Document:

GAMEBREAKER

Exhibit

10.56

 

MEDIA

ARTS GROUP, INC.

CONSULTING AGREEMENT

 

This Consulting Agreement, including the attached Exhibits

(“Agreement”) is made and entered into as of the 1st day of April,

2002, by and between MEDIA ARTS GROUP, INC. (“MAGI”), a Delaware corporation,

and Richard F. Barnett (“Consultant”). 

MAGI desires to retain Consultant as an independent contractor to

perform consulting services for MAGI relating to QVC sales, new dealer

recruiting, digital capture of artwork and assistance to the sales department,

and Consultant is willing to perform such services, on terms set forth more

fully below.  In consideration of the

mutual promises contained herein, the parties agree as follows:

 

1.  SERVICES AND COMPENSATION

(a)  Consultant agrees to

perform for MAGI the services described in the attached EXHIBIT A (“Services”).

(b)  MAGI agrees to pay

Consultant the compensation set forth in the attached EXHIBIT B for the

performance of the Services.

 

2.  CONFIDENTIALITY 

(a)  You agree

as follows:

(i)            all Confidential

Information remains the sole and exclusive property of MAGI;

 

(ii)           except in the

course of your performing the Services for MAGI, for a period of two years

after the termination of this Agreement, you shall keep any and all

Confidential Information strictly confidential and shall not sell, trade,

publish, disclose, use, produce, permit access to or otherwise reveal

Confidential Information to anyone in any manner whatsoever including, without

limitation, by means of photocopy, reproduction or electronic media.

 

(iii)          “Confidential

Information” means any and all information that is confidential and/or

proprietary to MAGI, whether or not marked as “confidential” or “proprietary”

which relates to MAGI’s past, present or future business activities, development,

or research including, without limitation, all of the following: sales volume,

co-operative advertising information, designs, illustrations, data,

documentation, diagrams, flow charts, research, development, processes,

procedures, “know-how”, new product or new technology information, product

prototypes, product copies, manufacturing, development or marketing techniques

and materials, development or marketing timetables, strategies and development

plans, including trade names, trademarks, customer, supplier or personal names

and other information related to customers, suppliers or personnel, pricing

policies and financial information, designs, drawings, specifications,

techniques, models, source code, object code, and other information of similar

nature, whether or not reduced to writing or other tangible form, and any other

trade secrets or nonpublic business information.  Confidential Information does not include any information which

(a) was in the lawful and unrestricted possession of you prior to its

disclosure by MAGI, (b) is or becomes generally available to the public by acts

other than those of you after receiving it, (c) has been received lawfully and

in good faith by you from a third party who did not derive it from MAGI, (d) is

disclosed as required by law, a court order or other governmental authority, or

(e) is disclosed with the prior consent of MAGI.

 

(iv)          Confidential

Information includes all styles, designs, customer lists, files, reports,

correspondence, records, financial data of any kind and all other documents,

regardless of form or medium (i) developed by you during the term of this

Agreement, (ii) received by you from or on behalf of MAGI and (iii) to which

you were given access in the course of your providing the Services(c)  Consultant agrees that Consultant will not,

during the term of this Agreement, improperly use or disclose any proprietary

information or trade secrets of any former or current employer or any other

person or entity with which Consultant has an agreement or a duty to keep in

confidence information acquired by Consultant in confidence and that Consultant

will not bring onto the premises of MAGI any unpublished document or

proprietary information belonging to such an employer, person, or entity unless

consented to in writing by such employer, person, or entity.  Consultant will indemnify MAGI and hold it

harmless from and against all claims, liabilities, damages and expenses,

including reasonable attorneys’ fees and costs of suit, arising out of or in

connection with any violation or claimed violation of a third party’s rights

resulting in whole or in part from MAGI’s use of the work product of Consultant

under this Agreement.

 

(b)  Consultant recognizes that

MAGI has received and in the future will receive from third parties their

confidential or proprietary information subject to a duty on MAGI’s part to

maintain the confidentiality of such information and use it only for certain

limited purposes.  Consultant agrees

that Consultant owes MAGI and such third parties, during the term of this

Agreement and

 

 

thereafter, a duty to hold all such confidential or proprietary

information in the strictest confidence and not to disclose it to any person,

firm or corporation or to use it except as necessary in carrying out the

Services for MAGI consistent with MAGI’s agreement with such third party.

 

(c)  Upon the termination of

this Agreement, or upon MAGI’s earlier request, Consultant will deliver to MAGI

all of MAGI’s property relating to, and all tangible and electronic embodiments

of, Confidential Information in Consultant’s possession or control.

 

(d)  Consultant represents and

warrants that each employee of Consultant, and each independent contractor of

Consultant, if any, has executed an agreement with Consultant containing

provisions in MAGI’s favor substantially similar to this Section 2.

 

3.  OWNERSHIP

Consultant agrees that all copyrightable material, notes, records,

drawings, designs, improvements, developments, discoveries and trade secrets

(collectively, “Developments”) conceived, made or discovered by Consultant in

performing the Services, solely or in collaboration with others, during the

term of this Agreement relating to the business of MAGI shall be the sole

property of MAGI.  In addition, to the

extent allowed by law, any Developments which constitute copyrightable subject

matter shall be considered “works made for hire” as that term is defined in the

United States Copyright Act.  Consultant

further agrees to assign (or cause to be assigned) and does hereby assign fully

to MAGI all such Developments and any copyrights, patents, mask work rights, or

other intellectual property rights relating thereto.  If any Development which constitutes copyrightable subject matter

is not deemed to be a “work made for hire” under the United States Copyright

Act, then the Consultant shall, and hereby does, grant to MAGI an exclusive

perpetual, irrevocable, royalty free, transferable, license to use such

Development in any manner and in every medium, whether now known or hereafter

devised, for any purpose throughout the Universe.

 

(b)  Upon the termination of

this Agreement, or upon MAGI’s earlier request, Consultant will deliver to MAGI

all of MAGI’s property relating to, and all embodiments of, Developments in

Consultant’s possession and control.

 

(c)  Consultant agrees to assist

MAGI, or its authorized representative, at MAGI’s expense, to obtain and from

time to time enforce and defend MAGI’s rights in the Developments and any

copyrights, patents, mask work rights or other intellectual property rights

relating thereto in any and all countries, and to execute all documents

reasonably necessary for MAGI to do so.

 

(d)  MAGI agrees that if in the

course of performing the Services, Consultant incorporates into any Development

developed hereunder any invention, improvement, development, concept, discovery

or other proprietary information owned by Consultant or in which Consultant has

an interest (“Item”), MAGI is hereby granted and shall have a nonexclusive,

royalty-free, perpetual, irrevocable worldwide license to make, have made,

modify, reproduce, display, use and sell such Item as part of or in connection

with such Invention.

 

(e)  Consultant agrees that if

MAGI is unable because of Consultant’s unavailability, dissolution, mental or

physical incapacity, or for any other reason, to secure Consultant’s signature

to apply for or to pursue any application for any United States or foreign

patents or mask work or copyright registrations covering the Developments

assigned to MAGI above, then Consultant hereby irrevocably designates and

appoints MAGI and its duly authorized officers and agents as Consultant’s agent

and attorney-in-fact, to act for and in Consultant’s behalf and stead to

execute and file any such applications and to do all other lawfully permitted

acts to further the prosecution and issuance of patents, copyright and mask

work registrations thereon with the same legal force and effect as if executed

by Consultant.

 

(f)  Consultant represents and

warrants that each employee of Consultant, and each independent contractor of

Consultant, if any, has executed an agreement with Consultant containing

provisions in MAGI’s favor substantially similar to this Section 3.

 

(g)  Notwithstanding any other

provision of this Section 3, the provisions of this Section 3 shall not apply

to any Invention that qualifies in all respects under Section 2870 of the

California Labor Code, which provides: “(a) Any provision in an employment

agreement which provides that an employee shall assign, or offer to assign, any

of his or her rights in an invention to his or her employer shall not apply to

an invention that the employee developed entirely on his or her own time

without using the employer’s equipment, supplies, facilities or trade secret

information, except for those Developments that either: (1) Relate at the time

of conception or reduction to practice of the invention to the employer’s

business, or actual demonstrably anticipated research or development of the

employer. (2) Result from any work performed by the employee for the

employer.  (b)  To the extent a provision in an employment agreement purports to

require an employee to assign an invention otherwise excluded from being

required to be assigned under subdivision (a), the provision is against the

public policy of this state and is unenforceable.”  Consultant shall advise MAGI promptly and in writing of any of

his or her previous or

 

2

 

future works or Developments which he believes qualify under the

California Labor Code Section 2870. 

MAGI agrees to receive such information in confidence.

 

4.  CONFLICTING OBLIGATIONS

Consultant represents and warrants that each employee of Consultant,

and each independent contractor of Consultant, if any, has executed an

agreement with Consultant containing provisions in MAGI’s favor substantially

similar to Sections 2, 3 and 7 of this Agreement.

 

5.  TERM AND TERMINATION

(a)  This Agreement will

commence on the date first written above and will continue for one year.  Upon mutual agreement of MAGI and

Consultant, this Agreement may be renewed for up to two additional one-year

periods.

