AGREEMENT dated as
of the 5 th
day of January, 2006 between Barr
Pharmaceuticals, Inc. (“ BPI ”) , a Delaware
corporation having its principal executive offices at 400 Chestnut
Ridge Road, Woodcliff Lake, New Jersey 07677, and Duramed
Pharmaceuticals, Inc., a Delaware corporation having its principal
executive offices at 1 Belmont Avenue, Bala Cynwd, PA 19004
(“ DPI ’), parties of the first part, and G.
Frederick Wilkinson (the “ Employee
”).
BPI and DPI and
the Employee hereby agree as follows:
1.
Employment . The Company agrees to employ the Employee, and
the Employee agrees to remain in the employ of the Company, during
the term of this Agreement and on the other terms and conditions
hereafter set forth. Subject to paragraph 13(d) below, where used
in this Agreement, the “ Company ” means BPI or,
commencing on the effective date of any assignment of BPI’s
rights or obligations in accordance with paragraph 13(d) below, the
Permitted Assignee (as such term is defined in that paragraph) to
which such rights or obligations are so assigned.
2.
Term . The term of this Agreement shall commence on
March 6, 2006 (the “ Commencement Date ”)
and shall terminate at 5 P.M. on the third anniversary of the
Commencement Date unless sooner terminated in accordance with the
terms of this Agreement or extended as hereinafter provided. The
term of this Agreement shall be extended, without further action by
BPI or the Employee, on the date (the “ Extension
Effective Date ”) which is six months before the third
anniversary of the Commencement Date and on the date (also an
“ Extension Effective Date ”) which is six
months before each subsequent anniversary of the Commencement Date,
for successive periods of twelve months each, unless either BPI or
an Affiliate (as defined in paragraph 3(a) below) shall have given
written notice to the Employee, or the Employee shall have given
written notice to BPI, in the manner set forth in paragraph 13(e)
or (f) below, prior to the Extension Effective Date in
question, that the term of this Agreement that is in effect at the
time such written notice is given is not to be extended or further
extended, as the case may be. Examples that illustrate the intended
operation of the preceding sentence appear in the Appendix to this
Agreement.
3. Positions
and Responsibilities; Place of Performance .
(a)
(i) Throughout the term of this Agreement, the Employee agrees
to remain in the employ of the Company, and the Company agrees to
employ the Employee, as the President and Chief Operating Officer
of DPI, reporting to the President and Chief Operating Officer of
BPI (the “ COO ”). As the President and Chief
Operating Officer of DPI, the Employee shall be responsible for
directing, managing and overseeing all commercial and developmental
proprietary pharmaceutical activities conducted by BPI or any
Affiliate (as defined below), including sales, marketing, managed
care, clinical trials and medical affairs related to such
activities, and including any such activities conducted by DPI on
behalf of BPI or any Affiliate, but excluding business
Page 1 of 26
development to
the extent responsibility therefor is shared on the date of this
Agreement with other members of management and excluding shared
services such as regulatory affairs, regulatory quality control,
information technology and systems, finance and human resources,
subject only to the authority of the COO, the Chairman and CEO of
BPI (the “ CEO ”) and the Board of Directors of
BPI (the “ BPI Board ”), and, except for the
aforementioned exclusions, shall have all of the powers, authority,
duties and responsibilities usually incident to the position and
role of a President and Chief Operating Officer of companies that
are comparable in size, character and performance to DPI, and such
other reasonable duties, consistent with the position of such a
President and Chief Operating Officer, as may be lawfully assigned
to him by the COO, the CEO or the BPI Board. As used in this
paragraph 3(a) and elsewhere in this Agreement, the term “
Affiliate ” means any “person” (as such
term is used in sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) that directly, or indirectly
through one or more intermediaries, controls, or is controlled by,
or is under common control with, BPI. For the purposes of the
preceding sentence, the word “ control ” (by
itself and as used in the terms “controlling”,
“controlled by” and “under common control
with”) means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of
a “person”, whether through the ownership of voting
securities, by contract, or otherwise.
