Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT is entered into
as of the 27th day of August 2005 (the “Effective
Date”) by and between Bentley Pharmaceuticals, Inc., a
Delaware corporation (the “Employer”), and John A.
Sedor, (the “Employee”).
RECITALS
The Employer desires to employ the
Employee, and the Employee desires to be employed by the Employer,
all upon the terms and provisions and subject to the conditions set
forth in this Agreement.
WITNESSETH
NOW THEREFORE
, in consideration of the foregoing
premises and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree to be legally bound as follows:
1.
Employment
. The Employer hereby employs
the Employee, and the Employee hereby accepts such employment, as
President of the Employer upon the terms and subject to the
conditions set forth in this Agreement. The Employee shall
perform such functions as are consistent with these positions under
the supervision of the Chief Executive Officer or the Board of
Directors of the Employer. The Employee shall, without any
compensation in addition to that which is specifically provided in
this Agreement, serve in such further offices or positions with
Employer or any subsidiary or affiliate of Employer (collectively,
the “Employer Group”) as shall from time to time be
reasonably requested by the Chief Executive Officer or the Board of
Directors of Employer.
2.
Term . Subject to the termination provisions
hereinafter contained, the term of employment under this Agreement
shall be for an initial term commencing on the Effective Date and
terminating on December 31, 2006. This Agreement shall
thereafter be automatically renewed for successive one
(1) year terms, unless the Employee’s employment with
the Employer has been terminated, as hereinafter provided, or
unless either party shall have given the other party prior notice
of termination of this Agreement effective as of the date of
expiration of its then applicable Term. The initial term of
employment hereunder, and any extension thereof pursuant to this
paragraph, are referred to as the “Term”.
3.
Compensation, Reimbursement,
Etc.
a.
Base Salary.
Commencing on the Effective Date,
the Employer shall pay to the Employee as compensation for all
services rendered by the Employee a base salary of $37,500.00 per
month (“Base Salary”), payable in accordance with the
Employer’s regular payroll practices, plus annual bonuses on
a calendar year basis as determined by the Compensation Committee
of the Board of Directors (the “Compensation
Committee”), subject to Sections 3(d) and 3(e). If
an increase in
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Base Salary is determined for a
calendar year after January 1 and before April 30 of that
year, the increase shall be retroactive to the beginning of that
year. Any bonus for 2005 will be prorated based on
the portion of 2005 that the Employee is employed by the
Employer. Annual reviews of the Employee will be on a
calendar year basis.
b.
Expense
Reimbursement. The
Employer shall reimburse the Employee on a semi-monthly basis for
all reasonable expenses incurred by the Employee in the performance
of his duties under this Agreement; provided however, that the
Employee shall have previously furnished to the Employer an
itemized account, satisfactory to the Employer, in substantiation
of such expenditures.
c.
Benefits.
The Employee shall be entitled to
health and other benefits on the same terms and conditions as the
Employer has made available to other senior executives of Employer,
including participation in the Employer’s health plans.
If the Employee elects not to participate in the Employer’s
health plans, Employee shall be entitled to reimbursement for the
premiums paid for an alternate plan in amounts not to exceed the
premiums that would have been paid on behalf of the Employee for
Employer’s health plan. The Employer shall obtain a
term life insurance and disability policy for the Employee with a
value equal to at least two year’s Base Salary payable to the
estate or beneficiaries of the Employee upon the Employee’s
death or to the Employee in the event of disability as provided in
Section 7(b) hereof.
d.
Bonuses.
The Employee shall be eligible for a
bonus each year of the Term of up to 50% of his annual Base Salary,
based upon achievement of the bonus targets for the year, payable
in cash and/or common stock, as determined by the Compensation
Committee, subject to the terms of the applicable year’s
bonus incentive plan approved by the Board of Directors and/or
Compensation Committee of the Employer. The bonus target for
2005 is 50% of annual Base Salary and shall be subject to the terms
of the “Bonus Targets under the 2005 Annual Bonus Incentive
Plan”, which has been approved by the Board of Directors
and/or Compensation Committee of the Employer and previously
provided to Employee. Such annual bonus will be
prorated as provided in Section 3(a) for 2005, and the
annual bonus will be awarded for each year as soon as practicable
after the Company’s annual results of operations are publicly
reported in the following year.
e.
