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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 24th day of July 1996 between MEDICIS
PHARMACEUTICAL CORP., a corporation organized under the laws of the State of
Delaware (the "Company") with offices located at 4343 East Camelback Road,
Phoenix, Arizona, and Jonah Shacknai (the "Executive"), residing at 5868 East
Berneil Lane, Paradise Valley, Arizona:
WITNESSETH:
WHEREAS, the Company and the Executive desire to enter into the present
Agreement whereby the Executive will continue to provide personal services to
the Company as Chairman and Chief Executive officer; and
WHEREAS, in its business, the Company has developed and uses valuable
technical and nontechnical information including information relating to
development, use, manufacture and marketing of certain biologically-active
compounds, and it is necessary for the Company to protect certain of the
information either by patents, copyrights, or by holding it secret or
confidential; and
WHEREAS, the aforesaid information is vital to the success of the
Company's business, and the Executive through his activities
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may become acquainted therewith, and may contribute thereto, either through
research, inventions, discoveries or otherwise; and
WHEREAS, in the course of his employment, the Executive has gained and
will gain knowledge of the business affairs, finances, management, marketing
programs and philosophy, customers and methods of operation of the Company; and
WHEREAS, the Company would suffer irreparable harm if the Executive
were to use such knowledge, information and business acumen in competition with
the Company,
NOW, THEREFORE, in consideration of the continued employment of
Executive by the Company as Chairman and Chief Executive Officer, the above
premises and the mutual agreements hereinafter set forth, the receipt, adequacy
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
(a) "Business of the Company" shall mean and include the
business of developing, manufacturing, marketing, selling and using certain
chemical compounds for use in the dermatologic industry or such other businesses
as the Company derived substantial revenues from, which revenues exceed twenty
(20%) percent of the Company's gross annual revenues in the Company's most
recent fiscal year.
(b) "Competing Business" shall mean any business which is the
same or essentially the same as the Business of the Company.
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(c) "Confidential Information" shall mean all non public
customer lists, sales and marketing information, customer account records,
training and operations material and memoranda, trade secrets, strategic
planning materials and information product development plans, scientific and
technical information, personnel records, pricing information, and financial
information concerning or relating to the business, accounts, customers,
employees and affairs of the Company, obtained by or furnished, disclosed or
disseminated to the Executive, or obtained, assembled or compiled by the
Executive or under his supervision during the course of his employment by the
Company, and all physical embodiments of the foregoing, all of which are hereby
agreed to be the property of and confidential to the Company, but Confidential
Information shall not include any of the foregoing to the extent the same is or
becomes publicly known through no fault or breach of this Agreement by the
Executive.
2. Terms of Employment; Duties.
(a) The Company employs the Executive as Chairman of the Board
of Directors of the Company, and Chief Executive Officer of the Company, and the
Executive accepts such employment with the Company in that capacity subject to
the terms and conditions hereof. The Executive shall in such office have the
responsibilities which include presiding over and participating in deliberations
of the Board as its Chairman and as a member of the Board;
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serving on the Executive Committee of the Board; exercising ultimate
responsibility on a reporting basis for sales, marketing, research and
development, operations, regulatory compliance, finance, personnel, corporate
development, public and shareholder relations and governmental relations
activities of the Company; exercising ultimate responsibility for strategic
planning and evaluation, and serving as Company's official spokesman and
representative in all matters.
(b) Throughout his employment hereunder, the Executive shall
devote substantially all of his time, energy and skill during regular business
hours to the performance of the duties of his employment (reasonable vacations,
reasonable absences due to illness, and reasonable time as may be necessary for
the Executive to manage his personal investments, excepted), shall faithfully
and industriously perform such duties, and shall diligently follow and implement
all management policies and decisions of the Company.
3. Compensation and Related Matters
(a) For his services hereunder, the Company shall pay to the
Executive the compensation and provide the benefits set forth in Exhibit A
attached hereto and incorporated herein as part of this Agreement and such
benefits as are otherwise provided for herein.
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(b) The Executive shall be eligible to fully participate in
all present or future pension, retirement, medical, dental, disability, life
insurance or any other employee benefit plans of the Company, and in addition,
the Executive shall be eligible to fully participate in all present or future
incentive compensation, bonus, profit sharing, stock option or stock purchase
plans of the Company as and to the extent granted or approved and determined by
the Board of Directors of the Company, subject to the provisions of Exhibit A
hereof.
4. Term and Termination of This Agreement.
(a) The Executive's employment under this Agreement shall be.
for a period of five (5) years commencing on July 1, 1996 and expiring on June
30, 2001 ("the Initial Term"), which period shall automatically be extended
beyond its current five-year term, without further action by the parties, as of
June 30, 2001 and as of each succeeding five-year period thereafter, for another
five (5) year period beginning on July 1, 2001 and each succeeding five (5) year
period, unless either party shall have served written notice upon the other six
(6) months prior to June 30, 2001, or prior to June 30th of the expiration date
occurring on each succeeding five (5) year period thereafter, of its intention
to terminate or modify this Agreement, subject however to the earlier
termination thereof pursuant to the provisions of this Agreement. Should this
Agreement be automatically renewed for any five (5)
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year period, the terms of said Agreement shall remain the same, except for any
increases in the salary, bonuses or benefits provided by the Company to the
Executive.
