Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the
26th day of April 2006, by and between FIRST HORIZON PHARMACEUTICAL CORPORATION,
a Delaware corporation (the “Company”), and LARRY M. DILLAHA (“Executive”).

 

WITNESSETH:

 

NOW, THEREFORE, in consideration of Executive’s continued employment, the
covenants and mutual agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:

 

1.               Employment.    Throughout the Term (as defined in Section 2
below), the Company shall employ Executive as provided herein, and Executive
hereby accepts such employment. In accepting such employment, Executive states
that, to the best of his knowledge, he is not now, and by accepting such
employment, will not be, under any restrictions in the performance of the duties
contemplated under this Agreement as a result of the provisions of any prior
employment agreement or non-compete or similar agreement to which Executive is
or was a party.

 

2.               Term of Employment.    The term of Executive’s employment by
the Company hereunder shall continue thereafter unless sooner terminated as a
result of Executive’s death or in accordance with the provisions of Section 7
below (the “Term”).

 

3.               Duties.    Throughout the Term, and except as otherwise
expressly provided herein, Executive shall be employed by the Company as the
Executive Vice President and Chief Medical Officer of the Company. Executive
shall devote his full time to the performance of his duties as Executive Vice
President and Chief Medical Officer of the Company in accordance with the
Company’s By-laws, this Agreement and the directions of the Company’s Board of
Directors and any executive officer of the Company who is senior to Executive.
Without limiting the generality of the foregoing, throughout the Term Executive
shall faithfully perform his duties as Executive Vice President and Chief
Medical Officer at all times so as to promote the best interests of the Company.

 

4.               Compensation.

 

(a)                                                          Salary.    For any
and all services performed by Executive under this Agreement during the Term, in
whatever capacity, the Company shall pay to Executive an annual salary of Two
Hundred Thousand Dollars ($200,000.00) per year (the “Salary”) less any and all
applicable federal, state and local payroll and withholding taxes. The Salary
shall be paid in the same increments as the Company’s normal payroll, but no
less frequent than bi-monthly and prorated, however, for any period of less than
a full month. The Salary will be reviewed annually by the Compensation Committee
of the Board of Directors and a determination shall be made at that time as to
the appropriateness of an increase, if any, thereto.

 

(b)                                                         Bonus.    In
addition to the Salary, Executive shall be eligible to receive from the Company
an incentive compensation bonus (the “Bonus”) of up

 

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to fifty percent (50%) of Executive’s Base Salary. The Bonus, if any, shall be
determined based on such criteria as shall be determined from time to time by
the Compensation Committee of the Board of Directors. The nature of the criteria
and the determination as to whether the criteria have been satisfied shall be
determined by the Compensation Committee of the Board of Directors in its sole
discretion. Accordingly, there is no assurance that a Bonus will be paid to
Executive with respect to all or any particular year during the Term.

 

5.               Restricted Stock Award. Subject to approval by the Board of
Directors (or an appropriate Committee appointed by the Board of Directors) and
your execution of a formal restricted stock award agreement, First Horizon
Pharmaceutical will grant you 4,000 shares of restricted Company stock on the
commencement date of your employment. Stock price shall be the average stock
trading price on the date Executive’s employment commences. Such restricted
stock award shall vest ratably over a four (4) year period commencing from the
date of the restricted stock award. The first vesting period shall occur one (1)
year from the date of the restricted stock award. Both stock price and vesting
schedule shall be specifically set forth in the restricted stock option
agreement to be executed by Executive and the Company.

 

6.               Benefits and Other Rights.    In consideration for Executive’s
performance under this Agreement, the Company shall provide to Executive the
following benefits:

 

(a)                                                          The Company will
provide Executive with cash advances for or reimbursement of all reasonable
out-of-pocket business expenses incurred by Executive in connection with his
employment hereunder. Such reimbursement, however, is conditioned upon Executive
adhering to any and all reasonable policies established by Company from time to
time with respect to such reimbursements or advances including, but not limited
to, a requirement that Executive submit supporting evidence of any such expenses
to the Company.

 

(b)                                                         The Company will
provide Executive and his family with the opportunity to receive group medical
coverage under the terms of the Company’s health insurance plan, but subject to
completion of normal waiting periods. During any such waiting period, the
Company will pay, or reimburse Executive for, the cost of COBRA coverage for
Executive and his family under his prior health plan.

 

(c)                                                          During the Term the
Executive shall be entitled to twenty (20) days paid vacation, it being
understood and agreed that unused vacation shall not be carried over from one
year to the next. In addition, Executive shall be entitled to eight (8) paid
holidays and four (4) paid personal days off.

 

7.              Termination of the Term.

 

(a)                                                          The Company shall
have the right to terminate the Term under the following circumstances:

 

(i)                                     Executive shall die;

 

(ii)                                  With or without Cause, effective upon
written notice to Executive by the Company; or

 

(iii)                               Upon or within one (1) year following a
Change of Control.

 

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(b)                                                         Executive shall have
the right to terminate the Term under the following circumstances:

 

(i)                                     At any time upon sixty (60) days prior
written notice to the Company; or

 

(ii)                                  For Good Reason upon or within one
(1) year following a Change of Control.