Automobile Allowance.
The employee will receive a monthly
allowance of $1,000 for an automobile of his own use.
f.
Annual Review.
The Employee shall be reviewed by
the CEO who will give recommendations to the Compensation Committee
on an annual (calendar year) basis.
g.
Equity
Incentives. Upon
commencement of employment, the Employee will be granted an award
of nonstatutory stock option (the “Initial Option”)
under the
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Employer’s 2005 Equity and
Incentive Plan (the “Plan”) to purchase 150,000 shares
of common stock of the Employer, which option shall be immediately
exercisable and not subject to vesting as to 100,000 of the shares
and shall become exercisable and vested as to the remaining 50,000
shares on December 31, 2005, and otherwise shall contain the
customary terms and conditions for options granted under the Plan
to executive employees. Thereafter, so long as the Employee
continues to be employed as an executive officer of the Employer,
the Employee will be entitled to receive:
(i)
subject to stockholder approval of
one or more increases after the date hereof totaling at least
600,000 shares in the number of shares reserved under the Plan
(which is planned for the 2006 annual meeting of stockholders of
the Employer), a nonstatutory stock option (the “Follow-On
Option Award”) under the Plan to purchase 150,000 shares of
common stock of the Employer, which option shall be on
substantially the same terms as the Initial Option except that it
(A) will be granted as of the date such increase in the
reserved shares is approved by stockholders, (B) have an
exercise price determined based on the fair market value of the
common stock as of the date of grant, (C) will vest in equal
quarterly installments over five years from the date of grant, and
(D) in addition to any acceleration provided for in
Section 8 hereof, will contain a provision that if the
Employee is terminated by the Company for any reason other than
“good cause” (as defined herein) after
December 31, 2006 (the end of the initial term of this
Agreement), on the date of such termination such number of unvested
options that would have vested under the terms of the applicable
option agreement had the Employee continued to be employed by the
Company for the six (6) month-period following the date of
termination shall immediately become vested; and
(ii)
subject to stockholder approval from
time to time of an increase of a sufficient number of additional
shares of common stock reserved under the Plan for annual grants to
all eligible employees of the Employer, annual equity awards in
each of the four years after 2005 with respect to no fewer than
50,000 shares (200,000 shares in the aggregate) (the “Annual
Equity Awards”) under the Plan, and further subject to
substantially same terms and conditions (and, if more than one type
of award is granted, in the same proportions) as the annual equity
awards made generally to the other executive officers of the
Employer, as determined in good faith by the Compensation
Committee, which awards shall be made on the same date as when
annual equity awards are made generally to the other executive
officers of the Employer; and
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(iii)
all of the foregoing options and
common stock shall be subject to equitable adjustment in light of
any stock split or stock dividend with respect to the
Employer’s common stock and to reduction in the case of
substitution of full value awards under the Plan, such as
Restricted Stock, in place of stock option awards, in each case as
determined in good faith by the Compensation Committee.
4.
Duties . The Employee will be engaged initially
as President of the Employer. In addition, the Employee shall
have such other duties and hold such offices as may from time to
time be reasonably assigned to him by the Chief Executive Officer
or the Board of Directors of the Employer.
5.
Extent of Services
. During the Term, the
Employee shall devote his full time, energy and attention to the
benefit and business of the Employer and its affiliates and shall
not be employed by another entity, either directly or as a
consultant to or in any other capacity, except as approved in
advance by the Employer’s Board of Directors; provided,
however, that no such approval shall be required to serve as a
director, officer or trustee of any trade association or of any
civic or charitable organization so long as such service does not
significantly interfere with the Employee’s performance of
his duties at the Employer.
