**Exhibit10.1**

 

**EMPLOYMENTAGREEMENT**

 

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

 

**WITNESSETH:**

 

NOW, THEREFORE, inconsideration of Executive’s continued employment, the covenants and mutualagreements set forth herein and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties hereto dohereby agree as follows:

 

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

 

2.               *Term of Employment*.    Theterm of Executive’s employment by the Company hereunder shall continuethereafter unless sooner terminated as a result of Executive’s death or inaccordance with the provisions of Section 7 below (the “Term”).

 

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

 

4.               *Compensation*.

 

(a)                                                          *Salary*.    For any andall services performed by Executive under this Agreement during the Term, inwhatever capacity, the Company shall pay to Executive an annual salary of TwoHundred Thousand Dollars ($200,000.00) per year (the “Salary”) less any and allapplicable federal, state and local payroll and withholding taxes. The Salaryshall be paid in the same increments as the Company’s normal payroll, but noless frequent than bi-monthly and prorated, however, for any period of lessthan a full month. The Salary will be reviewed annually by the CompensationCommittee of the Board of Directors and a determination shall be made at thattime as to the appropriateness of an increase, if any, thereto.

 

(b)                                                         *Bonus*.    Inaddition to the Salary, Executive shall be eligible to receive from the Companyan incentive compensation bonus (the “Bonus”) of up

 

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

 

5.               *Restricted Stock Award.*Subject toapproval by the Board of Directors (or an appropriate Committee appointed bythe Board of Directors) and your execution of a formal restricted stock awardagreement, First Horizon Pharmaceutical will grant you 4,000 shares ofrestricted Company stock on the commencement date of your employment. Stockprice shall be the average stock trading price on the date Executive’semployment commences. Such restricted stock award shall vest ratably over afour (4) year period commencing from the date of the restricted stock award. Thefirst vesting period shall occur one (1) year from the date of the restrictedstock award. Both stock price and vesting schedule shall be specifically setforth in the restricted stock option agreement to be executed by Executive andthe Company.

 

6.               *Benefits and Other Rights*.    Inconsideration for Executive’s performance under this Agreement, the Companyshall provide to Executive the following benefits:

 

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

 

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

 

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

 

*7.**              Termination of the Term*.

 

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

 

(i)                                     Executiveshall die;

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     Executiveshall be convicted of the commission of a felony or a crime involvingdishonesty, fraud or moral turpitude;

 

(ii)                                  Executivehas engaged in acts of fraud, embezzlement, theft or other dishonest actsagainst the Company;

 

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

 

(iv)                              Executive’sgross neglect or willful misconduct in the discharge of his duties andresponsibilities; or

 

(v)                                 Executive’srepeated refusal to follow the lawful direction of the Board of Directors orsupervising officers.

 

(d)                                                         Forpurposes of this Agreement, “Change of Control” shall mean the occurrence ofany of the following:

 

(i)                                     Theacquisition (other than by a direct purchase of shares from the Company) by any“person,” including a “syndication” or “group”, as those terms are used inSection 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, asamended (other than any such person currently owning in excess of the followingamount), of securities representing 20% or more of the combined voting power ofthe Company’s then outstanding voting securities, which is any security thatordinarily possesses the power to vote in the election of the Board ofDirectors of a corporation without the happening of any precondition orcontingency;

 

(ii)                                  TheCompany is merged or consolidated with another corporation and immediatelyafter giving effect to the merger or consolidation less than 80% of theoutstanding voting securities of the surviving or resulting entity are thenbeneficially owned in the aggregate by (x) the stockholders of the Companyimmediately prior to such merger or consolidation, or (y) if a record datehas been set to determine the stockholders of the Company entitled to vote onsuch merger or consolidation, the stockholders of the Company as of such recorddate;

 

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

 

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

 

(v)                                 TheCompany approves a plan or proposal for dissolution on liquidation of theCompany.