 

(b)  Upon termination all rights

and duties of the parties shall cease except: (i) that MAGI shall be obligated

to pay, within thirty (30) days of the effective date of termination, all

amounts owing to Consultant for unpaid services and related expenses, if any,

in accordance with the provisions of Section 1 (Services and Compensation)

hereof; and (ii) Section 2 (Confidentiality) shall survive termination of this

Agreement for two years after termination, and Sections  3 (Ownership), and 7 (Independent

Contractors) shall survive termination of this Agreement.

 

6.  ASSIGNMENT

Neither this Agreement nor any right hereunder or interest herein may

be assigned or transferred by Consultant without the express written consent of

MAGI.

 

7.  INDEPENDENT CONTRACTORS

(a)  Consultant enters into this

Agreement as, and shall continue to be, an independent contractor.  In no circumstance shall Consultant look to

MAGI as his or her employer, partner, agent, or principal.  Neither Consultant nor any employee of

Consultant shall be entitled to any benefits accorded to MAGI’s employees,

including worker’s compensation, disability insurance, retirement plans, or

vacation or sick pay.  Notwithstanding

the foregoing, any benefits due to Consultant under the Letter Agreement and

Release, dated May 1, 2002, between Consultant and MAGI (the “Letter

Agreement”) shall be provided by MAGI.

 

(b)  Consultant shall be

responsible for providing, at Consultant’s expense and in Consultant’s name,

disability, workers’ compensation, or other insurance required by law or as

Consultant may deem necessary or appropriate, as well as licenses and permits

usual or necessary for performing the Services.  Consultant shall pay, when and as due, any and all taxes incurred

as a result of Consultant’s compensation, including estimated taxes and payroll

taxes, and shall provide MAGI with proof of payment on demand.  Consultant hereby agrees to indemnify MAGI

for any claims, losses, costs, fees, liabilities, damages, or injuries suffered

by MAGI arising from Consultant’s breach of this provision.

 

(c)  Consultant and MAGI shall

provide to each other upon request any information reasonably necessary to

determine their obligations under this Agreement, fulfill the purposes of this

Agreement or maintain accurate records.

 

(d)  Consultant shall perform

the Services in a professional manner and shall have sole discretion and

control of the Services and the manner in which they are to be performed,

without the advice, control, or supervision of MAGI.

 

(e)  Consultant agrees to

indemnify MAGI from any and all loss or liability incurred by reason of the

alleged breach by Consultant of any confidentiality or services agreement with

anyone other than MAGI.

 

8. WAIVER

OF JURY TRIAL; EQUITABLE RELIEF AND ATTORNEYS FEES

(a) Each of Consultant and MAGI agree that neither party shall have the

right to a jury trial, and each hereby does waive any and all rights to a jury.

 

(b)  Consultant agrees that it

would be impossible or inadequate to measure and calculate MAGI’s damages from

any breach of the covenants set forth in Sections 2 or 3 herein.  Accordingly, Consultant agrees that if

Consultant breached Section 2 or 3, MAGI has, in addition to any other right or

remedy available, the right to obtain from any court of competent jurisdiction

an order restraining such breach or threatened breach and specific performance

of any such provision.  Consultant further

agrees to the extent provided by law that no bond or other security shall be

required in obtaining such equitable relief and Consultant hereby consents to

the issuance of such injunction and the ordering of such specific performance.

 

9.  GOVERNING LAW

This Agreement shall be governed by, and construed and interpreted

under, the laws of the State of California without reference to conflict of

laws principles.

 

10.  ENTIRE AGREEMENT

Except for the Letter Agreement, this Agreement and the Exhibits hereto

form the entire agreement of the 

 

3

 

parties and supersedes any prior agreements between them with respect

to the subject matter hereof.

 

11.  WAIVER

Waiver of any term or provision of this Agreement or forbearance to

enforce any term or provision by either party shall not constitute a waiver as

to any subsequent breach or failure of the same term or provision or a waiver

of any other term or provision of this Agreement.

 

12.  MODIFICATION

No modification to this Agreement, nor any waiver of any rights, shall

be effective unless agreed to in writing by Consultant and MAGI.

 

13.  COUNTERPARTS

This Agreement may be executed in counterpart, each of which shall be

deemed an original, but both of which together shall constitute one and the

same instrument.

 

14.  INTERPRETATION

Consultant and MAGI agree that this Agreement was the product of

negotiation, with each party having the opportunity to propose modification of

terms.  Accordingly, any ambiguity in

this Agreement shall not be construed for or against any party based upon who

prepared such terms;  the parties hereby

expressly waive California Civil Code Section 1654 with respect thereto.

 

15.  SEVERABILITY

Should any provision of this Agreement be found to be void or

unenforceable, the remainder of this Agreement shall remain in full force and

effect.

 

16.  SUBJECT TO APPROVAL OF BOARD OF DIRECTORS

Consultant understands, acknowledges

and agrees that this Agreement and its effectiveness is subject to the approval

of the Board of Directors of MAGI.  If

the Board of Directors of MAGI does not approve this Agreement, this Agreement

shall not become effective and shall be of no force or effect.

 

IN WITNESS WHEREOF, the undersigned are duly authorized to execute this

Agreement on behalf of Consultant and MAGI as of the day and year written

above.

 

	

   

  	

  MEDIA ARTS GROUP INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

  /s/ Richard F. Barnett

  	

   

  	

  By:

  	

  /s/ Ron D. Ford

  
	

  Richard F. Barnett

  	

   

  
	

   

  	

  Name:

  	

  Ron D. Ford

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  Chief Executive Officer

  
						

 

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EXHIBIT A

 

The following Services are to be performed by Consultant.  MAGI understands and acknowledges that

Consultant may provide consulting services to others and undertake other

activities unrelated to the Services under this Agreement (including, without

limitation, operation of one or more Signature Dealer galleries and the

development and operation of an originals and Plein Air program for Thomas

Kinkade).  In consideration thereof,

based on an average work week of 40 hours, on average over the term of this

Agreement the performance of the Services will constitute 55% of Consultant’s

work time, activities related to the galleries and originals and Plein Air

program will constitute 30% of Consultant’s work time and other activities will

constitute 15% of Consultant’s work time; provided that during the first 90

days of Consultant first commencing gallery operations, the relative

percentages will be 45% for the Services and 55% for the gallery.

 

1.             Upon request of

MAGI, Consultant shall serve as the spokesperson for MAGI and Thomas Kinkade in

connection with QVC programming.

 

2.             Upon request of

MAGI, Consultant shall appear with Thomas Kinkade at personal appearances

organized by MAGI (this portion of the services will involve travelling on the

part of Consultant).

 

3.             Upon request of

MAGI, Consultant shall assist in promotional and other events conducted by

MAGI.

 

4.             Consultant shall

consult with and assist MAGI in monitoring, policing and enforcing unauthorized

use of MAGI’s products, violations of dealer agreements, copyright and

trademark infringement and related matters.

 

5.             Consultant shall

consult with and advise MAGI and Thomas Kinkade on Thomas Kinkade’s release

schedule and work.

 

6.             Consultant shall

provide services as a historian of Thomas Kinkade’s art and MAGI.

 

7.             Consultant shall

assist the Vice President of Sales in the development of a plan for the retail

sale of paper products.

 

8.             As requested by

MAGI, Consultant shall generally consult with the Vice President of Sales and

other members of senior management on the business and direction of MAGI.

 

9.             Upon request of

MAGI, Consultant shall advise MAGI on the development/growth of sales to

specific galleries selected by MAGI.

 

10.           Assist MAGI in

acquiring or locating Thomas Kinkade artwork suitable for publication by MAGI.

 

5

 

11.           Consultant shall

advise MAGI on the development of a gallery featuring Thomas Kinkade’s “Plein

Air” works.

 

12.           MAGI shall provide

an office for Consultant at MAGI’s headquarters.  The office shall be comparable to the offices provided to Vice

Presidents of MAGI.  Consultant shall

perform his duties at such office at least once per week.

 

6

 

EXHIBIT B

 

(a)           MAGI shall pay to

Consultant an amount equal to $250,000 per year during the term of this

Agreement.  Such amount will be paid in

26 approximately equal payments in accordance with MAGI’s payroll practices.  MAGI shall reimburse Consultant for all

reasonable expenses incurred by Consultant in the performance of the Services

to the extent such expenses would be reimbursable by MAGI if incurred by a Vice

President of MAGI in the performance of his/her duties.  In the event this Agreement is terminated

for any reason other than the gross negligence or willful misconduct of

Consultant, MAGI shall pay to Consultant an amount equal to (x) all

compensation due to Consultant under this paragraph (a) for the remainder of

the initial one-year term (payable on the effective date of termination) and

(y) the additional payments set forth in paragraph (b) (calculated based on the

formula set forth below and the actual results for the Period, with such

additional payment to be made 60 days after the end of the Period).

 

(b)           In addition to the

payment provided in paragraph (a) above, MAGI shall be eligible to receive

additional payments based on MAGI’s 2002 and 2003 Plan as set forth below.  Such additional payments, if any, shall be

paid within 60 days after March 31, 2003. 

