Exhibit 10.1

 

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BIO-TECHNOLOGY GENERAL CORP.

 

 

 

Employment Agreement

for

Christopher G. Clement

President & Chief Operating Officer

 

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Contents

 

Article 1. Term of Employment

 

Article 2. Definitions

 

Article 3. Position and Responsibilities

 

Article 4. Standard of Care

 

Article 5. Compensation

 

Article 6. Expenses

 

Article 7. Employment Terminations

 

Article 8. Change in Control

 

Article 9. Assignment

 

Article 10. Legal Fees and Notice

 

Article 11. Confidentiality and Noncompetition

 

Article 12. Outplacement Assistance

 

Article 13. Miscellaneous

 

Article 14. Governing Law

 

 

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Employment Agreement

 

This Agreement is made, entered into, and is effective as of the Effective Date,
by and between the Company and the Executive.

 

 

Article 1. Term of Employment

 

 

1.1                                 The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company in accordance
with the terms and conditions set forth herein, for a period of three (3) years,
commencing as of the Effective Date.

 

1.2                                 Commencing on the third (3rd) anniversary of
the Effective Date, and each anniversary thereafter, the term of this Agreement
shall automatically be extended for one (1) additional year, unless at least
ninety (90) days prior to such anniversary, the Company or the Executive shall
have given notice in accordance with Section 10.2 hereof that it or he does not
wish to extend the term of the Agreement.

 

 

Article 2. Definitions

 

 

2.1                                 “Agreement” means this Employment Agreement.

 

2.2                                 “Annual Bonus” means the annual bonus to be
paid to the Executive in accordance with the Company’s annual bonus program as
described in Section 5.3 herein.

 

2.3                                 “Base Salary” means the salary of record
paid to the Executive as annual salary, pursuant to Section 5.2, excluding
amounts received under incentive or other bonus plans, whether or not deferred.

 

2.4                                 “Beneficial Owner” shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act.

 

2.5                                 “Beneficiary” means the persons or entities
designated or deemed designated by the Executive pursuant to Section 13.6
herein.

 

2.6                                 “Board” or “Board of Directors” means the
Board of Directors of the Company.

 

2.7                                 “Cause” means:

 

(a)                                  Executive materially breached any of the
terms of this Agreement and failed to correct such breach within fifteen (15)
days after written notice thereof from the Company;

 

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(b)                                 Executive has been convicted of a criminal
offense involving a felony giving rise to a sentence of imprisonment;

 

(c)                                  Executive has breached a fiduciary trust
for the purpose of gaining a personal profit, including, without limitation,
embezzlement; or

 

(d)                                 Despite adequate warnings, Executive
intentionally and willfully failed to perform reasonably assigned duties within
the normal and customary scope of the Position.

 

2.8                                 “Change in Control” or “CIC” of the Company
shall be deemed to have occurred as of the first day that any one or more of the
following conditions is satisfied:

 

(a)                                  Any consolidation or merger in which the
Company is not the continuing or surviving entity or pursuant to which shares of
the Common Stock would be converted into cash, securities, or other property,
other than (i) a merger of the Company in which the holders of the Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (ii) a
consolidation or merger which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (by being
converted into voting securities of the continuing or surviving entity) more
than 50% of the combined voting power of the voting securities of the continuing
or surviving entity immediately after such consolidation or merger and which
would result in the members of the Board immediately prior to such consolidation
or merger (including for this purpose any individuals whose election or
nomination for election was approved by a vote of at least two-thirds of such
members) constituting a majority of the Board (or equivalent governing body) of
the continuing or surviving entity immediately after such consolidation or
merger;

 

(b)                                 Any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all or substantially
all the Company’s assets;

 

(c)                                  The Company’s stockholders approve any plan
or proposal for the liquidation or dissolution of the Company;

 

(d)                                 Any Person shall become the Beneficial Owner
of forty (40) percent or more of the Common Stock other than pursuant to a plan
or arrangement entered into by such Person and the Company; or

 

(e)                                  During any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute a majority of the Board
unless the election or nomination for election by the Company’s stockholders of
each new director was approved by a vote of at lest two-thirds of the directors
then still in office who were directors at the beginning of the period.

 

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2.9                                 “CIC Severance Benefits” means the payment
of severance compensation associated with a Qualifying Termination occurring
subsequent to a Change in Control, as described in Section 8.3.

 

2.10                           “Code” means the United States Internal Revenue
Code of 1986, as amended.

 

2.11                           “Common Stock” means the common stock of the
Company, $.01 par value.

 

2.12                           “Compensation Committee” means the Compensation
and Stock Option Committee of the Board, or any other committee appointed by the
Board to perform the functions of such committee.

 

2.13                           “Company” means Bio-Technology General Corp., a
Delaware corporation, or any Successor Company thereto as provided in
Section 9.1 herein.

 

2.14                           “Director” means any individual who is a member
of the Board of Directors of the Company.

 

2.15                           “Disability” or “Disabled” means for all purposes
of this Agreement, the meaning ascribed to such term in the Company’s long-term
disability plan, or in any successor to such plan.

 

2.16                           “Effective Date” means May 14, 2002.

 

2.17                           “Effective Date of Termination” means the date on
which a termination of the Executive’s employment occurs.

 

2.18                           “Employment Date” means May 14, 2002.

 

2.19                           “Executive” means Christopher G. Clement who, as
of the Effective Date, resides at 25 Ford’s Crossing, Norwell, MA  02061.