 

(e)                                                          Forpurposes of this Agreement, “Good Reason” shall mean the occurrence of any oneor more of the following events which continues uncured for a period of notless thirty (30) days following written notice given by Executive to theCompany within fifteen (15) days following the occurrence of such event,unless the Executive specifically agrees in writing that such event shall notbe Good Reason:

 

(i)                                     Anymaterial breach of this Agreement by the Company;

 

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

 

(iii)                               Therequirement by the Company that Executive perform his services hereunderprimarily at a location outside of the metropolitan Atlanta, Georgia area; or

 

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

 

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

 

(a)                                                          Immediatelyresign from any and all other positions or committees which Executive holds oris a member of with the Company or any subsidiary of the Company including, butnot limited to, as an officer and director of the Company or any subsidiary ofthe Company.

 

(b)                                                         Providethe Company with all reasonable assistance necessary to permit the Company tocontinue its business operations without interruption and in a mannerconsistent with reasonable business practices; provided, however, that suchtransition period shall not exceed thirty (30) days after termination norrequire more than twenty (20) hours of Executive’s time per week andExecutive shall be promptly reimbursed for all out-of-pocket expenses.

 

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

 

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

 

(d)                                                         Otherthan as provided in this Section 8, upon a termination of employment allother benefits and/or entitlements to participate in programs or benefits, ifany, will cease as of the effective date except medical insurance coverage thatmay be continued at Executive’s own expense as provided by applicable law orwritten Company policy.

 

(e)                                                          Upontermination of Executive pursuant to § 7(a)(i) or § 7(a)(ii) withoutCause following the six (6) month anniversary of the Effective Date, theCompany shall: (i) provide Executive with Salary continuance, subject to §8(h) for six (6) months (a “Salary Continuance”) at the rate in effectimmediately prior to termination, plus (ii) a lump sum payment equal to FiftyPercent (50%) of the Bonus, if any, paid to Executive for the calendar yearimmediately preceding termination, plus (iii) provide six (6) monthsof COBRA coverage for Executive which shall be substantially equivalent to thatprovided by the Company prior to termination, plus (iv) the Executive’sthen unvested options and stock awards previously issued pursuant to theCompany’s stock option and other equity incentive plans shall immediately vestand be exercisable as provided for in the First Horizon PharmaceuticalCorporation Accelerated Vesting Plan, dated January 24, 2006. In the event oftermination of Executive’s employment prior to the six (6) monthanniversary of the Effective Date, Executive shall not be entitled to anyseverance from the Company.

 

(f)                                                            Upontermination of Executive pursuant to § 7(a)(ii) withCause or § 7(b)(i), the Company shall pay Executive or Executive’s estate allSalary accrued but unpaid as of the date of such termination.

 

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

 

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

 

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Continuancepayments. Failure of Executive to promptly report thereceipt of any compensation from a third party or the acceptance of a newposition shall entitle the Company to terminate all remaining Salary Continuanceand COBRA benefits and to seek restitution for any payments made to Executivesubsequent to such job acceptance or compensation receipt.

 

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

 

(j)                                                             Ifthe Company or the Company’s accountants determine that the payments called forunder Section 8(g) of this Agreement either alone or in conjunction withany other payments or benefits made available to the Employee by the Companywill result in the Employee being subject to an excise tax (“Excise Tax”) underSection 4999 of the Internal Revenue Code of 1986, as amended (the “Code”),or if an Excise Tax is assessed against Executive as a result of such paymentsor other benefits, the Company shall make a Gross-Up Payment (as defined below)to or on behalf of Executive as and when such determination(s) andassessments(s), as appropriate, are made, subject to the conditions of thissubsection (i). A “Gross-Up Payment” shall mean a payment to or on behalf ofExecutive that shall be sufficient to pay (i) any Excise Tax in full, (ii) anyfederal, state and local income tax and Social Security or other employment taxon the payment made to pay such Excise Tax as well as any additional Excise Taxon the Gross-Up Payment, and (iii) any interest or penalties assessed bythe Internal Revenue Service on Executive if such interest or penalties areattributable to the Company’s failure to comply with its obligations under thissubsection (i) or applicable law. Any determination under this subsection(i) by the Company or the Company’s accountants shall be made inaccordance with Section 280G of the Code, any applicable relatedregulations (whether proposed, temporary or final), any related InternalRevenue Service rulings and any related case law, and shall assume thatExecutive shall pay Federal income taxes at the highest marginal rate in effectfor the year in which the Gross-Up Payment is made and state and local incometaxes at the highest marginal rate in effect in the state of Executive’sresidence for such year. Executive shall take such action (other than waivingEmployee’s right to any payments or benefits) as the Company reasonablyrequests under the circumstances to mitigate or challenge such tax. If theCompany reasonably requests that Executive take action to mitigate orchallenge, or to mitigate and challenge, any such tax or assessment andExecutive complies with such request, the Company shall provide Executive withsuch information and such expert advice and assistance from the Company’saccountants, lawyers and other advisors as Executive may reasonably request andshall pay for all expenses incurred in effecting such compliance and anyrelated fines, penalties, interest and other assessments. Subject to theprovisions of this subsection (i), all determinations required to be made underthis subsection (i), including whether and when a Gross-Up Payment is