The period from April 1, 2002 to March 31, 2003 is referred to as the

“Period.”  The terms “Plan,” “Base

Plan,” “Budget,” and “Superior Plan,” refer to MAGI’s approved plan for the 9

months ended December 31, 2002 and the 3 months ended March 31, 2003.  If, during the Period, MAGI’s revenue and

profit is equal to Base Plan, Consultant shall be eligible to receive 33% of

the amounts set forth in (i) through (iv) below.  If, during the Period, MAGI’s revenue and profit is equal to

Budget, Consultant shall be eligible to receive 66% of the amounts set forth in

(i) through (iv) below.  If, during the

Period, MAGI’s revenue and profit is equal or greater than Superior Plan,

Consultant shall be eligible to receive 100% of the amounts set forth in (i)

through (iv) below.  If, during the

Period, MAGI’s revenue or profit is less than Base Plan, Consultant shall not

be entitled to receive any amounts set forth in (i) through (iv) below.  If, during the Period, MAGI’s revenue and

profit is greater than Base Plan but less than Superior Plan, the percentage of

the amounts set forth in (i) through (iii) below to which Consultant shall be

eligible shall be determined by interpolation based on the percentages set

forth above.  In no event shall the

total amount to be paid to Consultant under this paragraph (b) exceed $250,000.

 

(i)                                     If,

during the Period, MAGI’s sales to QVC are equal to Base Plan, MAGI shall pay

to Consultant $50,000 (i.e., 33% of $150,000). 

If, during the Period, MAGI’s sales to QVC are equal to Budget, MAGI

shall pay to Consultant $100,000 (i.e., 66% of $150,000).  If, during the Period, MAGI’s sales to QVC

are equal or greater than Superior Plan, MAGI shall pay to Consultant $150,000

(i.e., 100% of $150,000).  If, during

the Period, MAGI’s sales to QVC are less than Base Plan, MAGI shall not pay

Consultant any amounts under this clause (i). 

If, during the Period, MAGI’s sales to QVC are greater than Base Plan

but less than Superior Plan, the dollar amount to which Consultant shall be entitled

under this clause (i) shall be determined by interpolation based on the amounts

set forth above.  All amounts determined

by the formula in this clause (i) shall be further adjusted by

 

7

 

the formula set forth in the first paragraph of this

paragraph (b).  In no event shall the

total amount to be paid to Consultant under this clause (i) exceed $150,000.

 

(ii)                                  If,

during the Period, the number of new Signature Dealers opened equals Base Plan,

MAGI shall pay to Consultant $16,667 (i.e., 33% of $50,000).  If, during the Period, the number of new

Signature Dealers opened equals Budget, MAGI shall pay to Consultant $33,333

(i.e., 66% of $50,000).  If, during the

Period, the number of new Signature Dealers opened equals or exceeds Superior

Plan, MAGI shall pay to Consultant $50,000 (i.e., 100% of $50,000).  If, during the Period, the number of new

Signature Dealers opened is less than Base Plan, MAGI shall not pay Consultant

any amounts under this clause (ii).  If,

during the Period, the number of new Signature Dealers opened is greater than

Base Plan but less than Superior Plan, the dollar amount to which Consultant

shall be entitled under this clause (ii) shall be determined by interpolation

based on the amounts set forth above. 

All amounts determined by the formula in this clause (ii) shall be

further adjusted by the formula set forth in the first paragraph of this

paragraph (b).  In no event shall the

total amount to be paid to Consultant under this clause (ii) exceed

$50,000.  A “new” Signature Dealer is a

dealer that signs a new dealer agreement for a new location.  A new dealer does not include (i) a

transfer, assignment or sale of a dealership, gallery, location or territory

(or other change of ownership), (ii) a renewal of a dealer agreement,

dealership, gallery, location or territory, (iii) an upgrade or downgrade of a

dealer agreement, dealership, gallery, location or territory, (iv) the change

in location of a dealership, (v) the closing or termination of a dealer

agreement, dealership, gallery, location or territory, followed by the opening

of a similar dealership, gallery, location or territory, or (vi) the opening or

creation of a gallery or dealership which, in general, does not result in a net

increase in the number of dealerships.

 

(iii)                               If,

during the Period, revenue and profit from sales to the Signature Galleries

selected by MAGI pursuant to Paragraph 9 of Exhibit A of this Agreement (the

“Selected Galleries”) is equal to Base Plan, MAGI shall pay to Consultant

$25,000 (i.e., 33% of $75,000).  If,

during the Period, revenue and profit from sales to the Selected Galleries is

equal to Budget, MAGI shall pay to Consultant $50,000 (i.e., 66% of $75,000).  If, during the Period, revenue and profit

from sales to the Selected Galleries is equal to or greater than Superior Plan,

MAGI shall pay to Consultant $75,000 (i.e., 100% of $75,000).  If, during the Period, revenue or profit

from sales to the Selected Galleries is less than Base Plan, MAGI shall not pay

Consultant any amounts under this clause (iii).  If, during the Period, revenue and profit from sales to the

Selected Galleries is greater than Base Plan but less than Superior Plan, the

dollar amount to which Consultant shall be entitled under this clause (iii)

shall be determined by interpolation based on the amounts set forth above.  All amounts determined by the formula in

this clause (iii) shall be further adjusted by the formula set forth in the

first paragraph of this paragraph (b). 

In no event shall the total amount to be paid to Consultant under this

clause (iii) exceed $75,000.

 

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(iv)                              As

determined in the sole and absolute of MAGI’s CEO, Consultant shall be eligible

to receive an amount up to $25,000 (in addition to the amounts determined in

clauses (i) through (iii) above).  In

making such determination, MAGI’s CEO may consider the overall performance of

Consultant, the time and effort expended by Consultant in connection with the

Services, MAGI’s overall performance during the Period, and such other factors

as MAGI’s CEO, in his sole and absolute discretion, may deem appropriate to

consider.  The amount determined by

MAGI’s CEO to be payable to Consultant under this clause (iv) shall be further

adjusted by the formula set forth in the first paragraph of this paragraph

(b).  In no event shall the total amount

to be paid to Consultant under this clause (iv) be greater than an amount that

when added to the total amounts due to Consultant under clauses (i) through

(iii) above (prior to any adjustments pursuant to the first paragraph of this

paragraph (b)) exceeds $250,000.

 

EXAMPLE:

 

Assume (A) MAGI’s revenue and profit for the Period

equals Budget; (B) MAGI’s sales to QVC for the Period exceed Superior Plan; (C)

the number of new Signature Dealers opened during the Period is less than Base

Plan; (D) MAGI’s revenue and profit from sales to the Selected Galleries for

the Period equals Base Plan; and (E) MAGI’s CEO determines that Consultant

shall be paid an amount equal to $15,000 pursuant to clause (iv) above.

 

Consultant would be entitled to receive 66% x

[$150,000 + $0 + $25,000 + $15,000] = $126,666

 

The

additional payments set forth in this paragraph (b) are applicable only for the

first year of this Agreement.  If this

Agreement is extended past the first year, Consultant would not be eligible for

any of the payments or amounts set forth in this paragraph (b), and any

additional payments or eligibility criteria must be mutually agreed between Consultant

and MAGI.

 

9Fulbright & Jaworski Document

Exhibit

10.1

 

	

  

  	

   

  	

  BIO-TECHNOLOGY GENERAL CORP.

  

 

 

 

Employment

Agreement

for

Christopher

G. Clement

President

& Chief Operating Officer

 

 

Contents

 

	

  Article 1. Term of

  Employment

  
	

   

  
	

  Article

  2. Definitions

  
	

   

  
	

  Article 3.

  Position and Responsibilities

  
	

   

  
	

  Article 4. Standard of

  Care

  
	

   

  
	

  Article

  5. Compensation

  
	

   

  
	

  Article

  6. Expenses

  
	

   

  
	

  Article 7.

  Employment Terminations

  
	

   

  
	

  Article 8. Change in

  Control

  
	

   

  
	

  Article

  9. Assignment

  
	

   

  
	

  Article 10. Legal

  Fees and Notice

  
	

   

  
	

  Article

  11. Confidentiality and Noncompetition

  
	

   

  
	

  Article 12.

  Outplacement Assistance

  
	

   

  
	

  Article 13. Miscellaneous

  
	

   

  
	

  Article 14. Governing Law

  

 

 

2

 

Employment Agreement

 

This Agreement is made, entered into, and is effective

as of the Effective Date, by and between the Company and the Executive.

 

 

Article 1. Term of Employment

 

 

1.1                                 The

Company hereby agrees to employ the Executive and the Executive hereby agrees

to serve the Company in accordance with the terms and conditions set forth

herein, for a period of three (3) years, commencing as of the Effective Date.

 

1.2                                 Commencing

on the third (3rd) anniversary of the Effective Date, and each

anniversary thereafter, the term of this Agreement shall automatically be

extended for one (1) additional year, unless at least ninety (90) days prior to

such anniversary, the Company or the Executive shall have given notice in

accordance with Section 10.2 hereof that it or he does not wish to extend the

term of the Agreement.

 

 

Article 2. Definitions

 

 

2.1                                 “Agreement”

means this Employment Agreement.

 

2.2                                 “Annual

Bonus” means the annual bonus to be paid to the Executive in

accordance with the Company’s annual bonus program as described in Section 5.3

herein.

 

2.3                                 “Base

Salary” means the salary of record paid to the Executive as annual

salary, pursuant to Section 5.2, excluding amounts received under incentive or

other bonus plans, whether or not deferred.

 

2.4                                 “Beneficial

Owner” shall have the meaning ascribed to such term in Rule

13d-3 of the General Rules and Regulations under the Securities Exchange Act.

 

2.5                                 “Beneficiary”

means the persons or entities designated or deemed designated by the Executive

pursuant to Section 13.6 herein.

 

2.6                                 “Board” or

“Board of

Directors” means the Board of Directors of the Company.

