**Exhibit10.23**

 
| **** | **BIO–TECHNOLOGY GENERAL CORP.** |
|------|---------------------------------------|

**EmploymentAgreement**

**for**

**ErnestL. Kelly**

**SeniorVice President, Quality Assurance,**

**QualityControl and Regulatory Affairs**

 

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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                            |
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| Article 7.  Employment Terminations             |
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| Article 8. Change in  Control                   |
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| Article  9. Assignment                          |
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| Article 10. Legal  Fees and Notice              |
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| Article  11. Confidentiality and Noncompetition |
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| Article 12.  Outplacement Assistance            |
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| Article 13. Miscellaneous                       |
|                                            |
| Article  14. Governing Law                      |
|                                            |

 

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**Employment Agreement**

 

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

 

**Article 1. Term of Employment**

 

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

 

1.2                                 Commencingon the third (3rd) anniversary of the Effective Date, and eachanniversary thereafter, the term of this Agreement shall automatically beextended for one (1) additional year, unless at least ninety (90) days prior tosuch anniversary, the Company or the Executive shall have given notice inaccordance with Section 10.2 hereof that it or he does not wish to extend the termof the Agreement.

 

**Article 2. Definitions**

 

2.1           **“Agreement”** means thisEmployment Agreement.

 

2.2                                 **“AnnualBonus”** means the annual bonus to be paid to the Executive inaccordance with the Company’s annual bonus program as described in Section 5.3herein.

 

2.3                                 **“BaseSalary”** means the salary of record paid to the Executive as annualsalary, pursuant to Section 5.2, excluding amounts received under incentive orother bonus plans, whether or not deferred.

 

2.4                                 **“BeneficialOwner”** shall have the meaning ascribed to such term in Rule13d-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 Executivepursuant to Section 13.6 herein.

 

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

 

2.7           **“Cause”**means:

 

(a)     Executive materially breached any of theterms 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 criminaloffense involving a felony giving rise to a sentence of imprisonment;

 

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

 

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

 

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

 

(a)                                  Any consolidation or merger in which the Companyis not the continuing or surviving entity or pursuant to which shares of theCommon Stock would be converted into cash, securities, or other property, otherthan (i) a merger of the Company in which the holders of the Common Stockimmediately prior to the merger have the same proportionate ownership of commonstock of the surviving corporation immediately after the merger, or (ii) aconsolidation or merger which would result in the voting securities of theCompany outstanding immediately prior thereto continuing to represent (by beingconverted into voting securities of the continuing or surviving entity) morethan 50% of the combined voting power of the voting securities of thecontinuing or surviving entity immediately after such consolidation  or merger and which would result in the membersof the Board immediately prior to such consolidation or merger (including forthis purpose any individuals whose election or nomination for election wasapproved by a vote of at least two-thirds of such members) constituting amajority of the Board (or equivalent governing body) of the continuing orsurviving entity immediately after such consolidation or merger;

 

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

 

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

 

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

 

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

 

2.9                                 **“CICSeverance Benefits”**means the payment of severance compensationassociated with a Qualifying Termination occurring subsequent to a Change inControl, as described in Section 8.3.

 

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2.10         **“Code”**means the UnitedStates Internal Revenue Code of 1986, as amended.

 

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

 

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

 

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

 

2.14         **“Director”** means anyindividual 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 inthe Company’s long-term disability plan, or in any successor to such plan.

 

2.16         **“Effective Date”** meansJanuary 1, 2002.

 

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

 

2.18         **“Employment Date”**meansFebruary 5, 1996.

 

2.19                           **“Executive”**meansErnest L. Kelly, Ph.D. who, as of the Effective Date, resides at 159 Pine Lane,Yardley, Pennsylvania 19067.

 

2.20         **“Good Reason”**shall mean,without the Executive’s express written consent, the occurrence of any one ormore of the 

following:

 

(a)     Reducing the Executive’s Base Salary;

 

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

 

(c)               Failing to requireany Successor Company to assume and agree to perform the Company’s obligationshereunder;

 

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

 

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

 

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

 

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

 

2.21                           **“Notice ofTermination”**means a written notice****which shall indicate thespecific termination provision in this Agreement relied upon, and shall setforth in reasonable detail the facts and circumstances claimed to provide abasis for termination of the Executive’s employment under the provisions soindicated, and, where applicable, shall specifically include notice pursuant toSection 1.2 that Company has elected not to renew this Agreement.

