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| 8-K - HI TECH PHARMACAL CO INC | v201826_8k.htm |
Exhibit
10.5
EMPLOYMENT AGREEMENT,
effective as of November 10, 2010 (“Effective Date”), by and between HI-TECH
PHARMACAL CO., INC., a Delaware corporation with offices at 369 Bayview
Avenue, Amityville, New York 11701 (the “Corporation”), and REUBEN SELTZER, an individual
residing at 21 Glenwood Drive, Great Neck, New York 11021 (the
“Executive”).
W
I T N E S S E T H
WHEREAS, the Corporation
desires to secure the services of Executive upon the terms and conditions
hereinafter set forth; and
WHEREAS, Executive desires to
render services to the Corporation upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, the parties
mutually agree as follows:
Section
1. Employment. The
Executive’s Consulting Agreement, dated September 12, 2008, has terminated on
September 13, 2010. The Corporation hereby employs Executive and
Executive hereby accepts such employment, as an executive of the Corporation,
subject to the terms and conditions set forth in this Agreement, effective on
such termination date.
Section
2. Duties. Executive
shall serve as Vice Chairman – Business Development of the Corporation and shall
properly perform such duties as may be assigned to him from time to time by the
Chief Executive Officer and/or Board of Directors of the
Corporation. If requested by the Corporation, Executive shall serve
on any committee of the Board of Directors without additional
compensation. During the term of this Agreement, Executive shall
devote substantially all of his available business time to the performance of
his duties hereunder at the Corporation’s facility at Amityville, New York
unless otherwise authorized by the Board of Directors.
Section
3. Term of
Employment. The term of this Agreement shall be effective as
of September 13, 2010 and shall continue until April 30, 2013 and shall
automatically renew for successive one year terms unless terminated by the
Corporation upon six months’ advance written notice to Executive of the
Corporation’s decision not to renew the Agreement, or by Executive, upon 30
days’ advance written notice to the Corporation, or unless earlier terminated
pursuant to the provisions of Section 5 hereof.
Section
4. Compensation of
Executive.
4.1. Compensation. As
compensation for his services hereunder the Corporation shall pay Executive an
annual base salary (“Base Salary”) equal to $425,000 ($8,854.17 per
week). The Base Salary shall be payable weekly less such deductions
as shall be required to be withheld by applicable law and
regulations. Commencing on May 1, 2011 and for each fiscal year
thereafter, Executive shall be paid a Base Salary equal to the sum of
(a) the Base Salary for the immediately preceding year and (b) an
amount determined by multiplying the Base Salary in effect for the immediately
preceding year by five (5%) percent. The increased Base Salary
thereby established shall continue in effect and for all purposes of this
Agreement be defined as Base Salary during the term of this Agreement until
again adjusted as hereinabove provided.
4.2. Bonus; Stock
Options.
(a) In
addition to his Base Salary, Executive may receive a bonus (“Bonus”) during each
year of employment during the term of this Agreement. The Bonus for
each year shall be determined in accordance with the performance goals set by
the Compensation Committee of the Board of Directors and the President of the
Corporation in their sole discretion. The Bonus may be based on,
among other things, Executive’s development and implementation of strategic
objectives, acquisitions, product development, strategic alliances, including,
but not limited to, licensing arrangements and joint ventures, financings and
strategic divestitures. The Bonus shall be paid in cash within 30
days of November 1 of each year.
(b) On the
Effective Date, Executive shall receive options to purchase forty-five thousand
(45,000) shares of the Corporation’s Common Stock (“Options”). The
Options shall be at fair market value on the Effective Date and shall be
governed in accordance with the terms and provisions of the Corporation’s 2009
Stock Option Plan (the “Plan”). In addition, during the term of this
Agreement, Executive shall be eligible to receive annually options to purchase a
minimum amount of fifty thousand (50,000) shares of the Corporation’s Common
Stock, each in accordance with the terms and provisions of the
Plan. Such options shall vest in accordance with the terms of the
Plan, a copy of which shall be provided to Executive. All options to
purchase shares of the Corporation’s Common Stock shall be granted annually to
Executive on the same date as all other stock options are granted to the
Corporation’s employees and management. Nothing herein shall preclude
the Corporation from granting Executive additional options such as the
Compensation Committee of the Board of Directors, in its discretion, may
authorize from time to time.