 

2.7                                 “Cause” means:

 

(a)                                  Executive

materially breached any of the terms

of this Agreement and failed to correct such breach within fifteen (15) days

after written notice thereof from the Company;

 

3

 

(b)                                 Executive

has been convicted of a criminal

offense involving a felony giving rise to a sentence of imprisonment;

 

(c)                                  Executive

has breached a fiduciary trust for

the purpose of gaining a personal profit, including, without limitation,

embezzlement; or

 

(d)                                 Despite

adequate warnings, Executive intentionally and willfully failed to perform

reasonably assigned duties within the normal and customary scope of the

Position.

 

2.8                                 “Change in

Control” or “CIC” of the Company shall be deemed to have occurred as

of the first day that any one or more of the following conditions is satisfied:

 

(a)                                  Any consolidation or merger in which the Company

is not the continuing or surviving entity or pursuant to which shares of the

Common Stock would be converted into cash, securities, or other property, other

than (i) a merger of the Company in which the holders of the Common Stock

immediately prior to the merger have the same proportionate ownership of common

stock of the surviving corporation immediately after the merger, or (ii) a

consolidation or merger which would result in the voting securities of the

Company outstanding immediately prior thereto continuing to represent (by being

converted into voting securities of the continuing or surviving entity) more

than 50% of the combined voting power of the voting securities of the

continuing or surviving entity immediately after such consolidation  or merger and which would result in the members

of the Board immediately prior to such consolidation or merger (including for

this purpose any individuals whose election or nomination for election was

approved by a vote of at least two-thirds of such members) constituting a

majority of the Board (or equivalent governing body) of the continuing or

surviving entity immediately after such consolidation or merger;

 

(b)                                 Any

sale, lease, exchange, or other transfer (in one transaction or a series of

related transactions) of all or substantially all the Company’s assets;

 

(c)                                  The

Company’s stockholders approve any plan or proposal for the liquidation or

dissolution of the Company;

 

(d)                                 Any

Person shall become the Beneficial Owner of forty (40) percent or more of the

Common Stock other than pursuant to a plan or arrangement entered into by such

Person and the Company; or

 

(e)                                  During

any period of two consecutive years, individuals who at the beginning of such

period constitute the entire Board of Directors shall cease for any reason to

constitute a majority of the Board unless the election or nomination for

election by the Company’s stockholders of each new director was approved by a

vote of at lest two-thirds of the directors then still in office who were

directors at the beginning of the period.

 

4

 

2.9                                 “CIC

Severance Benefits” means the payment of severance compensation

associated with a Qualifying Termination occurring subsequent to a Change in

Control, as described in Section 8.3.

 

2.10                           “Code” means

the United States Internal Revenue Code of 1986, as amended.

 

2.11                           “Common

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

 

2.12                           “Compensation

Committee” means the Compensation and Stock Option Committee of the

Board, or any other committee appointed by the Board to perform the functions

of such committee.

 

2.13                           “Company”

means Bio-Technology General Corp., a Delaware corporation, or any Successor

Company thereto as provided in Section 9.1 herein.

 

2.14                           “Director”

means any individual who is a member of the Board of Directors of the Company.

 

2.15                           “Disability”

or “Disabled”

means for all purposes of this Agreement, the meaning ascribed to such term in

the Company’s long-term disability plan, or in any successor to such plan.

 

2.16                           “Effective

Date” means May 14, 2002.

 

2.17                           “Effective

Date of Termination” means the date on which a termination of the

Executive’s employment occurs.

 

2.18                           “Employment

Date” means May 14, 2002.

 

2.19                           “Executive” means

Christopher G. Clement who, as of the Effective Date, resides at 25 Ford’s

Crossing, Norwell, MA  02061.

 

2.20                           “Good

Reason” shall mean, without the Executive’s express written consent,

the occurrence of any one or more of the following:

 

(a)                                  Reducing

the Executive’s Base Salary;

 

(b)                                 Failing

to maintain Executive’s amount of benefits under or relative level of

participation in the Company’s employee benefit or retirement plans, policies,

practices, or arrangements in which the Executive participates as of the

Effective Date of this Agreement, including any perquisite program; provided,

however, that any such change that applies consistently to all executive

officers of the Company or is required by applicable law shall not be deemed to

constitute Good Reason;

 

(c)                                  Failing

to require any Successor Company to assume and agree to perform the Company’s

obligations hereunder;

 

5

 

(d)                                 The

occurrence of any one or more of the following events on or after the

announcement of the transaction which leads to the CIC and up to twenty–four

(24) calendar months following the effective date of a CIC:

 

(1)                                  Requiring

Executive to be based at a location that requires the Executive to travel at

least an additional thirty-five (35) miles per day;

 

(2)                                  Requiring

Executive to report to a position which is at a lower level than the highest

level to which Executive reported within the six (6) months prior to the CIC;

 

(3)                                  Demoting

Executive to a level lower than Executive’s level in the Company as of the

Effective Date.

 

2.21                           “Notice of

Termination” means a written notice  which shall indicate the

specific termination provision in this Agreement relied upon, and shall set

forth in reasonable detail the facts and circumstances claimed to provide a

basis for termination of the Executive’s employment under the provisions so

indicated, and, where applicable, shall specifically include notice pursuant to

Section 1.2 that Company has elected not to renew this Agreement.

 

2.22                           “Person” shall

have the meaning ascribed to such term in Section 3(a)(9) of the Securities

Exchange Act and used in Sections 13(d) and 14(d) thereof, including a

“group” as defined in Section 13(d) thereof.

 

2.23                           “Position”

shall have the meaning ascribed to it in Section 3.1.

 

2.24                           “Qualifying

Termination” means any of the events described in Section 8.2

herein, the occurrence of which triggers the payment of CIC Severance Benefits

hereunder.

 

2.25                           “Securities

Exchange Act” means the United States Securities Exchange Act of

1934, as amended.

 

2.26                           “Service

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

 

2.27                           “Severance

Benefits” means the payment of severance compensation as provided in

Sections 7.4 and 7.6 herein, and not payable due to a Change in Control of

the Company.

 

2.28                           “Successor

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

 

2.29                           “Term” shall

mean that period of time commencing on the Effective Date and ending on the

Effective Date of Termination.

 

6

 

Article

3. Position and Responsibilities

 

 

3.1                                 During

the term of this Agreement, the Executive agrees to serve as President and

Chief Operating Officer of the Company or in such other position which

Executive shall agree to accept or to which Executive shall be promoted during

the Term and Executive shall report directly to the Chief Executive Officer or

such other position which is at a higher position or level in the Company than

Executive and as shall be determined by the Chief Executive Officer in his sole

discretion, and shall maintain the level of duties and responsibilities as in

effect as of the Effective Date, or such higher level of duties and

responsibilities as Executive may be assigned during the Term (the “Position”).

 

 

Article 4. Standard of Care

 

 

4.1                                 During

the term of this Agreement, the Executive agrees to devote substantially his

full time, attention, and energies to the Company’s business and shall not be

engaged in any other business activity, whether or not such business activity

is pursued for gain, profit, or other pecuniary advantage unless such business

activity is approved by the Compensation Committee (or, in the event the

Compensation Committee ceases to exist, the Board).  However, subject to Article 11 herein and approval by the Compensation

Committee (or the Board, as the case may be), the Executive may serve as a

director of other companies so long as such service is not injurious to the

Company.

 

 

Article 5. Compensation

 

 

5.1                                 As

remuneration for all services to be rendered by the Executive during the term

of this Agreement, and as consideration for complying with the covenants

herein, the Company shall pay and provide to the Executive those items set

forth in Sections 5.2 through 5.8.

 

5.2                                 Base Salary.  The

Company shall pay the Executive a Base Salary in an amount which shall be

established from time to time by the Board of Directors of the Company or the

Board’s designee; provided, however, that such Base Salary shall not be less

than THREE-HUNDRED-TWENTY-FIVE THOUSAND DOLLARS (US$325,000) per year.

 

(a)                                  This

Base Salary shall be paid to the Executive in equal installments throughout the

year, consistent with the normal payroll practices of the Company.

 

(b)                                 The

Base Salary shall be reviewed at least annually following the Effective Date of

this Agreement, while this Agreement is in force, to ascertain whether, in the

judgment of the Board or the Board’s designee, such Base Salary should be

increased based primarily on the performance of the Executive during the year.

If so increased, the Base Salary as

 

7

 

stated above shall, likewise, be increased for all

purposes of this Agreement and shall not, in any event, be decreased in any

year.

 

5.3                                 Annual Bonus.  In

addition to his Base Salary, the Executive shall be entitled to participate in

the Company’s annual short-term incentive program, as such program may exist

from time to time, at a level commensurate with the Position.  The percentage of Base Salary targeted as

annual short-term incentive compensation shall be established for the Position

by the Company’s Compensation Committee in its sole discretion (the “targeted

Annual Bonus award”). Executive acknowledges that the amount of annual

short-term incentive, if any, to be awarded shall be at the sole discretion of

the Company’s Compensation Committee, may be less or more than the targeted

Annual bonus award, and will be based on a number of factors set in advance by

the Compensation Committee for each calendar year, including the Company’s

performance and the Executive’s individual performance. Nothing in this Section

5.3 shall be construed as obligating the Company or the Board to refrain from

changing, and/or amending the short-term incentive program, so long as such

changes are equally applicable to all executive employees in the Company.