 

2.20                           “Good Reason” shall mean, without the Executive’s
express written consent, the occurrence of any one or more of the following:

 

(a)                                  Reducing the Executive’s Base Salary;

 

(b)                                 Failing to maintain Executive’s amount of
benefits under or relative level of participation in the Company’s employee
benefit or retirement plans, policies, practices, or arrangements in which the
Executive participates as of the Effective Date of this Agreement, including any
perquisite program; provided, however, that any such change that applies
consistently to all executive officers of the Company or is required by
applicable law shall not be deemed to constitute Good Reason;

 

(c)                                  Failing to require any Successor Company to
assume and agree to perform the Company’s obligations hereunder;

 

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(d)                                 The occurrence of any one or more of the
following events on or after the announcement of the transaction which leads to
the CIC and up to twenty–four (24) calendar months following the effective date
of a CIC:

 

(1)                                  Requiring Executive to be based at a
location that requires the Executive to travel at least an additional
thirty-five (35) miles per day;

 

(2)                                  Requiring Executive to report to a position
which is at a lower level than the highest level to which Executive reported
within the six (6) months prior to the CIC;

 

(3)                                  Demoting Executive to a level lower than
Executive’s level in the Company as of the Effective Date.

 

2.21                           “Notice of Termination” means a written notice
which shall indicate the specific termination provision in this Agreement relied
upon, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
the provisions so indicated, and, where applicable, shall specifically include
notice pursuant to Section 1.2 that Company has elected not to renew this
Agreement.

 

2.22                           “Person” shall have the meaning ascribed to such
term in Section 3(a)(9) of the Securities Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a “group” as defined in
Section 13(d) thereof.

 

2.23                           “Position” shall have the meaning ascribed to it
in Section 3.1.

 

2.24                           “Qualifying Termination” means any of the events
described in Section 8.2 herein, the occurrence of which triggers the payment of
CIC Severance Benefits hereunder.

 

2.25                           “Securities Exchange Act” means the United States
Securities Exchange Act of 1934, as amended.

 

2.26                           “Service Multiple” shall have the meaning
ascribed to it in Section 7.4(c).

 

2.27                           “Severance Benefits” means the payment of
severance compensation as provided in Sections 7.4 and 7.6 herein, and not
payable due to a Change in Control of the Company.

 

2.28                           “Successor Company” shall have the meaning
ascribed to it in Section 9.1.

 

2.29                           “Term” shall mean that period of time commencing
on the Effective Date and ending on the Effective Date of Termination.

 

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Article 3. Position and Responsibilities

 

 

3.1                                 During the term of this Agreement, the
Executive agrees to serve as President and Chief Operating Officer of the
Company or in such other position which Executive shall agree to accept or to
which Executive shall be promoted during the Term and Executive shall report
directly to the Chief Executive Officer or such other position which is at a
higher position or level in the Company than Executive and as shall be
determined by the Chief Executive Officer in his sole discretion, and shall
maintain the level of duties and responsibilities as in effect as of the
Effective Date, or such higher level of duties and responsibilities as Executive
may be assigned during the Term (the “Position”).

 

 

Article 4. Standard of Care

 

 

4.1                                 During the term of this Agreement, the
Executive agrees to devote substantially his full time, attention, and energies
to the Company’s business and shall not be engaged in any other business
activity, whether or not such business activity is pursued for gain, profit, or
other pecuniary advantage unless such business activity is approved by the
Compensation Committee (or, in the event the Compensation Committee ceases to
exist, the Board).  However, subject to Article 11 herein and approval by the
Compensation Committee (or the Board, as the case may be), the Executive may
serve as a director of other companies so long as such service is not injurious
to the Company.

 

 

Article 5. Compensation

 

 

5.1                                 As remuneration for all services to be
rendered by the Executive during the term of this Agreement, and as
consideration for complying with the covenants herein, the Company shall pay and
provide to the Executive those items set forth in Sections 5.2 through 5.8.

 

5.2                                 Base Salary. The Company shall pay the
Executive a Base Salary in an amount which shall be established from time to
time by the Board of Directors of the Company or the Board’s designee; provided,
however, that such Base Salary shall not be less than THREE-HUNDRED-TWENTY-FIVE
THOUSAND DOLLARS (US$325,000) per year.

 

(a)                                  This Base Salary shall be paid to the
Executive in equal installments throughout the year, consistent with the normal
payroll practices of the Company.

 

(b)                                 The Base Salary shall be reviewed at least
annually following the Effective Date of this Agreement, while this Agreement is
in force, to ascertain whether, in the judgment of the Board or the Board’s
designee, such Base Salary should be increased based primarily on the
performance of the Executive during the year. If so increased, the Base Salary
as

 

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stated above shall, likewise, be increased for all purposes of this Agreement
and shall not, in any event, be decreased in any year.

 

5.3                                 Annual Bonus. In addition to his Base
Salary, the Executive shall be entitled to participate in the Company’s annual
short-term incentive program, as such program may exist from time to time, at a
level commensurate with the Position.  The percentage of Base Salary targeted as
annual short-term incentive compensation shall be established for the Position
by the Company’s Compensation Committee in its sole discretion (the “targeted
Annual Bonus award”). Executive acknowledges that the amount of annual
short-term incentive, if any, to be awarded shall be at the sole discretion of
the Company’s Compensation Committee, may be less or more than the targeted
Annual bonus award, and will be based on a number of factors set in advance by
the Compensation Committee for each calendar year, including the Company’s
performance and the Executive’s individual performance. Nothing in this Section
5.3 shall be construed as obligating the Company or the Board to refrain from
changing, and/or amending the short-term incentive program, so long as such
changes are equally applicable to all executive employees in the Company.

 

5.4                                 Long-Term Incentives. The Executive shall be
eligible to participate in the Company’s long-term incentive plan, as such shall
be amended or superseded from time to time provided, however, that nothing in
this Section 5.4 shall be construed as obligating the Company or the Board to
refrain from changing, and/or amending the long-term incentive plan, so long as
such changes are equally applicable to all executive employees in the Company.

