Exhibit 10.01
EMPLOYMENT
AGREEMENT
THIS AGREEMENT is made and entered
into as of the 28 th day of October, 2005, by and
between NEOPHARM, INC., a Delaware corporation (the
“Company”) and GUILLERMO A. HERRERA
(“Executive”).
WITNESSETH
:
WHEREAS, the Company desires to
employ Executive and Executive desires to accept such employment,
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of
the covenants and mutual agreements set forth herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto do hereby agree as
follows:
1.
Employment
. Throughout the Term (as
defined in Section 2 below), the Company shall employ
Executive as provided herein, and Executive hereby accepts such
employment. In accepting such employment, Executive states
that, to the best of his knowledge, (i) he is not now, and by
accepting such employment, will not be, under any restrictions in
the performance of the duties contemplated under this Agreement as
a result of the provisions of any prior employment agreement or
non-compete or similar agreement to which Executive is or was a
party; and (ii) he will not make use of or reveal to anyone
employed by or affiliated with the Company any information that is
of a confidential or proprietary nature which he has obtained or
which has been disclosed to him as a result of his position with
any entity with which he has been previously employed or
affiliated.
2.
Term of Employment
. The term of
Executive’s employment by the Company hereunder shall
commence on October 28, 2005, or such earlier or later date as
Executive and the Company may mutually agree (the “Effective
Date”) and shall continue thereafter unless sooner terminated
as a result of Executive’s death or in accordance with the
provisions of Section 7 below (the
“Term”).
3.
Duties . Throughout the Term, and except as
otherwise expressly provided herein, Executive shall be employed by
the Company as the President and Chief Executive Officer
(“CEO”) of the Company. In such capacity,
Executive shall devote his full time to the performance of his
duties as President and CEO of the Company in accordance with the
Company’s By-laws, this Agreement and the directions of the
Company’s Board of Directors. In addition, the Company
shall promptly appoint Executive to the Board and thereafter
nominate Executive as a nominee for election to the Board and
solicit proxies for his election for so long as this Agreement is
in effect. Without limiting the generality of the foregoing,
throughout the Term, Executive shall use his best efforts to
faithfully perform his duties as President and CEO at all times so
as to promote the best interests of the Company.
Notwithstanding the foregoing, Executive may engage in charitable,
civic or community activities and, with the prior approval of the
Board, may serve as a director of other business corporations,
provided that such activities or service do not interfere with
Executive’s duties hereunder or violate the terms of any
other covenants contained in Sections 9 and 10 hereof.
4.
Compensation
.
(a)
Base Salary
. For any and all services
performed by Executive under this Agreement during the Term, in
whatever capacity, the Company shall pay to Executive an annual
salary of Four Hundred Twenty-Five Thousand Dollars ($425,000) per
year (the “Base Salary”), less any and all applicable
federal, state and local payroll and withholding taxes. The
Base Salary shall be paid in the same increments as the
Company’s normal payroll, but no less frequent than monthly
and prorated, however, for any period of less than a full
month. The Salary will be reviewed annually by the
Compensation Committee of the Board of Directors and a
determination shall be made at that time as to the appropriateness
of an increase, if any, thereto.
(b)
Stock Grant
. Upon execution of this
Agreement by Executive and the Company, the Company will grant to
Executive. pursuant to the Company’s 1998 Equity Incentive
Plan, that number of shares of the Company’s common stock as
shall equal, based on the closing price of the common stock as
reported by Nasdaq on the date of this Agreement, Two Hundred
Thousand Dollars ($200,000.00) adjusted, as necessary, to reflect
the nearest whole share (the “Stock Grant”).
