder unless otherwise authorized
by the Board of Directors.
Section
3. Term of
Employment . The term of this contract shall
commence as of December 27, 2007 (the “Effective Date”)
and shall continue until December 26, 2009 unless earlier
terminated by Employee upon 30 days advance written notice to the
Corporation, or unless earlier terminated pursuant to the
provisions of Section 5 hereof (the “Term”).
Section
4. Compensation
of Employee .
4.1. Compensation
. As compensation for his services hereunder the
Corporation shall pay Employee an annual salary
(“Salary”) equal to $232,782. On the first
anniversary of the Effective Date, Employee’s Salary shall be
increased by five (5%) percent. The Salary shall be
payable weekly less such deductions as shall be required to be
withheld by applicable law and regulations.
4.2.
Stock Options .
(a) Employee
shall receive, on the Effective Date, an option to purchase five
thousand (5,000) shares of the Corporation’s Common Stock,
subject to and in accordance with the terms and provisions of the
Corporation’s Amended and Restated Stock Option Plan (the
“Plan”). The Stock Options shall vest in 25%
increments on the first through fourth anniversaries of the grant
date and shall be governed by the terms of the Plan, a copy of
which has been provided to Employee.
(b) On
or after the first anniversary of the Effective Date, Employee may
receive additional stock options at the sole discretion of the
Corporation’s management, such discretion to be exercised via
recommendation by the Corporation’s Chief Executive Officer
to the Compensation Committee; provided however, that the
Compensation Committee shall make the final determination, in its
discretion, as to the number of options or other stock or equity
based compensation, if any, to be granted to Employee.
4.3.
Bonus . During the Term of this
Agreement;
(a) For
the period commencing on the first day of the month following the
Effective Date (the “Start Date”) and ending on the day
immediately prior to the first anniversary of the Start Date
(“Year 1”), Employee shall receive a bonus equal to the
sum of (i) 1.5% of the first $2,000,000 of the Division’s
Pre-Tax Net Income (as hereinafter defined) for Year 1; (ii) 5% of
the Division’s Pre Tax Net Income in excess of $2,000,000 for
Year 1.
(b) For
the period commencing on the first anniversary of the Start Date
and ending on the day immediately prior to the second anniversary
of the Start Date (“Year 2”), Employee shall receive a
bonus equal to the sum of (i) 1.5% of the first $2,000,000 of the
Division’s Pre-Tax Net Income (as hereinafter defined) for
Year 2; (ii) 5% of the Division’s Pre Tax Net Income in
excess of $2,000,000 for Year 2.
(c) “Pre-Tax
Net Income” shall mean gross sales less the sum of (i)
returns, chargebacks, refunds, rebates and discounts; (ii) cost of
goods sold; and (iii) all costs directly attributable to the
Division, including without limitation, Selling, General and
Administrative expenses (SG&A) and Research and Development
expenses (R&D), all as determined in accordance with generally
accepted accounting principles of financial reporting in the United
States, applied on a consistent basis.
(d) Within
sixty (60) days after the end of each of Year 1 and Year 2, as the
case may be, the Corporation shall deliver to the Employee the
unaudited financial statements of the Division for such Year,
together with a determination (“Bonus Determination”)
of the amount of Bonus earned for such Year and showing the
calculations thereof. Any Bonus payable as reflected in
such Bonus Determination shall be paid to the Employee concurrently
with the delivery of such Bonus Determination. Absent
manifest error or calculation errors, such Bonus Determination
shall be final, conclusive, and binding upon the parties
hereto.
4.4.
Expenses . The Corporation shall pay or reimburse
Employee for all pre-approved reasonable and necessary business,
travel or other expenses incurred by him, upon proper documentation
thereof, which may be incurred by him in connection with the
rendition of the services contemplated hereunder.
4.5.
Benefits . During the term of this Agreement,
Employee shall be entitled to participate in such pension, profit
sharing, group insurance, option plans, hospitalization, and group
health benefit plans and all other benefits and plans as the
Corporation provides to its executives, which benefits plans will
cover Employee and his dependants. The Corporation shall pay for
the full cost of Employee’s family coverage health
insurance.