 

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required and the amountof such Gross-Up Payment and the assumptions to be utilized in arriving at suchdetermination, shall be made by the public accounting firm that is retained bythe Company as of the date immediately prior to the Change of Control (the “AccountingFirm”) which shall provide detailed supporting calculations both to the Companyand Executive within thirty (30) business days of the receipt of noticefrom the Company or Executive that there has been a payment that could triggera Gross-Up Payment, or such earlier time as is requested by the Company(collectively, the “Determination”). In the event that the Accounting Firm isserving as accountant or auditor for the individual, entity or group effectingthe Change of Control, Executive may appoint another nationally recognizedpublic accounting firm to make the determinations required hereunder (whichaccounting firm shall then be referred to as the Accounting Firm hereunder).All fees and expenses of the Accounting Firm shall be borne solely by theCompany and the Company shall enter into any agreement requested by theAccounting Firm in connection with the performance of the services hereunder.The Gross-Up Payment under this subsection (i) with respect to anypayments shall be made no later than sixty (60) days following suchpayments. If the Accounting Firm determines that no Excise Tax is payable byExecutive, it shall furnish Executive with a written opinion to such effect,and to the effect that failure to report the Excise Tax, if any, on Executive’sapplicable federal income tax return will not result in the imposition of anegligence or similar penalty. The Determination by the Accounting Firm shallbe binding upon the Company and Executive. As a result of the uncertainty inthe application of Section 4999 of the Code at the time of theDetermination, it is possible that Gross-Up Payments which will not have beenmade by the Company should have been made (“Underpayment”) or Gross-up Paymentsare made by the Company which should not have been made (“Overpayment”),consistent with the calculations required to be made hereunder. In the eventthat Executive thereafter is required to make payment of any additional ExciseTax, the Accounting Firm shall determine the amount of the Underpayment thathas occurred and any such Underpayment (together with interest at the rateprovided in Section 1274(b)(2)(B) of the Code)shall be promptly paid by the Company to or for the benefit of Executive. Inthe event the amount of the Gross-Up Payment exceeds the amount necessary toreimburse Executive for his Excise Tax as herein set forth, the Accounting Firmshall determine the amount of the Overpayment that has been made and any suchOverpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive to orfor the benefit of the Company. Executive shall cooperate to the extentExecutive’s expenses are reimbursed by the Company, with any reasonablerequests by the Company in connection with any contests or disputes with theInternal Revenue Service in connection with the Excise Tax.

 

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

 

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(a)                                                          Performservices for a Competing Business that are substantially similar in whole or inpart to those that he performed for the Company in his role as Executive VicePresident and Chief Medical Officer, including specifically, but not limitedto, the sale or marketing of drug products or the management of individualsinvolved in the sale or marketing of drug products. For purposes of thiscovenant, the term “Competing Business” shall mean any company engaged in thedevelopment, marketing or sale of prescription drug products, including genericand nongeneric drug products, which are competitive with: (1) thoseproducts being marketed by the Company at the time of Executive’s termination;or (2) those products that Executive was aware were under development bythe Company and expected to be marketed within two (2) years of Executive’stermination. This covenant shall apply only within the “Territory” which isdefined as the fifty states of the United States. Executive recognizes andagrees that in capacity of Executive Vice President and Chief Medical Officer,his duties extend throughout the entire service area of the Company whichincludes, at a minimum, the fifty states of the United States and that, becauseof the executive nature of Executive’s position with the Company, in order toafford the Company protection from unfair competition by the Executivefollowing his termination of employment, this covenant must extend throughoutthe stated Territory. Executive further acknowledges that this covenant doesnot prohibit him from engaging in his entire trade or business but only a verylimited segment of the pharmaceuticals industry