 

2.22                           **“Person”**shallhave the meaning ascribed to such term in Section 3(a)(9) of theSecurities 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 themeaning ascribed to it in Section 3.1.

 

2.24                           **“QualifyingTermination”** means any of the events described in Section 8.2herein, the occurrence of which triggers the payment of CIC Severance Benefitshereunder.

 

2.25         **“Securities Exchange Act”**meansthe United States Securities Exchange Act of 1934, as amended.

 

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

 

2.27                           **“SeveranceBenefits”**means the payment of severance compensation as provided inSections 7.4 and 7.6 herein, and not payable due to a Change in Control ofthe Company.

 

2.28         **“Successor Company”**shallhave the meaning ascribed to it in Section 9.1.

 

2.29         **“Term”**shall mean that periodof time commencing on the Effective Date and ending on the Effective Date ofTermination.

 

**Article3. Position and Responsibilities**

 

3.1                                 Duringthe term of this Agreement, the Executive agrees to serve as Senior VicePresident, Quality Assurance, Quality Control, and Regulatory Affairs of theCompany or in such other position which Executive shall agree to accept or towhich Executive shall be promoted during the Term and Executive shall reportdirectly to the President or such other position

 

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which is at a higher position or level in the Companythan Executive and as shall be determined by the Chief Executive Officer in hissole discretion, and shall maintain the level of duties and responsibilities asin effect as of the Effective Date, or such higher level of duties andresponsibilities as Executive may be assigned during the Term (the “Position”).

 

**Article 4. Standard of Care**

 

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

 

**Article 5. Compensation**

 

5.1                                 Asremuneration for all services to be rendered by the Executive during the termof this Agreement, and as consideration for complying with the covenantsherein, the Company shall pay and provide to the Executive those items setforth in Sections 5.2 through 5.8.

 

5.2                                 **Base Salary**.****TheCompany shall pay the Executive a Base Salary in an amount which shall beestablished from time to time by the Board of Directors of the Company or theBoard’s designee; provided, however, that such Base Salary shall not be lessthan TWO-HUNDRED-TWENTY-FIVE-THOUSAND DOLLARS (US$225,000) per year.

 

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

 

(b)              The Base Salaryshall be reviewed at least annually following the Effective Date of thisAgreement, while this Agreement is in force, to ascertain whether, in thejudgment of the Board or the Board’s designee, such Base Salary should beincreased based primarily on the performance of the Executive during the year.If so increased, the Base Salary as stated above shall, likewise, be increasedfor all purposes of this Agreement and shall not, in any event, be decreased inany year.

 

5.3                                 **Annual Bonus**.****Inaddition to his Base Salary, the Executive shall be entitled to participate inthe Company’s annual short-term incentive program, as such program may existfrom time to time, at a level commensurate with the Position.  The percentage of Base Salary targeted asannual short-term incentive compensation shall be established for the Positionby the Company’s Compensation Committee in its sole discretion (the “targetedAnnual Bonus 

 

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award”). Executive acknowledges that the amount ofannual short-term incentive, if any, to be awarded shall be at the sole discretionof the Company’s Compensation Committee, may be less or more than the targetedAnnual bonus award, and will be based on a number of factors set in advance bythe Compensation Committee for each calendar year, including the Company’sperformance and the Executive’s individual performance. Nothing in this Section5.3 shall be construed as obligating the Company or the Board to refrain fromchanging, and/or amending the short-term incentive program, so long as suchchanges are equally applicable to all executive employees in the Company.

 

5.4                                 **Long-TermIncentives**.****The Executive shall be eligible toparticipate in the Company’s long-term incentive plan, as such shall be amendedor superseded from time to time provided, however, that nothing in this Section5.4 shall be construed as obligating the Company or the Board to refrain fromchanging, and/or amending the long-term incentive plan, so long as such changesare equally applicable to all executive employees in the Company.

