Document:

WWW.EXFILE.COM, INC. -- 888-775-4789 -- CHATTEM, INC. -- EXHIBIT 10.2 TO FORM 10-Q

    EXHIBIT
10.2

    

    AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

    

    

    THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) has been made and
entered into as of the 8th day of July, 2008,
between CHATTEM, INC., a Tennessee corporation (“Company”) and ZAN GUERRY
(“Executive”).

    

    WITNESSETH

    

    WHEREAS,
the Executive currently serves as a key employee of the Company and his services
and knowledge with respect to the Company and its business strategies and
operations are critical to maintaining the Company’s position in its industry
against its competitors;

    

    WHEREAS,
the Board of Directors of the Company has determined that it is in the best
interests of the Company and its shareholders to secure the Executive’s
continued services, and in the event of his departure, the Executive’s agreement
to not compete with the Company for a period sufficient to allow
stability  to the Company in its business strategies and
operations.

    

    WHEREAS,
the Company and the Executive previously entered into an Employment Agreement
dated August 1, 2000;

    

    WHEREAS,
the Company desires to amend and restate the Employment Agreement to ensure
compliance with Section 409A of the Internal Revenue Code of 1986, as amended,
and to make certain other beneficial changes; and

    

    WHEREAS,
the Executive is willing to agree to the changes set forth herein in exchange
for the specified additional benefits provided hereunder.

    

    NOW,
THEREFORE, in consideration of the mutual covenants herein contained, and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Company and Executive agree as
follows:

    

    1.    Stated
Term.  This Employment Agreement shall be deemed to have
commenced on August 1, 2000, and unless it is terminated earlier in the manner
provided below in this Agreement, shall continue for a term of three years and
upon each anniversary date of this Agreement shall be deemed to automatically
renew for a new three year term from such anniversary date.  Not later
than each anniversary date of this Agreement, either party shall have the right
to provide written notice of their intention to have the Agreement expire at the
end of the then-pending three year term period without automatic
renewal.

    

    2.    Duties.  During
the term of employment set forth in this Agreement, Company shall employ
Executive, and Executive shall serve, as Chairman of the Board and 

     

    
      
        
        

      

      
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    Chief
Executive Officer, or in such other similar positions as may be assigned by the
Company’s Board of Directors.  Executive shall perform faithfully the
duties assigned to Executive by the Board of Directors of Company pursuant to
this Agreement to the best of Executive’s ability and shall devote substantially
all of Executive’s busi­ness time and attention to Company’s
business.

    

    3.    Salary.  Company
shall pay to Executive a salary at the rate of $_________ per annum in equal
monthly installments or on whatever basis the Company pays other
executives.  The Compensation Committee of the Board of Directors of
the Company shall at least annually evaluate and establish a base salary for
Executive for the upcoming year in an amount determined to be appropriate by the
Compensation Committee.

    

    4.    Incentive
Compensation.  Executive shall be entitled to participate in
the Company’s annual incentive compensation plan and any other plans
subsequently adopted by the Company and shall be eligible to receive grants of
stock options pursuant to the terms of the Company’s stock option plans
established for its executives as approved by the Compensation Committee of the
Board of Directors from time to time.

    

    5.    Withholding of
Taxes.  Any payments to Executive, to the estate of Executive,
or to the designated beneficiary or beneficiaries of Executive pursuant to the
terms of this Agreement shall be reduced by such amounts as are required to be
withheld under all present and future federal, state and local tax laws and
regulations and other laws and regulations.

    

    6.    Benefits.  During
the term of employment hereunder, Executive shall be entitled, to the extent
Executive is otherwise eligible, to participate fully in all benefits provided
by Company for its employees generally, including, but not limited to, any
retirement plans, life, health, and long-term disability insurance maintained
from time to time by Company.  Executive shall also  receive
an allowance for the use of an automobile for the duration of this Agreement and
such other perquisites as may be established by the Company from time to time
for its executives.

    

    7.    Expense
Allowance.  Executive is authorized to incur, or to cause
Company to incur, reasonable expenses in connection with the performance of
Executive’s duties hereunder.  Company shall reimburse Executive for
all such expenses upon the presentation by Executive from time to time of an
item­ized account of such expenditures.