(ii) Pursuant
to the terms of the Employee’s previous employment agreement
with his former employer, the Employee’s responsibilities set
forth in subparagraph 3(a)(i) above shall expressly exclude Oral
Micronized Progesterone and Progesterone Ring, both of which are
currently under development by the Company, during the first year
of the Employee’s employment. This limitation on the
Employee’s responsibilities, however, shall automatically
expire after the first anniversary of the Employee’s
employment. This limitation on responsibility shall have no effect
on the Employee’s compensation or benefits under this
Agreement.
(iii) The
Employee agrees to serve as an officer and member of the board of
directors of BPI and any Affiliate if he is elected or appointed to
serve as such during the term of this Agreement, without additional
compensation beyond that provided in this Agreement. Nothing in
this Agreement shall be interpreted or construed to constitute an
agreement, representation or warranty by BPI or DPI that the
Employee will be elected or appointed to the board of directors of
BPI or any Affiliate.
(b) In
connection with his employment by Company, the Employee shall be
based at the principal executive offices of BPI in the greater New
York City metropolitan area but agrees to travel, to the extent
reasonably necessary to perform his duties and obligations under
this Agreement, to Company facilities and other destinations
elsewhere at the Company’s expense.
(c) During
the term of this Agreement, the Employee shall serve the Company on
an exclusive basis (it being understood that the Employee’s
engaging in activities on behalf of BPI or an Affiliate shall be
deemed serving the Company for this purpose) and shall devote all
his business time, attention, skill and efforts to the
faithful
Page 2 of 26
performance of
his duties hereunder; provided that the Employee may engage in
community service and charitable activities and, with the approval
of the BPI Board, may serve as a member of the board of directors
of other companies (and retain remuneration for such service) if
such activities and service do not materially interfere with the
performance of his duties and responsibilities
hereunder.
4.
Compensation . For all services rendered by the Employee in
any capacity during the term of this Agreement, and for his
undertakings with respect to confidential information,
non-solicitation and disparaging remarks set forth in sections 6
and 7 below, the Employee shall be entitled to the
following:
(a) a
salary, payable in installments not less frequent than monthly, at
the annual rate of six hundred thousand dollars ($600,000), with
such increases in such rate, if any, as the Compensation Committee
of the BPI Board may approve from time to time during the term of
this Agreement in accordance with BPI’s regular
administrative practices applicable to senior officers from time to
time during the term of this Agreement (the annual salary rate as
increased from time to time during the term of this Agreement being
hereafter referred to as the “ Base Salary
”);
(b) participation
in BPI’s annual executive incentive or bonus plan as in
effect from time to time, with the opportunity to receive an award
in accordance with the terms and conditions of such plan, for each
fiscal year of BPI that commences or terminates during the term of
this Agreement, of up to 50% of the Employee’s Base Salary
earned during such year (or such higher percentage as the BPI Board
or a committee of the BPI Board may allow from time to time during
the term of this Agreement), it being understood that any award for
the fiscal year of BPI in which the term of this Agreement
commences or terminates pursuant to the terms hereof shall be
prorated based on the portion of such fiscal year that coincides
with the term of this Agreement and shall be made at the same time
as awards (if any) are made to other participants with respect to
such fiscal year. The Employee recognizes and agrees that the BPI
Board may defer the payment of any portion of his annual bonus to
the extent that, and for such period of time and on such terms and
subject to such conditions as, may be reasonably necessary to avoid
a loss by BPI or an Affiliate of a tax deduction with respect to
such portion of his annual bonus under section 162(m) of the
Internal Revenue Code and to avoid any inclusion of such portion of
his annual bonus or any other amount in the Employee’s gross