4.3. Expenses. The
Corporation shall pay or reimburse Executive for all reasonable and necessary
business, travel or other expenses incurred by him, upon proper documentation
thereof, which may be incurred by him in connection with the rendition of the
services contemplated hereunder.
4.4. Car
Allowance. In order to facilitate travel by Executive in the
performance of his duties hereunder, the Corporation shall furnish Executive,
without cost to him, with a Corporation owned or leased automobile of his
choice. The Corporation shall pay all the expenses of maintaining,
insuring and operating said automobile upon presentation of appropriate vouchers
and/or receipts to the extent that the Corporation does not pay such expenses
directly.
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4.5. Benefits. During
the term of this Agreement and all extensions thereto, Executive shall be
entitled to participate in such pension, profit sharing, group insurance, option
plans, hospitalization, and group health benefit plans and all other benefits
and plans as the Corporation provides to its senior executives.
4.6. Discretionary
Payments. Nothing herein shall preclude the Corporation from
paying Executive such bonus or bonuses or other compensation, as the Board of
Directors, in its discretion, may authorize from time to time.
Section
5. Termination.
5.1. Termination. This
Agreement and Executive’s employment hereunder shall terminate upon Executive’s
death or Total Disability, upon termination of employment of Executive For
Cause, upon Executive leaving his employment hereunder, or by the Corporation
upon six months advance written notification to Executive of the Corporation’s
decision not to renew this Agreement.
5.2. Termination For Cause or
Termination By Executive. In the event Executive is discharged
For Cause, as hereinafter defined, or if this Agreement is not renewed by the
Corporation upon at least 6 months’ advance written notice or Executive leaves
his employment hereunder, this Agreement shall be deemed terminated and the
Corporation shall be released from all obligations to Executive with respect to
this Agreement, except as provided in Section 10.7 hereto.
5.3. Definitions. As
used herein, the term “For Cause” shall mean (i) the Executive’s indictment,
plea or conviction of any criminal violation involving misappropriation of money
or other property, dishonesty, fraud, breach of trust or any other crime
involving moral turpitude which constitutes a felony, whether or not involving
the Corporation; (ii) the Executive’s willful engagement in gross misconduct in
the performance of his duties that materially injures the Corporation; (iii) the
Executive’s violation of Sections 8 or 9 of this Agreement; (iv) the Executive’s
habitual drunkenness or habitual use of illegal substances; (v) the
Executive’s gross negligence or fraud in the conduct of his duties hereunder; or
(vi) the Executive’s willful and continuous failure to substantially perform his
duties under this Agreement, including but not limited to failure resulting from
gross insubordination. A termination of Executive pursuant to
subparagraph (vi) shall occur only after the Board provides written notice to
Executive of his failure and 30 calendar days’ opportunity to cure such
failure. An act of Executive will not be deemed “willful” unless done
or omitted to be done by Executive not in good faith and without reasonable
belief that the act or omission was in the Corporation’s best
interests.