 

(b)                                 Solicitany current supplier, customer or client of the Company with whom Executivedealt, or with whom anyone in Executive’s direct chain of command dealt, onbehalf of the Company within the year preceding Executive’s termination ofemployment, for the purpose of purchasing drug products (or ingredients of drugproducts) or selling or marketing drug products, including generic andnongeneric drug products, which are competitive with: (1) those productsbeing marketed by the Company at the time of Executive’s termination; or (2) thoseproducts that Executive was aware were under development by the Company andexpected to be marketed within two (2) years of Executive’s termination.Notwithstanding this subsection (b), Executive may solicit suppliers that haveexcess capacity as reasonably determined by the Company.

 

*10.**       Confidentiality*.    Attachedto this Agreement as Exhibit A is the form of the Employee/IndependentContractor Confidentiality and Non-Solicitation Agreement (the “ConfidentialityAgreement”) which the Company requires all employees, including, but notlimited to, the Executive, to execute and which is a part of each employee’sterms of employment. By signing this Agreement, Executive acknowledges havingreceived, read, executed and delivered to the Company a copy of theConfidentiality Agreement and agrees that the terms of the ConfidentialityAgreement shall be incorporated by reference into this Agreement and shall beconsidered as part of the terms and conditions of Executive’s continuedemployment with the Company.

 

*11.**       Remedies*.

 

(a)                                                          Thecovenants of Executive set forth in Section 9 and Section 10 areseparate and independent covenants for which valuable consideration has beenpaid, the receipt, adequacy and sufficiency of which are acknowledged byExecutive, and have also been made by Executive to induce the Company to enterinto this Agreement and continue

 

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

 

(b)                                                         Eachof the covenants contained in Section 9 and Section 10 above shall beconstrued as agreements which are independent of any other provision of thisAgreement, and the existence of any claim or cause of action by any partyhereto against any other party hereto, of whatever nature, shall not constitutea defense to the enforcement of such covenants. If any of such covenants shallbe deemed unenforceable by virtue of its scope in terms of geographical area,length of time or otherwise, but may be made enforceable by the imposition oflimitations thereon, Executive agrees that the same shall be enforceable to thefullest extent permissible under the laws and public policies of thejurisdiction in which enforcement is sought. The parties hereto herebyauthorize any court of competent jurisdiction to modify or reduce the scope ofsuch covenants to the extent necessary to make such covenants enforceable.

 

(c)                                                          Inthe event that Executive believes that the Company is in violation of amaterial obligation owed to Executive under this Agreement, and the Executivehas given notice of such violation to the Company requesting that the Companycure such violation, and within twenty (20) business days the Company hasnot undertaken steps to cure such violation or to provide information toExecutive demonstrating that the Company is not in violation of the Agreement,and as a result of such failure to cure or dispute such violation, theExecutive terminates the Agreement in accordance with Section 7(b),Executive shall not be barred from seeking employment with a competitornotwithstanding the restriction of Section 9(a); provided, however, thatall other restrictions contained in this Agreement, including, but not limitedto the covenants in Section 9(b) and in Section 10, shall remain infull force and effect.

 

*12.**       Enforcement Costs*.    Ifany legal action or other proceeding is brought for the enforcement of thisAgreement, or because of an alleged dispute, breach, default ormisrepresentation in connection with any provisions of this Agreement, thesuccessful or prevailing party or parties shall be entitled to recoverreasonable attorney’s fees, court costs and all expenses even if not taxable ascourt costs (including, without limitation, all such fees, costs and expensesincident to appeal and other post judgment proceedings), incurred in thataction or proceeding, in addition to any other relief to which such party orparties may be entitled. Attorney’s fees shall include, without limitation,paralegal fees, investigative fees, administrative costs, sales and use taxesand all other charges billed by the attorney to the prevailing party.