 

5.5                                 Retirement Benefits. The Company shall
provide to the Executive participation in any Company qualified defined benefit
and defined contribution retirement plans as may be established during the term
of this Agreement; provided, however, that nothing in this Section 5.5 shall be
construed as obligating the Company to refrain from changing, and/or amending
the nonqualified retirement programs, so long as such changes are equally
applicable to all executive employees in the Company.

 

5.6                                 Employee Benefits. During the Term, and as
otherwise provided within the provisions of each of the respective plans, the
Company shall provide to the Executive all benefits to which other executives
and employees of the Company are entitled to receive, as commensurate with the
Position, subject to the eligibility requirements and other provisions of such
arrangements as applicable to executives of the Company generally.

 

(a)                                  Such benefits shall include, but shall not
be limited to, group term life insurance, comprehensive health and major medical
insurance, dental and life insurance, and short-term and long-term disability.

 

(b)                                 The Executive shall likewise participate in
any additional benefit as may be established during the term of this Agreement,
by standard written policy of the Company.

 

5.7                                 Vacation.  The Executive shall be entitled
to such paid vacation as is customary for the Position in corporate institutions
of similar size and character, but in any event not less than twenty (20) paid
vacation days during each calendar year; provided, however, that without

 

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prior written approval, Executive may carry forward into the next year no more
than ten (10) unused vacation days from the current year.

 

5.8                                 Perquisites. The Company shall provide to
the Executive, at the Company’s expense, all perquisites which the Board may
determine from time to time to provide; provided, however, that nothing in this
Section 5.8 shall be construed as obligating the Company or the Board to refrain
from changing, and/or amending the perquisite program, so long as such changes
are equally applicable to all executive employees in the Company.

 

5.9                                 Right to Change Plans. The Company shall not
be obligated to institute, maintain, or refrain from changing, amending, or
discontinuing any benefit plan, program, or perquisite, so long as such changes
are equally applicable to all executive employees in the Company.

 

 

Article 6. Expenses

 

 

6.1                                 Upon presentation of appropriate
documentation, the Company shall pay, or reimburse the Executive for all
ordinary and necessary expenses, in a reasonable amount, which the Executive
incurs in performing his duties under this Agreement including, but not limited
to, travel, entertainment, professional dues and subscriptions, and all dues,
fees, and expenses associated with membership in various professional, business,
and civic associations and societies.

 

 

Article 7. Employment Terminations

 

 

7.1                                 Termination Due to Death. In the event the
Executive’s employment is terminated while this Agreement is in force by reason
of death, the Company’s obligations under this Agreement shall immediately
expire. Notwithstanding the foregoing, the Company shall be obligated to pay to
the Executive the following:

 

(a)                                  Base Salary through the Effective Date of
Termination;

 

(b)                                 An amount equal to the Executive’s unpaid
targeted Annual Bonus award, established for the fiscal year in which such
termination is effective, multiplied by a fraction, the numerator of which is
the number of completed days in the then-existing fiscal year through the
Effective Date of Termination, and the denominator of which is three hundred
sixty-five (365);

 

(c)                                  All outstanding long-term incentive awards
shall be subject to the treatment provided under the applicable long-term
incentive plan of the Company;

 

(d)                                 Accrued but unused vacation pay through the
Effective Date of Termination; and

 

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(e)                                  All other rights and benefits the Executive
is vested in, pursuant to other plans and programs of the Company.

 

(f)                                    The benefits described in Sections 7.1(a)
and (d) shall be paid in cash to the Executive in a single lump sum as soon as
practicable following the Effective Date of Termination, but in no event beyond
thirty (30) days from such date. All other payments due to the Executive upon
termination of employment, including those in Sections 7.1(b) and (c), shall be
paid in accordance with the terms of such applicable plans or programs.

 

(g)                                 With the exception of the covenants
contained in Articles 9 and 14 and Sections 7.1(f), 13.3, 13.5, and 13.7 herein
(which shall survive such termination), the Company and the Executive thereafter
shall have no further obligations under this Agreement.

 

7.2                                 Termination Due to Disability.  In the event
that the Executive becomes Disabled during the term of this Agreement and is,
therefore, unable to perform his duties herein for more than one hundred eighty
(180) total calendar days during any period of twelve (12) consecutive months,
or in the event of the Board’s reasonable expectation that the Executive’s
Disability will exist for more than a period of one hundred eighty (180)
calendar days, the Company shall have the right to terminate the Executive’s
active employment as provided in this Agreement.

 

(a)                                  The Board shall deliver written notice to
the Executive of the Company’s intent to terminate for Disability at least
thirty (30) calendar days prior to the Effective Date of Termination.

 

(b)                                 Such Disability to be determined by the
Board of Directors of the Company upon receipt of and in reliance on competent
medical advice from one (1) or more individuals, selected by the Board, who are
qualified to give such professional medical advice.

 

(c)                                  A termination for Disability shall become
effective upon the end of the thirty (30) day notice period. Upon the Effective
Date of Termination, the Company’s obligations under this Agreement shall
immediately expire.

 

(d)                                 Notwithstanding the foregoing, the Company
shall be obligated to pay to the Executive the following:

 

(1)                                  Base Salary through the Effective Date of
Termination;

 

(2)                                  An amount equal to the Executive’s unpaid
targeted Annual Bonus award, established for the fiscal year in which the
Effective Date of Termination occurs, multiplied by a fraction, the numerator of
which is the number of completed days in the then-existing fiscal year through
the Effective Date of Termination, and the denominator of which is three hundred
sixty-five (365);

 

(3)                                  All outstanding long-term incentive awards
shall be subject to the treatment provided under the applicable long-term
incentive plan of the Company;

 

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(4)                                  Accrued but unused vacation pay through the
Effective Date of Termination; and

 

(5)                                  All other rights and benefits the Executive
is vested in, pursuant to other plans and programs of the Company.