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5.4. Payments. If
Executive’s employment is terminated by the Corporation without cause, or if
Executive terminates his employment for Good Reason, as defined in this
Agreement, then the Corporation shall pay to Executive after such termination,
severance payments (“Severance”) equal to the sum of (i) Executive’s Salary for
the greater of six (6) months or the balance of the term of this Agreement and
(ii) the pro rata portion of Executive’s annual bonus for the prior
year. The Severance shall be payable weekly less such deductions as
shall be required to be withheld by applicable law and
regulations. In addition, the Corporation shall continue to keep in
force and effect all health, insurance and welfare benefits for Executive and
Executive’s dependents for a period of the lesser of the balance of the term of
this Agreement from the date of Executive’s termination or until Executive and
his dependents are eligible for similar health, insurance and welfare benefits
from Executive’s new employer. Executive shall not be entitled to Severance if
the Corporation gives six months advance written notice to Executive of the
Corporation’s decision not to renew this Agreement, or if Executive’s employment
is terminated For Cause, as defined in this Agreement, or if Executive’s
employment is terminated due to Executive’s death or Total Disability or if
Executive’s employment is terminated due to a Change in Control, as defined in
this Agreement. If Executive’s employment is terminated due to a
Change in Control, payments shall be made to Executive in accordance with
Section 11 of this Agreement.
5.5. Termination for Good
Reason. “Good Reason” shall include any of the following, (i)
any assignment of Executive’s duties inconsistent with Executive’s position of
Vice Chairman – Business Development or which constitutes a significant
reduction in authority, responsibilities, or status, (ii) any demotion,
including, but not limited to reporting to an individual in the Corporation who
is not the Corporation’s Chief Executive Officer or Board of Directors, (iii)
requiring Executive to have his principal place of employment more than 15 miles
beyond the Corporation’s principal place of business as of the effective date of
this Agreement, (iv) any attempted reduction in Executive’s Base Salary, or
other benefit plans, or the level, amount or value of any accrued benefit, or
(v) any attempted reduction of stock option grants which are inconsistent with
the provisions of this Agreement.
5.6. Stock
Options.
(a) Upon the
death or Total Disability of Executive, or in the event of a Change in Control,
all stock options granted to Executive under the Plan (“Stock Options”) shall
automatically become fully vested and immediately exercisable.
(b) In the
event Executive is terminated without cause, or if the Executive terminates for
Good Reason, then Executive’s previously granted and unexercised Stock Options
shall continue to vest on their regular vesting dates until the date this
Agreement would have terminated had there not been a termination.
(c) In the
event Executive is terminated For Cause or leaves his employment hereunder other
than for Good Reason, all unvested Stock Options shall immediately terminate and
be forfeited.
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(d) In the
event there is a conflict between the terms of this Agreement and the Plan, this
Agreement shall govern.
Section
6. Disability.
6.1. Total
Disability. In the event Executive is mentally or physically
incapable or unable to perform his regular and customary duties of employment
with the Corporation for a period of ninety (90) days in any one hundred twenty
(120) day period, Executive shall be deemed to be suffering from a “Total
Disability” and the Corporation shall be entitled to terminate this
Agreement.
6.2. Payment During
Disability. In the event Executive is unable to perform his
duties hereunder by reason of a disability, which disability does not constitute
Total Disability, the Corporation shall continue to pay Executive his Salary
during the continuance of such disability. To the extent any proceeds
from a disability insurance policy owned by the Corporation are paid to
Executive or his designee, the Corporation shall receive a credit against its
obligations under this Section 6.2 in an amount equal to the
proceeds.
Section
7. Vacations. The
Executive shall be entitled to a vacation of four (4) weeks for each of the term
and all extensions thereof, during which period his Salary shall be paid in
full. The Executive shall take his vacation at such time or times as
Executive and the Corporation shall determine is mutually
convenient.
Section
8. Disclosure of Confidential
Information.
8.1. Disclosure. Executive
hereby acknowledges that the principal business of the Corporation is the
marketing and distribution of generic and branded pharmaceutical products and
such other businesses as the Corporation may conduct from time to time (the
“Business”). Executive acknowledges that he has and will acquire
confidential information concerning the Corporation, the Business, its products,
know-how, customers and plans and that, among other things, his knowledge of the
Business will be enhanced through his employment by the
Corporation. Executive acknowledges that such information is of great
value to the Corporation, is the sole property of the Corporation, and has been
and will be acquired by him in confidence.