(b) The term of the Executive's employment hereunder may be
terminated prior to the expiration of the Initial Term (or any extension or
automatic renewal thereof) in the following events:
(i) termination by mutual agreement of the parties;
(ii) termination by the Company without cause upon
sixty (60) days' written notice to the
Executive, as provided for in Section
5(a)(iii);
(iii) termination upon the Executive's death or
disability as defined in and as provided for in
Section 5(a)(v);
(iv) termination of the Executive for cause, as
provided for in Sections 5(a)(ii) and 7;
(v) resignation by the Executive for good reason,
as provided for in Sections 5(a)(iii) and 8;
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(vi) termination of the Executive arising as a
result of change in ownership or control, as
provided for in Sections 5(a)(iii) and 9; or
(vii) voluntary resignation by the Executive for
reasons other than those falling within
paragraph (i), (v) or (vi) herein.
5. Payments Upon Termination
(a) In the event that the Executive's employment
hereunder is terminated pursuant to Section 4(b)
above, the Company shall pay to Executive the
following amounts within thirty (30) days of such
termination or as otherwise set forth below:
(i) If the Executive's employment is terminated
pursuant to subsection 4(b)(i), the Company
shall pay to the Executive all amounts owing
to the Executive as Annual Compensation
through the Date of Termination (as defined
herein), consisting of Base Salary through
the end of the calendar month from the Date
of Termination and a pro rata bonus based
upon the Executive's prior year's bonus.
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(ii) If the Executive's employment is terminated
by the Company for Cause (as defined in
Section 7 herein) pursuant to subsection
4(b)(iv), or if the Executive voluntarily
resigns his employment pursuant to Section
4(b)(vii), the Company shall pay to the
Executive all amounts owing to the Executive
as Base Salary through the end of the
calendar month of the Date of Termination.
(iii) (a) If the Executive's employment is
terminated by the Company without
cause (Section 4(b)(ii)), or in the
event of the termination of this
Employment Agreement pursuant to
Section 4(b)(v) and Section 8
herein (Resignation by Executive
For Good Reason), or in the event
the Company shall terminate this
Employment Agreement for any reason
other than pursuant to Section
4(a)(iv) (cause) or Section
4(a)(iii) (death or disability), or
Section 4(b)(vi) and Section 9
(Termination of Employment as a
Result of Change In Ownership or
Control):
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-- the Company shall pay the
Executive his then current
annual compensation, and a
pro rata bonus based on the
Executive's prior year's
bonus, through the Date of
Termination.
-- in lieu of any further
salary payments to the
Executive for periods
subsequent to the Date of
Termination, the Company
shall pay as severance to
the Executive on the fifth
day following the Date of
Termination, a lump sum
payment equal to the number
of months remaining from
the date of termination
until the expiration date
of this Employment
Agreement, or any renewal
thereof, divided by twelve
(12), times the sum of (a)
the Executive's annual Base
Salary at the highest rate
in effect during the twelve
(12) months immediately
preceding the Date of
Termination and (b) the
average of the annual bonus
payments, if any, paid to
the Executive in the
preceding three (3) years,
however in
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no event shall the amount
of severance to be paid to
the Executive be less than
the amount of payment in
the event of non renewal of
the Employment Agreement,
as provided for in
paragraph 6 of this
Agreement, i.e. a lump sum
payment equal to (i) two
(2) times the sum of (A)
the Executive's annual Base
Salary at the highest rate
in effect during the twelve
(12) months immediately
preceding the Date of
Termination and (B) the
average of the Annual bonus
payments, if any, paid to
the Executive in the
preceding three (3) years;
and (ii) an additional
amount equal to 1/24 of the
lump sum payment provided
in clause (i), above,
multiplied by each full
year of the Executive's
service with the Company.
-- the Company shall pay all
other damages to which the
Executive may be entitled
as a result of the
Company's termination of
his
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employment under this
Agreement, except for
Cause, including damages
for any and all loss of
benefits to the Executive
under the employee benefit
plans which he would have
received had this Agreement
not been terminated for
reasons set forth in
subsections 4(b)(ii)
4(b)(v) and 4(b)(vi),
herein, and had the
Executive's employment
continued for the full
Initial Term, or for the
full period of any
extension or automatic
renewal, and including all
legal fees and expenses
incurred by the Executive
in contesting or disputing
any such termination or in
seeking to obtain or
enforce any right or
benefit provided by this
Employment Agreement.
(iii)(b) In the event of the termination of
this Employment Agreement pursuant
to Section 4(b)(vi) and Section 9
herein (Termination of Employment as
a Result of Change In Ownership Or
Control):
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-- the Company shall pay the
Executive his then current
annual compensation, and a
pro rata bonus based on the
Executive's prior year's
bonus, through the Date of
Termination.