 

5.4                                 Long-Term

Incentives.  The Executive shall be eligible to

participate in the Company’s long-term incentive plan, as such shall be amended

or superseded from time to time provided, however, that nothing in this Section

5.4 shall be construed as obligating the Company or the Board to refrain from

changing, and/or amending the long-term incentive plan, so long as such changes

are equally applicable to all executive employees in the Company.

 

5.5                                 Retirement

Benefits.  The Company shall provide to the Executive

participation in any Company qualified defined benefit and defined contribution

retirement plans as may be established during the term of this Agreement;

provided, however, that nothing in this Section 5.5 shall be construed as

obligating the Company to refrain from changing, and/or amending the

nonqualified retirement programs, so long as such changes are equally

applicable to all executive employees in the Company.

 

5.6                                 Employee

Benefits.  During the Term, and as otherwise provided

within the provisions of each of the respective plans, the Company shall

provide to the Executive all benefits to which other executives and employees

of the Company are entitled to receive, as commensurate with the Position,

subject to the eligibility requirements and other provisions of such

arrangements as applicable to executives of the Company generally.

 

(a)                                  Such

benefits shall include, but shall not be limited to, group term life insurance,

comprehensive health and major medical insurance, dental and life insurance,

and short-term and long-term disability.

 

(b)                                 The

Executive shall likewise participate in any additional benefit as may be

established during the term of this Agreement, by standard written policy of

the Company.

 

5.7                                 Vacation.  The Executive shall be entitled to such paid

vacation as is customary for the Position in corporate institutions of similar

size and character, but in any event not less than twenty (20) paid vacation

days during each calendar year; provided, however, that without

 

8

 

prior written approval, Executive may carry forward

into the next year no more than ten (10) unused vacation days from the current

year.

 

5.8                                 Perquisites.  The

Company shall provide to the Executive, at the Company’s expense, all perquisites which the Board may determine

from time to time to provide; provided, however, that nothing in this

Section 5.8 shall be construed as obligating the Company or the Board to

refrain from changing, and/or amending the perquisite program, so long as such

changes are equally applicable to all executive employees in the Company.

 

5.9                                 Right to

Change Plans. The Company shall not be obligated to institute,

maintain, or refrain from changing, amending, or discontinuing any benefit

plan, program, or perquisite, so long as such changes are equally applicable to

all executive employees in the Company.

 

 

Article 6. Expenses

 

 

6.1                                 Upon

presentation of appropriate documentation, the Company shall pay, or reimburse

the Executive for all ordinary and necessary expenses, in a reasonable amount,

which the Executive incurs in performing his duties under this Agreement

including, but not limited to, travel, entertainment, professional dues and

subscriptions, and all dues, fees, and expenses associated with membership in

various professional, business, and civic associations and societies.

 

 

Article

7. Employment Terminations

 

 

7.1                                 Termination

Due to Death.  In the event the Executive’s employment is

terminated while this Agreement is in force by reason of death, the Company’s

obligations under this Agreement shall immediately expire. Notwithstanding the

foregoing, the Company shall be obligated to pay to the Executive the

following:

 

(a)                                  Base

Salary through the Effective Date of Termination;

 

(b)                                 An

amount equal to the Executive’s unpaid targeted Annual Bonus award, established

for the fiscal year in which such termination is effective, multiplied by

a fraction, the numerator of which is the number of completed days in the

then-existing fiscal year through the Effective Date of Termination, and the

denominator of which is three hundred sixty-five (365);

 

(c)                                  All

outstanding long-term incentive awards shall be subject to the treatment

provided under the applicable long-term incentive plan of the Company;

 

(d)                                 Accrued

but unused vacation pay through the Effective Date of Termination; and

 

9

 

(e)                                  All

other rights and benefits the Executive is vested in, pursuant to other plans

and programs of the Company.

 

(f)                                    The

benefits described in Sections 7.1(a) and (d) shall be paid in cash to the

Executive in a single lump sum as soon as practicable following the Effective

Date of Termination, but in no event beyond thirty (30) days from such date.

All other payments due to the Executive upon termination of employment,

including those in Sections 7.1(b) and (c), shall be paid in accordance with

the terms of such applicable plans or programs.

 

(g)                                 With

the exception of the covenants contained in Articles 9 and 14 and Sections 7.1(f),

13.3, 13.5, and 13.7 herein (which shall survive such termination), the Company

and the Executive thereafter shall have no further obligations under this

Agreement.

 

7.2                                 Termination

Due to Disability.  In the

event that the Executive becomes Disabled during the term of this Agreement and

is, therefore, unable to perform his duties herein for more than

one hundred eighty (180) total calendar days during any period of twelve

(12) consecutive months, or in the event of the Board’s reasonable expectation

that the Executive’s Disability will exist for more than a period of one

hundred eighty (180) calendar days, the Company shall have the right to

terminate the Executive’s active employment as provided in this Agreement.

 

(a)                                  The

Board shall deliver written notice to the Executive of the Company’s intent to

terminate for Disability at least thirty (30) calendar days prior to the

Effective Date of Termination.

 

(b)                                 Such

Disability to be determined by the Board of Directors of the Company upon

receipt of and in reliance on competent medical advice from one (1) or more

individuals, selected by the Board, who are qualified to give such professional

medical advice.

 

(c)                                  A

termination for Disability shall become effective upon the end of the thirty

(30) day notice period. Upon the Effective Date of Termination, the Company’s

obligations under this Agreement shall immediately expire.

 

(d)                                 Notwithstanding

the foregoing, the Company shall be obligated to pay to the Executive the

following:

 

(1)                                  Base

Salary through the Effective Date of Termination;

 

(2)                                  An

amount equal to the Executive’s unpaid targeted Annual Bonus award, established

for the fiscal year in which the Effective Date of Termination occurs,

multiplied by a fraction, the numerator of which is the number of completed

days in the then-existing fiscal year through the Effective Date of

Termination, and the denominator of which is three hundred sixty-five (365);

 

(3)                                  All

outstanding long-term incentive awards shall be subject to the treatment

provided under the applicable long-term incentive plan of the Company;

 

10

 

(4)                                  Accrued

but unused vacation pay through the Effective Date of Termination; and

 

(5)                                  All

other rights and benefits the Executive is vested in, pursuant to other plans

and programs of the Company.

 

(e)                                  The

benefits described in Sections 7.2(d)(1) and (d)(4) shall be paid in cash to

the Executive in a single lump sum as soon as practicable following the

Effective Date of Termination, but in no event beyond thirty (30) days from

such date. All other payments due to the Executive upon termination of

employment, including those in Sections 7.2(d)(2) and (d)(3), shall be paid in

accordance with the terms of such applicable plans or program.

 

(f)                                    With

the exception of the covenants contained in Articles 8, 9, 11, and 14 and

Sections 7.2(e), 13.3, 13.5, and 13.7 herein (which shall survive such

termination), the Company and the Executive thereafter shall have no further

obligations under this Agreement.

 

7.3                                 Voluntary

Termination by the Executive. The Executive may terminate this

Agreement at any time by giving Notice of Termination to the Board of Directors

of the Company, delivered at least fourteen (14) calendar days prior to the

Effective Date of Termination.

 

(a)                                  The

termination automatically shall become effective upon the expiration of the

fourteen (14) day notice period. Notwithstanding the foregoing, the Company may

waive the fourteen (14) day notice period; however, the Executive shall be

entitled to receive all elements of compensation described in Sections 5.1

through 5.6 for the fourteen (14) day notice period, subject to the eligibility

and participation requirements of any qualified retirement plan.

 

(b)                                 Upon

the Effective Date of Termination, following the expiration of the fourteen

(14) day notice period, the Company shall pay the Executive his full Base

Salary and accrued but unused vacation pay, at the rate then in effect, through

the Effective Date of Termination, plus all other benefits to which the

Executive has a vested right at that time (for this purpose, the Executive

shall not be paid any Annual Bonus with respect to the fiscal year in which

voluntary termination under this Section occurs).

 

(c)                                  With

the exception of the covenants contained in Articles 8, 9, 11, and 14 and

Sections 13.3, 13.5, and 13.7 herein (which shall survive such termination),

the Company and the Executive thereafter shall have no further obligations

under this Agreement.

 

7.4                                 Involuntary

Termination by the Company without Cause. At all times during the

Term, the Board may terminate the Executive’s employment for reasons other than

death, Disability, or for Cause, by providing to the Executive a Notice of

Termination, at least sixty (60) calendar days (ninety (90) calendar days when

termination is due to non-renewal of this Agreement by the Company pursuant to

Section 1.2) prior to the Effective Date of Termination; provided, however,

that such notice shall not preclude the Company from requiring Executive to leave

the Company immediately upon receipt of such notice.

 

11

 

(a)                                  Such

Notice of Termination shall be irrevocable absent express, mutual consent of

the parties.