 

5.5                                 **RetirementBenefits**.****The Company shall provide to the Executiveparticipation in any Company qualified defined benefit and defined contributionretirement plans as may be established during the term of this Agreement;provided, however, that nothing in this Section 5.5 shall be construed asobligating the Company to refrain from changing, and/or amending thenonqualified retirement programs, so long as such changes are equallyapplicable to all executive employees in the Company.

 

5.6                                 **EmployeeBenefits**.****During the Term, and as otherwise providedwithin the provisions of each of the respective plans, the Company shallprovide to the Executive all benefits to which other executives and employeesof the Company are entitled to receive, as commensurate with the Position,subject to the eligibility requirements and other provisions of sucharrangements as applicable to executives of the Company generally.

 

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

 

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

 

5.7                                 **Vacation.**  The Executive shall be entitled to such paidvacation as is customary for the Position in corporate institutions of similarsize and character, but in any event not less than twenty (20) paid vacationdays during each calendar year; provided, however, that without prior writtenapproval, Executive may carry forward into the next year no more than ten (10)unused vacation days from the current year.

 

5.8                                 **Perquisites**.****TheCompany shall provide to the Executive, at the Company’s expense, all perquisites which the Board may determinefrom time to time to provide; provided, however, that nothing in thisSection 5.8 shall be construed as obligating the Company or the Board torefrain from changing, and/or amending the perquisite program, so long as suchchanges are equally applicable to all executive employees in the Company.

 

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

 

**Article 6. Expenses**

 

6.1                                 Uponpresentation of appropriate documentation, the Company shall pay, or reimbursethe Executive for all ordinary and necessary expenses, in a reasonable amount,which the Executive incurs in performing his duties under this Agreementincluding, but not limited to, travel, entertainment, professional dues andsubscriptions, and all dues, fees, and expenses associated with membership invarious professional, business, and civic associations and societies.

 

**Article7. Employment Terminations**

 

7.1                                 **TerminationDue to Death**.****In the event the Executive’s employment isterminated while this Agreement is in force by reason of death, the Company’sobligations under this Agreement shall immediately expire. Notwithstanding theforegoing, the Company shall be obligated to pay to the Executive thefollowing:

 

(a)     Base Salary through the Effective Date ofTermination;

 

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

 

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

 

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

 

(e)               All other rightsand benefits the Executive is vested in, pursuant to other plans and programsof the Company.

 

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

 

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(g)              With the exceptionof 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 andthe Executive thereafter shall have no further obligations under thisAgreement.

 

7.2                                 **TerminationDue to Disability.**  In theevent that the Executive becomes Disabled during the term of this Agreement andis, therefore, unable to perform his duties herein for more thanone hundred eighty (180) total calendar days during any period of twelve(12) consecutive months, or in the event of the Board’s reasonable expectationthat the Executive’s Disability will exist for more than a period of onehundred eighty (180) calendar days, the Company shall have the right toterminate the Executive’s active employment as provided in this Agreement.

 

(a)               The Board shalldeliver written notice to the Executive of the Company’s intent to terminatefor Disability at least thirty (30) calendar days prior to the Effective Dateof Termination.

 

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

 

(c)               A termination forDisability shall become effective upon the end of the thirty (30) day noticeperiod. Upon the Effective Date of Termination, the Company’s obligations underthis Agreement shall immediately expire.

 

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

 

(1)               Base Salary throughthe Effective Date of Termination;

 

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

 

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

 

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

 

(5)               All other rightsand benefits the Executive is vested in, pursuant to other plans and programsof the Company.

 

(e)               The benefitsdescribed in Sections 7.2(d)(1) and (d)(4) shall be paid in cash to theExecutive in a single lump sum as soon as practicable following the EffectiveDate 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 

 

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7.2(d)(2) and (d)(3),shall be paid in accordance with the terms of such applicable plans or program.

 

(f)                 With theexception of the covenants contained in Articles 8, 9, 11, and 14 and Sections7.2(e), 13.3, 13.5, and 13.7 herein (which shall survive such termination), theCompany and the Executive thereafter shall have no further obligations underthis Agreement.