 

(e)                                  The benefits described in Sections
7.2(d)(1) and (d)(4) shall be paid in cash to the Executive in a single lump sum
as soon as practicable following the Effective Date of Termination, but in no
event beyond thirty (30) days from such date. All other payments due to the
Executive upon termination of employment, including those in Sections 7.2(d)(2)
and (d)(3), shall be paid in accordance with the terms of such applicable plans
or program.

 

(f)                                    With the exception of the covenants
contained in Articles 8, 9, 11, and 14 and Sections 7.2(e), 13.3, 13.5, and 13.7
herein (which shall survive such termination), the Company and the Executive
thereafter shall have no further obligations under this Agreement.

 

7.3                                 Voluntary Termination by the Executive. The
Executive may terminate this Agreement at any time by giving Notice of
Termination to the Board of Directors of the Company, delivered at least
fourteen (14) calendar days prior to the Effective Date of Termination.

 

(a)                                  The termination automatically shall become
effective upon the expiration of the fourteen (14) day notice period.
Notwithstanding the foregoing, the Company may waive the fourteen (14) day
notice period; however, the Executive shall be entitled to receive all elements
of compensation described in Sections 5.1 through 5.6 for the fourteen (14) day
notice period, subject to the eligibility and participation requirements of any
qualified retirement plan.

 

(b)                                 Upon the Effective Date of Termination,
following the expiration of the fourteen (14) day notice period, the Company
shall pay the Executive his full Base Salary and accrued but unused vacation
pay, at the rate then in effect, through the Effective Date of Termination, plus
all other benefits to which the Executive has a vested right at that time (for
this purpose, the Executive shall not be paid any Annual Bonus with respect to
the fiscal year in which voluntary termination under this Section occurs).

 

(c)                                  With the exception of the covenants
contained in Articles 8, 9, 11, and 14 and Sections 13.3, 13.5, and 13.7 herein
(which shall survive such termination), the Company and the Executive thereafter
shall have no further obligations under this Agreement.

 

7.4                                 Involuntary Termination by the Company
without Cause. At all times during the Term, the Board may terminate the
Executive’s employment for reasons other than death, Disability, or for Cause,
by providing to the Executive a Notice of Termination, at least sixty (60)
calendar days (ninety (90) calendar days when termination is due to non-renewal
of this Agreement by the Company pursuant to Section 1.2) prior to the Effective
Date of Termination; provided, however, that such notice shall not preclude the
Company from requiring Executive to leave the Company immediately upon receipt
of such notice.

 

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(a)                                  Such Notice of Termination shall be
irrevocable absent express, mutual consent of the parties.

 

(b)                                 Upon the Effective Date of Termination (not
a Qualifying Termination), following the expiration of the sixty (60) day notice
period (90 days in the case of non-renewal), the Company shall pay and provide
to the Executive:

 

(1)                                  An amount equal to the Service Multiple
times the Executive’s annual Base Salary established for the fiscal year in
which the Effective Date of Termination occurs;

 

(2)                                  An amount equal to the Service Multiple
times the Executive’s targeted Annual Bonus award established for the fiscal
year in which the Effective Date of Termination occurs; provided, however, that
no payment shall be made under this Section 7.4(b)(2) if the Effective Date of
Termination is less than twelve (12) months after the Employment Date;

 

(3)                                  A continuation of the welfare benefits of
health care, life and accidental death and dismemberment, and disability
insurance coverage (or if continuation under the Company’s then current plans is
not allowed, then provision at the Company’s expense but subject to payment by
Executive of those payments which Executive would have been obligated to make
under the Company’s then current plan, of substantially similar welfare benefits
from one or more third party providers) after the Effective Date of Termination
for a number of months equal to the Service Multiple times twelve (12). These
benefits shall be provided to the Executive at the same coverage level as in
effect as of the Effective Date of Termination, and at the same premium cost to
the Executive which was paid by the Executive at the time such benefits were
provided. However, in the event the premium cost and/or level of coverage shall
change for all employees of the Company, or for management employees with
respect to supplemental benefits, the cost and/or coverage level, likewise,
shall change for the Executive in a corresponding manner. The continuation of
these welfare benefits shall be discontinued if prior to the expiration of the
period, the Executive has available substantially similar benefits at a
comparable cost to the Executive from a subsequent employer, as determined by
the Compensation Committee (or, in the event the Compensation Committee ceases
to exist, the Board);

 

(4)                                  All outstanding long-term incentive awards
shall be subject to the treatment provided under the applicable long-term
incentive plan of the Company;

 

(5)                                  An amount equal to the Executive’s unpaid
Base Salary and accrued but unused vacation pay through the Effective Date of
Termination; and

 

(6)                                  All other benefits to which the Executive
has a vested right at the time, according to the provisions of the governing
plan or program.

 

(c)                                  For purposes of this Section 7.4, the term
“Service Multiple” shall be equal to the quotient resulting from a formula the
numerator of which is the lesser of (a) full number

 

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of completed months that have elapsed since the Employment Date (but not less
than 6 months) and (b) twenty-four (24) and the denominator of which is twelve
(12);

 

(d)                                 In the event that the Board terminates the
Executive’s employment without Cause on or after the date of the announcement of
the transaction which leads to a CIC, the Executive shall be entitled to the CIC
Severance Benefits as provided in Section 8.3 in lieu of the Severance Benefits
outlined in this Section 7.4.

 

(e)                                  Payment of all of the benefits described in
Section 7.4(b)(1) shall be paid in cash to the Executive in equal bi-weekly
installments over a period of consecutive months equal to the Service Multiple
times twelve (12) and beginning on the fifteenth day of the month following the
month in which the Effective Date of Termination occurs.

 

(f)                                    Payment of all but forty-five thousand
dollars ($45,000) of the benefits described in Section 7.4(b)(2) shall be paid
in cash to the Executive in a single lump sum as soon as practicable following
the Effective Date of Termination, but in no event beyond thirty (30) days from
such date.  The forty-five thousand dollars ($45,000) which was withheld shall
be paid in cash to the Executive in a single lump sum at the end of the twelve
(12) month restrictive period set forth in Sections 11.2 and 11.3 of this
Agreement.