    

    8.    Vacation.  Executive
shall be entitled to paid vacation days each year in such amounts as may be
permitted under the Company’s vacation policies generally.  The timing
of Executive’s vacation shall be scheduled in a reason­able manner by
Company and the Executive.

    

    9.    Termination Before
Expiration of Stated Term.  The Executive’s employment pursuant
to this Agreement shall terminate prior to the expiration of its stated term
upon the first to occur of the following:

    

    
      
        
        

      

      
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    (a)           The
voluntary resignation of Executive.

    

    (b)           Executive’s
death.

    

    (c)           Executive’s
permanent disability.  The term “permanent disability” shall mean
physical or mental incapacity of a nature which has prevented or will prevent
Executive, in the sole judgment of the Board of Directors of the Company, from
performing on a full-time basis each of the material duties of Executive for a
period of 12 consecutive weeks or 24 weeks within any period of 12 consecutive
months.

    

    (d)           Executive’s
employment being terminated by Company for cause.  Termination “for
cause” shall be limited solely to termination because of Executive’s indictment
or conviction for a felony or other crime involving substantial moral turpitude,
alcoholism, drug addiction or the gross, active misfeasance of the Executive
with regard to his duties with the Company.  Termination for cause
shall occur immediately upon delivery to Executive of a notice of such action by
Company, which notice shall specify the ground for such
termination.

    

    (e)           Executive’s
employment being terminated by Company without cause.  Termination
“without cause” shall mean termination of employment on any basis other than by
expiration of the stated term, voluntary resignation, death, permanent
disability, or termination for cause, provided that, voluntary resignation when
the Company constructively discharges the Executive shall also be deemed
termination without cause. “Constructively Discharges” shall mean changes the
location of Executive’s principal place of employment from Chattanooga,
Tennessee, or reduces the Executive’s status, duties, responsibilities or direct
or indirect compensation, (including future increases commensurate with those
given other managers of the Company), or so alters the style or philosophy of
the conduct of the Company’s business, in the opinion of the Executive, as to
cause it to be undesirable to the Executive to remain in the employ of the
Company.

    

    10.    Duties of Executive on
Termination.  Upon the termination of his employment under this
Agreement, Executive shall immediately return any and all property of Company in
the possession of Executive, including, without limita­tion, all documents,
contracts, financial information and records.

    

    11.    Compensation Payable to
Executive on Termination.  The rights of Executive to
compensation upon termination of employment are as follows:

    

    (a)           In
the case of the expiration of the stated term of the Agreement, Company shall
pay to Executive any salary and bonus accrued to the date of expiration of the
Agreement.

    

    (b)           In
the case of the death of Executive, Company shall pay to Executive’s beneficiary
or beneficiaries designated in writing to Company, or to Executive’s estate in
the absence or lapse of such designation, the salary, as in effect at the date
of 

     

    
      
        
        

      

      
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    Executive’s
death, through the last day of the month in which death occurred and any accrued
bonus as of the last day of the month in which death occurred.

    

    (c)           In
the case of the permanent disability of Executive, Company shall pay to
Executive the salary, as in effect at the date of Executive’s permanent
disability, through the last day of the month in which such permanent disability
is determined and any accrued bonus as of the last day of the month in which
such permanent disability occurred.

    

    (d)           If
Executive’s employment is terminated for cause, Company’s only obligation to
Executive shall be payment of the salary accrued on the date on which such
termination occurs.

    

    (e)           If
Executive’s employment is terminated as a result of a voluntary resignation,
Executive shall be entitled to continuing monthly payments of 75 percent of
Executive’s monthly base salary at the time of termination payable during the
period of non-competition provided in Section 13 below.

    

    (f)           If
Executive’s employment is terminated without cause, including voluntary
resignation when the Company constructively discharges the Executive, the
Executive shall be entitled to receive (i) continuing monthly payments equal to
75 percent of Executive’s monthly base salary at the time of termination payable
during the period of non-competition provided in Section 13 below, and (ii) a
lump sum payment equal to 25 percent of the Executive’s monthly base salary at
the time of termination multiplied by the number of months remaining under the
three year term of the Agreement as liquidated damages for the early termination
of this Agreement, provided, however, that such amount shall be proportionately
refunded to the Company by the Executive to the extent the Executive is
successful during the remainder of the stated term of the Agreement in securing
employment in a comparable executive position with another employer in
Chattanooga, Tennessee, with a base salary at least equal to the base salary of
Executive upon termination of employment.  In addition, the Company
shall continue to provide the health, medical and life insurance benefits as set
forth in Section 12 below.