 

*13.**       Notices*.    Anyand all notices necessary or desirable to be served hereunder shall be inwriting and shall be:

 

(a)                                                          Personallydelivered, or

 

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(b)                                                         Sentby certified mail, postage prepaid, return receipt requested, or guaranteedovernight delivery by a nationally recognized express delivery company, in eachcase addressed to the intended recipient at the address set forth below.

 

(c)                                                          Fornotices sent to the Company:

 

First HorizonPharmaceutical Corporation6195 Shiloh RoadAlpharetta, Georgia 30005Telephone No.: (770) 442-9707Facsimile No.: (770) 442-9594

 

(d)                                                         Fornotices sent to Executive:

 

Mr. Larry M. Dillaha

403 N. Cameron Court

Nashville, TN 37076

 

Either party hereto mayamend the addresses for notices to such party hereunder by delivery of awritten notice thereof served upon the other party hereto as provided herein.Any notice sent by certified mail as provided above shall be deemed deliveredon the third (3rd) business day next following the postmark date which itbears.

 

*14.**       Entire Agreement*.    ThisAgreement sets forth the entire agreement of the parties hereto with respect tothe subject matter hereof, and specifically supersedes any other agreement orunderstanding among the parties hereto related to the subject matter hereof,including, without limitation, the Original Agreement. This Agreement may notbe modified or revised except pursuant to a written instrument signed by theparty against whom enforcement is sought.

 

*15.**       Severability*.    Theinvalidity or unenforceability of any provision hereof shall not affect theenforceability of any other provision hereof, and except as otherwise providedin Section 10 above, any such invalid or unenforceable provision shall besevered from this Agreement.

 

*16.**       Waiver*.    Failureto insist upon strict compliance with any of the terms or conditions hereofshall not be deemed a waiver of such term or condition, and the waiver orrelinquishment of any right or remedy hereunder at any one or more times shallnot be deemed a waiver or relinquishment of such right or remedy at any othertime or times.

 

*17.**       Arbitration*.    Anyclaims, disputes or controversies arising out of or relating to this Agreementbetween the parties (other than those arising under Section 10) shall besubmitted to arbitration by the parties. The arbitration shall be conducted in Atlanta,Georgia in accordance with the rules of the American Arbitration Associationthen in existence and the following provisions: Either party may serve upon theother party by guaranteed overnight delivery by a nationally recognized expressdelivery service, written demand that the dispute, specifying in detail itsnature, be submitted to arbitration. Within seven (7) business days after theservice of such demand, each of the parties shall appoint an arbitrator andserve written notice by guaranteed overnight delivery by a nationally recognizedexpress delivery service, of such appointment upon the other party. The twoarbitrators appointed shall appoint a third

 

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arbitrator.The decision of two arbitrators in writing under oath shall be final andbinding upon the parties. The arbitrators shall decide who is to pay theexpenses of the arbitration. If the two arbitrators appointed fail to agreeupon a third arbitrator within ten days after their appointment, then anapplication may be made by either party, upon notice to the other party, to anycourt of competent jurisdiction for the appointment of a third arbitrator, andany such appointment shall be binding upon both parties.

 

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

 

*19.**       Benefit and Assignability*.    ThisAgreement shall inure to the benefit of and be binding upon the Company and itssuccessors and assigns. The rights and obligations of Executive hereunder arepersonal to him, and are not subject to voluntary or involuntary alienation,transfer, delegation or assignment.