 

(g)                                 Except as specifically provided in Section
7.4(e) and (f), all other payments due to the Executive upon termination of
employment shall be paid in accordance with the terms of such applicable plans
or programs.

 

(h)                                 With the exception of the covenants
contained in Articles 8, 9, 10, 11, 12 and 14 and Sections 7.4, 13.3, 13.5, and
13.7 (which shall survive such termination), the Company and the Executive
thereafter shall have no further obligations under this Agreement.

 

(i)                                     Notwithstanding anything herein to the
contrary, the Company’s payment obligations under this Section 7.4 shall be
offset by any amounts that the Company is required to pay to the Executive under
a national statutory severance program applicable to such Executive.

 

7.5                                 Termination for Cause. Nothing in this
Agreement shall be construed to prevent the Board from terminating the
Executive’s employment under this Agreement for Cause.

 

(a)                                  To be effective, the Notice of Termination
must set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination for Cause.

 

(b)                                 In the event this Agreement is terminated by
the Board for Cause, the Company shall pay the Executive his Base Salary and
accrued vacation pay through the Effective Date of Termination, and the
Executive shall immediately thereafter forfeit all rights and benefits (other
than vested benefits) he would otherwise have been entitled to receive under
this Agreement. The Company and the Executive thereafter shall have no further
obligations under this Agreement with the exception of the covenants contained
in Articles 9, 10, 11, and 14 and Sections 13.3, 13.5, and 13.9 herein (which
shall survive such termination).

 

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7.6                                 Termination for Good Reason. Except where
Section 2.20(d) is applicable, this Section 7.6 shall only become effective when
at least twelve (12) months have elapsed since the Employment Date.   Prior to
this Section 7.6 becoming effective, any notice of termination by Executive may
only be given pursuant to Section 7.3.  The Executive shall have sixty (60) days
from the date he learns of action taken by the Company that allows the Executive
to terminate his employment for Good Reason to provide the Board with a Notice
of Termination.

 

(a)                                  The Notice of Termination must set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such Good Reason termination.

 

(b)                                 The Company shall have thirty (30) days to
cure such Company action following receipt of the Notice of Termination.

 

(c)                                  The Executive is required to continue his
employment for the sixty (60) day period following the date in which he provided
the Notice of Termination to the Board. The Company may waive the sixty (60) day
notice period; however, the Executive shall be entitled to receive all elements
of compensation described in Sections 5.1 through 5.6 for the sixty (60) day
notice period, subject to the eligibility and participation requirements of any
qualified retirement plan.

 

(d)                                 Upon a termination of the Executive’s
employment for Good Reason during the Term, and following the expiration of the
sixty (60) day notice period, the Company shall pay and provide to the Executive
the following:

 

(1)                                  An amount equal to two (2) times the
Executive’s annual Base Salary established for the fiscal year in which the
Effective Date of Termination occurs;

 

(2)                                  An amount equal to two (2) times the
Executive’s targeted Annual Bonus award established for the fiscal year in which
the Effective Date of Termination occurs;

 

(3)                                  A continuation of the welfare benefits of
health care, life and accidental death and dismemberment, and disability
insurance coverage for two (2) years after the Effective Date of Termination (or
if continuation under the Company’s then current plans is not allowed, then
provision at the Company’s expense but subject to payment by Executive of those
payments which Executive would have been obligated to make under the Company’s
then current plan, of substantially similar welfare benefits from one or more
third party providers). These benefits shall be provided to the Executive at the
same coverage level, as in effect as of the Effective Date of Termination and at
the same premium cost to the Executive which was paid by the Executive at the
time such benefits were provided. However, in the event the premium cost and/or
level of coverage shall change for all employees of the Company, or for
management employees with respect to supplemental benefits, the cost and/or
coverage level, likewise, shall change for the Executive in a corresponding
manner. The continuation of these welfare benefits shall be discontinued prior
to the end of the two (2) year period in the event the Executive has available
substantially similar benefits at a comparable cost to the Executive from a
subsequent employer, as determined by the Compensation Committee (or, in the
event the Compensation Committee ceases to exist, the Board);

 

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(4)                                  All outstanding long-term incentive awards
shall be subject to the treatment provided under the applicable long-term
incentive plan of the Company;

 

(5)                                  An amount equal to the Executive’s unpaid
Base Salary and accrued but unused vacation pay through the Effective Date of
Termination; and

 

(6)                                  All other benefits to which the Executive
has a vested right at the time, according to the provisions of the governing
plan or program.

 

(e)                                  In the event of termination of Executive’s
employment for Good Reason on or after the date of the announcement of the
transaction which leads to the CIC and up to twenty-four (24) months following
the date of the CIC, the Executive shall be entitled to the CIC Severance
Benefits as provided in Section 8.3 in lieu of the Severance Benefits outlined
in this Section 7.6.

 

(f)                                    The Executive’s right to terminate
employment for Good Reason shall not be affected by the Executive’s incapacity
due to physical or mental illness unless such incapacity is determined to
constitute a Disability as provided herein.

 

(g)                                 Payment of all but forty-five thousand
dollars ($45,000) of the benefits described in Section 7.6(d)(1) and payment of
all of the benefits described in Section 7.6(d)(2) shall be paid in cash to the
Executive in a single lump sum as soon as practicable following the Effective
Date of Termination, but in no event beyond thirty (30) days from such date. The
forty-five thousand dollars ($45,000) which was withheld shall be paid in cash
to the Executive in a single lump sum at the end of the twelve (12) month
restrictive period set forth in Sections 11.2 and 11.3 of this Agreement.