(c)
Bonus . In addition to the Base Salary,
Executive shall be eligible to receive from the Company an annual
incentive compensation bonus (the “Bonus”) based on a
percentage of his Base Salary. The Bonus, if any, shall be
determined based on the achievement by the Company of certain
specific strategic plans and goals (the “Performance
Goals”) during the preceding calendar year (the
“Measurement Period”) as shall be determined by the
Board in consultation with Executive. The Performance Goals
for each Measurement Period, beginning with the 2006 Measurement
Period, shall be established as promptly as possible in each such
Measurement Period, with the expectation that the Performance Goals
be in place each year prior to distribution of the Company’s
annual proxy materials. Following each Measurement Period,
the Compensation Committee of the Board shall review the
Performance Goals for the prior Measurement Period in light of the
Company’s actual performance during such Measurement Period
as reflected on the Company’s audited financial
statements. Achievement of various levels of the Performance
Goals shall result in the following payments as a percentage of
Salary:
|
Level of Achievement
|
|
Bonus as Percent of
Salary
|
|
|
Below Target
|
|
0%
|
|
|
Target Goal
|
|
50%
|
|
|
Overachievement Goal
|
|
50-100%
|
|
Payment of each year’s Bonus,
if any, shall be made within thirty (30) days after the
Company’s performance for the Measurement Period is
established on the basis of the Company’s audited financial
statements. In addition, and at its sole discretion, the
Board may award additional compensation to Executive based on
Executive’s contributions to the Company. For the 2005
Measurement Period, a Bonus, if any, shall be at the discretion of
the Board of Directors and shall be
based upon such criteria as the
Compensation Committee of the Board shall deem
reasonable.
5.
Benefits and Other
Rights . In
consideration for Executive’s performance under this
Agreement, the Company shall provide to Executive the following
benefits:
(a)
The Company will provide Executive
with cash advances for or reimbursement of all reasonable
out-of-pocket business expenses incurred by Executive in connection
with his employment hereunder; provided, however, Executive adheres
to any and all reasonable policies established by the Company from
time to time with respect to such reimbursements or advances,
including, but not limited to, a requirement that Executive submit
supporting evidence of any such expenses to the Company.
(b)
The Company will provide Executive
with a monthly car allowance in the amount of One Thousand Dollars
($1,000.00) subject to standard payroll withholding for
taxes.
(c)
The Company will provide Executive
with disability coverage on the same basis as is provided to its
other senior executives.
(d)
The Company will provide Executive
and his family with the opportunity to receive group medical
coverage under the terms of the Company’s health insurance
plan, but subject to completion of normal waiting periods.
During any such waiting period, the Company will pay, or reimburse
Executive for, the cost of COBRA coverage for Executive and his
family under his prior health plan.
(e)
During the Term Executive shall be
entitled to four (4) weeks paid vacation, it being understood
and agreed that unused vacation shall not be carried over from one
year to the next.
(f)
During the Term Executive shall be
eligible to participate in the Company’s 401(k) program and
life insurance programs, if any, subject to satisfying any
eligibility requirements for said benefits.
6.
Options .
(a)
The Company shall grant to Executive
options pursuant to the Company’s 1998 Equity Incentive Plan
(the “Option Plan”), as amended, to purchase 500,000
shares of the Company’s common stock (the
“Options”) at an option exercise price equal to the
Fair Market Value (as determined under the Option Plan) of the
Company’s common stock as of the Effective Date, which date
shall be the date of grant of the Options for purposes of the
Option Plan (the “Date of Grant”). The Options
shall vest in equal installments of 125,000 Options per year on
each of the first four anniversaries of the Date of Grant.
The Options shall not be exercisable subsequent to the date ten
(10) years after the Date of Grant. In all other respects the
Initial Options shall be governed by the terms and conditions of
the Option Plan.
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7.
Termination of the
Term .
(a)
The Company shall have the right to
terminate the Term under the following circumstances:
(i)
Executive shall die or suffer a
Disability, as herein defined;
(ii)
With or without Cause, as herein
defined, effective upon written notice to Executive by the Company;
or,
(iii)
Upon or within one (1) year
following a Change of Control, as herein defined, effective upon
written notice to Executive from the Company.
(b)
Executive shall have the right to
terminate the Term under the following circumstances:
(i)
At any time upon thirty (30) days
prior written notice to the Company; or
(ii)
For Good Reason, as herein defined,
upon or within one (1) year following a Change of
Control.
(c)
For purposes of this Agreement,
“Cause” shall mean:
(i)
Executive shall be indicted for or
convicted of the commission of a felony or a crime involving
dishonesty, fraud or moral turpitude;
(ii)
Executive has engaged in acts of
fraud, misappropriation, embezzlement, theft or other dishonest
acts with respect to the Company or any affiliate of the
Company;
(iii)
Executive violates the
Company’s Code of Business Conduct and Ethics or any
statutory or common law duty of loyalty to the Company or its
subsidiaries, which violation is willful and deliberate on
Executive’s part;
(iv)
Executive’s gross neglect or
willful misconduct in the discharge of his duties and
responsibilities;
(v)
Executive’s failure to follow
the lawful direction of the Board of Directors or supervising
officers which failure continues for five (5) business days
after written notice of the failure has been given to Executive by
the Company; or
(vi)
Executive’s material breach of
any restrictive covenant set forth in Section 9 or
Section 10 of this Agreement.