 

(c)                                                          For purposes of
this Agreement, “Cause” shall mean:

 

(i)                                     Executive shall be convicted of the
commission of a felony or a crime involving dishonesty, fraud or moral
turpitude;

 

(ii)                                  Executive has engaged in acts of fraud,
embezzlement, theft or other dishonest acts against the Company;

 

(iii)                               Executive commits an act which negatively
impacts the Company or its employees including, but not limited to, engaging in
competition with the Company, disclosing confidential information or engaging in
sexual harassment, discrimination or other human rights-type violations;

 

(iv)                              Executive’s gross neglect or willful
misconduct in the discharge of his duties and responsibilities; or

 

(v)                                 Executive’s repeated refusal to follow the
lawful direction of the Board of Directors or supervising officers.

 

(d)                                                         For purposes of this
Agreement, “Change of Control” shall mean the occurrence of any of the
following:

 

(i)                                     The acquisition (other than by a direct
purchase of shares from the Company) by any “person,” including a “syndication”
or “group”, as those terms are used in Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (other than any such person
currently owning in excess of the following amount), of securities representing
20% or more of the combined voting power of the Company’s then outstanding
voting securities, which is any security that ordinarily possesses the power to
vote in the election of the Board of Directors of a corporation without the
happening of any precondition or contingency;

 

(ii)                                  The Company is merged or consolidated with
another corporation and immediately after giving effect to the merger or
consolidation less than 80% of the outstanding voting securities of the
surviving or resulting entity are then beneficially owned in the aggregate by
(x) the stockholders of the Company immediately prior to such merger or
consolidation, or (y) if a record date has been set to determine the
stockholders of the Company entitled to vote on such merger or consolidation,
the stockholders of the Company as of such record date;

 

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(iii)                               If at any time during a calendar year a
majority of the directors of the Company are not persons who were directors at
the beginning of the calendar year;

 

(iv)                              The Company transfers substantially all of its
assets to another corporation which is a less than 80% owned subsidiary of the
Company; or

 

(v)                                 The Company approves a plan or proposal for
dissolution on liquidation of the Company.

 

(e)                                                          For purposes of
this Agreement, “Good Reason” shall mean the occurrence of any one or more of
the following events which continues uncured for a period of not less thirty
(30) days following written notice given by Executive to the Company within
fifteen (15) days following the occurrence of such event, unless the Executive
specifically agrees in writing that such event shall not be Good Reason:

 

(i)                                     Any material breach of this Agreement by
the Company;

 

(ii)                                  Any failure to continue the Executive as
an executive officer of the Company;

 

(iii)                               The requirement by the Company that
Executive perform his services hereunder primarily at a location outside of the
metropolitan Atlanta, Georgia area; or

 

(iv)                              The reduction of the Employee’s salary below
the amount set forth in Section 4(a) above without the written consent of
Executive.

 

8.              Effect of Expiration or Termination of the Term.    Promptly
following the termination of the Term, and except as otherwise expressly agreed
to by the Company in writing, Executive shall:

 

(a)                                                          Immediately resign
from any and all other positions or committees which Executive holds or is a
member of with the Company or any subsidiary of the Company including, but not
limited to, as an officer and director of the Company or any subsidiary of the
Company.

 

(b)                                                         Provide the Company
with all reasonable assistance necessary to permit the Company to continue its
business operations without interruption and in a manner consistent with
reasonable business practices; provided, however, that such transition period
shall not exceed thirty (30) days after termination nor require more than twenty
(20) hours of Executive’s time per week and Executive shall be promptly
reimbursed for all out-of-pocket expenses.

 

(c)                                                          Deliver to the
Company possession of any and all property owned or leased by the Company which
may then be in Executive’s possession or under his control, including, without
limitation, any and all such keys, credit cards, automobiles, equipment,
supplies, books, records, files, computer equipment, computer software and other
such tangible and intangible property of any description whatsoever. If,
following the expiration or termination of the Term, Executive shall receive any
mail addressed to the Company, then Executive shall immediately deliver

 

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such mail, unopened and in its original envelope or package, to the Company.

 

(d)                                                         Other than as
provided in this Section 8, upon a termination of employment all other benefits
and/or entitlements to participate in programs or benefits, if any, will cease
as of the effective date except medical insurance coverage that may be continued
at Executive’s own expense as provided by applicable law or written Company
policy.

 

(e)                                                          Upon termination of
Executive pursuant to § 7(a)(i) or § 7(a)(ii) without Cause following the six
(6) month anniversary of the Effective Date, the Company shall: (i) provide
Executive with Salary continuance, subject to § 8(h) for six (6) months (a
“Salary Continuance”) at the rate in effect immediately prior to termination,
plus (ii) a lump sum payment equal to Fifty Percent (50%) of the Bonus, if any,
paid to Executive for the calendar year immediately preceding termination, plus
(iii) provide six (6) months of COBRA coverage for Executive which shall be
substantially equivalent to that provided by the Company prior to termination,
plus (iv) the Executive’s then unvested options and stock awards previously
issued pursuant to the Company’s stock option and other equity incentive plans
shall immediately vest and be exercisable as provided for in the First Horizon
Pharmaceutical Corporation Accelerated Vesting Plan, dated January 24, 2006. In
the event of termination of Executive’s employment prior to the six (6) month
anniversary of the Effective Date, Executive shall not be entitled to any
severance from the Company.