 

(h)                                 Except as specifically provided in Section
7.6(g), all other payments due to the Executive upon termination of employment
shall be paid in accordance with the terms of such applicable plans or programs.

 

(i)                                     Notwithstanding anything herein to the
contrary, the Company’s payment obligations under this Section 7.6 shall be
offset by any amounts that the Company is required to pay to the Executive under
a national statutory severance program applicable to such Executive.

 

(j)                                     With the exceptions of the covenants
contained in Articles 8, 9, 10, 11, 12 and 14 and Sections 7.6, 13.3, 13.5, and
13.7 (which shall survive such termination) herein, the Company and the
Executive thereafter shall have no further obligations under this Agreement.

 

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Article 8. Change in Control

 

 

8.1                                 Employment Termination Following a Change in
Control. The Executive shall be entitled to receive from the Company CIC
Severance Benefits if a Notice of Termination for a Qualifying Termination of
the Executive has been delivered; provided, that:

 

(a)                                  The Executive shall not be entitled to
receive CIC Severance Benefits if he is terminated for Cause (as provided in
Section 7.5 herein), or if his employment with the Company ends due to death, or
Disability, or due to voluntary termination of employment by the Executive
without Good Reason.

 

(b)                                 CIC Severance Benefits shall be paid in lieu
of all other benefits provided to the Executive under the terms of this
Agreement.

 

8.2                                 Qualifying Termination. The occurrence of
any one or more of the following events on or after the date of the announcement
of the transaction which leads to the CIC and up to twenty-four (24) months
following the date of the CIC shall trigger the payment of CIC Severance
Benefits to the Executive under this Agreement:

 

(a)                                  An involuntary termination of the
Executive’s employment by the Company for reasons other than Cause, death, or
Disability, as evidenced by a Notice of Termination delivered by the Company to
the Executive;

 

(b)                                 A voluntary termination by the Executive for
Good Reason as evidenced by a Notice of Termination delivered to the Company by
the Executive;

 

(c)                                  Failure to renew this Agreement (if the
Agreement would expire unless renewed within such period), as evidenced by a
Notice of Termination delivered by the Company to the Executive; or

 

(d)                                 The Company or any Successor Company
materially breaches any material provision of this Agreement and does not cure
such breach within thirty (30) days of receiving a written notice from the
Executive with such notice explaining in reasonable detail the facts and
circumstances claimed to provide a basis for the Executive’s claim.

 

8.3                                 Severance Benefits Paid upon a Qualifying
Termination. In the event the Executive becomes entitled to receive CIC
Severance Benefits, the Company shall pay to the Executive and provide him the
following:

 

(a)                                  An amount equal to two and one half (2.5)
times the Executive’s annual Base Salary established for the fiscal year in
which the Effective Date of Termination occurs;

 

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(b)                                 An amount equal to two and one half (2.5)
times the Executive’s targeted Annual Bonus award established for the fiscal
year in which the Executive’s Effective Date of Termination occurs;

 

(c)                                  An amount equal to the Executive’s unpaid
Base Salary and accrued but unused vacation pay through the Effective Date of
Termination;

 

(d)                                 All outstanding long-term incentive awards
shall be subject to the treatment provided under the applicable long-term
incentive plan of the Company;

 

(e)                                  A continuation of the welfare benefits of
health care, life and accidental death and dismemberment, and disability
insurance coverage for two and one half (2.5) full years after the Effective
Date of Termination (or if continuation under the Company’s then current plans
is not allowed, then provision at the Company’s expense but subject to payment
by Executive of those payments which Executive would have been obligated to make
under the Company’s then current plan, of substantially similar welfare benefits
from one or more third party providers).

 

(1)                                  These benefits shall be provided to the
Executive at the same coverage level, as in effect as of the Effective Date of
Termination or, if greater, as in effect sixty (60) days prior to the date of
the Change in Control, and at the same premium cost to the Executive which was
paid by the Executive at the time such benefits were provided.

 

(2)                                  In the event the premium cost and/or level
of coverage shall change for all employees of the Company, or for management
employees with respect to supplemental benefits, the cost and/or coverage level,
likewise, shall change for the Executive in a corresponding manner.

 

(3)                                  The continuation of these welfare benefits
shall be discontinued prior to the end of the two and one half year period in
the event the Executive has available substantially similar benefits at a
comparable cost to the Executive from a subsequent employer, as determined by
the Compensation Committee (or, in the event the Compensation Committee ceases
to exist, the Board).

 

8.4                                 Form and Timing of Severance Benefit.
Payment of all of the benefits described in Sections 8.3(a) through (c) shall be
paid in cash to the Executive in a single lump sum as soon as practicable
following the Effective Date of Termination, but in no event beyond thirty (30)
days from such date. All other payments due to the Executive upon termination of
employment shall be paid in accordance with the terms of such applicable plans
or programs.

 

8.5                                 Excise Tax. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with, or plan of the Company (in
the aggregate, the “Total Payments”), if any of the Total Payments will be
subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or
any similar tax that may hereafter be imposed), the Company shall pay to the
Executive, in cash, an additional amount (the “Gross-Up Payment”) such that the
net amount retained by the

 

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Executive after deduction of any Excise Tax upon the Total Payments and any
federal, state and local income tax and Excise Tax upon the Gross-Up Payment
provided for by this Section 8.5 (including FICA and FUTA), shall be equal to
the Total Payments. Such payment shall be made by the Company to the Executive
as soon as practical following the Effective Date of Termination, but in no
event beyond thirty (30) days from such date.