(d)
For purposes of this Agreement,
“Change of Control” shall mean the occurrence of any of
the following:
4
(i)
The acquisition (other than by a
direct purchase of shares from the Company) by any
“person,” including a “syndication” or
“group”, as those terms are used in
Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (other than by any such person
currently owning in excess of 20% of the type of securities
hereafter described), of securities representing 50% or more of the
combined voting power of the Company’s then outstanding
voting securities, which is any security that ordinarily possesses
the power to vote in the election of the Board of Directors of a
corporation without the happening of any precondition or
contingency;
(ii)
The Company is merged or
consolidated with another corporation and immediately after giving
effect to the merger or consolidation less than 50% of the
outstanding voting securities of the surviving or resulting entity
are then beneficially owned in the aggregate by (x) the
stockholders of the Company immediately prior to such merger or
consolidation, or (y) if a record date has been set to determinate
the stockholders of the Company entitled to vote on such merger or
consolidation, the stockholders of the Company as of such record
date;
(iii)
If at any time during a calendar
year a majority of the directors of the Company are not persons who
were directors at the beginning of the calendar year or are not
persons who were nominated or approved for election by a majority
of directors who were directors at the beginning of the year (or
are deemed to have been in office as of such date through the prior
operation of this provision); or
(iv)
The Company transfers substantially
all of its assets to another corporation which is a less than 80%
owned subsidiary of the Company.
(e)
For purposes of this Agreement,
“Good Reason” shall mean the occurrence of any one or
more of the following events which continues uncured for a period
of not less than thirty (30) days following written notice given by
Executive to the Company within fifteen (15) days following the
occurrence of such event, unless Executive specifically agrees in
writing that such event shall not be Good Reason:
(i)
Any material breach of this
Agreement by the Company;
(ii)
Any failure to continue Executive as
an executive officer of the Company;
(iii)
The requirement by the Company that
Executive perform his services hereunder primarily at a location
outside of the metropolitan Chicago, Illinois area; or
(iv)
The reduction of the
Employee’s Base Salary below the amount set forth in
Section 4(a) above without the written consent of
Executive.
5
(f)
For purposes of this Agreement,
“Disability” shall mean (i) Executive becomes
eligible for full benefits under a long-term disability policy
provided by the Company or (ii) Executive has been unable, due
to physical or mental illness or incapacity, as verified by a
licensed physician selected by the Company, to substantially
perform the essential duties of his employment for a continuous
period of ninety (90) days or an aggregate of one-hundred eighty
(180) days during any consecutive twelve (12)-month
period.
8.
Effect of Expiration or
Termination of the Term . Promptly following the termination of
the Term, and except as otherwise expressly agreed to in writing by
the Company, Executive shall:
(a)
Immediately resign, effective as of
the date of termination, from any and all other positions or
committees which Executive holds or is a member of with the Company
or any subsidiary of the Company, including, but not limited to, as
an officer and director of the Company or any subsidiary of the
Company. Executive hereby agrees to execute any and all
reasonable documentation evidencing such resignation upon request
and at the sole expense of the Company, but he shall be treated for
all purposes as having so resigned upon termination of his
employment regardless of when or whether he executes any such
documentation.
(b)
Provide the Company with all
reasonable assistance necessary to permit the Company to continue
its business operations without interruption and in a manner
consistent with reasonable business practices; provided, however,
that such transition period shall not exceed thirty (30) days after
termination nor require more than twenty (20) hours of
Executive’s time per week and Executive shall be promptly
reimbursed for all out-of-pocket expenses.
(c)
Deliver to the Company possession of
any and all property owned or leased by the Company which may then
be in Executive’s possession or under his control, including,
without limitation, any and all such keys, credit cards,
automobiles, equipment, supplies, books, records, files, computer
equipment, computer software and other such tangible and intangible
property of any description whatsoever. If, following the
expiration or termination of the Term, Executive shall receive any
mail addressed to the Company, then Executive shall immediately
deliver such mail, unopened and in its original envelope or
package, to the Company.
(d)
Other than as specifically provided
in this Section 8, upon a termination of employment all other
benefits and/or entitlements to participate in programs or
benefits, if any, will cease as of the effective date of such
termination.
(e)
Upon termination of Executive
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