 

(f)                                                            Upon termination
of Executive pursuant to § 7(a)(ii) with Cause or § 7(b)(i), the Company shall
pay Executive or Executive’s estate all Salary accrued but unpaid as of the date
of such termination.

 

(g)                                                         Upon termination of
Executive pursuant to § 7(a)(iii) or § 7(b)(ii), the Company shall: (i) provide
Executive with Salary continuance for twelve (12) months at the rate in effect
immediately prior to termination, plus (ii) a lump sum payment equal to One
Hundred Percent (100%) of the Bonus, if any, paid to Executive for the calendar
year immediately preceding termination, plus (iii) provide COBRA coverage for
Executive which shall be substantially equivalent to that provided by the
Company prior to termination until the earlier of (A) twelve (12) months after
the date of termination, (B) the availability of replacement coverage to
Executive from a third party employer after Executive has accepted another
full-time position and (C) the expiration of COBRA benefits by reason or lapse
of the statutory or regulatory benefit period established by governmental
authority. Further, upon a Change in Control, regardless of whether the
Executive is terminated, all of Executive’s then unvested options and stock
awards previously issued pursuant to the Company’s stock option and other equity
incentive plans shall immediately vest and be exercisable as herein provided.

 

(h)                                                         In the event that
Executive shall be entitled to receive a Salary Continuance and COBRA benefit
pursuant to § 8(e), such Salary Continuance and COBRA benefit shall continue
only until such time as Executive shall have accepted another full time
position. In addition, in the event that Executive shall perform consulting or
other services for which he shall receive compensation, all compensation shall
be reported to the Company and shall be offset against any remaining Salary

 

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Continuance payments. Failure of Executive to promptly report the receipt of any
compensation from a third party or the acceptance of a new position shall
entitle the Company to terminate all remaining Salary Continuance and COBRA
benefits and to seek restitution for any payments made to Executive subsequent
to such job acceptance or compensation receipt.

 

(i)                                                             Any dollar
amounts which are to be paid at the time of termination under this Section 8,
other than Salary Continuance, payments under Section 8(g)(i) and COBRA
payments, shall be paid within thirty (30) days after the date of termination.
Any Salary Continuance, payments under Section 8(g)(i) or COBRA payments shall
be made in accordance with the usual payroll practices which were applicable
prior to termination. Except as otherwise specifically set forth herein, any and
all payments made pursuant to this Agreement shall be net of any and all
applicable federal, state and local payroll and withholding taxes.

 

(j)                                                             If the Company
or the Company’s accountants determine that the payments called for under
Section 8(g) of this Agreement either alone or in conjunction with any other
payments or benefits made available to the Employee by the Company will result
in the Employee being subject to an excise tax (“Excise Tax”) under Section 4999
of the Internal Revenue Code of 1986, as amended (the “Code”), or if an Excise
Tax is assessed against Executive as a result of such payments or other
benefits, the Company shall make a Gross-Up Payment (as defined below) to or on
behalf of Executive as and when such determination(s) and assessments(s), as
appropriate, are made, subject to the conditions of this subsection (i). A
“Gross-Up Payment” shall mean a payment to or on behalf of Executive that shall
be sufficient to pay (i) any Excise Tax in full, (ii) any federal, state and
local income tax and Social Security or other employment tax on the payment made
to pay such Excise Tax as well as any additional Excise Tax on the Gross-Up
Payment, and (iii) any interest or penalties assessed by the Internal Revenue
Service on Executive if such interest or penalties are attributable to the
Company’s failure to comply with its obligations under this subsection (i) or
applicable law. Any determination under this subsection (i) by the Company or
the Company’s accountants shall be made in accordance with Section 280G of the
Code, any applicable related regulations (whether proposed, temporary or final),
any related Internal Revenue Service rulings and any related case law, and shall
assume that Executive shall pay Federal income taxes at the highest marginal
rate in effect for the year in which the Gross-Up Payment is made and state and
local income taxes at the highest marginal rate in effect in the state of
Executive’s residence for such year. Executive shall take such action (other
than waiving Employee’s right to any payments or benefits) as the Company
reasonably requests under the circumstances to mitigate or challenge such tax.
If the Company reasonably requests that Executive take action to mitigate or
challenge, or to mitigate and challenge, any such tax or assessment and
Executive complies with such request, the Company shall provide Executive with
such information and such expert advice and assistance from the Company’s
accountants, lawyers and other advisors as Executive may reasonably request and
shall pay for all expenses incurred in effecting such compliance and any related
fines, penalties, interest and other assessments. Subject to the provisions of
this subsection (i), all determinations required to be made under this
subsection (i), including whether and when a Gross-Up Payment is

 