-- in lieu of any further
salary payments to the
Executive for periods
subsequent to the Date of
Termination, the Company
shall pay as severance to
the Executive on the fifth
day following the Date of
Termination, a lump sum
payment equal to 4 times
the sum of (a) the
Executive's annual Base
Salary at the highest rate
in effect during the twelve
(12) months immediately
preceding the Date of
Termination and (b) the
average of the annual bonus
payments, if any, paid to
the Executive in the
preceding three (3) years;
and
-- the Company shall pay all
other damages to which the
Executive may be entitled
as a result of the
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Company's termination of
his employment under this
Agreement, except for
Cause, including damages
for any and all loss of
benefits to the Executive
under the employee benefit
plans which he would have
received had this Agreement
not been terminated for
reasons set forth in
subsections 4(b)(ii)
4(b)(v) and 4(b)(vi),
herein, and had the
Executive's employment
continued for the full
Initial Term, or for the
full period of any
extension or automatic
renewal, and including all
legal fees and expenses
incurred by the Executive
in contesting or disputing
any such termination or in
seeking to obtain or
enforce any right or
benefit provided by this
Employment Agreement.
(iv) If Executive's employment is terminated
pursuant to subsection 4(b)(iii) by reason
of Executive's death, the Company agrees to
pay to the legal representative of his
estate, (i) for a period of twelve (12)
months
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(commencing with the Date of Termination)
an amount equal to and payable at the same
rate at his then current Base Salary, and
(ii) any payment the Executive's spouse,
beneficiaries, or estate may be entitled to
receive pursuant to any pension or employee
benefit plan or life insurance policy
presently maintained by the Company.
(v) During any period that the Executive fails to
perform his duties hereunder as a result of
incapacity due to his physical or mental or
emotional illness, the Executive shall
continue to receive his full Base Salary
along with any bonus payments awarded by the
Board of Directors until the Executive
returns to his duties or until his employment
is terminated for reason of disability
pursuant to Section 4(b)(iii).
"Disability" shall mean the inability of
the Executive to perform the duties of
Chairman and Chief Exchange Officer of the
Company due to physical, mental or
emotional incapacity or illness, where such
inability is expected to result in death or
to be of long-continued
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and indefinite duration, but in no event
shall such duration be less than One
Hundred Eighty (180) consecutive days. The
determination of "Disability" shall be made
by the Board of Directors of the Company
("the Board") and the Executive, as
determined by an independent physician
selected by both the Board and the
Executive. In the event of such Disability,
the Company may, at its election and by
providing written notice thereof to the
Executive within sixty (60) days after such
determination, terminate the Executive's
employment hereunder effective on the date
set forth in such notice. If the Board or
the Company does not timely give notice to
the Executive of its election to terminate
the Executive for such Disability, then the
Company shall be deemed to have waived its
right to terminate the Executive based upon
such Disability.
After such termination because of the
Executive's disability, the Executive shall
be paid, in substantially equal monthly
installments, 100% of his Base Salary (at
the rate in effect at the time Notice of
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Termination is given) for twelve (12)
months, and thereafter an annual amount
equal to 50% of such Base Salary for the
balance of the Initial Term, but in no
event for less than a second twelve (12)
month period.
(b) In no event shall any payment pursuant to this
Section 5 be made to the extent that it would
constitute an "excess parachute payment," as
defined in Section 280G of the Internal Revenue
Code of 1986. Should any such payment provided for
in section 5 constitute an "excess parachute
payment" as defined in Section 280G of the Internal
Revenue Code of 1986, the Company and the Executive
shall meet in good faith to negotiate a substitute
payment to the Executive equal to that amount which
constitutes the excess parachute payment, the
payment of which amount is permissible under the
Internal Revenue Code and regulations promulgated
thereunder.
(c) Unless the Executive is terminated for Cause pursuant
to Section 4(a)(iii) or voluntarily resigns his
employment pursuant to section 4(a)(vii), the Company
shall maintain in full force and effect, for the
continued benefit of the
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Executive, for a period of four (4) years following
the Date of Termination all employee benefit plans
and programs in which Executive was entitled to
participate immediately prior to the Date of
Termination, provided that the Executive's continued
participation in such employee benefit plans is
possible under the general terms and provisions of
such plans and programs. In the event that the
Executive's participation in any such plan or program
is barred at any time during this four (4) year
period, the Company shall arrange to provide the
Executive with benefits substantially similar to
those which the Executive would otherwise have been
entitled to receive under such plans and programs
from which his continued participation is barred, or
alternatively, to provide to the Executive the
economic after-tax equivalent of the participation in
all of said employee benefit plans in which the
Executive's participation is barred. At the end of
the period of coverage, the Executive shall have the
option to have assigned to him at no cost and with no
apportionment of prepaid premiums any assignable
insurance policy owned by the Company which relate
specifically to the Executive.