income pursuant to section 409A(a)(l)(A) of the Internal Revenue
Code. Any such deferred amount shall be non-forfeitable, shall
constitute an unfunded, unsecured obligation of the Company, and
until paid shall be deemed invested in such hypothetical
investments as the Employee may select from among the hypothetical
investment options that are available from time to time during the
deferral period under BPI’s excess 401(k) plan or, if no such
investment options are available at the time in question under that
plan, then from among the same hypothetical investment options that
were available under BPI’s excess 401(k) plan on the date
hereof or a reasonable facsimile thereof;
Page 3 of 26
(c) participation
in BPI’s stock and incentive award plan as from time to time
in effect, with an initial grant under such plan of stock
appreciation rights (“ SARs ”) with respect to a
total of 75,000 shares of BPI common stock, subject to the terms
and conditions of the plan, such other terms and conditions
consistent with the terms of such plan as the Board or a committee
of the Board granting the options (the Administrator”) may
impose, and the following terms and conditions:
(i) the exercise
price at which the SARs may be exercised shall be the fair market
value of the shares on the date on which the SARs are granted (the
“ Grant Date ”); and
(ii) the SARs
shall become exercisable in five equal annual installments of
15,000 SARs each commencing on the first anniversary of the Grant
Date and continuing on each of the four succeeding anniversaries of
the Grant Date, provided in the case of each such installment that
the Employee’s full-time employment by the Company continues
until the anniversary date in question; and
(iii) to the
extent not therefore exercisable, the SARs shall become exercisable
on the date, if any, on which a Change in Control (as defined in
BPI’s Stock Incentive and Award Plan as in effect on the date
of this Agreement) occurs, if the Employee’s full-time
employment by the Company continues until that date, provided that,
if such Change in Control occurs less than six months after the
Grant Date, the Employee agrees in writing (if requested to do so
by the Administrator) to remain in the employ of the Company or a
subsidiary at least through the date which is six months after the
Grant Date with substantially the same title, duties, authority,
reporting relationships and compensation as on the day immediately
preceding such Change in Control; and
(iv) the SARs
shall expire on the tenth anniversary of the Grant Date unless the
Employee’s employment terminates before that date, in which
case the SARs shall expire upon such termination of employment or
within such period of time thereafter as the Administrator may
specify in the instrument evidencing the grant of the SARs;
and
(v) any amount
payable by BPI in respect of any exercise of the SARs shall be paid
in the form of BPI common stock, and will not be paid in the form
of cash.
The Employee
will be eligible to participate in annual grants under BPI’s
stock and incentive award plan commencing with the grant
anticipated in July 2006. The time at which any such grants
are to be made, and the type, amount and terms and conditions of
any such grants, shall be determined by the Compensation Committee
of the Board in its sole discretion;
Page 4 of 26
(d) the
business and personal use of an automobile at Company expense
including, without limitation, payment or reimbursement of
automobile insurance and maintenance expenses in accordance with
BPI’s automobile policy applicable to senior officers on the
Commencement Date or, in lieu of the business and personal use of
an automobile at Company expense, a $1,500 monthly cash
allowance; and
(e) participation
in all health, welfare, savings and other employee benefit and
fringe benefit plans (including vacation pay plans or policies and
life and disability insurance plans) in which other senior officers
of BPI or DPI participate during the term of this Agreement,
subject in all events to the terms and conditions of such plans as
in effect from time to time. Nothing in this paragraph
(e) shall preclude BPI or any Affiliate from amending or
terminating any such plan at any time. The plans covered by this
paragraph (e) shall not include the annual incentive or stock
incentive plans, which are covered by paragraphs (b) and
(c) above.
5.
Termination of Employment .
(a)
Termination by BPI or an Affiliate without Good Cause or by the
Employee for Good Reason .
