Exhibit 10.1
EMPLOYMENT AGREEMENT
, effective as of August 1, 2005,
by and between HI-TECH PHARMACAL CO., INC., a Delaware corporation
with offices at 369 Bayview Avenue, Amityville, New York 11701
( the “Corporation”), and WILLIAM PETERS,
an individual residing in Southampton, New York ( the
“ Executive”).
W I T N E S S E T
H
WHEREAS , the Corporation desires to secure the services
of Executive upon the terms and conditions hereinafter set forth;
and
WHEREAS , Executive 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 Executive and Executive hereby accepts
such employment, as an executive of the Corporation, subject to the
terms and conditions set forth in this Agreement.
Section 2. Duties . Executive
shall serve as Vice President and Chief Financial Officer of the
Corporation and shall properly perform such duties as may be
assigned to him from time to time by the Chief Executive Officer
and/or Board of Directors of the Corporation. If requested by the
Corporation, Executive shall serve on any committee of the Board of
Directors without additional compensation. During the term of this
Agreement, Executive 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 August 1, 2005 and
shall continue until July 31, 2007 and shall automatically renew
for successive one year terms unless terminated by the Corporation
upon six months’ advance written notice to Executive of the
Corporation’s decision not to renew the contract, or by
Executive, upon 30 days advance written notice to the Corporation,
or unless earlier terminated pursuant to the provisions of Section
5 hereof.
Section 4. Compensation of
Executive .
4.1. Compensation . As
compensation for his services hereunder the Corporation shall pay
Executive (i) for the period August 1, 2005 through July 31, 2006
(“Year One”), an annual salary (“Salary”)
equal to $210,000 ($4,038.46 per week); and (ii) for the period
August 1, 2006 through July 31, 2007 (“Year Two”), an
annual salary (“Salary”) equal to $220,500 ($4,240.38
per week). Executive’s compensation after July 31, 2007 shall
be adjusted upward annually on August 1 of each year by the greater
of 5% or the annual percentage change in the New York City
Metropolitan Consumer Price Index or such other agreed upon
substitute. The Salary shall be payable weekly less such deductions
as shall be required to be withheld by applicable law and
regulations.
4.2. Bonus; Stock Options
.
(a) In addition to his annual
Salary, Executive shall receive a bonus (“Bonus”)
during each year of employment. The Bonus for each of Year One,
Year Two and each successive term shall be determined in accordance
with the performance goals set by the Compensation Committee of the
Board of Directors and the President of the Corporation in their
sole discretion. The Compensation Committee and the President shall
set a target for the Bonus which shall be equal to or greater than
twenty-five (25%) percent of the Executive’s annual salary;
provided, however, that such target bonus is not binding on the
Committee or President. The Bonus shall be paid in cash within 30
days of August 1 of each year.
(b) During Year One of the term of
this Agreement, Executive shall receive, at the commencement of
Year One, options to purchase a minimum of twenty-five thousand
(25,000) shares of the Corporation’s Common Stock, each in
accordance with the terms and provisions of the Corporation’s
Amended and Restated Stock Option Plan (the “Plan”).
After commencement of Year Two the Option Committee shall either
approve the grant of options to Executive to purchase twenty-five
thousand (25,000) shares of the Corporation’s Common Stock,
or, in the discretion of the Compensation Committee shall approve
other stock based or other compensation which the Corporation may
grant in lieu of stock options to executives of the Company. The
value of such stock based or other compensation (excluding salary
or bonus) shall be consistent with such compensation granted to
other executives of the Company. 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 Executive.
4.3. Expenses . The
Corporation shall pay or reimburse Executive for all 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.
4.4. Car Allowance . The
Corporation shall pay to the Executive a car allowance of $500 per
month for the term of the contract.
4.5. Benefits . During the
term of this Agreement and all extensions thereto, Executive 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 senior executives, which benefits plans will cover Executive
and his dependants.
4.6. Life Insurance; Disability
Insurance . The Corporation shall procure for Executive, at the
Corporation’s expense, term life insurance and long-term
disability insurance as more specifically detailed on Exhibit A
attached hereto.
4.7. Discretionary Payments .
Nothing herein shall preclude the Corporation from paying Executive
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 Executive’s employment
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hereunder shall terminate upon Executive’s
death or Total Disability, upon termination of employment of
Executive For Cause, upon Executive leaving his employment
hereunder, or by the Corporation upon six months advanced written
notification to Executive of the Corporation’s decision not
to renew this Agreement.
