exhibit10_5.htm


    Exhibit
      10.5



    FIRST
      AMENDMENT TO

    EXECUTIVE
      EMPLOYMENT AGREEMENT

    


    This
      FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (the “First Amendment”), is
      entered into as of September 28, 2007, by and between POZEN Inc. (the “Company”)
      and William L. Hodges (“Executive”).

    


    WITNESSETH:

    


    WHEREAS,
      the Company and Executive entered into that certain Executive Employment
      Agreement dated August 3, 2004 (the “Original Agreement”); and

    


    WHEREAS,
      the Company and Executive desire to amend certain terms of the Original
      Agreement, as set forth below, in order to facilitate compliance with Section
      409A of the Internal Revenue Code of 1986, as amended.

    


    NOW,
      THEREFORE, in consideration of the foregoing and the provisions and mutual
      promises herein contained and other good and valuable consideration, the parties
      hereby agree as follows:

    


    1.  All
      capitalized terms that are not defined herein shall have the meanings ascribed
      to such terms in the Original Agreement.

     

    2.  Section
      4(b) of the Original Agreement is hereby amended and restated in its entirety
      as
      follows:

    


    “(b)           Bonus.  Executive
      shall be eligible to receive an annual cash incentive bonus of up to forty
      percent (40%) of Executive’s annual base salary as may be set by the Committee
      by March 31 of each year.  The determination of the actual bonus
      earned, if any, shall be at the sole discretion of the Committee and shall
      be
      based upon the Committee’s assessment of Executive’s performance and the
      achievement of certain objectives which shall be set by the Committee from
      time
      to time. Executive’s performance shall be evaluated by the Committee on an
      annual basis, and the Committee shall adjust Executive’s salary in its sole
      discretion.  Nothing in this section shall be construed as
      guaranteeing Executive a bonus in any amount.  If an annual bonus is
      awarded, it shall be paid in the year following the year in which such bonus
      was
      earned, on or before March 15 of such following year.”

    


    3.  Section
      5(c) of the Original Agreement is hereby amended and restated in its entirety
      as
      follows:


    
      
        
        

      

      
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    “(c)           Obligations
      upon Certain Terminations.  Upon voluntary termination of this
      Agreement, or termination of Executive’s employment by the Company for Cause (as
      defined above) or upon Executive’s death or disability, or termination by
      Executive for other than Good Reason (as defined below), the Company shall
      have
      no further obligations hereunder other than the payment of all compensation
      and
      other benefits payable to Executive through the date of such
      termination.  Such amounts shall be paid on the Company’s next
      regularly scheduled payroll date unless any such amount is not then calculable,
      in which case payment of such amount shall be made on the first regularly
      scheduled payroll date after the amount is calculable but no later than March
      15
      of the year following the year in which the Executive’s employment
      terminated.”

    


    4.  Section
      5(d) of the Original Agreement is amended and restated in its entirety as
      follows:

    


    “(d)           Severance.

    


    (i)           In
      the event of termination of Executive’s employment (A) by the Company for
      reasons other than Cause or Executive’s death or disability, or (B) by Executive
      for Good Reason, and provided Executive executes and does not revoke a Release
      and Settlement Agreement  (the “Release”) in a form acceptable to the
      Company, Executive shall receive a severance benefit, subject to any applicable
      taxes and withholdings, in an amount equal to one (1) year’s base salary (the
“Salary Benefit”) plus the average annual bonus awarded Executive over the
      previous two (2) years (the “Bonus”, and, together with the Salary Benefit, the
“Severance Benefit”). Subject to Section 5(d)(ii) below, the Company shall pay
      the Salary Benefit, in monthly installments, on the fifth business day of each
      month commencing with the second month following the month in which Executive’s
      termination of employment occurred. The Company shall pay the Bonus in a lump
      sum payment within ninety (90) days of the date of termination of Executive’s
      employment (the “Termination Date”), but in no event later than March 15 of the
      year following the year in which such termination of employment occurred, or
      in
      the event of termination pursuant to Section 5(e)(iv), no later than March
      15 of
      the year following the year in which the Change of Control
      occurred.  Executive shall also continue to be entitled to receive all
      Company nontaxable health and other nontaxable employee benefits to which
      Executive was entitled as of the Termination Date, subject to the terms of
      all
      applicable benefit plans and to the extent such benefits can be provided to
      non-employees (or to the extent such benefits cannot be provided to
      non-employees, then the amount the Company was paying for those benefits
      immediately prior to the Termination Date), at the same average level and on
      the
      same terms and conditions which applied immediately prior to the Termination
      Date, for the shorter of (i) one year following the Termination Date or (ii)
      until Executive obtains comparable coverage from another employer (the
“Continuing Benefits”).


    
      
        
        

      

      
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    (ii)           Notwithstanding
      the foregoing, if Executive is on the termination date a “specified employee”
(as defined in Section 409A of the Internal Revenue Code, as amended (the
“Code”), and the regulations promulgated under such Section 409A (“Code Section
      409A”) and as determined in accordance with the permissible method then in use
      by the Company, or, if none, in accordance with the applicable default
      provisions of Code Section 409A, relating to “specified employees”), then if and
      to the extent required in order to avoid the imposition on Executive of any
      excise tax under Code Section 409A, the payment of any Severance Benefit,
      Continuing Benefits or other payments under this Section 5 shall not commence
      until, and shall be made on, the first business day after the date that is
      six
      (6) months following the Termination Date, and in such event the initial payment
      shall include a catch-up amount covering amounts that would otherwise have
      been
      paid during the six-month period following the Termination Date.”

    


    5.  Section
      5(f) of the Original Agreement is hereby amended and restated in its entirety
      as
      follows:

    


    “(f)           Tax
      Gross-Up for Parachute Payments.