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(d) (i) In addition to the foregoing, if the
Executive's employment is terminated by the
Company without cause pursuant to Section
4(b)(ii), upon the Executive's death or
disability pursuant to Section 4(b)(iii),
upon the Executive's resignation for good
reason pursuant to Section 4(b)(v), as a
result of a change in ownership or control
pursuant to Section 4(b)(vi), or upon the
nonrenewal of this Agreement on its expira-
tion date, all stock options awarded to the
Executive on or before the Date of
Termination under the Company's outstanding
Incentive Stock Option Plans; or issuable to
Executive under any future stock option plans
granted by the Company during the term of
this Agreement ("the Options"), shall immedi-
ately vest to the Executive's benefit or the
benefit of the Executive's estate, in the
event of his death. Further, the Executive
shall retain the right to exercise his rights
under the options for the full term(s)
thereof, and the Company shall take all
actions as are necessary to transfer the
Options from the Company's qualified stock
option plan(s) to the Company's nonqualified
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stock option plan(s) or such other plans as
may be applicable. The intent of this
provision is to insure that in the event of
termination of the Executive's employment
for reasons referenced in this subsection,
the Executive shall be fully vested in the
Options and shall have the full term of
each such option or options to exercise the
same.
(ii) In the event the Executive's employment is
terminated in accordance with Section
4(a)(vi) and, as a consequence of such change
in ownership or Control the Company's incen-
tive Stock option plans in existence at the
time of the Executive's termination of
employment cease to exist at any time before
the Executive's right to exercise the Options
pursuant to Section 5(d)(i) above has
expired, the Executive's right to the
Options, or to the receipt of cash compensa-
tion in lieu thereof, shall be governed by
the provisions of section 9(b)(ii), below.
(e) The Executive shall not be required to mitigate the
amount of any payment provided for in this Section
5 by seeking other employment or otherwise, and no
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compensation earned by the Executive after his
termination of employment with the Company shall be
applied to offset any payment provided for in this
Agreement.
(f) Any termination of the Executive's employment by the
Company or by the Executive (other than termination
by reason of the Executive's death) shall be
communicated by written Notice of Termination to the
other party hereto in accordance with provisions set
forth in this Agreement.
(g) "Date of Termination" shall mean:
(i) if the Executive's employment is terminated
by his death, the date of his death,
(ii) if the Executive's employment is terminated
by reason of the Executive's disability,
sixty (60) days after Notice of Termination
is given (provided that the Executive shall
not have returned to the performance of his
duties on a reasonable full-time basis
during such sixty (60) day period),
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(iii) if the Executive's employment is terminated
for any other reason, the date specified in
the Notice of Termination; provided that if
within sixty (60) days after the Notice of
Termination is given the party receiving such
Notice of Termination notifies the other
party that a dispute exists concerning the
termination, the Date of Termination shall be
the date on which said dispute is finally
determined, either by mutual written agree-
ment of the parties, or by a final arbitra-
tion award as provided for in Section 18 (the
time for appeal therefrom having expired and
no appeal having been perfected).
6. Payment in the Event of Non Renewal of Agreement
(a) In the event this Agreement is not renewed by the Company
for a minimum period of three years after its expiration date of June 30, 2001,
the Company shall pay as severance to the Executive on the fifth day following
the Date of Termination, a lump sum payment equal to (i) two (2) times the sum
of (A) the Executive's annual Base Salary at the highest rate in effect during
the twelve (12) months immediately preceding the Date of Termination and (B) the
average of the annual bonus payments, if any, paid to the Executive in the
preceding three (3) years; and
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(ii) an additional amount equal to 1/24 of the lump sum payment provided in
clause (i), above, multiplied by each full year of the Executive's service with
the Company.
(b) Upon the non renewal of this Agreement by the Company as
provided in Section 6(a) above, the Company shall maintain in full force and
effect for the continued benefit of the Executive for a period of two (2) years
following the Date of Termination all employee benefit plans and programs in
which the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation in such
employee benefit plans is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in any
such plan or program is barred at any time during this two (2) year period, the
Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive would otherwise have been entitled to
receive under such plans and programs from which his continued participation is
barred, or alternatively, to provide to the Executive the economic after-tax
equivalent of the participation in all of said employee benefit plans in which
the Executive's participation is barred. At the end of the period of coverage,
the Executive shall have the option to have assigned to him at no cost and with
no apportionment of prepaid premiums any assignable insurance policy owned by
the Company which relates specifically to him.
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(c) In the event of the non-renewal of the Company of this
Agreement as provided for in Section 6(a), above, all options awarded to the
Executive on or before the Date of Termination under the Company's outstanding
Incentive Stock option Plans, or issuable to Executive under any future stock
option plans established by the Company during the term of this Agreement, shall
immediately vest to the Executive's benefit and the Executive shall retain the
right to exercise his rights under the Options for the full term(s) thereof, and
the Company shall take all actions as are necessary to transfer the "Options"
from the Company's qualified stock option plan(s) to the Company's nonqualified
stock option plan(s) or such other plans as may be applicable.
7. Termination for Cause
(a) If the Company reasonably shall determine that there are
grounds for discharging the Executive for Cause (as hereinafter defined), the
Company may, through the Board, at its election within thirty (30) days
thereafter, give the Executive notice of its intention to terminate the
Executive for cause, stating the grounds for termination and specifying a date,
within thirty (30) days of such notice, on which the Executive shall be given an
opportunity to discuss such grounds for termination at a meeting of the Board.