5.2. Termination For Cause or
Termination By Executive . In the event Executive is discharged
For Cause, as hereinafter defined, or if this Agreement is not
renewed by the Corporation upon at least 6 months’ advance
written notice or Executive leaves his employment hereunder, this
Agreement shall be deemed terminated and the Corporation shall be
released from all obligations to Executive with respect to this
Agreement, except as provided in section 10.7 hereto.
5.3. Definitions . As used
herein, the term “For Cause” shall mean (i) the
Executive’s indictment, plea or conviction of any criminal
violation involving misappropriation of money or other property,
dishonesty, fraud, breach of trust or any other crime involving
moral turpitude which constitutes a felony, whether or not
involving the Corporation; (ii) the Executive’s willful
engagement in gross misconduct in the performance of his duties
that materially injures the Corporation; (iii) the
Executive’s violation of Sections 8 or 9 of this Agreement;
(iv) the Executive’s habitual drunkenness or habitual use of
illegal substances; (v) the Executive’s gross negligence or
fraud in the preparation of the Corporation’s financial
statements causing their restatement due to errors, omissions, or
fraud in their preparation; or (vi) the Executive’s willful
and continuous failure to substantially perform his duties under
this Agreement, including but not limited to failure resulting from
gross insubordination. A termination of Executive pursuant to
subparagraph (vi) shall occur only after the Board provides written
notice to the Executive of his failure and 30 calendar days’
opportunity to cure such failure. An act of the Executive will not
be deemed “willful” unless done or omitted to be done
by the Executive not in good faith and without reasonable belief
that the act or omission was in the Corporation’s best
interests.
5.4. Payments . If
Executive’s employment is terminated, or if Executive
terminates his employment for Good Reason, as defined in this
Agreement, then Corporation shall pay to Executive after such
termination, severance payments (“Severance”) equal to
the sum of (i) Executive’s Salary for the greater of six (6)
months or the balance of the term of this Agreement and (ii) the
pro rata portion of Executive’s annual bonus for the prior
year. The Severance shall be payable weekly less such deductions as
shall be required to be withheld by applicable law and regulations.
In addition, the Corporation shall continue to keep in force and
effect all health, insurance and welfare benefits for Executive and
Executive’s dependents for a period of the lesser of six
months from the date of Executive’s termination or until
Executive and his dependents are eligible for similar health,
insurance and welfare benefits from Executive’s new employer.
Executive shall not be entitled to Severance if the Corporation
gives six months advance written notice to Executive of the
Corporation’s decision not to renew this Agreement, or if
Executive’s employment is terminated For Cause, as defined in
this Agreement, or if Executive’s employment is terminated
due to Executive’s death or Total Disability or if
Executive’s employment is terminated due to a Change in
Control, as defined in this Agreement. If Executive’s
employment is terminated due to a Change in Control, payments shall
be made to Executive in accordance with Section 11 of this
Agreement.
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5.5. Termination for Good
Reason . Good Reason shall include any of the following, (i)
any assignment of Executive’s duties inconsistent with
Executive’s position of Vice President and Chief Financial
Officer or which constitutes a significant reduction in authority,
responsibilities, or status, (ii) any demotion, including, but not
limited to reporting to an individual in the Corporation who is not
the Corporation’s CEO or Board of Directors, (iii) requiring
Executive to have his principal place of employment more than 15
miles beyond the Corporation’s principal place of business as
of the effective date of this Agreement, without providing
Executive with relocation benefits for relocation expenses
(packing, unpacking, moving company charges, attorneys’ fees,
inspection costs, title insurance and other closing costs including
brokerage fees for selling Executive’s home, excluding any
points on financing a new house or costs of renovating a new
residence), (iv) any attempted reduction in Executive’s base
salary, or other benefit plans, or the level, amount or value of
any accrued benefit, or (v) any attempted reduction, during Year
One or Year Two, of Executive’s Bonus or stock option grants
which are inconsistent with the provisions of this
Agreement.
5.6. Stock Options
.
(a) Upon the death or Total
Disability of Executive, or in the event of a Change in Control,
all stock options granted to Executive under the Plan (“Stock
Options”) shall automatically become fully vested and
immediately exercisable.
(b) In the event Executive is
terminated without cause, or if the Executive terminates for Good
Reason, then Executive’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.
(c) In the event Executive is
terminated For Cause or leaves his employment hereunder other than
for Good Reason, 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
Disabilit
