EXHIBIT
10.4
FORM OF
SECOND AMENDED AND RESTATED
NON-COMPETITION AND SEVERANCE AGREEMENT
This
Second Amended and Restated Non-Competition and Severance
Agreement (this “Agreement”) is made and entered
into as of the 8 th day of July,
2008, by and between CHATTEM, INC., a Tennessee corporation
(the “
Company”) and __________________________ (the
“Executive”).
WITNESSETH
WHEREAS,
the Company is desirous of assuring itself of continuity of
management through the hiring and retention of certain key
executives, and to foster their unbiased and analytical
assessment of any offer to acquire control of the Company;
and
WHEREAS,
the Company desires to impose upon the Executive obligations
of confidentiality and to restrict his ability to obtain
employment with certain competitors of the Company;
and
WHEREAS,
the Company and the Executive have previously entered that
certain Non-Competition and Severance Agreement dated October
28, 2005, which provides certain benefits in the event of a
change in control of the Company;
WHEREAS,
the Company desires to amend and restate the Agreement in the
form hereinafter set forth to comply with the provisions of
Section 409A of the Internal Revenue Code of 1986, as amended,
(the “Code”) and to make certain other beneficial
changes; and
WHEREAS,
the Executive is willing to accept obligations of
confidentiality and non-competition and to agree to the
changes set forth herein in exchange for specified additional
severance benefits provided hereunder.
NOW,
THEREFORE, the Company and the Executive do hereby agree as
follows:
1.
Term . The term of this Agreement shall commence
as of the day and year first above written and continue
indefinitely thereafter for a period ending with the termination of
the Executive ’ s
employment with the Company. Notwithstanding the
foregoing, the expiration of the term of this Agreement shall not
affect any right or obligations continuing thereafter as
specifically set forth herein.
2.
Confidentiality Obligations . The Executive
agrees to maintain all confidential information and trade secrets
obtained during the course of his employment with the Company as
confidential and to disclose the same to no one, other than in the
furtherance of the Company’s business in the normal course or
to a fellow employee with a reasonable need to know, unless the
Executive can demonstrate by documentary evidence that such
information was (1) known to him prior to his employment with the
Company; (2) subsequently became part of
the
public domain through no fault of his own; or (3) was subsequently
disclosed to him by a third party not in violation of any
obligation of confidentiality and non-use with the
Company. The Executive agrees to maintain such
confidential information and trade secrets as confidential during
the term of this Agreement and, for confidential information for a
period of twelve (12) months thereafter and, for trade secrets for
so long as the information remains a trade secret. It is
agreed that, for purposes of this Agreement, the term
“confidential information” shall mean any and all
information relative to the Company which is unpublished or not
readily available to the general public, and the term “trade
secrets” means information, without regard to form, that
derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by
proper means by, persons other than the Company who can obtain
economic value from its disclosure or use, and is the subject of
efforts by the Company that are reasonable under the circumstances
to maintain its secrecy.
3.
Non-Compete . In the event of a Change in Control
(as hereinafter defined) while Executive is employed by the Company
and the termination of Executive’s employment entitling
Executive to the Severance Benefit, Executive will not, for a
period of twelve (12) months after such termination of employment,
accept compensation or anything of value from, nor offer or provide
any services, including consulting services, to any person,
company, partnership, joint venture or other entity which has or
does a significant business involving, in whole or in part,
over-the-counter drugs, functional toiletries or dietary
supplements which are competitive with the products of the Company
marketed and sold during the term of this Agreement up through the
date of termination of employment with annual sales for the
Company’s most recently completed fiscal year in excess of
$10 million. This provision applies only to persons or
entities selling the above specified products in competition with
the Company through food, drug or mass merchandiser channels of
distribution in the United States.
4.
Severance Benefits . If the Company Discharges or
Constructively Discharges the Executive during the term of this
Agreement within twenty-four (24) months after the occurrence of a
Change in Control, the Executive shall receive the Severance
Benefit. If the Company’s shareholders approve a
merger or other transaction which results in a Change in Control
and the Company Discharges or Constructively Discharges the
Executive on or after the date of the related shareholder meeting
but before the actual date of the Change in Control, Executive
shall be deemed to have been Discharged or Constructively
Discharged immediately following the Change in
Control. In addition, after a Change in Control, the
Executive shall be entitled to resign his employment with the
Company and receive the Severance Benefit (a
“Resignation”) at any time during the period commencing
one-hundred and eighty (180) days after the Change in Control and
ending two-hundred and forty (240) days after the Change in Control
notwithstanding that the fact that no Discharge or Constructive
Discharge has occurred. These terms are hereby defined as
follows:
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A.
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“Change
in Control” shall mean the occurrence of any one of the
following events:
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(i)
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the
sale by the Company of all or substantially all of its assets or
the consummation by the Company of any merger,
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consolidation,
reorganization, or business combination with any person, in each
case, other than in a transaction:
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(a)
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in
which persons who were shareholders of the Company immediately
prior to such sale, merger, consolidation, reorganization, or
business combination own, immediately thereafter, (directly or
indirectly) more than 50% of the combined voting power of the
outstanding voting securities of the purchaser of the assets or the
merged, consolidated, reorganized or other entity resulting from
such corporate transaction (the “Successor
Entity”);
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(b)
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in
which the Successor Entity is an employee benefit plan sponsored or
maintained by the Company or any person controlled by the Company;
or
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(c)
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after
which more than 50% of the members of the board of directors of the
Successor Entity were members of the Board of Directors of the
Company (the “Board”) at the time of the action of the
Board approving the transaction (or whose nominations or elections
were approved by at least 2/3 of the members of the Board at that
time);
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(ii)
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the
acquisition directly or indirectly by any “person” or
“group” (as those terms are used in Sections 13(d), and
14(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”), including without limitation, Rule 13d-5(b)) of
“beneficial ownership” (as determined pursuant to Rule
13d-3 under the Exchange Act) of securities entitled to vote
generally in the election of directors (“voting
securities”) of the Company that represent 30% or more of the
combined voting power of the Company’s then-outstanding
voting securities, other than:
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(a)
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an
acquisition by a trustee or other fiduciary holding securities
under any employee benefit plan (or related trust) sponsored or
maintained by the Company or any person controlled by the Company
or by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any person controlled by the
Company;
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(b)
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an
acquisition of voting securities by the Company or a person owned,
directly or indirectly, by the holders of at least 50% of the
voting power of the Company’s then
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outstanding
securities in substantially the same proportions as their ownership
of the stock of the Company;
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(c)
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an
acquisition of voting securities from the Company; or
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(d)
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an
acquisition of voting securities pursuant to a transaction
described in clause (i) of this definition that would not be a
Change in Control under clause (i); and
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for
purposes of clarification, an acquisition of the Company’s
securities by the Company th
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