 

IN WITNESS WHEREOF, theparties hereto have executed this Employment Agreement as of the day and yearfirst above written. 

 
|   |   | EXECUTIVE:                                |
|--------|--------|-------------------------------------------|
|   |   |                                      |
|   |   | /s/ LARRY M. DILLAHA                      |   |
|   |   | Name: Larry M. Dillaha                    |
|   |   |                                      |
|   |   | FIRST HORIZON PHARMACEUTICAL  CORPORATION |
|   |   |                                      |
|   |   | By:                                       | /s/ PATRICK FOURTEAU |   |
|   |   | Name:                                     | Patrick Fourteau, Chief  Executive Officer |
|        |        |                                           |  |  |  |

 

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**EXHIBIT A**

 

**FirstHorizon Pharmaceutical Corporation**

 

**Employee/ Independent Contractor**

**Confidentiality,Non-Solicitation and Non-Competition Agreement**

 

**Employee or Independent Contractor Name:**

 

Thegrowth and success of First Horizon Pharmaceutical Corporation (“FHPC”) arelargely dependent on two key assets, our proprietary information and our highlycompetent employees and independent contractors. Our employees are obtained byrecruiting the best people available and giving themopportunities to advance and share in the success of FHPC.

 

Ourproprietary information (confidential items and information not generally knownoutside of FHPC) is obtained by research and product development, businessdevelopment conducted by FHPC, product improvements, marketing and salesmethods, and service to customers. Many FHPC employees make majorcontributions, and independent contractors may do so as well. These result in apool of information and expertise, which enables FHPC to conduct its businesswith unusual success, and thus with unusual potential for its employees andindependent contractors. However, this potential exists only as long as thisinformation and expertise are retained within FHPC. Once generally known, thisinformation gives no advantages to FHPC, its employees, its independentcontractors, or its stockholders.

 

In effect, all FHPCemployees and independent contractors have a common interest and responsibilityin seeing that no one employee or independent contractor accidentally orintentionally discloses or distributes this pool of information and expertisein an unauthorized manner. To help protect you, other employees or independentcontractors, and FHPC against such disclosure, this Agreement has been preparedso that we have a common understanding concerning your responsibilities in thisconnection. Please read this Agreement carefully so that you may understand itsimportance.

 

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

 

1.                                       DefinedTerms: The following definitions will have the meanings indicated when usedin this document:

 

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

 

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(b)                                 Inventionmeans any invention, original work of authorship, development, concept, tradesecret, discovery, innovation or improvement (whether or not patentable, orregistratable under copyright or similar laws) made, initiated, conceived, orfirst actually or constructively reduced to practice by me, closely or jointlywith others:

 

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

 

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

 

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

 

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

 

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

 

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

 

Thisdefinition of invention includes each and every invention and/or improvementthat I may make or conceive, either solely or jointly with others, within oneyear after termination of employment for any reason with FHPC if and to theextent the invention and/or improvement results from any work for FHPC, any useof FHPC’s premises or property or any use of FHPC’s confidential items orconfidential information.

 

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

 

2.                                       Protectionof Confidential Information

 

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

 

(b)                                 Section2 will not apply to any information which:

 

(i)                                     is or becomes publicly known under circumstances involvingno breach by me of the terms of this Section 2, however, ConfidentialInformation

 

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shallnot be publicly known by reason of such information’s or item’s being availablein isolated segments in two or more readily available public documents,

 

(ii)                                  is generally disclosed to third parties by FHPC withoutrestriction on such third parties, or

 

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

 

exceptthat a breach by me of my obligations under this Section 2 shall not beabsolved by the subsequent occurrence of any of the exceptions above.

 

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

 

(d)                                 Iacknowledge that my agreement to protect Confidential Information among otherthings prohibits me from communicating Confidential Information to formeremployees of FHPC, both while I am employed by FHPC and after termination of myemployment for the duration of my agreement which is set forth in Section 2(a).

 

(e)                                  Ishall submit to FHPC any proposed publication which contains any discussionrelating to FHPC, any Confidential Information, or Invention of FHPC, or anywork performed by me during the course of my employment with FHPC. Unless I amnotified by FHPC that such publication contains Confidential Information withinninety (90) days of FHPC’s written acknowledgement of receipt of suchpublication, I may proceed with such publication. This provision extends topublications that are written and/or published after the termination of myemployment.

 

(f)                                    Myemployment with FHPC and performance of my duties and responsibilities as anemployee do not and will not breach any agreement, which obligated me to keepin confidence any trade secrets or confidential information of any other partyor to refrain from competing, directly or indirectly, with the business of anyother party, and I shall not disclose to FHPC any trade secrets, ConfidentialInformation of any other party.