8.2. Confidentiality. In
consideration of the obligations undertaken by the Corporation herein, Executive
will not, at any time during or after the term of Executive’s employment with
the Corporation, directly or indirectly, use for Executive’s own benefit or any
other party’s benefit, or reveal, divulge or make known to any person, any
information which is treated as confidential by the Corporation and not
otherwise in the public domain. Confidential information shall not
include information which was given to Executive by any third party under no
obligation of confidentiality, or information which Executive is required to
disclose as a result of a governmental investigation or by a court
order. Executive agrees that all materials or copies thereof
containing confidential information of the Corporation in Executive’s custody or
possession will not, at any time, be removed from the Corporation’s premises
without the prior written consent of the Chief Executive Officer of the
Corporation and shall be delivered to the Corporation upon the earlier of
(i) a request by the Corporation or (ii) the termination of
Executive’s employment with the Corporation. After such delivery,
Executive shall not retain any such materials or copies thereof.
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8.3. Survival. The
provisions of this Section 8 shall survive Executive’s employment hereunder for
a period of three years.
Section
9. Conflicts of Interest;
Insider Trading.
9.1. Conflicts of
Interest. In order to avoid actual or apparent conflicts of
interest, except with the Corporation’s consent, Executive shall not have any
direct or indirect ownership or financial interest in any company, person or
entity which is: (i) a service provider to, or vendor of, the Corporation; (ii)
a customer of the Corporation; or (iii) a competitor of the
Corporation. Executive shall not be deemed to have any direct or
indirect ownership or financial interest for any such interest that does not
exceed two percent (2%) of the issued and outstanding voting securities of any
class of any corporation whose voting capital stock is traded on a national
securities exchange or in the over-the-counter market.
9.2. General
Requirements. Executive shall observe such lawful policies of
the Corporation as may from time to time apply.
9.3. Insider
Trading. Considering that the Corporation is a publicly-traded
corporation, Executive hereby agrees that Executive shall comply with any and
all federal and state securities laws, including but not limited to those that
relate to non-disclosure of information, insider trading and individual
reporting requirements and shall specifically abstain from discussing the
non-public aspects of the Corporation’s business affairs with any individual or
group of individuals (e.g., Internet chat rooms) who does not have a business
need to know such information for the benefit of the
Corporation. Executive hereby agrees to immediately notify the
Corporation’s Compliance Officer in accordance with the Corporation’s Insider
Trading Policy prior to Executive’s acquisition or disposition of the
Corporation’s securities.
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Section
10. Indemnification.
10.1. Indemnification. The
Corporation hereby agrees to indemnify and hold harmless Executive to the
fullest extent permitted by the Corporation’s Certificate of Incorporation,
By-Laws, the Delaware General Corporation Law or any other applicable law, as
any or all may be amended from time to time. Such reimbursements shall include
but not be limited to Executive’s reasonable and necessary out of pocket
expenses including attorneys fees, settlement payments and any other such costs
and expenses.
10.2. Directors and Officers
Policy. The Corporation shall ensure that its Directors’,
Officers’, Insured Entity and Employment Practices Liability Insurance policy
(“D&O Policy”) shall cover Executive as an Insured Person, as such term is
defined in the D&O Policy. Such D&O Policy is currently in
effect and the Corporation knows of no reason why such policy would be
terminated or allowed to lapse. If so, the Corporation shall immediately notify
Executive of such policy termination.
10.3. Undertaking. To
the extent that the Corporation advances payment for any fees or expenses to
Executive pursuant to this Section 10, such advance shall be accompanied by a
written undertaking by Executive to repay such amounts if it shall be ultimately
determined by a court of competent jurisdiction in a final disposition, that
Executive (i) is not entitled to be indemnified by the Corporation or (ii) that
the amount advanced exceeded the indemnification to which he is entitled, in
which case the amount of such excess shall be repaid to the
Corporation.
10.4. Notice. As
a condition precedent to his right to be indemnified hereunder, Executive shall
give the Corporation notice in writing as soon as practicable of any claim made
against him for which indemnity will or could be sought under this
Agreement.
