Exhibit 10.11
EMPLOYMENT
AGREEMENT
This Employment Agreement
(“Agreement”) is entered into as of this 8th Day of
September, 2009 (“Effective Date”) between Lannett
Company, Inc. (“Company”) and Stephen J. Kovary
(Executive).
RECITALS
Company wishes to employ Executive
as its Vice President of Operations; and Executive wishes to accept
such employment under the terms and conditions set forth in this
Agreement.
IT IS AGREED
as follows:
1.
Employment.
Company hereby employs Executive as
its Vice President of Operations; and Executive accepts such
employment.
2.
Term. The term of employment under this Agreement
shall commence on the Effective Date and shall continue, unless
otherwise terminated earlier under Section 8, until the day
before the one-year anniversary of the Effective Date, i.e.,
September 8, 2009 (the “Term”), provided that on
the day before the one-year anniversary of the Effective Date and
the day before the anniversary of any one-year renewal of such
Agreement the Term shall be automatically extended for successive
additional one (1) year periods unless at least ninety (90)
days prior to such anniversary date, either Company or Executive
furnishes the other with written notice that the term is not to be
so extended.
3.
Duties. Executive shall devote his full-time efforts to
the proper and faithful performance of all duties customarily
discharged by a Vice President of Operations for a company doing
the type of business engaged in by Company and any additional
duties assigned to him from time to time by the President and Chief
Executive Officer of Company and/or the Board of Directors of
Company. Executive shall report directly to the President and CEO
of the Company. Executive agrees to use his best efforts and comply
with all fiduciary and professional standards in the performance of
his duties hereunder. Executive shall provide services to any
subsidiary or affiliate of Company without additional compensation
and benefits beyond those set forth in this Agreement, and any
compensation and benefits provided to Executive for such services
shall be a credit with regard to amounts due from Company under
this Agreement. Executive represents and warrants to Company that,
at all times prior to the Effective Date when he has served as Vice
President of Operations of the Company and at all times during the
Term, he has either fulfilled or will fulfill his duty of loyalty
to Company; and he has either acted or will act in the best
interests of the Company’s shareholders.
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4.
Base Salary. Executive
shall be paid a base salary of Two Hundred Thousand and no cents
($200,000.00) per annum for the Term, payable, less applicable
withholdings, in proportional monthly payments or more frequently
in accordance with Company’s regular practice. Salary for a
portion of any period will be prorated. The Compensation Committee
of the Board of Directors and the President and CEO will conduct an
annual performance review of Executive and, as part of such review,
will consider adjustments to the base salary set forth herein based
on the performance of both Executive and Company.
5.
Annual Bonus. Executive shall be eligible to participate in
the Management Incentive Bonus Plan (the “MIB”)
administered by the Compensation Committee, or any successor annual
bonus plan or arrangement generally made available to the executive
officers of Company. The MIB shall provide Executive with a target
bonus opportunity for each fiscal year of Company (i.e. July 1
to June 30), regardless of whether or not a bonus is declared
for any fiscal year.
6.
Benefits.
During the Term Executive shall have
the following benefits:
(a)
Executive may participate in all
Company sponsored stock option plans, retirement plans,
401(k) plans, life insurance plans, medical insurance plans,
disability insurance plans, executive stock ownership plans and
such other benefit plans generally available from time to time to
other executive employees of Company for which he qualifies under
the terms of the plans. Executive’s participation in and
benefits under any benefit plan shall be on the terms and subject
to the conditions specified in such plan.
(b)
Vacation days or personal time off
(PTO) granted to Executive in accordance with the Company’s
published vacation or PTO policy generally afforded to salaried
management employees.
7.
Reimbursement of Expenses. Company will reimburse Executive
for the reasonable and necessary expenses incurred by him in the
performance of his duties under this Agreement in accordance with
Company’s policies in effect from time to time.
8.
Termination of Employment.
(a)
Executive’s employment under
this Agreement may be terminated at any time by the President and
Chief Executive Officer, and/or the Board of Directors of Company,
with or without Cause (as defined below). Executive’s
employment is “at-will.”
(b)
Executive’s employment under
this Agreement shall terminate upon his resignation or
death.