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(b) If the grounds for termination are those specified in
clause (ii), (iii) or (iv) of paragraph (d) hereof, at such Board meeting the
Board and the Executive shall discuss in good faith and shall determine and set
forth in writing what actions the Executive might take, and by what date, to
cure the material adverse impact or default, as the case may be, to the
reasonable satisfaction of the Board, but in no event earlier than sixty (60)
days after said meeting. When the Board and the Executive have agreed in writing
upon a cure and the date by which it shall be provided, the Board shall take no
further action regarding termination for cause on such grounds until such date,
and on such date it shall provide written notice to the Executive that either
(i) the cure has been satisfactorily provided, and the Board shall continue to
employ the Executive under this Agreement pursuant to the terms hereof, or (ii)
the cure has not been satisfactorily provided and the Board is terminating the
Executive's employment for cause effective immediately.
(c) If the grounds for termination are those specified in
clause (i) of paragraph (d) hereof, it is understood and agreed that no
satisfactory cure is available. If following discussion with the Executive of
the grounds for his termination (as specified in clause (i) of paragraph (d)
hereof, at the Board meeting the Board shall continue intent on discharging the
Executive for cause on such grounds, the Company shall provide written notice of
termination to the Executive within thirty (30) days of the date of
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such meeting, and such termination shall be effective upon the date set forth in
such notice.
(d) For purposes of this Agreement the term "cause"
shall mean:
(i) the conviction of the Executive for a felony
involving fraud or moral turpitude;
(ii) The Executive's engaging in activities
prohibited by Section 10 hereof;
(iii) the Executive's frequent willful gross
neglect (other than as a result of
physical, mental or emotional illness) of
his duties and responsibilities under this
Agreement that has a material adverse
impact on the business or reputation of the
Company; or
(iv) the Executive's willful gross misconduct that
has a material adverse impact on the business
or reputation of the Company.
(e) For each act or occurrence giving rise to a basis for
termination for cause, failure by the Company to timely give. all written
notices as set forth in this Section, from the date the
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Board or any of its members were either (i) aware of such act or occurrence
giving rise to a basis for termination for cause, or (ii) with reasonable due
diligence should have known of such act or occurrence giving rise to a basis for
termination for cause, shall constitute a waiver of the Company's right to
terminate based upon such cause, but such waiver shall not prejudice the
Company's right to terminate pursuant to this Section based upon another act or
occurrence giving rise to a basis for termination for cause, whether of the same
or a different type.
8. Resignation by Executive for Good Reason
In the event that the Company shall during the term of this contract
(i) fail to continue the appointment of the Executive as Chairman and Chief
Executive Officer, (ii) reduce the Executive's annual salary below the minimum
amount specified in Appendix A, (iii) materially diminish the duties or
responsibilities of the Executive as Chairman and Chief Executive Officer, as
the same are set forth hereinabove, (iv) assign to the Executive such duties and
responsibilities inconsistent with his position as Chairman and Chief Executive
Officer, or (v) after a change in ownership or control of the Company, relocate
its headquarters to a location more than thirty (30) miles, by air, from its
location immediately prior to such charge in ownership or control (each of the
foregoing hereinafter referred to as a "Triggering Event"), then the Executive
may give notice to the Company of his election to
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terminate this Agreement pursuant to this Section, effective sixty (60) days
from the date of such notice, unless the Company shall have cured the default
giving rise to his Notice of Termination. Such notice from the Executive shall
state the Triggering Event that provides the grounds for his termination, and
such notice must be given, if at all, within one hundred and twenty (120) days
of the occurrence of the Triggering Event referred to as providing such grounds
for termination. Within the sixty (60) day period specified in the Executive's
notice to the Company, the Executive and the Board shall discuss in good faith
what actions the Board might take, and by what date, to cure the default
involved in the Triggering Event specified by the Executive. If within that
sixty (60) day period the Board and the Executive are unable to agree in writing
upon a cure or the date by which such cure shall be provided, the Executive's
termination shall be effective on the date specified in his original notice to
the Company. If within such sixty (60) day period the Board and the Executive
shall agree in writing upon a cure and the date by which it shall be provided,
then on such date the Executive shall notify the Board either (i) that the cure
has been satisfactorily provided, and the Executive is willing to continue his
employment under this Agreement pursuant to the terms hereof (except as such
terms may have been altered by the agreed-upon cure), or (ii) that the cure has
not been satisfactorily provided and the Executive is terminating his employment
hereunder effective immediately.
