EX-10.2



 





Exhibit 10.2




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as
of September 27, 2004 by and among Ludo Reynders, an individual residing in
Cary, North Carolina (“Employee”), and aaiPharma Inc., a Delaware
corporation (the “Company”).



Background Statement




     Employee wishes to accept employment with the Company, and the Company
wishes to employ Employee, on the terms and conditions set forth herein.



Statement of Agreement




     In consideration of the mutual covenants herein, Employee and the Company
agree as follows:



     1. Employment. The Company agrees to employ Employee, and Employee agrees
to serve the Company, upon the terms and conditions set forth in this
Agreement.



     2. Position and Responsibilities. During the period of Employee’s
employment hereunder, the Company shall employ Employee with such
responsibilities, duties and authorities as may be set by from time to time by
the Board of Directors of the Company (the “Board”).



     3. Term of Employment. Subject to Section 6 of this Agreement, the term
of Employee’s employment hereunder shall commence immediately and shall
continue for two years; provided that this Agreement shall renew for successive
one-year periods unless notice of termination of this Agreement is provided by
Employee to the Company, or by the Company to Employee, within 90 days prior to
the date such one-year renewal period would be scheduled to begin (the term of
Employee’s employment pursuant to this Agreement being referred to herein as
the “Period of Employment”).



     4. Duties. During the Period of Employment, Employee shall devote all of
his business time, attention, skills and efforts to the business of the Company
and the faithful performance of his duties hereunder; provided, however, that
with the approval of the Board, Employee may engage in such other activities
that, in the Board’s judgment, will not present any conflict of interest with
the Company or any affiliate of the Company (a “Company Affiliate”) or
adversely affect the performance of Employee’s duties pursuant to this
Agreement. In the performance of his duties, Employee shall at all times be
subject to the control and supervision of the Board or such individual or
individuals as shall be designated by the Board.



     5. Compensation and Benefits. For all services rendered by the Employee
to the Company in any capacity under this Agreement, the Company shall
compensate Employee during the Period of Employment as follows:











 





     (a) Base Salary. The Company shall pay Employee an annual salary that is
no less than a base salary (the “Base Salary”) of Five Hundred Fifty Thousand
($550,000) per year, subject to applicable federal and state income and social
security tax withholding requirements. During the Period of Employment, the
Base Salary may be increased as determined by the Board or its Compensation
Committee. Employee’s salary shall be payable in accordance with the Company’s
customary payroll practices.



     (b) Incentive Compensation. Employee shall be eligible to participate in
such incentive compensation plans, including cash bonus plans and stock option
plans, as the Board or its Compensation Committee may from time to time
determine.



     (c) Employee Benefit Plans or Arrangements. Employee shall be eligible to
participate in such other employee benefit plans of the Company, as presently
in effect or as they may be modified or added to from time to time, including,
without limitation, plans providing retirement benefits, medical insurance,
life insurance, disability insurance, and accidental death or dismemberment insurance, subject to satisfaction of
minimum term of service or other requirements set forth in such plans.



     (d) Vacation and Sick Leave. Employee shall be entitled to four weeks
paid vacation per year and sick leave in accordance with the Company’s policies
as adopted from time to time.



     (e) Reimbursement of Expenses. The Company shall pay or reimburse
Employee for all reasonable travel and other business expenses incurred by him
in performing his duties under this Agreement. Such expenses shall be
appropriately documented and submitted to the Company in accordance with the
Company’s policies in effect from time to time.



     (f) Tax Preparation and Financial Planning. The Company shall reimburse
the Employee for all expenses up to a maximum Ten Thousand Dollars ($10,000)
incurred by Employee in any calendar year during the Period of Employment for
services performed by third parties in assisting Employee with the preparation
of tax returns and provision of financial planning services.



     (g) Excise Tax. If a Change of Control occurs and if any payments
received or to be received by Employee in connection with a Change of Control
of the Company (the “Total Payments”) will be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code (“the Code”), the Company will pay
to Employee (or, to the extent required, withhold and pay to the applicable
taxing authorities), within thirty days of any payments giving rise to the
excise tax, an additional amount (the “gross-up payment”) such that the net
amount retained or to be retained by Employee, after deduction of any excise
tax on the Total Payments and any Federal and state and local income tax and
excise tax on the gross-up payment provided for by this Section, will equal the
Total Payments.



     For purposes of determining the amount of the additional payment, Employee
will be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year that the payment is to be made,
and state and local incomes taxes at the highest marginal rate of taxation in
the state and locality of the Employee’s residence on the date of



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termination
or the date that excise tax is withheld by the Company, net of the maximum
reduction in Federal income taxes that could be obtained by deducting such
state and local taxes.