    


    (A)           If
      at any time or from time to time it shall be determined that any payment to
      Executive pursuant to this Agreement or any other payment or benefit hereunder
      or under any other plan or agreement or otherwise (“Potential Parachute
      Payment”) would constitute an “excess parachute payment” within the meaning of
      Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and
      thus would be subject to the excise tax imposed by Section 4999 of the Code,
      or
      any similar tax payable under any United States federal, state, local, foreign
      or other law (“Excise Tax”), then Executive shall receive and the Company shall
      pay or cause to be paid a Tax Gross-Up Payment with respect to all Taxes as
      defined below.  The Tax Gross-Up Payment is intended to compensate
      Executive for all such excise taxes and federal, state, local, foreign or other
      income, employment or excise taxes or other taxes (“Taxes”) payable by Executive
      with respect to the Tax Gross-Up Payment and shall be in an amount such that
      after payment of Taxes on such amount there remains a balance sufficient to
      pay
      the taxes being reimbursed.  For purposes of determining the amount of
      the Tax Gross-Up Payment, Executive shall be deemed to pay federal income tax
      and employment taxes at the highest marginal rate of federal income and
      employment taxation in the calendar year in which the Tax 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 Executive’s residence (or, if greater, the
      state and locality in which Executive is required to file a nonresident income
      tax return with respect to the Potential Parachute Payment), net of the maximum
      reduction in federal income taxes that may be obtained from the deduction of
      such state and local taxes.


    
      
        
        

      

      
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    (B)           The
      determinations to be made under this Section 5(f) shall be made by the Company’s
      independent public accountants (the “Accounting Firm”), which firm shall provide
      its determinations and any supporting calculations both to the Company and
      to
      Executive.  Any such determination by the Accounting Firm shall be
      binding upon the Company and Executive.  All fees and expenses of the
      Accounting Firm in performing the determinations referred to in this Section
      5(f) shall be borne solely by the Company, and the Company shall indemnify
      and
      hold harmless the Accounting Firm of and from any and all claims, damages and
      expenses resulting therefrom, except for claims, damages or expenses resulting
      from the gross negligence or willful misconduct of the Accounting
      Firm.

    


    (C)           Any
      Tax Gross-Up Payment, as determined pursuant to this Section 5(f), shall be
      paid
      by the Company to Executive as and when the Excise Tax is incurred on a
      Potential Parachute Payment, or at such later date as mutually agreed by the
      parties hereto, but in no event later than the end of Executive’s taxable year
      next following the taxable year in which Executive remits the applicable Excise
      Tax to the IRS and any applicable state taxing authorities. The Tax Gross-Up
      Payment shall be paid in accordance with Code Section 409A, to the extent
      applicable, including, to the extent applicable, subject to and in compliance
      with Section 5(d)(ii).”

    


    6.  Section
      5(h) of the Original Agreement is hereby amended and restated in its entirety
      as
      follows:

    


    “(h)           Change
      of Control.  For purposes of this Agreement, a “Change of Control”
shall be deemed to have occurred:

    


    (i)           If
      any person (as such term is used in sections 13(d) and 14(d) of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company
      or any trustee or fiduciary holding securities under an employee benefit plan
      of
      the Company) becomes a beneficial owner (as defined in Rule 13d-3 under the
      Exchange Act), directly or indirectly, of securities of the Company representing
      more than 50% of the voting power of the then outstanding securities of the
      Company; provided that a Change of Control shall not be deemed to occur as
      a
      result of a transaction in which the Company becomes a subsidiary of another
      corporation and in which the stockholders of the Company, immediately prior
      to
      the transaction, will beneficially own, immediately after the transaction,
      shares entitling such stockholders to more than 50% of all votes to which all
      stockholders of the parent corporation would be entitled in the election of
      directors (without consideration of the rights of any class of stock to elect
      directors by a separate class vote); or


    
      
        
        

      

      
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    (ii)           Upon
      the consummation of (A) a merger or consolidation of the Company with another
      corporation where the stockholders of the Company, immediately prior to the
      merger or consolidation, will not beneficially own, immediately after the merger
      or consolidation, shares entitling such stockholders to more than 50% of all
      votes to which all stockholders of the surviving corporation would be entitled
      in the election of directors (without consideration of the rights of any class
      of stock to elect directors by a separate class vote), or (B) a sale or other
      disposition of all or substantially all of the assets of the
      Company.”

    


    7.  Except
      as
      herein amended, the terms and provisions of the Original Agreement shall remain
      in full force and effect as originally executed.

    


    8.  This
      First Amendment shall be governed by and construed and enforced in accordance
      with the laws of the State of North Carolina, without reference to the choice
      of
      law provisions of such laws.

    


    9.  This
      First Amendment may be executed in any number of counterparts, each of which
      shall constitute one agreement binding on all parties hereto.

    


    10.  This
      First Amendment and the Original Agreement, as amended and modified by this
      First Amendment, shall constitute and be construed as a single
      agreement.

    


    


    


    


    [Signature
      page follows]

    



    
      
        
        

      

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

    


    


    
      	 	
              COMPANY:

            
	 	 	 
	 	
              POZEN
                INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                John R. Plachetka

            
	 	 	
              John
                R. Plachetka, Pharm.D.

            
	 	 	
              Chairman,
                President and CEO

            
	 	 	 
	 	 	 
	 	
              EXECUTIVE:

            
	 	 	 
	 	 	 
	 	 	
              /s/
                William L. Hodges

            
	 	 	
              William
                L. Hodges

            
	 	 	 
	 	 	 


    

    



    
      
        
        

      

      
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