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9. Termination of Employment as a Result of Change in
Ownership or Control of the Company
(a) In the event that the Company shall enter into an
agreement to merge with, or to sell or otherwise dispose of all or substantially
all of its assets or stock to, or is acquired by another corporation or other
entity (hereinafter, a "Change in ownership or Control"), and the parties to
such agreement do not appoint the Executive as Chairman and Chief Executive
Officer (or to such other position of authority and responsibility as may be
acceptable to the Executive in his sole discretion) of the newly created or
merged entity or purchaser, then the Board shall notify the Executive in
writing, specifying such other senior executive position with the new entity
purchaser, or controlling entity, in which the Executive is to serve, the duties
to be assigned to such position, and any other amendments to the terms and
provisions of this Agreement that the above-mentioned parties propose. In no
event, however, shall the remuneration, benefit coverage, stock option
entitlements or severance payments be less than that provided for in this
Agreement. At any time during the period following such notice and ending six
(6) months from the effective date of the Change in Ownership or Control, the
Executive may elect to give notice to the Company, to the purchaser, to the new
entity, or to the controlling entity as the case may be, that he is terminating
this Agreement pursuant to this Section, effective on the date specified in such
notice. If the Agreement is terminated pursuant to this section the Company
shall provide the Executive
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all benefits and obligations as provided in Section 5 hereof; provided, however,
that prior to the effective date of the Change in Ownership or Control, the
Company shall make arrangements satisfactory to the Executive by providing
adequate security that the new entity, purchaser or controlling entity following
the Change in ownership or Control will have the financial resources to make the
payments and provide for the payments and benefits (or the economic equivalent
thereof) to the Executive on a timely basis in accordance with the terms of this
Agreement.
(b) In the event the Change in Ownership or Control results in
the dissolution, elimination or modification of the Company's Incentive Stock
Option Plans or any future stock option plan(s) established by the Company, and
the Executive becomes employed by the successor entity in accordance with
Section 9(a), above, the Executive may, at his sole discretion, elect to (i)
accept participation in and the award of stock options in such stock option
plans of the successor or controlling entity, as offered to him by such
successor or controlling entity, or (ii) receive a payment in cash for such
stock options of the Company as calculated in accordance with the following
formula:
(A) All stock options awarded to the Executive by the Company
shall be deemed to have become fully vested as of the date on
which the Company's Incentive Stock Option Plans or any future
stock option plans established by the
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Company have been dissolved, eliminated or modified ("the Old
Vested Options"). The Executive shall retain the right to
exercise all such Options for the full term(s) thereof, and
the Company shall take all actions as are necessary to
transfer the Options from the Company's qualified stock
options plan(s) to the Company's non-qualified stock option
plan(s) or such other plans as applicable.
The cash equivalent of these Stock Options shall be the
average of the then present value of all stock options granted
to the Executive over the prior three (3) years, and shall be
determined pursuant to the "Black-Scholes" options pricing
model.
The Executive will be provided with a lump-sum payment, within
30 days of the dissolution, elimination or modification of the
Company's stock options plans, equal to the calculated cash
equivalent of the Old Vested options, plus an additional cash
amount (grossed up) to cover all taxes required to be paid by
the Executive on this cash equivalent.
(B) In addition, the Executive will be credited, for the purpose
of this Section, with additional stock options equal to 0.5
percent (0.5%) of the fully diluted
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capitalization of the Company calculated as of the day before
the change in ownership or Control, multiplied by the number
of years (including fraction thereof) from that date to the
end of the term of this Agreement as set forth in Section 4(a)
("the Cash Equivalency Obligation of Successor"). The cash
equivalency of stock options provided in this paragraph shall
be determined pursuant to the "Black-Scholes" options pricing
model.
On the first anniversary date of this Agreement following the
Change in ownership or Control, the successor entity shall
provide the Executive with a cash payment to be calculated as
follows: the Cash Equivalency obligation of Successor
multiplied by a fraction the numerator of which is the number
of months or fraction thereof from the effective date of the
Change in ownership or Control to the anniversary date and the
denominator of which is the total number of months or fraction
thereof from the effective date of the Change in ownership or
Control and the end of the term of this Agreement. On each
succeeding anniversary date through the end of the term of
this Agreement, the successor entity shall provide the
Executive with a cash payment to be calculated as follows: the
Cash Equivalency obligation of Successor multiplied by a
fraction the numerator of which is 12 and the denominator of
which is the total number of months
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between the effective date of the Change in ownership or
Control and the end of the term of this Agreement.
(c) In the event the Change in Ownership or Control results in
the Executive's participation in a medical insurance plan which provides a
lesser amount of benefits or coverage than the Company's medical plan for the
Executive and/or members of his immediate family, the successor or controlling
entity shall provide the Executive with a cash payment sufficient to reimburse
the Executive for all medical expenses incurred by the Executive for himself and
for members of his immediate family, and the successor or controlling entity
shall provide the Executive with an additional cash amount (gross up) to cover
all taxes required to be paid by the Executive on such medical expense
reimbursement.
10. Agreement Not to Compete.
The Executive agrees that during his employment by the Company, and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination arises as a result of a change in ownership or
control as provided for in Section 5(a)(iii) and 9 herein, in which case the
Executive shall not be bound by any post-termination agreement not to compete,
he will not, without the prior written consent of the Company, either directly
or indirectly, on his own behalf or in the service or on behalf of others as a
shareholder (other than ownership of less
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than five percent (5%) of the outstanding voting securities of an entity whose
voting securities are traded on a national securities exchange), officer,
trustee, consultant, or executive or managerial employee, engage in, consult
with or be employed by any competing Business.
11. Agreement Not to Solicit Customers.
The Executive agrees that during his employment by the Company and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination is for cause under Section 7, or voluntary
resignation under Section 4(a)(7), or non-renewal of this Agreement under
Section 6, he will not without the prior written consent of the Company, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or appropriate, or attempt to solicit, divert or
appropriate, to any Competing Business, any person or entity whose account with
the Company was sold or serviced by or under the supervision of the Executive
during the two (2) years preceding the termination of such employment.