 

7.3                                 **VoluntaryTermination by the Executive**. The Executive may terminate thisAgreement at any time by giving Notice of Termination to the Board of Directorsof the Company, delivered at least fourteen (14) calendar days prior to theEffective Date of Termination.

 

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

 

(b)              Upon the EffectiveDate of Termination, following the expiration of the fourteen (14) day noticeperiod, the Company shall pay the Executive his full Base Salary and accruedbut unused vacation pay, at the rate then in effect, through the Effective Dateof Termination, plus all other benefits to which the Executive has a vestedright at that time (for this purpose, the Executive shall not be paid anyAnnual Bonus with respect to the fiscal year in which voluntary terminationunder this Section occurs).

 

(c)               With the exceptionof 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 andthe Executive thereafter shall have no further obligations under thisAgreement.

 

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

 

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

 

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

 

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

 

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(2)               An amount equal tothe Service Multiple times the Executive’s targeted Annual Bonus awardestablished for the fiscal year in which the Effective Date of Terminationoccurs; provided, however, that no payment shall be made under this Section7.4(b)(2) if the Effective Date of Termination is less than twelve (12) monthsafter the Employment Date;

 

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

 

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

 

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

 

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

 

(c)               For purposes ofthis Section 7.4, the term “Service Multiple” shall be equal to the quotientresulting from a formula the numerator of which is the lesser of (a) fullnumber of completed months that have elapsed since the Employment Date (but notless than 6 months) and (b) eighteen (18) and the denominator of which istwelve (12);

 

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

 

(e)               Payment of all ofthe benefits described in Section 7.4(b)(1) shall be paid in cash to theExecutive in equal bi-weekly installments over a period of consecutive monthsequal to 

 

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the Service Multiple times twelve (12) and beginningon the fifteenth day of the month following the month in which the EffectiveDate of Termination occurs.

 

(f)                 Payment of allbut forty thousand dollars ($40,000) of the benefits described inSection 7.4(b)(2) shall be paid in cash to the Executive in a single lumpsum as soon as practicable following the Effective Date of Termination, but inno event beyond thirty (30) days from such date.  The forty thousand dollars ($40,000) which was withheld shall bepaid 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 thisAgreement.

 

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

 

(h)              With the exceptionof the covenants contained in Articles 8, 9, 10, 11, 12 and 14 and Sections7.4, 13.3, 13.5, and 13.7 (which shall survive such termination), the Companyand the Executive thereafter shall have no further obligations under thisAgreement.

 

(i)                  Notwithstandinganything herein to the contrary, the Company’s payment obligations under thisSection 7.4 shall be offset by any amounts that the Company is required to payto the Executive under a national statutory severance program applicable tosuch Executive.

 

7.5                                 **Terminationfor Cause**. Nothing in this Agreement shall be construed to preventthe Board from terminating the Executive’s employment under this Agreement forCause.

 

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

 

(b)              In the event thisAgreement is terminated by the Board for Cause, the Company shall pay theExecutive his Base Salary and accrued vacation pay through the Effective Dateof Termination, and the Executive shall immediately thereafter forfeit allrights and benefits (other than vested benefits) he would otherwise have beenentitled to receive under this Agreement. The Company and the Executivethereafter shall have no further obligations under this Agreement with theexception of the covenants contained in Articles 9, 10, 11, and 14 and Sections13.3, 13.5, and 13.9 herein (which shall survive such termination).

 

7.6                                 **Terminationfor Good Reason**.****Except where Section 2.20(d) isapplicable, 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 oftermination by Executive may only be given pursuant to Section 7.3.  The Executive shall have sixty (60) daysfrom the date he learns of action taken by the Company that allows theExecutive to terminate his employment for Good Reason to provide the Board witha Notice of Termination.

 

(a)               The Notice ofTermination must set forth in reasonable detail the facts and circumstancesclaimed to provide a basis for such Good Reason termination.

 

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(b)              The Company shallhave thirty (30) days to cure such Company action following receipt of theNotice of Termination.

 

(c)               The Executive isrequired to continue his employment for the sixty (60) day period following thedate in which he provided the Notice of Termination to the Board. The Companymay waive the sixty (60) day notice period; however, the Executive shall beentitled to receive all elements of compensation described in Sections 5.1through 5.6 for the sixty (60) day notice period, subject to the eligibilityand participation requirements of any qualified retirement plan.