(i) If
the Employee’s employment with the Company is terminated by
BPI or an Affiliate without Good Cause (except as an incident of
assigning the rights to Employee’s services to a Permitted
Assignee in accordance with paragraph 13(d) below) or is terminated
by the Employee for Good Reason, in either case during the term of
this Agreement and other than at the expiration of the term of this
Agreement as the same may have been extended in accordance with the
provisions of section 2 above (any such employment termination
being hereafter referred to as a “ Compensable
Termination ”), the Company shall pay the Employee the
portion of his Base Salary accrued through the date of the
Compensable Termination and any other amounts to which he is
entitled by law or pursuant to the terms of any compensation or
benefit plan or arrangement in which he participated prior to the
Compensable Termination and, in addition, subject to compliance by
the Employee with the provisions of sections 6 and 7 below,
relating to confidential information, non-solicitation and
disparaging remarks, the Company shall, as liquidated damages or
severance pay or both (whichever characterization(s) will serve to
validate the payments), and as additional consideration for the
Employee’s undertakings under sections 6 and 7 below, pay the
Employee the following:
(A) his
annual bonus for the fiscal year of BPI preceding the fiscal year
of BPI in which the Compensable Termination occurs, if unpaid at
the time of the Compensable Termination, the amount of such bonus
to be determined by the Compensation Committee of the BPI Board on
a basis consistent with the prior bonus determinations with respect
to the Employee or, in the event a Change in Control or Potential
Change in Control (as defined in section 11 below) occurred before
the Compensable Termination, consistent with the bonus
determinations with respect to the
Page 5 of 26
Employee prior
to the Change in Control or Potential Change in Control, unless the
Board or a committee of the Board made no bonus determinations with
respect to the Employee before the Compensable Termination or, if
applicable, before the Change in Control or Potential Change in
Control, in which case consistent with the Board’s or Board
committee’s bonus determinations with respect to the
President of Duramed Research Inc. before the Compensable
Termination or, if applicable, before the Change in Control or
Potential Change in Control; and
(B) a
prorated annual bonus for the fiscal year of BPI in which the
Compensable Termination occurs, such prorated annual bonus to be
determined by multiplying the “ Applicable Average
Bonus ” as defined below in this subparagraph 5(a)(i)(B)
by a fraction the numerator of which shall be the number of days
elapsed in such fiscal year through (and including) the date on
which the Compensable Termination occurs and the denominator of
which shall be the number 365. For purposes of this Agreement, the
“ Applicable Average Bonus ” means the higher of
(I) the average annual bonus (including any deferred bonus)
awarded to the Employee during the three year period immediately
preceding the Compensable Termination or, if the Employee was
employed by the Company for less than three years before the
Compensable Termination, during the period of his employment by the
Company prior to the Compensable Termination (annualizing any bonus
awarded for less than a full year of employment), or (II) the
average annual bonus (including any deferred bonus) awarded to the
Employee during the three fiscal years of the Company that precede
the fiscal year in which the Compensable Termination occurs or
during the portion of such three fiscal years in which he was
employed by the Company (annualizing any bonus awarded for less
than a full year of employment); provided that, if the Compensable
Termination occurs after a Change in Control or Potential Change in
Control, the Applicable Average Bonus shall not be less than the
average annual bonus (including any deferred bonus) awarded to the
Employee during the three years preceding the date on which the
Change in Control or Potential Change in Control occurred or during
the portion of such three years in which he was employed by the
Company (annualizing any bonus awarded for less than a full year of
employment); and
(C) an
amount of money (the “ Severance Payment ”)
equal to two and one-half (2 1 / 2 )
times the Employee’s “Annual Cash Compensation”
as hereafter defined, unless the Severance Payment is payable
solely on account of the Employee’s resignation for Good
Reason pursuant to subparagraph 5(d)(v) below (relating to BPI or
an Affiliate giving the Employee notice of non-extension), in which
case the Severance Payment shall be equal to one and one-quarter
(1 1
/ 4 )
times the Employee’s “Annual Cash Compensation”
as hereafter defined. Except as otherwise provided hereafter in
this subparagraph 5(a)(i)(C), sixty percent (60%) of the Severance
Payment shall be paid in a lump sum within ten days after the date
of the Compensable Termination. The forty percent (40%) balance of
the Severance Payment shall be paid in twelve (12) equal
monthly installments one of which shall be paid at the end of each
of the first twelve (12) months after the date of the
Compensable Termination, provided, in the case of each of such 12
installments, that the Employee has not accepted full-time or
regular part-time employment with or regularly served as a
consultant to a for-profit
Page 6 of 26
pharmaceutical
company prior to the date for payment of such installment, it being
understood and agreed that the foregoing condition shall not be
violated by the Employee’s serving as a member of a board of
directors of a for-profit pharmaceutical company or by his
performing consulting services on an ad hoc basis for such a
company. If a Change in Control or Potential Change in Control as
defined in section 11 below occurs (either before or after the
Compensable Termination), the Severance Payment (or, in the case of
a Change in Control or Potential Change in Control that occurs
after the Compensable Termination, any portion thereof that remains
unpaid at the time such Change in Control or Potential Change in
Control occurs) shall be paid in a lump sum within ten days after
the Compensable Termination (or, in the case of a Change in Control
or Potential Change in Control that occurs after the Compensable
Termination, within ten days after the Change in Control or
Potential Change in Control occurs), and the two preceding
sentences of this subparagraph shall not apply. In addition, if the
Severance Payment is payable solely on account of the
Employee’s resignation for Good Reason pursuant to
subparagraph 5(d)(v) below (relating to BPI or an Affiliate giving
the Employee notice of non-extension), the Severance Payment shall
be paid in a lump sum within ten days after the Employee resigns
for such Good Reason, and the second and third preceding sentences
of this subparagraph shall not apply. During the 18 month
period following a Compensable Termination, the Company shall also
provide the Employee with COBRA coverage at its expense. For
purposes of this section 5, the Employee’s “ Annual
Cash Compensation ” shall mean the sum of (I) the
Employee’s highest Base Salary (i.e., one year’s salary
at its highest rate), plus (II) the “Applicable Average
Bonus” as defined in subparagraph 5(a)(i)(B)
above.