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(c)
Executive’s employment under
this Agreement shall terminate upon thirty (30) days written notice
by Company to Executive of a termination due to Disability,
provided such notice is delivered during the period of Disability.
The term “Disability” shall mean, for purposes of this
Agreement, the inability of Executive, due to injury, illness,
disease or bodily or mental infirmity to engage in the performance
of his material duties of employment with Company as contemplated
by Section 3 herein for (i) any period of ninety (90)
consecutive days or (ii) a period of one hundred fifty days
(150) in any consecutive twelve (12) months, provided that if the
Executive returns to work in the consecutive 12 month period for a
period of less than ten (10) consecutive business days in
duration, such return to work shall not be deemed to interfere with
a determination of consecutive absent days if the reason for
absence before and after the interim return are the same. Benefits
to which Executive is entitled under any disability policy or plan
provided by Company shall reduce the base salary paid to Executive
during any period of Disability on a dollar-for-dollar
basis.
(d)
Company shall have the right to
terminate Executive’s employment for Cause. For purposes of
this Agreement, “Cause” shall consist of any of the
following:
(i)
Executive’s willful commission
of an act constituting fraud, embezzlement, breach of any fiduciary
duty owed to the Company or its stockholders or other material
dishonesty with respect to the Company;
(ii)
Gross negligence or willful
misconduct in the performance of Executive’s
duties;
(iii)
Willful or reckless conduct of
Executive which has an adverse impact (economic or otherwise) on
Company;
(iv)
Executive’s willful violation
of any law, rule or regulation relating to the operation of
Company or any of its subsidiaries or affiliates;
(v)
The order of any court or
supervising governmental agency with jurisdiction over the affairs
of Company or any subsidiary or affiliate;
(vi)
Executive’s willful violation
of any provision of this Agreement, including without limitation
violation of Sections 9, 10, 11 or 12;
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(vii)
Executive’s conviction or plea
of nolo contendere (or its equivalent) with respect to a felony or
any other crime involving dishonesty or moral turpitude;
(viii)
Abuse of illegal drugs or other
controlled substances or habitual intoxication;
(ix)
Willful violation by Executive of
Company’s published business conduct guidelines, code of
ethics, conflict of interest or other similar policies;
or
(x)
Executive becoming under
investigation by or subject to any disciplinary charges by any
regulatory agency having jurisdiction over the Company (including
but not limited to the Drug Enforcement Administration (DEA), Food
and Drug Administration (FDA) or the Securities and Exchange
Commission (SEC)) or if any complaint is filed against Executive by
any such regulatory agency.
(e)
If Executive’s employment
terminates for Cause or for any reason other than as set forth in
Section 8(f), Company shall be obligated only to continue to
pay Executive’s salary and, to the extent earned, accrued and
unpaid, annual cash bonus and long term incentive compensation and
furnish the then existing benefits under Section 6 up to the
date of termination (except as otherwise set forth in this
Agreement).
(f)
If Executive’s employment is
terminated by Company without Cause following the completion of two
(2) full years of employment with Company, in addition to the
amounts payable under Section 8(e), Executive shall be
entitled to receive the following: (i) his base salary for a
period of eighteen (18) months after the termination date,
(ii) insurance coverage provided to him equal to such coverage
provided to him on the date of termination at no cost or, if
ineligible for continued coverage under Company policies,
reimbursement of the cost of comparable coverage for a period of
eighteen (18) months, (iii) a pro rated annual cash bonus for
the then current fiscal year calculated as if all base targets and
base goals are achieved (but no other incentive compensation beyond
the date of termination), if it is more likely than not, within the
Company’s discretion, that the bonus will be earned by
Executive, to be paid at the times and frequency regularly paid,
and (iv) the Company shall cause all outstanding Company stock
options awarded Executive prior to termination of his employment to
be one hundred percent (100%) vested at termination. As a condition
to the salary, insurance continuation, under this
Section 8(f), Executive must first execute and deliver to
Company, in a form prepared by Company, a release of all claims
against Company and other appropriate parties, excluding
Company’s performance under this Section 8(f) and
Executive’s vested rights under Company sponsored retirement
plans, 401(k) plans and stock ownership plans. The obligation
of Company to pay Executive’s salary as required by
Subsection (i) of this Section 8(f) shall not be
subject to offset for earnings from Executive’s subsequent
employment,
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