 

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

 

(1)               An amount equal toone-and-one-half (1.5) times the Executive’s annual Base Salary established forthe fiscal year in which the Effective Date of Termination occurs;

 

(2)               An amount equal toone-and-one-half (1.5) times the Executive’s targeted Annual Bonus awardestablished for the fiscal year in which the Effective Date of Terminationoccurs;

 

(3)               A continuation ofthe welfare benefits of health care, life and accidental death and dismemberment,and disability insurance coverage for one-and-one-half (1.5) years after theEffective Date of Termination (or if continuation under the Company’s thencurrent plans is not allowed, then provision at the Company’s expense butsubject to payment by Executive of those payments which Executive would havebeen obligated to make under the Company’s then current plan, of substantiallysimilar welfare benefits from one or more third party providers). Thesebenefits shall be provided to the Executive at the same coverage level, as ineffect as of the Effective Date of Termination and at the same premium cost tothe Executive which was paid by the Executive at the time such benefits wereprovided. However, in the event the premium cost and/or level of coverage shallchange for all employees of the Company, or for management employees withrespect to supplemental benefits, the cost and/or coverage level, likewise,shall change for the Executive in a corresponding manner. The continuation ofthese welfare benefits shall be discontinued prior to the end of theone-and-one-half (1.5) year period in the event the Executive has availablesubstantially similar benefits at a comparable cost to the Executive from asubsequent employer, as determined by the Compensation Committee (or, in theevent the Compensation Committee ceases to exist, the Board);

 

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

 

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

 

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

 

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

 

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

 

(g)              Payment of all butforty thousand dollars ($40,000) of the benefits described inSection 7.6(d)(1) and payment of all of the benefits described in Section7.6(d)(2) shall be paid in cash to the Executive in a single lump sum as soonas practicable following the Effective Date of Termination, but in no eventbeyond thirty (30) days from such date. The forty thousand dollars ($40,000)which was withheld shall be paid in cash to the Executive in a single lump sumat the end of the twelve (12) month restrictive period set forth inSections 11.2 and 11.3 of this Agreement.

 

(h)              Except as specificallyprovided in Section 7.6(g), all other payments due to the Executive upontermination of employment shall be paid in accordance with the terms of suchapplicable plans or programs.

 

(i)                  Notwithstandinganything herein to the contrary, the Company’s payment obligations under thisSection 7.6 shall be offset by any amounts that the Company is required to payto the Executive under a national statutory severance program applicable tosuch Executive.

 

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

 

**Article 8. Change in Control**

 

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

 

(a)               The Executive shallnot 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 endsdue to death, or Disability, or due to voluntary termination of employment bythe Executive without Good Reason.

 

(b)              CIC SeveranceBenefits shall be paid in lieu of all other benefits provided to the Executiveunder the terms of this Agreement.

 

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8.2                                 **QualifyingTermination**.****The occurrence of any one or more of thefollowing events on or after the date of the announcement of the transactionwhich leads to the CIC and up to twenty-four (24) months following the date ofthe CIC shall trigger the payment of CIC Severance Benefits to the Executiveunder this Agreement:

 

(a)               An involuntarytermination of the Executive’s employment by the Company for reasons other thanCause, death, or Disability, as evidenced by a Notice of Termination deliveredby the Company to the Executive;

 

(b)              A voluntarytermination by the Executive for Good Reason as evidenced by a Notice ofTermination delivered to the Company by the Executive;

 

(c)               Failure to renewthis Agreement (if the Agreement would expire unless renewed within suchperiod), as evidenced by a Notice of Termination delivered by the Company tothe Executive; or

 

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

 

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

 

(a)                                  Anamount equal to two (2)****times the Executive’s annual Base Salaryestablished for the fiscal year in which the Effective Date of Terminationoccurs;

 

(b)                                 Anamount equal to two (2)****times the Executive’s targeted AnnualBonus award established for the fiscal year in which the Executive’s EffectiveDate of Termination occurs;

 

(c)                                  Anamount equal to the Executive’s unpaid Base Salary and accrued but unusedvacation pay through the Effective Date of Termination;

 

(d)                                 Alloutstanding long-term incentive awards shall be subject to the treatmentprovided under the applicable long-term incentive plan of the Company;

 

(e)                                  Acontinuation of the welfare benefits of health care, life and accidental deathand dismemberment, and disability insurance coverage for two (2)****fullyears after the Effective Date of Termination (or if continuation under theCompany’s then current plans is not allowed, then provision at the Company’sexpense but subject to payment by Executive of those payments which Executivewould have been obligated to make under the Company’s then current plan, ofsubstantially similar welfare benefits from one or more third party providers).