(ii) If
the term of this Agreement as the same may have been extended in
accordance with the provisions of section 2 above is not extended
or further extended because BPI or an Affiliate gives written
notice of non-extension to the Employee as provided in section 2
above, and there is not Good Cause for termination of the
Employee’s employment at the time of giving such notice, and
the Employee does not thereafter resign for Good Reason during the
term of this Agreement as permitted by paragraph 5(d)(v) below,
then the Company, subject to fulfillment by the Employee of his
obligations under this Agreement during the balance of the term and
his compliance with the provisions of sections 6 and 7 below,
relating to confidential information, non-solicitation and
disparaging remarks, shall, as non-renewal compensation, and as
additional consideration for the Employee’s undertakings
under this Agreement including sections 6 and 7 below, pay the
Employee an amount of money (the “ Non-Renewal Payment
”) equal to the Employee’s Annual Cash Compensation as
defined in subparagraph 5(a)(i)(C) above, in addition to any other
amounts to which the Employee may be entitled hereunder (including
without limitation his annual bonus pursuant to paragraph 4(b)
above for the fiscal year of BPI in which his employment terminates
and any amounts to which he may be entitled under section 8, 9 or
10 below) or by law or pursuant to the terms of any compensation or
benefit plan or arrangement in which he participated before his
employment terminated. The Non-Renewal Payment shall be paid in a
lump sum within ten days after the date on which the
Employee’s employment terminates. During the 18 month
period following the termination of his employment, the Company
shall also provide the Employee with COBRA coverage at its
expense.
Page 7 of 26
(iii) The
foregoing provisions of (including any payments under) this
paragraph 5(a) shall be in lieu of any severance pay that may be
payable under any plan or practice of BPI or any Affiliate, but
shall be in addition to (and not in lieu of) any payments to which
the Employee may be entitled under sections 8, 9 and 10 below.
Subparagraphs 5(a)(i)(C) and 5(a)(ii) above are intended to be
mutually exclusive, and in no event shall such subparagraphs,
either individually or collectively, be construed to require the
Company to pay an amount of money in excess of two and one-half
(2 1
/ 2 )
times the Employee’s Annual Cash Compensation under such
subparagraphs, either individually or collectively, in addition to
the 18 months of COBRA coverage provided for therein. The
Employee shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement (including but
not limited to any payment provided for above in this paragraph
5(a)) by seeking other employment or otherwise, nor shall any
compensation earned by the Employee in other employment or
otherwise reduce the amount of any payment or benefit provided for
in this Agreement.
(b)
Termination by BPI or an Affiliate for Good Cause or by the
Employee without Good Reason. If, during the term of this
Agreement, the Employee’s employment by the Company and its
subsidiaries is terminated by BPI or an Affiliate for Good Cause or
by the Employee without Good Reason, the Employee shall not be
entitled to receive any compensation under section 4 above accruing
after the date of such termination or any payment under paragraph
5(a) above. However, any obligations of BPI or the Company under
sections 8, 9 and 10 shall not be affected by such termination of
employment. The provisions of this paragraph 5(b) shall be in
addition to, and not in lieu of, any other rights and remedies the
Company may have at law or in equity or under any other provision
of this Agreement in respect of such termination of employment.