 

(b)                                 Upon

the Effective Date of Termination (not a Qualifying Termination), following the

expiration of the sixty (60) day notice period (90 days in the case of

non-renewal), the Company shall pay and provide to the Executive:

 

(1)                                  An

amount equal to the Service Multiple times the Executive’s annual Base Salary

established for the fiscal year in which the Effective Date of Termination

occurs;

 

(2)                                  An

amount equal to the Service Multiple times the Executive’s targeted Annual

Bonus award established for the fiscal year in which the Effective Date of

Termination occurs; provided, however, that no payment shall be made under this

Section 7.4(b)(2) if the Effective Date of Termination is less than twelve (12)

months after the Employment Date;

 

(3)                                  A

continuation of the welfare benefits of health care, life and accidental death

and dismemberment, and disability insurance coverage (or if continuation under

the Company’s then current plans is not allowed, then provision at the

Company’s expense but subject to payment by Executive of those payments which

Executive would have been obligated to make under the Company’s then current

plan, of substantially similar welfare benefits from one or more third party

providers) after the Effective Date of Termination for a number of months equal

to the Service Multiple times twelve (12). These benefits shall be provided to

the Executive at the same coverage level as in effect as of the Effective Date

of Termination, and at the same premium cost to the Executive which was paid by

the Executive at the time such benefits were provided. However, in the event

the premium cost and/or level of coverage shall change for all employees of the

Company, or for management employees with respect to supplemental benefits, the

cost and/or coverage level, likewise, shall change for the Executive in a

corresponding manner. The continuation of these welfare benefits shall be

discontinued if prior to the expiration of the period, the Executive has

available substantially similar benefits at a comparable cost to the Executive

from a subsequent employer, as determined by the Compensation Committee (or, in

the event the Compensation Committee ceases to exist, the Board);

 

(4)                                  All

outstanding long-term incentive awards shall be subject to the treatment

provided under the applicable long-term incentive plan of the Company;

 

(5)                                  An

amount equal to the Executive’s unpaid Base Salary and accrued but unused

vacation pay through the Effective Date of Termination; and

 

(6)                                  All

other benefits to which the Executive has a vested right at the time, according

to the provisions of the governing plan or program.

 

(c)                                  For

purposes of this Section 7.4, the term “Service Multiple” shall be equal to the

quotient resulting from a formula the numerator of which is the lesser of (a)

full number

 

12

 

of completed months that have elapsed since the

Employment Date (but not less than 6 months) and (b) twenty-four (24) and the

denominator of which is twelve (12);

 

(d)                                 In

the event that the Board terminates the Executive’s employment without Cause on

or after the date of the announcement of the transaction which leads to a CIC,

the Executive shall be entitled to the CIC Severance Benefits as provided in

Section 8.3 in lieu of the Severance Benefits outlined in this Section

7.4.

 

(e)                                  Payment

of all of the benefits described in Section 7.4(b)(1) shall be paid in cash to

the Executive in equal bi-weekly installments over a period of consecutive

months equal to the Service Multiple times twelve (12) and beginning on the

fifteenth day of the month following the month in which the Effective Date of

Termination occurs.

 

(f)                                    Payment

of all but forty-five thousand dollars ($45,000) of the benefits described in

Section 7.4(b)(2) shall be paid in cash to the Executive in a single lump

sum as soon as practicable following the Effective Date of Termination, but in

no event beyond thirty (30) days from such date.  The forty-five thousand dollars ($45,000) which was withheld

shall be paid in cash to the Executive in a single lump sum at the end of the

twelve (12) month restrictive period set forth in Sections 11.2 and 11.3 of

this Agreement.

 

(g)                                 Except

as specifically provided in Section 7.4(e) and (f), all other payments due to

the Executive upon termination of employment shall be paid in accordance with

the terms of such applicable plans or programs.

 

(h)                                 With

the exception of the covenants contained in Articles 8, 9, 10, 11, 12 and 14

and Sections 7.4, 13.3, 13.5, and 13.7 (which shall survive such termination),

the Company and the Executive thereafter shall have no further obligations

under this Agreement.

 

(i)                                     Notwithstanding

anything herein to the contrary, the Company’s payment obligations under this

Section 7.4 shall be offset by any amounts that the Company is required to pay

to the Executive under a national statutory severance program applicable to

such Executive.

 

7.5                                 Termination

for Cause. Nothing in this Agreement shall be construed to prevent

the Board from terminating the Executive’s employment under this Agreement for

Cause.

 

(a)                                  To

be effective, the Notice of Termination must set forth in reasonable detail the

facts and circumstances claimed to provide a basis for such termination for

Cause.

 

(b)                                 In

the event this Agreement is terminated by the Board for Cause, the Company

shall pay the Executive his Base Salary and accrued vacation pay through the

Effective Date of Termination, and the Executive shall immediately thereafter

forfeit all rights and benefits (other than vested benefits) he would otherwise

have been entitled to receive under this Agreement. The Company and the

Executive thereafter shall have no further obligations under this Agreement

with the exception of the covenants contained in Articles 9, 10, 11, and 14 and

Sections 13.3, 13.5, and 13.9 herein (which shall survive such termination).

 

13

 

7.6                                 Termination

for Good Reason.  Except where Section 2.20(d) is

applicable, this Section 7.6 shall only become effective when at least twelve

(12) months have elapsed since the Employment Date.   Prior to this Section 7.6 becoming effective, any notice of

termination by Executive may only be given pursuant to Section 7.3.  The Executive shall have sixty (60) days from

the date he learns of action taken by the Company that allows the Executive to

terminate his employment for Good Reason to provide the Board with a Notice of

Termination.

 

(a)                                  The

Notice of Termination must set forth in reasonable detail the facts and

circumstances claimed to provide a basis for such Good Reason termination.

 

(b)                                 The

Company shall have thirty (30) days to cure such Company action following

receipt of the Notice of Termination.

 

(c)                                  The

Executive is required to continue his employment for the sixty (60) day period

following the date in which he provided the Notice of Termination to the Board.

The Company may waive the sixty (60) day notice period; however, the Executive

shall be entitled to receive all elements of compensation described in Sections

5.1 through 5.6 for the sixty (60) day notice period, subject to the

eligibility and participation requirements of any qualified retirement plan.

 

(d)                                 Upon

a termination of the Executive’s employment for Good Reason during the Term,

and following the expiration of the sixty (60) day notice period, the Company

shall pay and provide to the Executive the following:

 

(1)                                  An

amount equal to two (2) times the Executive’s annual Base Salary established

for the fiscal year in which the Effective Date of Termination occurs;

 

(2)                                  An

amount equal to two (2) times the Executive’s targeted Annual Bonus award

established for the fiscal year in which the Effective Date of Termination

occurs;

 

(3)                                  A

continuation of the welfare benefits of health care, life and accidental death

and dismemberment, and disability insurance coverage for two (2) years after

the Effective Date of Termination (or if continuation under the Company’s then

current plans is not allowed, then provision at the Company’s expense but

subject to payment by Executive of those payments which Executive would have

been obligated to make under the Company’s then current plan, of substantially

similar welfare benefits from one or more third party providers). These

benefits shall be provided to the Executive at the same coverage level, as in

effect as of the Effective Date of Termination and at the same premium cost to

the Executive which was paid by the Executive at the time such benefits were

provided. However, in the event the premium cost and/or level of coverage shall

change for all employees of the Company, or for management employees with

respect to supplemental benefits, the cost and/or coverage level, likewise,

shall change for the Executive in a corresponding manner. The continuation of

these welfare benefits shall be discontinued prior to the end of the two (2)

year period in the event the Executive has available substantially similar

benefits at a comparable cost to the Executive from a subsequent employer, as

determined by the Compensation Committee (or, in the event the Compensation

Committee ceases to exist, the Board);

 

14

 

(4)                                  All

outstanding long-term incentive awards shall be subject to the treatment

provided under the applicable long-term incentive plan of the Company;

 

(5)                                  An

amount equal to the Executive’s unpaid Base Salary and accrued but unused

vacation pay through the Effective Date of Termination; and

 

(6)                                  All

other benefits to which the Executive has a vested right at the time, according

to the provisions of the governing plan or program.

 

(e)                                  In

the event of termination of Executive’s employment for Good Reason on or after

the date of the announcement of the transaction which leads to the CIC and up

to twenty-four (24) months following the date of the CIC, the Executive shall

be entitled to the CIC Severance Benefits as provided in Section 8.3 in

lieu of the Severance Benefits outlined in this Section 7.6.

 

(f)                                    The

Executive’s right to terminate employment for Good Reason shall not be affected

by the Executive’s incapacity due to physical or mental illness unless such

incapacity is determined to constitute a Disability as provided herein.

 

(g)                                 Payment

of all but forty-five thousand dollars ($45,000) of the benefits described in

Section 7.6(d)(1) and payment of all of the benefits described in Section

7.6(d)(2) shall be paid in cash to the Executive in a single lump sum as soon

as practicable following the Effective Date of Termination, but in no event

beyond thirty (30) days from such date. The forty-five thousand dollars

($45,000) which was withheld shall be paid in cash to the Executive in a single

lump sum at the end of the twelve (12) month restrictive period set forth

in Sections 11.2 and 11.3 of this Agreement.

 

(h)                                 Except

as specifically provided in Section 7.6(g), all other payments due to the

Executive upon termination of employment shall be paid in accordance with the

terms of such applicable plans or programs.

 

(i)                                     Notwithstanding

anything herein to the contrary, the Company’s payment obligations under this

Section 7.6 shall be offset by any amounts that the Company is required to pay

to the Executive under a national statutory severance program applicable to

such Executive.

 

(j)                                     With

the exceptions of the covenants contained in Articles 8, 9, 10, 11, 12 and 14

and Sections 7.6, 13.3, 13.5, and 13.7 (which shall survive such termination)

herein, the Company and the Executive thereafter shall have no further

obligations under this Agreement.