     For purposes of determining whether any of the Total Payments would not be
deductible by the Company and would be subject to the excise tax and the amount
of such excise tax, (1) the Total Payments will be treated as “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and all
parachute payments in excess of the base amount within the meaning of Section
280G(b)(3) will be treated as subject to the excise tax unless, in the opinion
of the Company’s tax counsel, such Total Payments (in whole or in part) are not
parachute payments, or such parachute payments in excess of the Base Amount (as
defined in Section 280G(b)(3) of the Code), whether in whole or in part, are
otherwise not subject to the excise tax, and (2) the value of any non-cash
benefits or any deferred payment or benefit will be determined by the Company’s
independent auditors in accordance with Sections 280G(d)(3) and (4) of the
Code.



     If the excise tax is subsequently determined to be less than the amount
originally taken into account hereunder, Employee will repay to the Company,
when such reduction in excise tax is finally determined, the portion of the
additional payment attributable to such reduction plus interest on the
repayment at the rate provided in Section 1274(d) of the Code. If the excise
tax is determined to exceed the amount originally taken into account hereunder
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the additional payment), the Company will make an
additional payment, determined in accordance with the principles set forth
above, in respect of such excess (plus any interest payable with respect to
such excess) when such excess is finally determined.



     6. Termination of Employment.



     (a) Termination by Company. The Company shall have the right to terminate
Employee’s employment under this Agreement upon the death or Disability (as
defined below) of Employee or for Cause (as defined below) without any further
obligation to Employee under this Agreement. Termination for Disability or for
Cause will be effective upon delivery of written notice of such termination to
Employee.




	(i)	 	“Disability” means any impairment of mind or body that
renders Employee unable to perform his normal duties and
functions hereunder for a continuous period of at least three
months or is likely to prevent Employee from performing such
duties and functions for more than six months during any 18-month
period, as determined in good faith by a physician selected by
the Board. Any refusal by Employee to submit to a medical
examination for the purpose of certifying Disability under this
Section shall be deemed conclusively to constitute evidence of
Employee’s Disability.
	 
	(ii)	 	“Cause” means (A) the repeated failure of Employee to
perform his duties hereunder in a competent and professional
manner; (B) the commission of an act by Employee constituting
financial dishonesty against the Company or any Company
Affiliate; (C) any knowing falsification of information to be
submitted




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	 	 	by or on behalf of the Company or any Company Affiliate
to the Food and Drug Administration or other governmental
authority; (D) the failure to cooperate in any investigation by
the Food and Drug Administration or other governmental authority
of the Company or any Company Affiliate or any internal
investigation by the Company, including by the Board or any
committee of the Board; (E) the commission of an act by Employee
involving a felony; (F) the commission of an act by Employee
involving moral turpitude that brings the Company or any Company
Affiliate into public disrepute or disgrace or causes material
harm to the customer relations, operations or business prospects
of the Company or any Company Affiliate.





     (b) Termination Without Cause. The Company shall have the right to
terminate Employee’s employment hereunder at any time for any reason subject to
the provisions of this Section 6(b). In the event the Company shall terminate
the Employee for any reason other than as provided in Section 6(a) (which the
Company may do at anytime in its sole discretion), the Company shall pay to
Employee an amount equal to his Base Salary, less applicable withholding for
taxes. The Company, at its option, may pay such amounts either (i) in
installments in the amounts and on the payment dates on which such Base Salary
would have been paid if Employee had continued as an employee of the Company or
(ii) as a single payment not later than 60 days after the date of termination,
in which event the single payment shall be in an amount equal to the net
present value (at an 8% discount rate) of the total amount of such payments.
Such payments shall be Employee’s only remedy with respect to such termination.



     (c) Termination by Employee. Employee shall have the right to terminate
his employment under this Agreement at any time for any reason upon delivery of
written notice to the Company. In the event that, at any time within twelve
months following a Change in Control (as defined below), Employee terminates
his employment under this agreement for Good Reason (as defined below), as
specified in the written notice of termination given by Employee to the
Company, the Company shall pay to Employee his Base Salary, less applicable
withholding for taxes, until the end of the twelve-month period following the
Change of Control. The Company, at its option, may pay such amounts either (i)
in installments in the amounts and on the payment dates on which such Base
Salary would have been paid if Employee had continued as an employee of the
Company or (ii) as a single payment not later than 60 days after the date of
termination, in which event the single payment shall be in an amount equal to
the net present value (at an 8% discount rate) of the total amount of such
payments. A termination by Employee for Good Reason in accordance with the
second sentence of this Section 6(d) shall not be deemed a voluntary
termination of employment by Employee for the purpose of this Agreement or any
plan or practice of the Company or its affiliates.