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required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the Change of Control (the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Company and Executive within thirty
(30) business days of the receipt of notice from the Company or Executive that
there has been a payment that could trigger a Gross-Up Payment, or such earlier
time as is requested by the Company (collectively, the “Determination”). In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, Executive may
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection with the performance of
the services hereunder. The Gross-Up Payment under this subsection (i) with
respect to any payments shall be made no later than sixty (60) days following
such payments. If the Accounting Firm determines that no Excise Tax is payable
by Executive, it shall furnish Executive with a written opinion to such effect,
and to the effect that failure to report the Excise Tax, if any, on Executive’s
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”) or Gross-up Payments are made by the
Company which should not have been made (“Overpayment”), consistent with the
calculations required to be made hereunder. In the event that Executive
thereafter is required to make payment of any additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or
for the benefit of Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse Executive for his Excise Tax as herein
set forth, the Accounting Firm shall determine the amount of the Overpayment
that has been made and any such Overpayment (together with interest at the rate
provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive
to or for the benefit of the Company. Executive shall cooperate to the extent
Executive’s expenses are reimbursed by the Company, with any reasonable requests
by the Company in connection with any contests or disputes with the Internal
Revenue Service in connection with the Excise Tax.

 

9.              Restrictive Covenants for Executive.     Executive hereby
covenants and agrees with the Company that for so long as Executive is employed
by the Company and for a period (the “Restricted Period”) of twelve (12) months
after termination of such employment for any reason, Executive shall not,
without the prior written consent of the Company, which consent shall be within
the sole and exclusive discretion of the Company, either directly or indirectly
on his own account or on behalf of any other person or entity:

 

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(a)                                                          Perform services
for a Competing Business that are substantially similar in whole or in part to
those that he performed for the Company in his role as Executive Vice President
and Chief Medical Officer, including specifically, but not limited to, the sale
or marketing of drug products or the management of individuals involved in the
sale or marketing of drug products. For purposes of this covenant, the term
“Competing Business” shall mean any company engaged in the development,
marketing or sale of prescription drug products, including generic and
nongeneric drug products, which are competitive with: (1) those products being
marketed by the Company at the time of Executive’s termination; or (2) those
products that Executive was aware were under development by the Company and
expected to be marketed within two (2) years of Executive’s termination. This
covenant shall apply only within the “Territory” which is defined as the fifty
states of the United States. Executive recognizes and agrees that in capacity of
Executive Vice President and Chief Medical Officer, his duties extend throughout
the entire service area of the Company which includes, at a minimum, the fifty
states of the United States and that, because of the executive nature of
Executive’s position with the Company, in order to afford the Company protection
from unfair competition by the Executive following his termination of
employment, this covenant must extend throughout the stated Territory. Executive
further acknowledges that this covenant does not prohibit him from engaging in
his entire trade or business but only a very limited segment of the
pharmaceuticals industry

 

(b)                                 Solicit any current supplier, customer or
client of the Company with whom Executive dealt, or with whom anyone in
Executive’s direct chain of command dealt, on behalf of the Company within the
year preceding Executive’s termination of employment, for the purpose of
purchasing drug products (or ingredients of drug products) or selling or
marketing drug products, including generic and nongeneric drug products, which
are competitive with: (1) those products being marketed by the Company at the
time of Executive’s termination; or (2) those products that Executive was aware
were under development by the Company and expected to be marketed within two (2)
years of Executive’s termination. Notwithstanding this subsection (b), Executive
may solicit suppliers that have excess capacity as reasonably determined by the
Company.

 

10.       Confidentiality.    Attached to this Agreement as Exhibit A is the
form of the Employee/Independent Contractor Confidentiality and Non-Solicitation
Agreement (the “Confidentiality Agreement”) which the Company requires all
employees, including, but not limited to, the Executive, to execute and which is
a part of each employee’s terms of employment. By signing this Agreement,
Executive acknowledges having received, read, executed and delivered to the
Company a copy of the Confidentiality Agreement and agrees that the terms of the
Confidentiality Agreement shall be incorporated by reference into this Agreement
and shall be considered as part of the terms and conditions of Executive’s
continued employment with the Company.

 

11.       Remedies.

 

(a)                                                          The covenants of
Executive set forth in Section 9 and Section 10 are separate and independent
covenants for which valuable consideration has been paid, the receipt, adequacy
and sufficiency of which are acknowledged by Executive, and have also been made
by Executive to induce the Company to enter into this Agreement and continue

 

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Executive’s employment with the Company. Each of the aforesaid covenants may be
availed of, or relied upon, by the Company in any court of competent
jurisdiction, and shall form the basis of injunctive relief and damages
including expenses of litigation (including, but not limited to, reasonable
attorney’s fees upon trial and appeal) suffered by the Company arising out of
any breach of the aforesaid covenants by Executive. The covenants of Executive
set forth in this Section 9 are cumulative to each other and to all other
covenants of Executive in favor of the Company contained in this Agreement and
shall survive the termination of this Agreement for the purposes intended.

 

(b)                                                         Each of the
covenants contained in Section 9 and Section 10 above shall be construed as
agreements which are independent of any other provision of this Agreement, and
the existence of any claim or cause of action by any party hereto against any
other party hereto, of whatever nature, shall not constitute a defense to the
enforcement of such covenants. If any of such covenants shall be deemed
unenforceable by virtue of its scope in terms of geographical area, length of
time or otherwise, but may be made enforceable by the imposition of limitations
thereon, Executive agrees that the same shall be enforceable to the fullest
extent permissible under the laws and public policies of the jurisdiction in
which enforcement is sought. The parties hereto hereby authorize any court of
competent jurisdiction to modify or reduce the scope of such covenants to the
extent necessary to make such covenants enforceable.