 

15

 

Article 8. Change in Control

 

 

8.1                                 Employment

Termination Following a Change in Control.  The Executive shall be

entitled to receive from the Company CIC Severance Benefits if a Notice of

Termination for a Qualifying Termination of the Executive has been delivered;

provided, that:

 

(a)                                  The

Executive shall not be entitled to receive CIC Severance Benefits if he is

terminated for Cause (as provided in Section 7.5 herein), or if his employment

with the Company ends due to death, or Disability, or due to voluntary

termination of employment by the Executive without Good Reason.

 

(b)                                 CIC

Severance Benefits shall be paid in lieu of all other benefits provided to the

Executive under the terms of this Agreement.

 

8.2                                 Qualifying

Termination.  The occurrence of any one or more of the

following events on or after the date of the announcement of the transaction

which leads to the CIC and up to twenty-four (24) months following the date of

the CIC shall trigger the payment of CIC Severance Benefits to the Executive

under this Agreement:

 

(a)                                  An

involuntary termination of the Executive’s employment by the Company for

reasons other than Cause, death, or Disability, as evidenced by a Notice of

Termination delivered by the Company to the Executive;

 

(b)                                 A

voluntary termination by the Executive for Good Reason as evidenced by a Notice

of Termination delivered to the Company by the Executive;

 

(c)                                  Failure

to renew this Agreement (if the Agreement would expire unless renewed within

such period), as evidenced by a Notice of Termination delivered by the Company

to the Executive; or

 

(d)                                 The

Company or any Successor Company materially breaches any material provision of

this Agreement and does not cure such breach within thirty (30) days of

receiving a written notice from the Executive with such notice explaining in

reasonable detail the facts and circumstances claimed to provide a basis for

the Executive’s claim.

 

8.3                                 Severance

Benefits Paid upon a Qualifying Termination.  In the event the Executive

becomes entitled to receive CIC Severance Benefits, the Company shall pay to

the Executive and provide him the following:

 

(a)                                  An

amount equal to two and one half (2.5)  times the Executive’s annual Base Salary

established for the fiscal year in which the Effective Date of Termination

occurs;

 

16

 

(b)                                 An

amount equal to two and one half (2.5)  times the Executive’s targeted Annual

Bonus award established for the fiscal year in which the Executive’s Effective

Date of Termination occurs;

 

(c)                                  An

amount equal to the Executive’s unpaid Base Salary and accrued but unused

vacation pay through the Effective Date of Termination;

 

(d)                                 All

outstanding long-term incentive awards shall be subject to the treatment

provided under the applicable long-term incentive plan of the Company;

 

(e)                                  A

continuation of the welfare benefits of health care, life and accidental death

and dismemberment, and disability insurance coverage for two and one half (2.5)  full

years after the Effective Date of Termination (or if continuation under the

Company’s then current plans is not allowed, then provision at the Company’s

expense but subject to payment by Executive of those payments which Executive

would have been obligated to make under the Company’s then current plan, of

substantially similar welfare benefits from one or more third party providers).

 

(1)                                  These

benefits shall be provided to the Executive at the same coverage level, as in

effect as of the Effective Date of Termination or, if greater, as in effect

sixty (60) days prior to the date of the Change in Control, and at the same

premium cost to the Executive which was paid by the Executive at the time such

benefits were provided.

 

(2)                                  In

the event the premium cost and/or level of coverage shall change for all

employees of the Company, or for management employees with respect to

supplemental benefits, the cost and/or coverage level, likewise, shall change

for the Executive in a corresponding manner.

 

(3)                                  The

continuation of these welfare benefits shall be discontinued prior to the end

of the  two

and one half year period in the event the Executive has available substantially

similar benefits at a comparable cost to the Executive from a subsequent

employer, as determined by the Compensation Committee (or, in the event the

Compensation Committee ceases to exist, the Board).

 

8.4                                 Form and

Timing of Severance Benefit. Payment of all of the benefits

described in Sections 8.3(a) through (c) shall be paid in cash to the Executive

in a single lump sum as soon as practicable following the Effective Date of

Termination, but in no event beyond thirty (30) days from such date. All other

payments due to the Executive upon termination of employment shall be paid in

accordance with the terms of such applicable plans or programs.

 

8.5                                 Excise Tax.

In the event that the Executive becomes entitled to Severance Benefits or any

other payment or benefit under this Agreement, or under any other agreement

with, or plan of the Company (in the aggregate, the “Total Payments”), if any

of the Total Payments will be subject to the tax (the “Excise Tax”) imposed by

Section 4999 of the Code (or any similar tax that may hereafter be imposed),

the Company shall pay to the Executive, in cash, an additional amount (the

“Gross-Up Payment”) such that the net amount retained by the

 

17

 

Executive after deduction of any Excise Tax upon the

Total Payments and any federal, state and local income tax and Excise Tax upon

the Gross-Up Payment provided for by this Section 8.5 (including FICA and

FUTA), shall be equal to the Total Payments. Such payment shall be made by the

Company to the Executive as soon as practical following the Effective Date of

Termination, but in no event beyond thirty (30) days from such date.

 

(a)                                  For

purposes of determining whether any of the Total Payments will be subject to

the Excise Tax and the amounts of such Excise Tax:

 

(1)                                  Any

payments or benefits received or to be received by the Executive in connection

with a Change in Control or the Executive’s termination of employment (whether

pursuant to the terms of this Agreement or any other plan, arrangement, or

agreement with the Company, or with any person (which shall have the meaning

set forth in Section 3(a)(9) of the Securities Exchange Act, including a

“group” as defined in Section 13(d) therein) whose actions result in a Change

in Control or any person affiliated with the Company or such persons) shall be

treated as “parachute payments” within the meaning of Section 280G(b)(2) of the

Code, and all “excess parachute payments” within the meaning of Section

280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion

of tax counsel as supported by the Company’s independent auditors and

reasonably acceptable to the Executive, such other payments or benefits (in

whole or in part) do not constitute parachute payments, or unless such excess

parachute payments (in whole or in part) represent reasonable compensation for

services actually rendered within the meaning of Section 280G(b)(4) of the Code

in excess of the base amount within the meaning of Section 280G(b)(3) of the

Code, or are otherwise not subject to the Excise Tax;

 

(2)                                  The

amount of the Total Payments which shall be treated as subject to the Excise

Tax shall be equal to the lesser of: (i) the total amount of the Total

Payments; or (ii) the amount of excess parachute payments within the meaning of

Section 280G(b)(1) (after applying clause (a) above); and

 

(3)                                  The

value of any noncash benefits or any deferred payment or benefit shall be

determined by the Company’s independent auditors in accordance with the

principles of Sections 280G(d)(3) and (4) of the Code.

 

(b)                                 For

purposes of determining the amount of the Gross-Up Payment, the Executive shall

be deemed to pay federal income taxes at the highest marginal rate of federal

income taxation in the calendar year in which the Gross-Up Payment is to be

made, and state and local income taxes at the highest marginal rate of taxation

in the state and locality of the Executive’s residence on the Effective Date of

Termination, net of the maximum reduction in federal income taxes which could

be obtained from deduction of such state and local taxes.

 

(c)                                  In

the event the Internal Revenue Service subsequently adjusts the excise tax

computation herein described, the Company shall reimburse the Executive for the

full amount necessary to make the Executive whole (less any amounts received by

the Executive that he would not have received had the computation initially

been computed as subsequently

 

18

 

adjusted), including the value of benefits that were

erroneously limited, the value of any overpaid excise tax, and any related

interest and/or penalties due to the Internal Revenue Service.

 

8.6                                 With

the exceptions of the covenants contained in Articles 8, 9, 10, 11, 12 and 14

and Sections 13.3, 13.5, and 13.7 (which shall survive such termination)

herein, the Company and the Executive thereafter shall have no further

obligations under this Agreement.

 

 

Article 9. Assignment

 

 

9.1                                 Assignment

by Company.  This Agreement may and shall be assigned

or transferred to, and shall be binding upon and shall inure to the benefit of

any Successor Company, with Successor Company for purposes of this Agreement

being defined as a company that (i) acquires greater than fifty percent (50%) of

the assets of the Company or (ii) acquires greater than fifty percent (50%) of

the outstanding stock of the Company, or (iii) is the surviving entity in the

event of a CIC.

 

(a)                                  Any

such Successor Company shall be deemed substituted for all purposes of the

“Company” under the terms of this Agreement.

 

(b)                                 Failure

of the Company to obtain the agreement of any Successor Company to be bound by

the terms of this Agreement prior to the effectiveness of any such succession

shall be a breach of this Agreement, and shall immediately entitle the

Executive to benefits from the Company in the same amount and on the same terms

as the Executive would be entitled to receive in the event of a termination of

employment for Good Reason as provided in Section 7.7 (failure not related to a

Change in Control) or Section 8.3 (if the failure of assignment follows or is

in connection with a Change in Control).

 

(c)                                  Except

as herein provided, this Agreement may not otherwise be assigned by the

Company.

 

9.2                                 Assignment

by Executive.  This Agreement shall inure to the benefit

of and be enforceable by the Executive’s personal or legal representatives,

executors, administrators, successors, heirs, distributees, devisees, and

legatees.

 

(a)                                  If

the Executive dies while any amount would still be payable to him pursuant to

this Agreement had he continued to live, all such amounts, unless otherwise

provided herein, shall be paid in accordance with the terms of this

Agreement, to the Executive’s Beneficiary.

 

(b)                                 If

the Executive has not named a Beneficiary, then such amounts shall be paid to

the Executive’s devisee, legatee, or other designee, or if there is no such

designee, to the Executive’s estate.