6.
Vacation . The Employee may take a maximum of four
weeks of vacation each calendar year, at times to be determined in
a manner most convenient to the business of the Employer, as
approved by the Chief Executive Officer. A maximum of one
week of unused vacation may be carried over from one calendar year
to the next.
7.
Termination Following Death or
Incapacity .
a.
Death.
All rights of the Employee under
this Agreement shall terminate upon death (other than rights
accrued prior thereto). All Plan Awards shall vest in
accordance with the Plan and shall be exercisable for a period of
time as set forth in the Plan. The Employer shall pay to the
estate of the Employee any unpaid salary and other benefits due as
well as reimbursable expenses accrued and owing to the Employee at
the time of his death. The Employer agrees to maintain life
insurance coverage on the Employee in an amount equivalent to two
year’s salary, which insurance will be payable to the
Employee’s estate or beneficiaries upon his death as the
Employee may designate. The Employer shall have no additional
financial obligation under this Agreement to the Employee or his
estate beyond the term-life insurance benefit describe
above.
b.
Disability.
i.
During any period of disability,
illness or incapacity during the Term which renders the Employee at
least temporarily unable to perform the services required under
this Agreement, the Employee shall receive his salary payable under
Section 3 of this Agreement, less any benefits received by him
under any insurance carried by or provided by the Employer;
provided however, all rights of the Employee under this
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Agreement (other than rights already
accrued) shall terminate as provided below upon the
Employee’s permanent disability (as defined
below).
ii.
The term “permanent
disability” as used in this Agreement shall mean the
inability of the Employee, as determined by the Board of Directors
of the Employer, by reason of physical or mental disability to
perform the duties required of him under this Agreement after a
period of: (a) 120 consecutive days of such disability;
or (b) disability for at least six months during any twelve
month period. Upon such determination, the Board of Directors
may terminate the Employee’s employment under this Agreement
upon ten (10) days prior written notice. In the event of
permanent disability all Plan Awards shall vest in accordance with
the terms of the Plan and shall be exercisable for a period of time
as set forth in the Plan.
iii.
If any determination of the Board of
Directors with respect to permanent disability is disputed by the
Employee, the parties hereto agree to abide by the decision of a
panel of three physicians. The Employee and Employer shall
each appoint one member, and the third member of the panel shall be
appointed by the other two physicians. If the physicians
appointed by the parties have not agreed upon the third physician
within fifteen (15) days, either party may petition the New
Hampshire Medical Society to appoint a third physician. The
Employee agrees to make himself available for and to submit to
reasonable examinations by such physicians as may be directed by
the Employer. Failure to submit to any such exam shall
constitute a material breach of this Agreement. In the event
such a panel is convened, the party whose position is not sustained
will bear all the associated costs.
8.
Other Terminations
.
a.
Without Cause
.
i.
Either the Employee or the Employer
may terminate the Employee’s employment hereunder at any time
upon written notice.
ii.
If the Employee gives notice
pursuant to paragraph (i) above, the Employer shall have the
right to either (a) relieve the Employee, in whole or in part,
of his duties under this Agreement or (b) to accelerate the
date of termination of employment to coincide with the date on
which the written notice is received.
iii.
Notwithstanding any provisions
hereof to the contrary, the Employer may terminate Employee’s
employment hereunder without cause at any time. If the
Employer terminates the Employee’s Employment pursuant to the
provisions of this section 8(a), it shall pay to the Employee
as a severance benefit, in cash, an amount equal to the
Employee’s annual Base Salary
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plus bonus (the higher of the bonus
target for the current year or the bonus paid in the prior
year). Additionally, the vesting of Plan Awards shall be
accelerated on a pro rata basis determined by the number of
completed months of service during the then current annual vesting
period, and all other vesting of Plan Awards shall
cease.
b.
For Cause .
i.
The Employer may terminate the
Employee’s employment hereunder without notice (a) upon
the Employee’s breach of any m