 

(c)                                                          In the event that
Executive believes that the Company is in violation of a material obligation
owed to Executive under this Agreement, and the Executive has given notice of
such violation to the Company requesting that the Company cure such violation,
and within twenty (20) business days the Company has not undertaken steps to
cure such violation or to provide information to Executive demonstrating that
the Company is not in violation of the Agreement, and as a result of such
failure to cure or dispute such violation, the Executive terminates the
Agreement in accordance with Section 7(b), Executive shall not be barred from
seeking employment with a competitor notwithstanding the restriction of
Section 9(a); provided, however, that all other restrictions contained in this
Agreement, including, but not limited to the covenants in Section 9(b) and in
Section 10, shall remain in full force and effect.

 

12.       Enforcement Costs.    If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorney’s fees, court costs and all expenses even if not
taxable as court costs (including, without limitation, all such fees, costs and
expenses incident to appeal and other post judgment proceedings), incurred in
that action or proceeding, in addition to any other relief to which such party
or parties may be entitled. Attorney’s fees shall include, without limitation,
paralegal fees, investigative fees, administrative costs, sales and use taxes
and all other charges billed by the attorney to the prevailing party.

 

13.       Notices.    Any and all notices necessary or desirable to be served
hereunder shall be in writing and shall be:

 

(a)                                                          Personally
delivered, or

 

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(b)                                                         Sent by certified
mail, postage prepaid, return receipt requested, or guaranteed overnight
delivery by a nationally recognized express delivery company, in each case
addressed to the intended recipient at the address set forth below.

 

(c)                                                          For notices sent to
the Company:

 

First Horizon Pharmaceutical Corporation
6195 Shiloh Road
Alpharetta, Georgia 30005
Telephone No.: (770) 442-9707
Facsimile No.: (770) 442-9594

 

(d)                                                         For notices sent to
Executive:

 

Mr. Larry M. Dillaha

403 N. Cameron Court

Nashville, TN 37076

 

Either party hereto may amend the addresses for notices to such party hereunder
by delivery of a written notice thereof served upon the other party hereto as
provided herein. Any notice sent by certified mail as provided above shall be
deemed delivered on the third (3rd) business day next following the postmark
date which it bears.

 

14.       Entire Agreement.    This Agreement sets forth the entire agreement of
the parties hereto with respect to the subject matter hereof, and specifically
supersedes any other agreement or understanding among the parties hereto related
to the subject matter hereof, including, without limitation, the Original
Agreement. This Agreement may not be modified or revised except pursuant to a
written instrument signed by the party against whom enforcement is sought.

 

15.       Severability.    The invalidity or unenforceability of any provision
hereof shall not affect the enforceability of any other provision hereof, and
except as otherwise provided in Section 10 above, any such invalid or
unenforceable provision shall be severed from this Agreement.

 

16.       Waiver.    Failure to insist upon strict compliance with any of the
terms or conditions hereof shall not be deemed a waiver of such term or
condition, and the waiver or relinquishment of any right or remedy hereunder at
any one or more times shall not be deemed a waiver or relinquishment of such
right or remedy at any other time or times.

 

17.       Arbitration.    Any claims, disputes or controversies arising out of
or relating to this Agreement between the parties (other than those arising
under Section 10) shall be submitted to arbitration by the parties. The
arbitration shall be conducted in Atlanta, Georgia in accordance with the rules
of the American Arbitration Association then in existence and the following
provisions: Either party may serve upon the other party by guaranteed overnight
delivery by a nationally recognized express delivery service, written demand
that the dispute, specifying in detail its nature, be submitted to arbitration.
Within seven (7) business days after the service of such demand, each of the
parties shall appoint an arbitrator and serve written notice by guaranteed
overnight delivery by a nationally recognized express delivery service, of such
appointment upon the other party. The two arbitrators appointed shall appoint a
third

 

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arbitrator. The decision of two arbitrators in writing under oath shall be final
and binding upon the parties. The arbitrators shall decide who is to pay the
expenses of the arbitration. If the two arbitrators appointed fail to agree upon
a third arbitrator within ten days after their appointment, then an application
may be made by either party, upon notice to the other party, to any court of
competent jurisdiction for the appointment of a third arbitrator, and any such
appointment shall be binding upon both parties.

 

18.       Governing Law.    This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with the law of
the State of Georgia, without regard to its conflicts of laws provisions.
Subject to Section 16, each party hereto hereby (a) agrees that the state and
federal courts of the Northern District of Georgia shall have exclusive
jurisdiction and venue of any litigation which may be initiated with respect to
this Agreement or to enforce rights granted hereunder and (b) consents to the
personal jurisdiction and venue of such courts for such purposes.

 

19.       Benefit and Assignability.    This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
rights and obligations of Executive hereunder are personal to him, and are not
subject to voluntary or involuntary alienation, transfer, delegation or
assignment.

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the day and year first above written.