12. Agreement Not to Solicit Employees.
The Executive agrees that during his employment by the Company and for
a period of one (1) year following the termination of such employment, except if
the Executive's termination is for cause
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under Section 7, or voluntary resignation under Section 4(a)(7), or non renewal
or this Agreement under Section 6, he will not, either directly or indirectly,
on his own behalf or in the service or on behalf of others, solicit, divert or
hire away, or attempt to solicit, divert or hire away, to any Competing Business
any person employed by the Company, whether or not such employee is a full-time
employee or a temporary employee of the Company, whether or not such employment
is pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
13. Ownership, Non-Disclosure and Non-Use of Confidential
Information.
(a) The Executive acknowledges and agrees that all
Confidential Information as defined in Section 1(c), hereof, and all physical
embodiments thereof, are confidential to and shall be and remain the sole and
exclusive property of the Company. Upon request by the Company, and in any event
upon termination of his employment with the Company for any reason, the
Executive shall promptly deliver to the Company all property belonging to the
Company, including without limitation, all Confidential Information (and all
embodiments thereof), then in his custody, control or possession.
(b) The Executive agrees that he will not, either during the
term of his employment by the Company, or for a period of five (5) years after
the termination of his employment, without the
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prior written consent of the Company, disclose or make available any
Confidential Information, as defined in Section 1(c) hereof, to any person or
entity, nor shall he make or cause to be made, or permit or allow, either on his
own behalf or on behalf of others, any use of such Confidential Information
other than in the proper performance of his duties hereunder.
14. Ownership of Inventions.
(a) The Executive shall promptly disclose to the Company all
discoveries, inventions, and improvements, patentable or unpatentable, conceived
or made by the Executive, individually or jointly with any other person or
persons, during the period of his employment by the Company (whether or not
during working hours) relating in any manner to the business or activities of
the Company, whether such discovery, invention or improvement be a machine,
apparatus, process, composition, article, or other subject. All such
discoveries, inventions and improvements shall be the sole and exclusive
property of the Company in respect to any and all countries, their territories
and possessions. The Executive shall, during his employment within the Company
and thereafter, perform at the request and expense of the Company all lawful
acts and execute, acknowledge and deliver all such instruments deemed necessary
by the Company to vest in the Company the entire right, title and interest in
and to such discoveries, inventions and improvements, and to enable the Company
to properly
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prepare, file and prosecute applications for and obtain patents (including like
kinds of industrial property) thereon in any and all countries selected by the
Company as well as reissues, renewals and extensions thereof, and to obtain and
record title to such applications and patents so that the Company shall be the
sole and absolute owner thereof in any and all countries in which it may desire
patent or like protection.
(b) Any provision in this Agreement requiring the Executive to
assign his rights in any invention does not apply to an invention for which no
equipment, supplies, facility, or trade secret information of the Company was
used and which was developed entirely on the Executive's own time, and: (a)
which does not relate (i) to the Business of the Company or (ii) to the
Company's actual or demonstrably anticipated research or development, or (b)
which does not result from any work performed by the Executive for the Company.
15. Business and Travel Expense.
The Executive shall be reimbursed for his out-of-pocket expenses
incurred in carrying out the Company's business, including all travel and
entertainment expenses reasonably required by the Executive in his position as
Chairman and Chief Executive officer, in accordance with Company policy and upon
proof of such expenditures. It is understood that the Executive's wife may
accompany
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him on business travel when the Executive determines that her presence will
enable him to further the interests of the Company and in such circumstances the
Executive shall be reimbursed for her reasonable out-of-pocket travel and
entertainment expenses as well.
16. Financial Planning Expenses.
The Company shall reimburse the Executive for reasonable costs and
expenses incurred by the Executive for financial, estate and tax planning up to
an aggregate of Ten Thousand Dollars ($10,000) annually.
17. Legal and Consulting Fees.
The Company shall pay all reasonable legal fees and consulting expenses
incurred by the Executive in connection with the negotiation and preparation of
this Agreement.
18. Resolution of Disputes
(a) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in the
City of Phoenix, in accordance with the rules of the American Arbitration
Association (the "AAA"). The arbitration shall be before three (3) arbitrators,
all of whom shall be attorneys. One arbitrator shall be appointed by the
Executive; one
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arbitrator shall be appointed by the Company, and the third Arbitrator shall be
selected by the two appointed Arbitrators. In the event the two appointed
Arbitrators are unable to agree upon the third Arbitrator, either party may
petition the Superior Court of the State of Arizona, Maricopa County, for
appointment of the third arbitrator. The arbitrators shall not have the
authority to add to, subtract from or in any way modify the express written
terms of the Agreement, and in rendering an award, the arbitrators shall be
required to adhere to the express written provisions of this Agreement and the
intention of the parties appearing therefrom. The decision of the arbitrators
shall be final and binding on the parties hereto and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
(b) The costs for the arbitration shall be borne equally by
both parties.