 

(a)                                  For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amounts of such
Excise Tax:

 

(1)                                  Any payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive’s termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement, or agreement with the Company, or with
any person (which shall have the meaning set forth in Section 3(a)(9) of the
Securities Exchange Act, including a “group” as defined in Section 13(d)
therein) whose actions result in a Change in Control or any person affiliated
with the Company or such persons) shall be treated as “parachute payments”
within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute
payments” within the meaning of Section 280G(b)(1) shall be treated as subject
to the Excise Tax, unless in the opinion of tax counsel as supported by the
Company’s independent auditors and reasonably acceptable to the Executive, such
other payments or benefits (in whole or in part) do not constitute parachute
payments, or unless such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to
the Excise Tax;

 

(2)                                  The amount of the Total Payments which
shall be treated as subject to the Excise Tax shall be equal to the lesser of:
(i) the total amount of the Total Payments; or (ii) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after applying
clause (a) above); and

 

(3)                                  The value of any noncash benefits or any
deferred payment or benefit shall be determined by the Company’s independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.

 

(b)                                 For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made, and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive’s residence on the Effective Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes.

 

(c)                                  In the event the Internal Revenue Service
subsequently adjusts the excise tax computation herein described, the Company
shall reimburse the Executive for the full amount necessary to make the
Executive whole (less any amounts received by the Executive that he would not
have received had the computation initially been computed as subsequently

 

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adjusted), including the value of benefits that were erroneously limited, the
value of any overpaid excise tax, and any related interest and/or penalties due
to the Internal Revenue Service.

 

8.6                                 With the exceptions of the covenants
contained in Articles 8, 9, 10, 11, 12 and 14 and Sections 13.3, 13.5, and 13.7
(which shall survive such termination) herein, the Company and the Executive
thereafter shall have no further obligations under this Agreement.

 

 

Article 9. Assignment

 

 

9.1                                 Assignment by Company. This Agreement may
and shall be assigned or transferred to, and shall be binding upon and shall
inure to the benefit of any Successor Company, with Successor Company for
purposes of this Agreement being defined as a company that (i) acquires greater
than fifty percent (50%) of the assets of the Company or (ii) acquires greater
than fifty percent (50%) of the outstanding stock of the Company, or (iii) is
the surviving entity in the event of a CIC.

 

(a)                                  Any such Successor Company shall be deemed
substituted for all purposes of the “Company” under the terms of this Agreement.

 

(b)                                 Failure of the Company to obtain the
agreement of any Successor Company to be bound by the terms of this Agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement, and shall immediately entitle the Executive to benefits from the
Company in the same amount and on the same terms as the Executive would be
entitled to receive in the event of a termination of employment for Good Reason
as provided in Section 7.7 (failure not related to a Change in Control) or
Section 8.3 (if the failure of assignment follows or is in connection with a
Change in Control).

 

(c)                                  Except as herein provided, this Agreement
may not otherwise be assigned by the Company.

 

9.2                                 Assignment by Executive. This Agreement
shall inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees.

 

(a)                                  If the Executive dies while any amount
would still be payable to him pursuant to this Agreement had he continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the Executive’s Beneficiary.

 

(b)                                 If the Executive has not named a
Beneficiary, then such amounts shall be paid to the Executive’s devisee,
legatee, or other designee, or if there is no such designee, to the Executive’s
estate.

 

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Article 10. Legal Fees and Notice

 

 

10.1                           Payment of Legal Fees. To the extent permitted by
law, the Company shall pay all legal fees, costs of litigation, prejudgment
interest, and other expenses incurred by Executive in contesting a termination,
if Executive prevails.

 

10.2                           Notice. Any notices, requests, demands, or other
communications provided by this Agreement shall be sufficient if in writing and
if sent by registered or certified mail to the Executive at the last address he
has filed in writing with the Company or, in the case of the Company, at its
principal offices to the attention of the General Counsel.

 

 

Article 11. Confidentiality and Noncompetition

 

 

11.1                           Disclosure of Information. The Executive
recognizes that he has access to and knowledge of confidential and proprietary
information of the Company that is essential to the performance of his duties
under this Agreement.

 

(a)                                  The Executive will not, during and for five
(5) years after the term of his employment by the Company, in whole or in part,
disclose such information to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever, nor shall he make use of any
such information for his own purposes, so long as such information has not
otherwise been disclosed to the public or is not otherwise in the public domain
except as required by law or pursuant to administrative or legal process.

 

11.2                           Covenants Regarding Other Employees. During the
term of this Agreement, and for a period of twelve (12) months following the
Executive’s termination of employment for any reason, the Executive agrees not
to actively solicit any employee of the Company to terminate his or her
employment with the Company or to interfere in a similar manner with the
business of the Company.

 

11.3                           Noncompete Following a Termination of Employment.
From the Effective Date of this Agreement until six (6) months following the
Executive’s Effective Date of Termination for any reason, the Executive will
not: (a) directly or indirectly own any equity or proprietary interest in
(except for ownership of shares in a publicly traded company not exceeding three
percent (3%) of any class of outstanding securities), or be an employee, agent,
director, advisor, or consultant to or for any competitor of the Company,
whether on his own behalf or on behalf of any person; or (b) undertake any
action to induce or cause any customer or client to discontinue any part of its
business with the Company.

 

11.4                           Waiver of Covenants Upon a Change in Control.
Upon the occurrence of a Change in Control, the Executive shall be released from
each of the covenants set forth in Sections 11.2

 

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and 11.3, if such Executive is terminated by the Company without Cause or if the
Executive terminates his employment with the Company for Good Reason.

 

 

Article 12. Outplacement Assistance

 

 

12.1                           Following a termination of employment, other than
for Cause, the Executive shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Executive within the two and one half
(2.5) year period after the Effective Date of Termination; provided, however,
that the total reimbursement shall be limited to an amount equal to twenty
percent (20%) of the Executive’s Base Salary as of the effective date of
termination.

 

 

Article 13. Miscellaneous

 

 

13.1                           Entire Agreement. With the exception of the
Company’s Proprietary Information and Inventions Agreement previously executed
by Executive, this Agreement supersedes any prior agreements (specifically, the
offer letter dated March 14, 2001), or understandings, oral or written, between
the parties hereto or between the Executive and the Company, with respect to the
subject matter hereof, and constitutes the entire agreement of the parties with
respect thereto.