 

 

 

EXECUTIVE:

 

 

 

 

 

/s/ LARRY M. DILLAHA

 

 

 

Name: Larry M. Dillaha

 

 

 

 

 

FIRST HORIZON PHARMACEUTICAL
CORPORATION

 

 

 

 

 

By:

/s/ PATRICK FOURTEAU

 

 

 

Name:

Patrick Fourteau, Chief Executive Officer

 

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EXHIBIT A

 

First Horizon Pharmaceutical Corporation

 

Employee / Independent Contractor

Confidentiality, Non-Solicitation and Non-Competition Agreement

 

Employee or Independent Contractor Name:

 

The growth and success of First Horizon Pharmaceutical Corporation (“FHPC”) are
largely dependent on two key assets, our proprietary information and our highly
competent employees and independent contractors. Our employees are obtained by
recruiting the best people available and giving them opportunities to advance
and share in the success of FHPC.

 

Our proprietary information (confidential items and information not generally
known outside of FHPC) is obtained by research and product development, business
development conducted by FHPC, product improvements, marketing and sales
methods, and service to customers. Many FHPC employees make major contributions,
and independent contractors may do so as well. These result in a pool of
information and expertise, which enables FHPC to conduct its business with
unusual success, and thus with unusual potential for its employees and
independent contractors. However, this potential exists only as long as this
information and expertise are retained within FHPC. Once generally known, this
information gives no advantages to FHPC, its employees, its independent
contractors, or its stockholders.

 

In effect, all FHPC employees and independent contractors have a common interest
and responsibility in seeing that no one employee or independent contractor
accidentally or intentionally discloses or distributes this pool of information
and expertise in an unauthorized manner. To help protect you, other employees or
independent contractors, and FHPC against such disclosure, this Agreement has
been prepared so that we have a common understanding concerning your
responsibilities in this connection. Please read this Agreement carefully so
that you may understand its importance.

 

IN CONSIDERATION OF the premises above and my employment or continued employment
as an employee or independent contractor of FHPC, I hereby agree with FHPC as
follows:

 

1.                                       Defined Terms: The following
definitions will have the meanings indicated when used in this document:

 

(a)                                  Confidential Information means any
proprietary information, materials, or trade secrets or know-how, (whether or
not patentable), or any similar items owned by or in the possession of FHPC.
Confidential Information includes records, files, memoranda, notes, computer
software, computer files, computer programs, computer databases, reports, price
lists, customer lists, drawings, plans, reprints experimental data, reports,
sources of materials or supply, patent strategies, consultations and plans or
strategies concerning business not limited to sales, business development
marketing and clinical development, and employment and compensation policies,
including any negative developments, which are communicated to, acquired by or
learned of by FHPC, financial data that is not public information, business
development projects including information concerning the existence, scope or
activities of any FHPC development project. All copies and reproductions of FHPC
confidential items, whether on paper, in a computer readable medium, or in any
other form, are also Confidential Items.

 

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(b)                                 Invention means any invention, original work
of authorship, development, concept, trade secret, discovery, innovation or
improvement (whether or not patentable, or registratable under copyright or
similar laws) made, initiated, conceived, or first actually or constructively
reduced to practice by me, closely or jointly with others:

 

(i)                                     which results from any work for FHPC,
any use of FHPC’s premises or property, or any use of FHPC’s Confidential
Information, confidential items or other resources;

 

(ii)                                  which relates to any method, process,
laboratory practice or know-how useful to or being developed by FHPC in
connection with any existing or planned business of FHPC or any actual or
anticipated research or development of FHPC; or

 

(iii)                               which relates to any product, article or
manufacture, or composition of matter being developed, made, sold, or used in
connection with FHPC’s business or FHPC’s development.

 

However, where and to the extent required by applicable state statute, this
Agreement shall not require assignment to FHPC of the rights in an invention if
no equipment, supplies, facilities, trade secrets, confidential information or
confidential items of FHPC were used, and the invention was developed entirely
on my own time unless:

 

(i)                                     the invention relates directly to FHPC
business or to FHPC’s actual or demonstrably anticipated research or
development; or

 

(ii)                                  the invention results from any work
performed by me for FHPC.

 

This definition of invention includes each and every invention and/or
improvement that I may make or conceive, either solely or jointly with others,
within one year after termination of employment for any reason with FHPC if and
to the extent the invention and/or improvement results from any work for FHPC,
any use of FHPC’s premises or property or any use of FHPC’s confidential items
or confidential information.

 

(c)                                  “Employment” means the period during which
(i) I am employed by FHPC as an employee, whether on a full-time or part-time
basis and whether to fill a permanent or temporary position, or (ii) I am
engaged by FHPC as an independent contractor, whether on a project or continuing
basis.

 

2.                                       Protection of Confidential Information

 

(a)                                  During my employment and for three (3)
years after the termination of my employment for any reason, I will hold in
strictest confidence and will not disclose, communicate or divulge to, or use
for my own benefit or the benefit of another, any Confidential Information or
Inventions. Notwithstanding the previous sentence, for such Confidential
Information constituting trade secrets under the Georgia Trade Secrets Act of
1990, as may be amended from time to time (the “Act”), I will maintain the
confidentiality of such Confidential Information for as long as is permitted
under the Act.