 

19

 

Article 10. Legal Fees and Notice

 

 

10.1                           Payment of

Legal Fees.  To the

extent permitted by law, the Company shall pay all legal fees, costs of

litigation, prejudgment interest, and other expenses incurred by Executive in

contesting a termination, if Executive prevails.

 

10.2                           Notice.  Any

notices, requests, demands, or other communications provided by this Agreement

shall be sufficient if in writing and if sent by registered or certified

mail to the Executive at the last address he has filed in writing with the

Company or, in the case of the Company, at its principal offices to the

attention of the General Counsel.

 

 

Article

11. Confidentiality and Noncompetition

 

 

11.1                           Disclosure

of Information.  The Executive recognizes that he has

access to and knowledge of confidential and proprietary information of the

Company that is essential to the performance of his duties under this

Agreement.

 

(a)                                  The

Executive will not, during and for five (5) years after the term of his

employment by the Company, in whole or in part, disclose such information to

any person, firm, corporation, association, or other entity for any reason or

purpose whatsoever, nor shall he make use of any such information for his own

purposes, so long as such information has not otherwise been disclosed to the

public or is not otherwise in the public domain except as required by law or

pursuant to administrative or legal process.

 

11.2                           Covenants

Regarding Other Employees. During the term of this Agreement, and

for a period of twelve (12) months following the Executive’s termination of

employment for any reason, the Executive agrees not to actively solicit any

employee of the Company to terminate his or her employment with the Company or

to interfere in a similar manner with the business of the Company.

 

11.3                           Noncompete

Following a Termination of Employment.  From the Effective Date of this

Agreement until six (6) months following the Executive’s Effective Date of

Termination for any reason, the Executive will not: (a) directly or indirectly

own any equity or proprietary interest in (except for ownership of shares in a

publicly traded company not exceeding three percent (3%) of any class of

outstanding securities), or be an employee, agent, director, advisor, or

consultant to or for any competitor of the Company, whether on his own behalf

or on behalf of any person; or (b) undertake any action to induce or cause

any customer or client to discontinue any part of its business with the

Company.

 

11.4                           Waiver of Covenants Upon a Change in Control. Upon the occurrence of a Change in

Control, the Executive shall be released from each of the covenants set forth

in Sections 11.2

 

20

 

and

11.3, if such Executive is terminated by the Company without Cause or if the

Executive terminates his employment with the Company for Good Reason.

 

 

Article

12. Outplacement Assistance

 

 

12.1                           Following a termination of employment, other than

for Cause, the Executive shall be reimbursed by the Company for the costs of

all outplacement services obtained by the Executive within the two and

one half (2.5)  year period after the

Effective Date of Termination; provided, however, that the total reimbursement

shall be limited to an amount equal to twenty percent (20%) of the Executive’s

Base Salary as of the effective date of termination.

 

 

Article 13. Miscellaneous

 

 

13.1                           Entire

Agreement.  With the exception of the Company’s

Proprietary Information and Inventions Agreement previously executed by

Executive, this Agreement supersedes any prior agreements (specifically, the

offer letter dated March 14, 2001), or understandings, oral or written, between

the parties hereto or between the Executive and the Company, with respect to

the subject matter hereof, and constitutes the entire agreement of the parties

with respect thereto.

 

13.2                           Modification.  This

Agreement shall not be varied, altered, modified, canceled, changed, or in any

way amended except by mutual agreement of the parties in a written instrument

executed by the parties hereto or their legal representatives.

 

13.3                           Severability.  In

the event that any provision or portion of this Agreement shall be determined

to be invalid or unenforceable for any reason, the remaining provisions of this

Agreement shall be unaffected thereby and shall remain in full force and

effect.

 

13.4                           Counterparts.  This

Agreement may be executed in one (1) or more counterparts, each of which shall

be deemed to be an original, but all of which together will constitute one and

the same Agreement.

 

13.5                           Tax

Withholding.  The Company may withhold from any benefits

payable under this Agreement all federal, state, city, or other taxes as may be

required pursuant to any law or governmental regulation or ruling.

 

13.6                           Beneficiaries.  To

the extend allowed by law, any payments or benefits hereunder due to the

Executive at the time of his death shall nonetheless be paid or provided and

the Executive may designate one or more persons or entities as the primary

and/or contingent beneficiaries of any amounts to be received under this

Agreement. Such designation must be in the form of a signed writing acceptable

to the Board or the Board’s designee. The Executive may make or change such

designation at any time.

 

21

 

13.7                           Payment

Obligation Absolute. Absent actions deliberately or willfully taken

by the Executive to materially injure the Company, the Company’s obligation to

make the payments and the arrangement provided for herein shall be absolute and

unconditional, and shall not be affected by any circumstances, including,

without limitation, any offset, counterclaim, recoupment, defense, or other

right which the Company may have against the Executive or anyone else.

 

(a)                                  All

amounts payable by the Company hereunder shall be paid without notice or

demand. Subject to the provisions set forth in Sections 7.4 and 7.6, and

Article 11, each and every payment made hereunder by the Company shall be

final, and the Company shall not seek to recover all or any part of such

payment from the Executive or from whomsoever may be entitled thereto, for any

reasons whatsoever.

 

(b)                                 With

the exception of the Company’s willful material breach of its payment

obligations under Articles 7 and 8 of this Agreement (provided, however, that

no such breach shall be deemed to have occurred until the Executive has provided

the Board with written notice of such breach and a reasonable opportunity for

cure), the restrictive covenants contained in Article 11 are independent of any

other contractual obligations in this Agreement or otherwise owed by the

Company to the Executive. Except as provided in this paragraph, the existence

of any claim or cause of action by Executive against the Company, whether based

on this Agreement or otherwise, shall not create a defense to the enforcement

by the Company of any restrictive covenant contained herein.

 

13.8                           The

Executive shall not be obligated to seek other employment in mitigation of the

amounts payable or arrangements made under any provision of this Agreement, and

the obtaining of any such other employment shall in no event effect any

reduction of the Company’s obligations to make the payments and arrangements

required to be made under this Agreement.

 

13.9                           Previous

Obligations.

 

(a)                                  Executive

agrees and confirms that Executive’s acceptance of this Agreement and

performance of his duties hereunder will not in any way require or place

Executive in a position that may require or potentially may require the use or

disclosure of any third party’s trade secrets or proprietary information.

 

(b)                                 Executive

confirms that Executive has disclosed to the Company all agreements Executive

has with any third party that incorporate confidentiality restrictions or a

covenant not to compete.

 

(c)                                  Executive

believes that he is under no obligations to any third party, including any

confidentiality agreements, covenants not compete or the like, which will in

any way restrict the Executive’s ability to perform his duties hereunder.

 

(d)                                 Executive

agrees and confirms that in the event Executive is ever asked to participate in

any activity or perform any job duties and responsibilities as an employee of

the Company which the Executive believes may involve the utilization or

dissemination of

 

22

 

information a third party has identified as its

proprietary information or a trade secret or which may fall under a previously

executed covenant not to compete, Executive will immediately notify the Chief

Executive Officer and General Counsel and will not undertake to participate in

any activities which require or could possibly require Executive to utilize or

rely upon such proprietary information or trade secret.

 

13.10                     Review by

Counsel.  Prior to executing

this Agreement, Executive agrees that he has consulted with his attorney who

represents his interests and who has fully and completely explained the terms

and conditions of this Agreement and the obligations created herein.

 

 

Article 14. Governing Law

 

 

14.1                           To the

extent not preempted by federal law, the provisions of this Agreement shall be

construed and enforced in accordance with the laws of the state of New Jersey.

 

 

Article

15. Relocation

 

 

15.1                           Executive

hereby agrees to relocate to the Iselin, New Jersey metropolitan area within

six months of the Employment Date. 

Executive hereby acknowledges that the Company is entering into this

Agreement in reliance upon Executive’s covenant to relocate to the Iselin, New

Jersey metropolitan area within six months of the Employment Date.  Executive hereby agrees that prior to his relocation

to the Iselin, New Jersey metropolitan area, he will spend that number of days

each week at the Company’s executive offices as the Chairman and Chief

Executive Officer of the Company may direct. 

Prior to Executive’s relocation to the Iselin, New Jersey metropolitan

area, the Company will reimburse Executive for his out-of-pocket cost of

commuting between Boston, Massachusetts and Iselin, New Jersey each week, as

well as Executive’s reasonable out-of-pocket hotel costs while working at the

Company’s Iselin, New Jersey headquarters.

 

15.2                           The

Company shall reimburse Executive for all reasonable documented out-of-pocket

moving expenses incurred by Executive in relocating from the Boston,

Massachusetts/San Diego metropolitan area to the Iselin, New Jersey

metropolitan area.  In addition, the

Company will reimburse Executive for all reasonable documented out-of-pocket

move-related expenses, up to a maximum of $20,000.

 

23

 

IN WITNESS WHEREOF, the Company, through

its duly authorized representative, and the Executive have executed this

Agreement as of the Effective Date.

 

	

   

  	

  Executive:

  
	

   

  	

   

  
	

   

  	

  /s/

  	

  Christopher G. Clement

  	

   

  
	

   

  	

   

  	

  Christopher G. Clement

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Company:

  
	

   

  	

   

  
	

   

  	

  Bio-Technology

  General Corp.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Sim Fass

  	

   

  
	

   

  	

   

  	

  Sim Fass

  
	

   

  	

   

  	

  Chairman & CEO

  
							

 

24

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