 

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

 

3.                                       Inventionsand Patents

 

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

 

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

 

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

 

(c)                                  Iwill disclose to FHPC promptly all Inventions.

 

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

 

(e)                                  Ishall, at FHPC’s expense, execute declarations, further assignments, documentsand other instruments as necessary or desirable to fully and completely assignall Inventions to FHPC or its designee and to assist FHPC or its designee inapplying for, prosecuting and enforcing patents, copyrights or otherintellectual property rights in the United States and in any foreign countrywith respect to any Invention. I understand that this obligation shall continueto exist after the termination of my employment, regardless of the reasons forand circumstances of termination. If FHPC is unable because of my mental orphysical incapacity or for any other reason to secure my signature to apply foror to pursue any application for any United States or foreign patents orcopyright registrations covering Inventions assigned to FHPC as above, then Ihereby irrevocably designate and appoint FHPC and its duly authorized officersand agents as my agent and attorney-in-fact, to act for and in my behalf andstead to execute and file any such applications and to do all other lawfullypermitted acts to further the prosecution and issuance of letters patent orcopyright registrations thereon with the same legal force and effect as ifexecuted by me.

 

4.                                       CopyrightableMaterial

 

# Withoutlimiting the above, I specifically agree that all copyrightable materialsgenerated or developed by me in connection with my duties and responsibilitieswith FHPC and under this Agreement, including but not limited to advertisingmaterials, product name and identities, product instructions, laboratorynotebooks, protocols, scientific publications, artistic and product designs,sketches, technical bulletins, computer programs, computer files, computersoftware, and computer databases, shall be considered works made for hire underthe copyright laws of the United States and that they shall, upon creation, beowned exclusively by FHPC. To the extent that any such materials, underapplicable law, may not be considered works made for hire, I hereby assign toFHPC the ownership of all copyrights in such materials, without the necessityof

 

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# any furtherconsideration, and FHPC shall be entitled to register and hold in its own nameall copyrights in respect of such materials.

 

5.                                       Non-Solicitation.

 

Iagree that during my employment by FHPC and for three (3) years from thetermination of such employment for any reason, I will not, either directly orindirectly, on my own behalf or in the service of or on behalf of others,solicit, divert or recruit, or attempt to solicit, divert or recruit, anyemployee of FHPC, with whom I had contact during my employment with FHPC, toleave such employment, whether or not such employment is pursuant to a writtencontract with the Company or at will.

 

6.                                       NoCompetition

 

Whileemployed at FHPC, I will not provide services to any other pharmaceutical orrelated company (excluding Northhampton Medical, Inc.) which is the same orsimilar to the services I have provided to First Horizon. I understand that thepreceding sentence does not apply to me to the extent I am an independentcontractor of FHPC.

 

7.                                       Expenses

 

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

 

8.                                       No Assuranceor Obligation of Employment

 

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

 

9.                                       Costs

 

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

 

10.                                 Miscellaneous

 

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

 

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

 

(c)                                                          Thevalidity, construction, enforcement and interpretation of this Agreement shallbe governed by the internal laws (and not the laws of conflicts) of the Stateof Georgia. I agree that the state and federal courts of the Northern Districtof Georgia shall have exclusive jurisdiction and venue of any litigationarising out of or relating to this Agreement and my employment or thetermination of my employment with FHPC and I hereby expressly consent to thepersonal

 

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jurisdiction and venueof the state and federal courts of the Northern District of Georgia for anysuch litigation.

 

(d)                                                         ThisAgreement shall be binding upon and inure to the benefit of me and FHPC and ourrespective heirs, executors, administrators, legal representatives, successorsand assigns.

 

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

 

 

**Employeeor Independent Contractor:**

 

 
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| Printed  Name                                 |   | Date   |   |
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| Signature                                     |   |   |   |
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| **Agreed  to and Accepted:**                  |   |   |   |
|                                          |   |   |   |
| **First  Horizon Pharmaceutical Corporation** |   |   |   |
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| By                                            |   | Date   |   |
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| Title                                         |   |   |   |

 

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