(c) Pending the outcome or resolution of any arbitration, the
Company shall continue payment of all amounts when and as due the Executive
under this Agreement without regard to any dispute; provided, however, that if
the arbitration shall be decided in favor of the Company, the, Executive shall
promptly repay to the Company, with interest at the prime rate as published from
time to time by Chemical Bank, all amounts he would not have been entitled to
receive under this Agreement had the dispute not been taken to arbitration, and
the arbitration award in favor of
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the Company shall be deemed an award in the amount of the repayment
due to the Company.
19. Compliance With Securities Laws.
The Executive shall comply with all federal and state securities laws
and Company policies and guidelines relating thereto concerning insider trading,
reporting requirements, and confidentiality of undisclosed internal material
information about the Company.
20. Severability, etc.
(a) The Executive agrees that the covenants and agreements
contained in sections 10, 11, 12 and 13 of this Agreement, and the subsections
of those Sections, are of the essence of this Agreement; that each of such
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company and the Business of the Company; that the company is
engaged in the Business of the company; that irreparable loss and damage will be
suffered by the Company should the Executive breach any of such covenants and
agreements; that each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement; that the unenforceability
of any such covenant or agreement shall not affect
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the validity or enforceability of any other such covenant or agreements or any
other provision or provisions of this Agreement; and that, in addition to other
remedies available to it, the Company shall be entitled to seek both temporary
and permanent injunctive relief to prevent a breach or contemplated breach by
the Executive of any of such covenants or agreements.
(b) In the event any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable because it is invalid or in
conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the parties shall be construed and enforced as if this Agreement did not contain
such invalid or unenforceable provisions.
21. No Set-Off By the Company.
The Company shall continue to provide to the Executive all
compensation, benefits and prerequisites of the office of Chairman and Chief
Executive Officer provided for in this Agreement notwithstanding the existence
of any claim, dispute, action or cause of action by the Company against the
Executive, whether based. upon this Agreement or otherwise. Such dispute, claim
or cause of action by the Company against the Executive shall be resolved in
accordance with Section 18 hereof, with the exception
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of the Company's right to seek injunctive relief provided for in
section 20 hereof.
22. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
23. Notices.
Any notice to either party hereunder shall be in writing, and shall be
deemed to be sufficiently given to or served on such party, for all purposes, if
the same shall be personally delivered to such party, or sent to such party by
registered mail, postage prepaid, at the address of such party given above.
Either party hereto may change the address to which notices are to be sent to
such party hereunder by written notice of such new address given to the other
party hereto.
24. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona applicable to contracts to be
performed therein, without regard to conflict of laws principles.
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25. Assignment.
This Agreement may not be assigned by the Company without the prior
written consent of the Executive. The Executive shall have the right to
designate a beneficiary, his executor, his administrator or his estate to
receive any payments or benefits payable under this Agreement upon his death.
26. Waiver.
Except as otherwise provided for in this Agreement, no term or
condition of this Agreement shall be deemed to have been waived, nor shall there
be any estoppel against the enforcement of any provision of this Agreement,
except by written instrument of the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
27. Amendment of Agreement.
This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
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28. Entire Agreement.
This Agreement represents the entire understanding of the parties
hereto and supersedes any prior understandings or agreements between the
parties, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided
and not expressly provided in this Agreement.
IN WITNESS WHEREOF, the Executive has executed this Agreement and the
Company has caused this Agreement to be executed by its representative thereunto
duly authorized as of the date set forth above.
MEDICIS PHARMACEUTICAL CORPORATION
By: /s/ Michael A. Pietrangelo
-----------------------------------------
Michael A. Pietrangelo
Chairman of the Executive Committee
of the Board of Directors
By: /s/ Joseph Salvani
------------------------------------------
Joseph Salvani
Chairman, Compensation Committee,
Member of Board of Directors
By: /s/ Jonah Shacknai
------------------------------------------
Jonah Shacknai
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EXHIBIT A - STOCK OPTION AND COMPENSATION COMMITTEE
The following sets forth the Executive's compensation in accordance with
paragraph 3(a):
1. Annual base compensation* $400,000 per year
("Base Salary")
2. Health/Medical and other Actual cost
employee benefits pro-
vided to other employees
of the Company.
3. Health Club Membership $100 per month
4. Automobile Allowance $900 per month
5. Incentive Stock Options Minimum annual award of .5 percent
(.5%) of the fully diluted
capitalization of the Company to be
awarded no earlier than thirty (30)
days before or no later than thirty
(30) days after the anniversary
date of this Agreement. In the
event of a change in ownership or
control of the Company, or if the
Company's Incentive Stock Option
Plans are dissolved, eliminated or
modified, then the Executive shall
receive in lieu of this minimum
annual award, a minimum annual
award equal to the "cash
equivalent" as set forth and
provided for in Section 9(b).
6. Annual Cash Bonus The Board agrees to determine, in
good faith, the annual cash bonus
to be provided to the Executive
based upon the Executive's
performance and the performance of
the Company measured against the
Company's fiscal plan for the prior
fiscal year.
*The Stock Option and Compensation Committee will review the base salary amount
annually and provide an increase in the Executive's base annual compensation as
appropriate and within its discretion.