10.5. Cooperation. Executive
shall fully cooperate with the Corporation in connection with any matter, which
results in the assertion of a claim by Executive for indemnification
hereunder. The Corporation shall be entitled at its own expense to
participate in the defense of any proceeding, claim or action, or, if it shall
elect, to assume such defense, in which event such defense shall be conducted by
counsel chosen by the Corporation, subject to the consent of Executive, which
consent shall not be unreasonably withheld or delayed.
10.6. Exceptions. The
Corporation shall not be liable under this Agreement to make any payment in
connection with any claim:
(e) for which
payment is actually made to Executive under valid and collectable insurance
policies, premiums for which are paid by the Corporation or any of its
affiliates, except in respect of any deductible and excess beyond the amount of
payment under such insurance;
(f) for which
Executive is indemnified by the Corporation otherwise than pursuant to this
Agreement, provided such amount has previously been paid to
Executive;
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(g) brought
about or contributed to by the dishonesty of Executive seeking payment
hereunder; and
(h) by
Executive who acts as a plaintiff suing the Corporation, its affiliates or other
directors, officers or shareholders of the Corporation or its affiliates or
other directors or officers of the Corporation or its affiliates except with
regard to Executive’s successful enforcement of Section 10.1 hereof.
10.7. Survival. The
obligations of the Corporation hereunder will survive (i) any actual or
purported termination of this Agreement by the Corporation or its successors or
assigns, whether by operation of law or otherwise, (ii) any change in the
Corporation’s Certificates of Incorporation or By-laws, and (iii) termination of
Executive’s services to the Corporation or its affiliates (whether such services
were terminated by the Corporation, such affiliate or Executive), if such claim
arises as a result of an occurrence prior to the termination of this Agreement,
whether or not a claim is made or an action or proceeding is threatened or
commenced before or after the actual or purported termination of this Agreement,
change in the Corporation’s Certificate of Incorporation or By-laws, or
termination of Executive’s services.
Section
11. Change in
Control.
11.1. Payment on Change in
Control. The Corporation will provide or cause to be provided
to Executive the rights and benefits described below during the term of this
Agreement, following a Change in Control. In the event of a Change in
Control the Corporation shall pay or cause its successor to pay to Executive, in
cash, in a lump sum within 15 days after the Change in Control, an amount equal
to 3 times Executive’s base compensation which equals the sum of the following:
(i) Executive’s annual salary on the day preceding the Change in Control, plus
(ii) Executive’s annual bonus for the year immediately preceding the Change in
Control. In addition, following a Change in Control, at no cost to
Executive, (i) the Corporation shall maintain for Executive and Executive’s
dependents, all health, insurance and welfare benefits for the lesser of one
year or until Executive and his dependents are eligible for similar health,
insurance and welfare benefits from Executive’s new employer and (ii) to
continue to pay to Executive the automobile allowance provided in Section 4.4
hereof until the end of the automobile lease then in effect (but not more than 2
years).
11.2. Change in Control
Defined. A “Change in Control” shall be deemed to occur upon
the earliest to occur after the date of this Agreement of any of the following
events;
(a) Acquisition of Stock by
Third Party. Any Person (as hereinafter defined) is or becomes
the Beneficial Owner (as hereinafter defined), directly or indirectly, of
securities of the Corporation representing forty (40%) percent or more of the
combined voting power of the Corporation’s then outstanding securities
(“Acquisition”).
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(b) Change in Board of
Directors. The date when Continuing Directors cease to be a
majority of the Directors then in office, it being understood that it shall not
be deemed a Change in Control as long as the majority of the Directors were
nominated by the Continuing Directors;
(c) Corporate
Transactions. The effective date of a merger or consolidation
of the Corporation with any other entity, and with the power to elect at least a
majority of the board of directors or other governing body of such surviving
entity; and
(d) Liquidation. The
approval by the shareholders of the Corporation of a complete liquidation of the
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation’s assets.