 

13.2                           Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended except by mutual
agreement of the parties in a written instrument executed by the parties hereto
or their legal representatives.

 

13.3                           Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.

 

13.4                           Counterparts. This Agreement may be executed in
one (1) or more counterparts, each of which shall be deemed to be an original,
but all of which together will constitute one and the same Agreement.

 

13.5                           Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state, city, or other
taxes as may be required pursuant to any law or governmental regulation or
ruling.

 

13.6                           Beneficiaries. To the extend allowed by law, any
payments or benefits hereunder due to the Executive at the time of his death
shall nonetheless be paid or provided and the Executive may designate one or
more persons or entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement. Such designation must be in the
form of a signed writing acceptable to the Board or the Board’s designee. The
Executive may make or change such designation at any time.

 

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13.7                           Payment Obligation Absolute. Absent actions
deliberately or willfully taken by the Executive to materially injure the
Company, the Company’s obligation to make the payments and the arrangement
provided for herein shall be absolute and unconditional, and shall not be
affected by any circumstances, including, without limitation, any offset,
counterclaim, recoupment, defense, or other right which the Company may have
against the Executive or anyone else.

 

(a)                                  All amounts payable by the Company
hereunder shall be paid without notice or demand. Subject to the provisions set
forth in Sections 7.4 and 7.6, and Article 11, each and every payment made
hereunder by the Company shall be final, and the Company shall not seek to
recover all or any part of such payment from the Executive or from whomsoever
may be entitled thereto, for any reasons whatsoever.

 

(b)                                 With the exception of the Company’s willful
material breach of its payment obligations under Articles 7 and 8 of this
Agreement (provided, however, that no such breach shall be deemed to have
occurred until the Executive has provided the Board with written notice of such
breach and a reasonable opportunity for cure), the restrictive covenants
contained in Article 11 are independent of any other contractual obligations in
this Agreement or otherwise owed by the Company to the Executive. Except as
provided in this paragraph, the existence of any claim or cause of action by
Executive against the Company, whether based on this Agreement or otherwise,
shall not create a defense to the enforcement by the Company of any restrictive
covenant contained herein.

 

13.8                           The Executive shall not be obligated to seek
other employment in mitigation of the amounts payable or arrangements made under
any provision of this Agreement, and the obtaining of any such other employment
shall in no event effect any reduction of the Company’s obligations to make the
payments and arrangements required to be made under this Agreement.

 

13.9                           Previous Obligations.

 

(a)                                  Executive agrees and confirms that
Executive’s acceptance of this Agreement and performance of his duties hereunder
will not in any way require or place Executive in a position that may require or
potentially may require the use or disclosure of any third party’s trade secrets
or proprietary information.

 

(b)                                 Executive confirms that Executive has
disclosed to the Company all agreements Executive has with any third party that
incorporate confidentiality restrictions or a covenant not to compete.

 

(c)                                  Executive believes that he is under no
obligations to any third party, including any confidentiality agreements,
covenants not compete or the like, which will in any way restrict the
Executive’s ability to perform his duties hereunder.

 

(d)                                 Executive agrees and confirms that in the
event Executive is ever asked to participate in any activity or perform any job
duties and responsibilities as an employee of the Company which the Executive
believes may involve the utilization or dissemination of

 

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information a third party has identified as its proprietary information or a
trade secret or which may fall under a previously executed covenant not to
compete, Executive will immediately notify the Chief Executive Officer and
General Counsel and will not undertake to participate in any activities which
require or could possibly require Executive to utilize or rely upon such
proprietary information or trade secret.

 

13.10                     Review by Counsel.  Prior to executing this Agreement,
Executive agrees that he has consulted with his attorney who represents his
interests and who has fully and completely explained the terms and conditions of
this Agreement and the obligations created herein.

 

 

Article 14. Governing Law

 

 

14.1                           To the extent not preempted by federal law, the
provisions of this Agreement shall be construed and enforced in accordance with
the laws of the state of New Jersey.

 

 

Article 15. Relocation

 

 

15.1                           Executive hereby agrees to relocate to the
Iselin, New Jersey metropolitan area within six months of the Employment Date. 
Executive hereby acknowledges that the Company is entering into this Agreement
in reliance upon Executive’s covenant to relocate to the Iselin, New Jersey
metropolitan area within six months of the Employment Date.  Executive hereby
agrees that prior to his relocation to the Iselin, New Jersey metropolitan area,
he will spend that number of days each week at the Company’s executive offices
as the Chairman and Chief Executive Officer of the Company may direct.  Prior to
Executive’s relocation to the Iselin, New Jersey metropolitan area, the Company
will reimburse Executive for his out-of-pocket cost of commuting between Boston,
Massachusetts and Iselin, New Jersey each week, as well as Executive’s
reasonable out-of-pocket hotel costs while working at the Company’s Iselin, New
Jersey headquarters.

 

15.2                           The Company shall reimburse Executive for all
reasonable documented out-of-pocket moving expenses incurred by Executive in
relocating from the Boston, Massachusetts/San Diego metropolitan area to the
Iselin, New Jersey metropolitan area.  In addition, the Company will reimburse
Executive for all reasonable documented out-of-pocket move-related expenses, up
to a maximum of $20,000.

 

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IN WITNESS WHEREOF, the Company, through its duly authorized representative, and
the Executive have executed this Agreement as of the Effective Date.

 

 

Executive:

 

 

 

/s/

Christopher G. Clement

 

 

 

Christopher G. Clement

 

 

 

 

 

Company:

 

 

 

Bio-Technology General Corp.

 

 

 

 

 

By:

/s/ Sim Fass

 

 

 

Sim Fass

 

 

Chairman & CEO

 

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