 

(b)                                 Section 2 will not apply to any information
which:

 

(i)                                     is or becomes publicly known under
circumstances involving no breach by me of the terms of this Section 2, however,
Confidential Information

 

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shall not be publicly known by reason of such information’s or item’s being
available in isolated segments in two or more readily available public
documents,

 

(ii)                                  is generally disclosed to third parties by
FHPC without restriction on such third parties, or

 

(iii)                               is approved for release by written
authorization of the Board of Directors of the Company:

 

except that a breach by me of my obligations under this Section 2 shall not be
absolved by the subsequent occurrence of any of the exceptions above.

 

(c)                                  All Confidential Information remains the
property of FHPC at all times, before, during and after my employment. I will,
upon termination of my employment at FHPC or at any other time upon request by
FHPC, promptly deliver to FHPC all Confidential Information I may have in my
possession, including but not limited to all Confidential Information relating
to the business of FHPC. I understand that I must obtain FHPC’s express, written
permission with regard to any Confidential Information, if I wish to keep any
copies of any Confidential Information after the termination of my employment. I
agree to, upon FHPC’s request, certify to FHPC under oath that I have complied
with the provisions of this section 2(c).

 

(d)                                 I acknowledge that my agreement to protect
Confidential Information among other things prohibits me from communicating
Confidential Information to former employees of FHPC, both while I am employed
by FHPC and after termination of my employment for the duration of my agreement
which is set forth in Section 2(a).

 

(e)                                  I shall submit to FHPC any proposed
publication which contains any discussion relating to FHPC, any Confidential
Information, or Invention of FHPC, or any work performed by me during the course
of my employment with FHPC. Unless I am notified by FHPC that such publication
contains Confidential Information within ninety (90) days of FHPC’s written
acknowledgement of receipt of such publication, I may proceed with such
publication. This provision extends to publications that are written and/or
published after the termination of my employment.

 

(f)                                    My employment with FHPC and performance
of my duties and responsibilities as an employee do not and will not breach any
agreement, which obligated me to keep in confidence any trade secrets or
confidential information of any other party or to refrain from competing,
directly or indirectly, with the business of any other party, and I shall not
disclose to FHPC any trade secrets, Confidential Information of any other party.

 

(g)                                 I acknowledge and agree that although I may
disclose and discuss Confidential Information with other current employees of
FHPC, I will do so only on a need-to-know basis and for the sole purpose of
advancing the best interests and the business objectives of FHPC.

 

3.                                       Inventions and Patents

 

(a)                                  I have attached hereto as Exhibit A is a
list describing all inventions, original works of authorship, developments,
improvements and trade secrets which were made by me prior to my employment with
FHPC (collectively, “Prior Inventions”), which belong to me, which relate to
FHPC’s proposed business, products or

 

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research and development, and which are not assigned to FHPC hereunder, or, if
no such list is attached, I represent that there are no such Prior Inventions.
If in the course of my Employment Term I incorporate into a FHPC product,
process or machine a Prior Invention owned by me or in which I have an interest,
FHPC is hereby granted and shall have a nonexclusive, royalty-free, irrevocable,
perpetual, worldwide license to make, have made, modify, use and sell such Prior
Invention as part of or in connection with such product, process or machine.

 

(b)                                 Inventions shall be the property of FHPC. I
hereby assign to FHPC or its designee all right, title and interest in and to
any and all Inventions and any and all related patents, copyrights, trademarks,
and trade names, and applications therefore, in the United States and elsewhere.

 

(c)                                  I will disclose to FHPC promptly all
Inventions.

 

(d)                                 If I am employed in a technical capacity, I
will maintain a laboratory notebook or equivalent record that is kept in
accordance with standard scientific practices. This notebook will contain daily
records of all business protocols, procedures, studies, experiments, data, etc.
and will document the conception and/or reduction to practice of any Invention.
I will follow any guidelines and policies that FHPC presently has or implements
in the future regarding the content, protection, counter-signing or notarizing
of notebooks. I understand that all notebooks and copies thereof are FHPC’s
property and I may not have a copy of any notebook upon the termination of my
employment without the express written permission of FHPC, regardless of the
circumstances of termination.

 

(e)                                  I shall, at FHPC’s expense, execute
declarations, further assignments, documents and other instruments as necessary
or desirable to fully and completely assign all Inventions to FHPC or its
designee and to assist FHPC or its designee in applying for, prosecuting and
enforcing patents, copyrights or other intellectual property rights in the
United States and in any foreign country with respect to any Invention. I
understand that this obligation shall continue to exist after the termination of
my employment, regardless of the reasons for and circumstances of termination.
If FHPC is unable because of my mental or physical incapacity or for any other
reason to secure my signature to apply for or to pursue any application for any
United States or foreign patents or copyright registrations covering Inventions
assigned to FHPC as above, then I hereby irrevocably designate and appoint FHPC
and its duly authorized officers and agents as my agent and attorney-in-fact, to
act for and in my behalf and stead to execute and file any such applications and
to do all other lawfully permitted acts to further the prosecution and issuance
of letters patent or copyright registrations thereon with the same legal force
and effect as if executed by me.