     (d) Definition
of “Change in Control”. “Change in Control” shall mean:




	(i)	 	An acquisition of any common stock, par value $0.001
per share, of the Company (“Common Stock”) or other Voting
Securities (as defined below) by any “Person” (as the term person
is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)),
immediately after which such Person has “Beneficial Ownership”
(within the




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	 	 	meaning of Rule 13d-3 promulgated under the Exchange
Act) of fifty percent (50%) or more of either (A) the
then-outstanding Common Stock or (B) the combined voting power of
the Company’s then-outstanding voting securities entitled to vote
for the election of directors (the “Voting Securities”);
provided, however, in determining whether a Change in Control has
occurred, Common Stock or Voting Securities which are acquired in
a “Non-Control Acquisition” (as defined below) shall not
constitute an acquisition which would cause a Change in Control.
A “Non-Control Acquisition” shall mean an acquisition of Common
Stock (A) directly from the Company, (B) by an employee benefit
plan (or a trust forming a part thereof)
maintained by (x) the Company or (y) any corporation or other
Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this definition, a
“Related Entity”), (C) by the Company or any Related Entity, or
(D) by any Person in connection with a “Non-Control Transaction”
(as defined below);






	(ii)	 	The individuals who, as of the date hereof, are members
of the Board (the “Incumbent Board”), cease for any reason to
constitute at least a two-thirds of the members of the Board, or
following a Merger (as defined below), the board of directors of
the ultimate Parent Corporation (as defined below); provided,
however, that if the election, or nomination for election by the
Company’s common stockholders, of any new director was approved
by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, further, however, that
no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of an
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a “Proxy Contest”),
including by reason of any agreement intended to avoid or settle
any Proxy Contest; or
	 
	(iii)	 	The consummation of:






	(A)	 	A merger, consolidation or reorganization with
or into the Company, or in which securities of the Company
are issued (a “Merger”), unless the Merger is a “Non-Control
Transaction.” A “Non-Control Transaction” shall mean a Merger
in which:






	(1)	 	the stockholders of the Company
immediately before such Merger own directly or indirectly
immediately following the Merger at least fifty percent
(50%) of the outstanding common stock and the combined
voting power of the outstanding voting securities of (x)
the corporation resulting from such Merger (the
“Surviving Corporation”), if fifty percent (50%) or more
of the combined voting power of the then outstanding
voting securities of the Surviving Corporation is not
Beneficially Owned, directly or indirectly by another
corporation (a




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	 	 	“Parent Corporation”), or (y) if there is
one or more Parent Corporations, the ultimate Parent
Corporation;






	(2)	 	the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for the Merger, constitute at least
two-thirds of the members of the board of directors of,
(x) the Surviving Corporation, if fifty percent (50%) or
more of the combined voting power of the then outstanding
voting securities of the Surviving Corporation is not
Beneficially Owned, directly or indirectly by a Parent
Corporation, or (y) if there is one or more Parent
Corporations, the ultimate Parent Corporation; and
	 
	(3)	 	no Person other than the Company, any
Related Entity, or any employee benefit plan (or any
trust forming a part thereof) that, immediately prior to
the Merger, was maintained by the Company or any Related
Entity, or any Person who, immediately prior to the
Merger had Beneficial Ownership of thirty percent (30%)
or more of the then outstanding Common Stock or Voting
Securities, has Beneficial Ownership, directly or
indirectly, of thirty percent (30%) or more of the
combined voting power of the outstanding voting
securities or common stock of (x) the Surviving
Corporation, if fifty percent (50%) or more of the
combined voting power of the then outstanding voting
securities of the Surviving Corporation is not
Beneficially Owned, directly or indirectly by a Parent
Corporation, or (y) if there is one or more Parent
Corporations, the ultimate Parent Corporation; or






	(B)	 	A complete liquidation or dissolution of the
Company; or
	 
	(C)	 	The direct or indirect sale or other
disposition of all or substantially all of the assets of the
Company to any Person (other than a transfer to a Related
Entity or under conditions that would constitute a
Non-Control Transaction (with the disposition of assets being
regarded as a Merger for this purpose) or the distribution to
the Company’s stockholders of the stock of a Related Entity
or any other assets).





Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the “Subject Person”) acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Common Stock or
Voting Securities as a result of the acquisition of Common Stock or Voting
Securities by the Company which, by reducing the number of Common Stock or
Voting Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Common Stock or Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Common Stock or Voting Securities which increases the
percentage of the then outstanding Common Stock or Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.