 

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(1)                                  Thesebenefits shall be provided to the Executive at the same coverage level, as ineffect as of the Effective Date of Termination or, if greater, as in effectsixty (60) days prior to the date of the Change in Control, and at the samepremium cost to the Executive which was paid by the Executive at the time suchbenefits were provided.

 

(2)                                  Inthe event the premium cost and/or level of coverage shall change for allemployees of the Company, or for management employees with respect tosupplemental benefits, the cost and/or coverage level, likewise, shall changefor the Executive in a corresponding manner.

 

(3)                                  Thecontinuation of these welfare benefits shall be discontinued prior to the endof the****twoyear period in the event the Executive has available substantially similarbenefits at a comparable cost to the Executive from a subsequent employer, asdetermined by the Compensation Committee (or, in the event the CompensationCommittee ceases to exist, the Board).

 

8.4                                 **Form andTiming of Severance Benefit**. Payment of all of the benefitsdescribed in Sections 8.3(a) through (c) shall be paid in cash to the Executivein a single lump sum as soon as practicable following the Effective Date ofTermination, but in no event beyond thirty (30) days from such date. All otherpayments due to the Executive upon termination of employment shall be paid inaccordance with the terms of such applicable plans or programs.

 

8.5                                 **Excise Tax**.In the event that a Change in Control occurs, and a determination is made bythe Company pursuant to Section 280G and 4999 of the Code that a goldenparachute excise tax is due, the benefits provided to the Executive under thisAgreement that are classified as “parachute payments” (as such term is definedin Section 280G of the Code), shall be limited to the amount just necessary toavoid the excise tax.

 

(a)               This limitationshall be applied if, and only if, such a limitation results in a greater net(of excise tax) cash benefit to the Executive than he would receive had thebenefits not been capped and an excise tax been levied.

 

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

 

**Article 9. Assignment**

 

9.1                                 **Assignmentby Company**.****This Agreement may and shall be assignedor transferred to, and shall be binding upon and shall inure to the benefit ofany Successor Company, with Successor Company for purposes of this Agreementbeing 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 inthe event of a CIC.

 

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

 

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

 

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

 

9.2                                 **Assignmentby Executive**.****This Agreement shall inure to the benefitof and be enforceable by the Executive’s personal or legal representatives,executors, administrators, successors, heirs, distributees, devisees, andlegatees.

 

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

 

(b)              If the Executive hasnot named a Beneficiary, then such amounts shall be paid to the Executive’sdevisee, legatee, or other designee, or if there is no such designee, to theExecutive’s estate.

 

**Article 10. Legal Fees and Notice**

 

10.1                           **Payment ofLegal Fees**.****To theextent permitted by law, the Company shall pay all legal fees, costs oflitigation, prejudgment interest, and other expenses incurred by Executive incontesting a termination, if Executive prevails.

 

10.2                           **Notice**.****Anynotices, requests, demands, or other communications provided by this Agreementshall be sufficient if in writing and if sent by registered or certifiedmail to the Executive at the last address he has filed in writing with theCompany or, in the case of the Company, at its principal offices to theattention of the General Counsel.

 

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**Article11. Confidentiality and Noncompetition**

 

11.1                           **Disclosureof Information**.****The Executive recognizes that he hasaccess to and knowledge of confidential and proprietary information of theCompany that is essential to the performance of his duties under thisAgreement.

 

(a)               The Executive willnot, during and for five (5) years after the term of his employment by theCompany, 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 assuch information has not otherwise been disclosed to the public or is nototherwise in the public domain except as required by law or pursuant toadministrative or legal process.