 

4.                                       Copyrightable Material

 

WITHOUT LIMITING THE ABOVE, I SPECIFICALLY AGREE THAT ALL COPYRIGHTABLE
MATERIALS GENERATED OR DEVELOPED BY ME IN CONNECTION WITH MY DUTIES AND
RESPONSIBILITIES WITH FHPC AND UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED
TO ADVERTISING MATERIALS, PRODUCT NAME AND IDENTITIES, PRODUCT INSTRUCTIONS,
LABORATORY NOTEBOOKS, PROTOCOLS, SCIENTIFIC PUBLICATIONS, ARTISTIC AND PRODUCT
DESIGNS, SKETCHES, TECHNICAL BULLETINS, COMPUTER PROGRAMS, COMPUTER FILES,
COMPUTER SOFTWARE, AND COMPUTER DATABASES, SHALL BE CONSIDERED WORKS MADE FOR
HIRE UNDER THE COPYRIGHT LAWS OF THE UNITED STATES AND THAT THEY SHALL, UPON
CREATION, BE OWNED EXCLUSIVELY BY FHPC. TO THE EXTENT THAT ANY SUCH MATERIALS,
UNDER APPLICABLE LAW, MAY NOT BE CONSIDERED WORKS MADE FOR HIRE, I HEREBY ASSIGN
TO FHPC THE OWNERSHIP OF ALL COPYRIGHTS IN SUCH MATERIALS, WITHOUT THE NECESSITY
OF

 

--------------------------------------------------------------------------------

 

ANY FURTHER CONSIDERATION, AND FHPC SHALL BE ENTITLED TO REGISTER AND HOLD IN
ITS OWN NAME ALL COPYRIGHTS IN RESPECT OF SUCH MATERIALS.

 

5.                                       Non-Solicitation.

 

I agree that during my employment by FHPC and for three (3) years from the
termination of such employment for any reason, I will not, either directly or
indirectly, on my own behalf or in the service of or on behalf of others,
solicit, divert or recruit, or attempt to solicit, divert or recruit, any
employee of FHPC, with whom I had contact during my employment with FHPC, to
leave such employment, whether or not such employment is pursuant to a written
contract with the Company or at will.

 

6.                                       No Competition

 

While employed at FHPC, I will not provide services to any other pharmaceutical
or related company (excluding Northhampton Medical, Inc.) which is the same or
similar to the services I have provided to First Horizon. I understand that the
preceding sentence does not apply to me to the extent I am an independent
contractor of FHPC.

 

7.                                       Expenses

 

I agree to repay any advances that FHPC may make to me for business expenses,
charges by me on any company credit card, and loans from FHPC to me unless such
expenses, charges or loans are reimbursable business expenses in accordance with
FHPC policies as established from time-to-time. Subject to applicable law, I
hereby expressly authorize FHPC to offset any amounts that I owe to FHPC from
compensation payable to me.

 

8.                                       No Assurance or Obligation of
Employment

 

I agree and understand that nothing in this Agreement shall confer any right
with respect to continuation of employment by the Company, nor shall it
interfere in any way with my right or the Company’s right to terminate my
employment at any time, with or without cause or notice.

 

9.                                       Costs

 

Should FHPC successfully enforce its rights against me under this Agreement,
FHPC shall be entitled to its costs of such enforcement, including reasonable
attorneys’ fees. Should I prevail in said action, FHPC shall pay my reasonable
costs associated with such enforcement, including my reasonable attorneys’ fees.

 

10.                                 Miscellaneous

 

(a)                                                          The terms of this
agreement shall survive termination of my employment.

 

(b)                                                         If any provision of
the Agreement shall, for any reason be held to be invalid or unenforceable in
any respect, such invalidity or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid or
unenforceable provision had not been included herein.

 

(c)                                                          The validity,
construction, enforcement and interpretation of this Agreement shall be governed
by the internal laws (and not the laws of conflicts) of the State of Georgia. I
agree that the state and federal courts of the Northern District of Georgia
shall have exclusive jurisdiction and venue of any litigation arising out of or
relating to this Agreement and my employment or the termination of my employment
with FHPC and I hereby expressly consent to the personal

 

--------------------------------------------------------------------------------

 

jurisdiction and venue of the state and federal courts of the Northern District
of Georgia for any such litigation.

 

(d)                                                         This Agreement shall
be binding upon and inure to the benefit of me and FHPC and our respective
heirs, executors, administrators, legal representatives, successors and assigns.

 

(e)                                                          This Agreement
embodies the entire agreement between FHPC and me in regard to the matters
discussed herein and hereby supersede any previous Agreements between FHPC and
me in regard to the matters discussed herein. No modification of or amendment to
this Agreement, nor any waiver of any rights under this Agreement, will be
effective unless in writing and signed by both parties.

 

 

Employee or Independent Contractor:

 

 

 

 

 

 

Printed Name

 

Date

 

 

 

 

 

 

 

 

 

Signature

 

 

 

 

 

 

 

 

 

 

 

Agreed to and Accepted:

 

 

 

 

 

 

 

First Horizon Pharmaceutical Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By

 

Date

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

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