However, if during the term of this Agreement the Employee’s
employment is terminated by the Employee without Good Reason and
the Employee gives BPI at least 120 days’ advance notice
of such termination, then the Employee shall not have any
obligation or liability to BPI or any Affiliate under this
Agreement on account of such termination of employment, but his
obligations under Section 6 and 7 hereof shall not be affected
by such termination of employment.
(c) Good
Cause Defined . For purposes of this Agreement, BPI and its
Affiliates shall have “ Good Cause ” to
terminate the Employee’s employment by the Company during the
term of this Agreement only if:
(i) (A) the
Employee fails to substantially perform his duties hereunder for
any reason or to devote substantially all his business time
exclusively to the affairs of the Company (including Company
activities on behalf of BPI or an Affiliate), other than by reason
of a medical condition that prevents the Employee from
substantially performing his duties hereunder even with a
reasonable accommodation by the Company, or fails to obtain the
consent of the BPI Board to his service on the board of directors
of another company, and (B) such failure is not discontinued
within a reasonable period of time, in no event to exceed
30 days, after the Employee receives written notice from BPI
or an Affiliate of such failure; or
Page 8 of 26
(ii) the
Employee commits an act of dishonesty resulting or intended to
result directly or indirectly in gain or personal enrichment at the
expense of BPI or an Affiliate, or engages in conduct that
constitutes a felony in the jurisdiction in which the Employee
engages in such conduct; or
(iii) the
Employee is grossly negligent or engages in willful misconduct or
insubordination in the performance of his duties hereunder;
or
(iv) the
Employee materially breaches his obligations under section 6 or
paragraph 7(a) below, relating to confidential information and
non-solicitation.
Any foregoing
provision of this paragraph 5(c) to the contrary notwithstanding,
BPI and its Affiliates shall not have “Good Cause” to
terminate the Employee’s employment within three years after
a Change in Control or Potential Change in Control (as such terms
are defined in section 11 below) unless (A) the
Employee’s act or omission is willful and has a material
adverse effect upon BPI, (B) the BPI Board gives the Employee
(I) written notice warning of its intention to terminate the
Employee for Good Cause if the specified act or omission alleged to
constitute Good Cause is not discontinued and, if curable, cured,
and (II) a reasonable opportunity after receipt of such
written notice, but in no event less than two weeks, to discontinue
and, if curable, cure the conduct alleged to constitute Good Cause,
and (C) the Employee fails to discontinue and, if curable,
cure the act or omission in question; provided that clauses
(B) and (C) of this sentence shall not apply with respect
to conduct on the part of the Employee that constitutes a felony in
the jurisdiction in which the Employee engages in such conduct,
and, provided further, that this sentence shall not apply to
conduct involving moral turpitude. For all purposes of this
Agreement, no act, or failure to act, on the Employee’s part
shall be deemed “willful” unless done, or omitted to be
done, by him intentionally and in bad faith (i.e., without
reasonable belief that his action or omission was in furtherance of
the interests of BPI or an Affiliate).
(d)
Good Reason Defined . For purposes of this Agreement, the
Employee shall have “ Good Reason ” to terminate
his employment during the term of this Agreement only
if:
(i) the
Company fails to pay or provide any amount or benefit that the
Company is obligated to pay or provide under section 4 above or
section 8, 9 or 10 below and the failure is not remedied within
30 days after BPI receives written notice from the Employee of
such failure; or
(ii) the
Employee is assigned duties, responsibilities or reporting
relationships not contemplated by section 3 above without his
consent, or his duties or responsibilities or power or authority
contemplated by section 3 above are limited in any respect
materially detrimental to him, and in either case the situation is
not
Page 9 of 26
remedied within
30 days after BPI receives written notice from the Employee of
the situation; or
(iii) he
is removed from, or not elected or reelected to, the office, title
or position of President and Chief Operating Officer of DPI, and
BPI and the Affiliates do not have Good Cause for doing so;
or
(iv) BPI
or an Affiliate relocates his office outside of either the
Company’s principal executive offices or the greater New York
City metropolitan area without his written consent (given in a
personal rather than representative capacity), and the situation is
not remedied within 30 days after BPI receives written notice from
the Employee of the situation; or
(v) BPI
or an Affiliate gives the Employee written notice, in the manner
set forth in paragraph 13(e) or (f) below, prior to any
Extension Effective Date, that the term of this
Agreement
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