 

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

 

11.3                           **NoncompeteFollowing a Termination of Employment**.****From the Effective Date of thisAgreement until six (6) months following the Executive’s Effective Date ofTermination for any reason, the Executive will not: (a) directly or indirectlyown any equity or proprietary interest in (except for ownership of shares in a publiclytraded company not exceeding three percent (3%) of any class of outstandingsecurities), or be an employee, agent, director, advisor, or consultant to orfor any competitor of the Company, whether on his own behalf or on behalf ofany person; or (b) undertake any action to induce or cause any customer orclient 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 inControl, the Executive shall be released from each of the covenants set forthin Section 11.2 and 11.3, if such Executive is terminated by the Companywithout Cause or if the Executive terminates his employment with the Companyfor Good Reason.

 

**Article12. Outplacement Assistance**

 

12.1                           Following a termination of employment, other thanfor Cause, the Executive shall be reimbursed by the Company for the costs ofall outplacement services obtained by the Executive within the two (2) yearperiod after the Effective Date of Termination; provided, however, that thetotal 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.

 

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**Article 13. Miscellaneous**

 

13.1                           **EntireAgreement**.****With the exception of the Company’sProprietary Information and Inventions Agreement previously executed by Executive, this Agreement supersedes anyprior agreements (specifically, the prior employment agreement executed by theExecutive as of  January 29, 1996, andany and all amendments thereto), or understandings, oral or written, betweenthe parties hereto or between the Executive and the Company, with respect tothe subject matter hereof, and constitutes the entire agreement of the parties withrespect thereto.

 

13.2                           **Modification**.****ThisAgreement shall not be varied, altered, modified, canceled, changed, or in anyway amended except by mutual agreement of the parties in a written instrumentexecuted by the parties hereto or their legal representatives.

 

13.3                           **Severability**.****Inthe event that any provision or portion of this Agreement shall be determinedto be invalid or unenforceable for any reason, the remaining provisions of thisAgreement shall be unaffected thereby and shall remain in full force andeffect.

 

13.4                           **Counterparts**.****ThisAgreement may be executed in one (1) or more counterparts, each of which shallbe deemed to be an original, but all of which together will constitute one andthe same Agreement.

 

13.5                           **TaxWithholding**.****The Company may withhold from any benefitspayable under this Agreement all federal, state, city, or other taxes as may berequired pursuant to any law or governmental regulation or ruling.

 

13.6                           **Beneficiaries**.****Tothe extend allowed by law, any payments or benefits hereunder due to theExecutive at the time of his death shall nonetheless be paid or provided andthe Executive may designate one or more persons or entities as the primaryand/or contingent beneficiaries of any amounts to be received under thisAgreement. Such designation must be in the form of a signed writing acceptableto the Board or the Board’s designee. The Executive may make or change suchdesignation at any time.

 

13.7                           **PaymentObligation Absolute**. Absent actions deliberately or willfully takenby the Executive to materially injure the Company, the Company’s obligation tomake the payments and the arrangement provided for herein shall be absolute andunconditional, and shall not be affected by any circumstances, including,without limitation, any offset, counterclaim, recoupment, defense, or otherright which the Company may have against the Executive or anyone else.

 

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

 

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

 

(c)               The Executive shallnot be obligated to seek other employment in mitigation of the amounts payableor arrangements made under any provision of this Agreement, and the obtainingof any such other employment shall in no event effect any reduction of theCompany’s obligations to make the payments and arrangements required to be madeunder this Agreement.

 

**Article 14. Governing Law**

 

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

 

**IN WITNESS WHEREOF**, the Company, throughits duly authorized representative, and the Executive have executed thisAgreement as of the Effective Date.

 
|   | Executive:                        |
|--------|-----------------------------------|
|   |                              |
|   | /s/ Ernest L. Kelly               |   |
|   | Ernest L. Kelly, Ph.D.            |
|   |                              |
|   | Company:                          |
|   |                              |
|   | **Bio-Technology  General Corp.** |
|   |                              |
|   | By:                               |  /s/ Sim Fass |   |
|   | Sim Fass                          |
|   | Chairman &  CEO               |
|   |                              |
|        |                                   |  |  |  |

 

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