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     (e) Definition
of “Good Reason”. “Good Reason” shall mean:




	(i)	 	without Employee’s consent, (A) the assignment to
Employee of any new duties or responsibilities substantially
inconsistent in character with Employee’s duties and
responsibilities within the Company immediately prior to a Change
in Control, (B) any substantial adverse change in Employee’s
duties and responsibilities as in effect immediately prior to a
Change in Control, including, but not limited to, a reduction in
duties or responsibilities that occurs because the Company is no
longer an independent publicly-held entity, (C) a change in any
annual or long term incentive plan in which Employee participated
immediately prior to the Change in Control such that Employee’s
opportunity, in the aggregate, to earn incentive compensation is
materially impaired, (D) a material reduction in the aggregate
value of Company perquisites made available to Employee, (E) an
elimination or material impairment of Employee’s ability to
participate in retirement plans comparable to those in which
Employee participated immediately prior to the Change in Control,
(F) any substantial increase in Employee’s obligation to travel
on the Company’s business over Employee’s business travel
obligations during the year prior to the Change in Control;
	 
	(ii)	 	the failure of the Company to comply with any of its
obligations under Section 5 of this Agreement;
	 
	(iii)	 	without Employee’s consent, the relocation of
Employee’s work site to a location that is more than fifty (50)
miles from the offices of the Company at which Employee was
employed immediately prior to the Change in Control, or the
failure of the Company to pay or reimburse Employee, in
accordance with the Company’s relocation policy for its employees
in existence immediately prior to a Change in Control, for all
reasonable costs and expenses, plus “gross ups,” if any, referred
to in such policy incurred by Employee relating to a change of
Employee’s principal residence in connection with any such
relocation to which Employee consents.





     7. Severability. If any provision contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. If a court
determines that this Agreement or any covenant contained herein is
unreasonable, void or unenforceable, for any reason whatsoever, then in such
event the parties hereto agree that the duration, geographical or other
limitation imposed herein should be such as the court, or jury, as the case may
be, determines to be fair and reasonable, it being the intent of each of the
parties hereto to be subject to an agreement that is necessary for the
protection of the legitimate interest of the Company and its successors or
assigns and that is not unduly harsh in curtailing the legitimate rights of the
Employee.



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     8. Employee’s Representation. Employee represents that his experience and
capabilities are such that the provisions of Section 9(a) will not unreasonably
limit him in earning a livelihood.



     9. General Provisions.



     (a) Entire Agreement. This Agreement, the offer letter agreement executed
by the Employee and the Company dated September 27, 2004, and the Covenant Not
to Compete and the Assignment of Invention Agreements, each dated as of the
date hereof between the Employee and the Company, contain the entire
understanding between the parties hereto relating to the employment of Employee
by the Company and supersedes any and all prior employment, compensation or
retirement agreements between the Company and Employee.



     (b) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and its affiliates and their successors and
assigns, and shall be binding upon and inure to the benefit of Employee and his
estate, legal representatives and assigns, provided, however, that in no event
shall Employee’s obligations to perform services for the Company be delegated
or transferred by Employee.



     (c) Amendment of Agreement. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be binding or effective for
any purpose unless it is made in writing signed by the party against whom
enforcement of such amendment, modification, waiver, termination or
cancellation is sought. No course of dealing between the parties to this
Agreement shall be deemed to affect, modify, amend or discharge any provision
or term of this Agreement. No delay on the part of the Company or Employee in
the exercise of any of their respective rights or remedies shall operate as a
waiver thereof, and no single or partial exercise by the Company or Employee of
any such right or remedy shall preclude other or further exercise thereof. A
waiver of right or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right or remedy on any other occasion.



     (d) Insurance. The Company, at its discretion, may apply for and procure
in its own name and for its own benefit, life insurance on Employee in any
amount or amounts considered advisable; and Employee shall have no right, title
or interest therein. Employee agrees to submit to any medical or other
examination and to execute and deliver any applications or other instruments in
writing as may be reasonably necessary to obtain such insurance.



     (e) Notices. All notices under this Agreement shall be in writing and
shall be deemed effective when delivered in person (in the Company’s case, to
its Secretary) or when mailed, if mailed by certified mail, return receipt
requested. Notices mailed shall be addressed, in the case of Employee, to him
at his residential address, and in the case of Company, to its corporate
headquarters, attention of the Secretary, or to such other address as Employee
or the Company may designate in writing at any time or from time to time to the
other party in accordance with this Section.



     (f) Governing Law. This agreement shall be governed and construed in
accordance with the laws of the State of North Carolina.



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     (g) Counterparts. This Agreement may be executed on separate counterparts
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.



     (h) Headings. The headings in the sections of this Agreement are for
convenience only and shall not be deemed to constitute a part thereof and shall
not affect the constructions or interpretation of this Agreement.



     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and Employee has signed this Agreement, all as
of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	aaiPHARMA INC.
	 
	 	 	 	 	 	 
	

	 	By:	 	/s/ James G. Martin
	 	 	 	 	

	

	 	 	 	Name:	 	James G. Martin
	

	 	 	 	 	 	

	

	 	 	 	Title:	 	Chairman, Compensation Committee
	

	 	 	 	 	 	

	 
	 	 	 	 	 	 
	 	 	EMPLOYEE
	 

	 
	 	/s/ Ludo Reynders
	 	 	

	 	 	LUDO REYNDERS








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