4.6.
Discretionary Payments . Nothing herein shall
preclude the Corporation from paying Employee such bonus or bonuses
or other compensation, as the Board of Directors, in its
discretion, may authorize from time to time.
Section
5.
Termination.
5.1.
Termination . This Agreement and Employee’s
employment hereunder shall terminate immediately upon (i)
Employee’s death or Total Disability; (ii) the termination of
employment of Employee For Cause, as hereinafter defined; or (iii)
a Corporation Termination. Upon a termination of this
Agreement, the Corporation shall be released from all obligations
to Employee with respect to this Agreement, except as provided in
Section 10.7 hereto.
5.2.
Definitions .
(a) As
used herein, the term “For Cause” shall mean (i)
Employee’s substantiated misappropriation of the
Corporation’s assets or substantiated perpetration of fraud
against, or substantiated dishonesty in dealings with the
Corporation; (ii) Employee’s indictment, plea or conviction
in a court of law of any crime or offense involving willful
misappropriation of money or other property or any other crime
involving moral turpitude which constitutes a felony, whether or
not involving the Corporation; (iii) Employee’s behavior
which is materially detrimental to the Corporation’s
reputation; (iv) Employee’s disobedience of a material
directive from the Chief Executive Officer or Board of Directors of
the Corporation consistent with Employee’s duties hereunder
or Employee’s willful refusal to follow, or reckless
disregard of, the policies and directives of the Corporation; (v)
Employee’s habitual drunkenness or habitual use of illegal
substances; (vi) Employee’s failure to cooperate with a
governmental or regulatory investigation concerning the Corporation
or Employee; (vii) Employee’s leaving of his employment
hereunder; or (viii) Employee’s repeated failure to perform
his duties or Employee’s breach of his responsibilities under
this Agreement; provided that the Corporation shall have given
Employee notice of his failure to perform his duties or breach of
his responsibilities, and for a period of five (5) days thereafter,
such failure or breach shall not have been remedied to the
reasonable satisfaction of the Corporation.
(b) As
used herein, the term “Corporation Termination” shall
mean the termination by the Corporation of this Agreement and
Employee’s employment upon the giving to Employee of two
weeks prior written notice by the Corporation; provided however,
that a Corporation Termination shall not include a termination by
the Corporation For Cause and/or as a result of Employee’s
death or Total Disability. The Corporation shall be
permitted to effect a Corporation Termination for any reason and at
any time.
5.3.
Severance . If Employee’s employment is
terminated as a result of a Corporation Termination during the two
years of his employment, then the Corporation shall pay to Employee
after such termination, severance payments
(“Severance”) equal to eighty percent (80%) of
Employee’s Salary for a period beginning on the date that the
Corporate Termination occurs and ending on the earlier of (i) the
two year anniversary date of this Agreement, or (ii) the one year
anniversary date of the Corporate Termination. The
Severance shall be payable weekly less such deductions as shall be
required to be withheld by applicable law and
regulations. In addition, if Employee’s employment
is terminated as a result of a Corporation Termination, then
Employee shall be entitled to the Bonus for the year in which such
termination occurs as provided in Section 4.2 hereof as if Employee
had not been terminated. Employee shall not be entitled
to Severance if Employee’s employment is terminated For
Cause, or if Employee’s employment is terminated due to his
death or Total Disability.
5.4.
Stock Options .
(a) Upon
the death or Total Disability of Employee, all stock options
granted to Employee under the Plan (“Stock Options”)
shall automatically become fully vested and immediately
exercisable.
(b) In
the event Employee is terminated pursuant to a Corporation
Termination, then Employee’s previously granted and
unexercised Stock Options shall continue to vest on their regular
vesting dates until the date this Agreement would have terminated
had there not been a termination without cause.
(c) In
the event Employee is terminated For Cause, all unvested Stock
Options shall immediately terminate and be forfeited.
(d) In
the event there is a conflict between the terms of this Agreement
and the Plan, this Agreement shall govern.
Section
6.
Disability .
6.1.
Total Disability . In the event Employee is
mentally or physically incapable or unable to perform his regular
and customary duties of employment with the Corporation for a
period of ninety