(e) Certain
Definitions. For purposes of this Section 11, the following
terms shall have the following meanings:
(i) “Person”
shall have the meaning as set forth in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (“Exchange Act”); provided, however, that
Person shall exclude (i) the Corporation, (ii) any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation, (iii) any
corporation owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation, and (iv) any members of the Seltzer family, including
affiliates, trusts and foundations for the benefit of Seltzer family
members.
(ii) “Beneficial
Owner” shall have the meaning given to such term in Rule 13d-3 under the
Exchange Act.
(iii) “Continuing
Directors” as used in this Agreement shall mean the persons who constitute the
Board of Directors of the Corporation on the date hereof together with their
successors whose nominations were approved by a majority of Continuing
Directors.
Section
12. Miscellaneous.
12.1. Injunctive
Relief. Executive agrees that any breach or threatened breach
by him of Sections 8 or 9 of this Agreement shall entitle the Corporation, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to enjoin such breach or threatened
breach. The parties understand and intend that each restriction
agreed to by Executive herein shall be construed as separable and divisible from
every other restriction, that the unenforceability of any restriction shall not
limit the enforceability, in whole or in part, of any other restriction, and
that one or more or all of such restrictions may be enforced in whole or in part
as the circumstances warrant. In the event that any restriction in
this Agreement is more restrictive than permitted by law in the jurisdiction in
which the Corporation seeks enforcement thereof, such restriction shall be
limited to the extent permitted by law.
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12.2. Assignment. Neither
Executive nor the Corporation may assign or delegate any of their rights or
duties under this Agreement, except as provided in Section 10.5
hereof.
12.3. Entire
Agreement. This Agreement constitutes and embodies the entire
and complete understanding and agreement of the parties with respect to
Executive’s employment by the Corporation, supersedes all prior understandings
and agreements, if any, whether oral or written, between Executive and the
Corporation and shall not be amended, modified or changed except by an
instrument in writing executed by the party to be charged. The
invalidity or partial invalidity of one or more provisions of this Agreement
shall not invalidate any other provision of this Agreement. No waiver
by either party of any provision or condition to be performed shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. An e-mail intending to amend or modify this
Agreement shall not be binding upon the parties.
12.4. Binding
Effect. This Agreement shall inure to the benefit of, be
binding upon and enforceable against, the parties hereto and their respective
successors.
12.5. Captions. The
captions contained in this Agreement are for convenience of reference only and
shall not affect in any way the meaning or interpretation of this
Agreement.
12.6. Notices. All
notices, requests, demands and other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by fax or certified, mail, postage prepaid, to
the party at the address set forth above or to such other address as either
party may hereafter give notice of in accordance with the provisions
hereof.
12.7. Governing
Law. This Agreement shall be governed by and interpreted under
the laws of the State of New York applicable to contracts made and to be
performed therein without giving effect to the principles of conflict of laws
thereof. Except in respect of any action commenced by a third party
in another jurisdiction, the parties hereto agree that any legal suit, action,
or proceeding against them arising out of or relating to this Agreement may be
brought in the United States Federal Courts in the State of New York or the
state courts, in the State of New York. The parties hereto hereby
accept the jurisdictions of such courts for the purpose of any such action or
proceeding, and agree that venue for any action or proceeding brought in the
State of New York shall lie in the United States Federal Courts in the Eastern
District or any state court located in Nassau County, New York, as the case may
be. By its execution hereof, the parties hereby irrevocably waive any
objection and any right of immunity on the ground of venue, the convenience of
the forum or the jurisdiction of such courts or from the execution of judgments
resulting therefrom. The parties hereby irrevocably accept and submit
to the jurisdiction of the aforesaid courts in any such suit, action or
proceeding.
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12.8. Counterparts. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date set forth
above.
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HI-TECH
PHARMACAL CO., INC.
/s/David
Seltzer
By:
David Seltzer, President and Chief Executive Officer
Dated: November
10, 2010
/s/Reuben
Seltzer
REUBEN
SELTZER
Dated: November
10, 2010
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