    

    (g)           Notwithstanding
the foregoing subsections (e) and (f), in the event the Executive is a “specified
employee”
within the meaning of Section 409A of the Code and the regulations thereunder as
of the date of termination of employment, the severance payments under
subsections (e) or (f), as the case may be, shall accrue during the first six
(6) months after the date of termination of employment and be paid on the first
day of the seventh (7th) month
after the date of termination of employment as required by Section 409A, or, if
earlier, the date of death of the Executive.  Thereafter, subsequent
severance payments shall be made in the time and manner set forth in subsection
(e) or (f).

    

    12.    Continuation of
Benefits.  If the Executive’s employment is terminated as set
forth in Section 11(f) above, the Company shall continue to provide health,
medical and life insurance in accordance with the following rules:

    

    
      
        
        

      

      
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    A.           General
Rule.  If Executive’s employment is terminated as set forth in Section
11(f) above and Executive timely elects COBRA coverage under the provisions of
Section 4980B of the Code in connection with Executive’s termination of
employment, the Company shall reimburse Executive for the COBRA coverage
premiums Executive pays each month to purchase such coverage from the Company
for Executive and, if so elected, for Executive’s eligible dependents, and the
reimbursement for one month shall be made no later than the end of the
immediately following month; provided, however, such reimbursement shall be made
for no more than the greater of (1) the balance of the remaining term of
employment under this Agreement, or (2) 24 months, of COBRA coverage (the
“Coverage Period”).

    

    B.           Special
Rules.

    

    (i).           COBRA
Coverage Expires.  If Executive’s COBRA coverage expires in less than
the Coverage Period and Executive elects before the expiration of such COBRA
coverage to continue to purchase from the Company coverage identical to COBRA
coverage under this Section 12.B(i) at 100% of the then COBRA coverage premium,
Executive may purchase such coverage until the total number of months of
coverage Executive has purchased under Section 12.A and  this Section
12.B(i) equals the Coverage Period.  The Company shall reimburse
Executive for such premiums, and the reimbursement for premiums paid for one
month shall be made no later than the end of the following month.

    

    (ii).           Additional
Coverage.  If Executive elects before the expiration of Executive’s
coverage under Section 12.A or Section 12.B(i), whichever comes last, to
continue to purchase from the Company coverage identical to COBRA coverage under
this Section 12.B(ii), Executive may purchase such coverage at Executive’s
expense at 100% of the then COBRA coverage premium for a period which shall not
exceed 18 additional months, provided Executive pays such premiums at the same
time and in the same manner as the Company then requires for premium payments to
purchase COBRA coverage.

    

    C.           Life
Insurance.  In addition, if Executive’s employment is terminated as
set forth in Section 11(f) above, the Company shall reimburse Executive for life
insurance premiums Executive pays each month to purchase life insurance coverage
at substantially the same level of benefits as the Executive has at the date of
termination of employment, and the reimbursement for one month shall be made no
later than the end of the immediately following month.  Such payments
shall continue through the greater of (1) the balance of the remaining term of
employment under this Agreement, or (2) 24 months.  Notwithstanding
the foregoing, in the event the Executive is a “specified employee” within the
meaning of Section 409A of the Code and the regulations thereunder as of the
date of termination of employment, the reimbursements under this subsection 12C
shall accrue during the first six (6) months after the date of termination of
employment and be paid on the first day of the seventh (7th) month after the
date of termination of employment as required by Section 409A, or, if earlier,
the date of death of the Executive.  Thereafter, subsequent
reimbursements shall be made in the time and manner set forth in this subsection
12C.

    

    
      
        
        

      

      
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    13.    Non-Compete.  Executive
covenants and agrees that Executive will not, at any time during the term of
this Agreement and, in the event of termination for cause, termination upon
voluntary resignation, or termination without cause, for a period of 18 months
following such termination of employment, accept compensation or anything of
value from, nor offer or provide any services, including consulting services, to
any person, company, partnership, joint venture or other entity in a capacity
involving, in whole or in part, over-the-counter drugs, functional toiletries or
dietary supplements which are competitive with the products of Company marketed
and sold during the term of this Agreement up through the date of termination of
employment with annual sales for the Company’s most recently completed fiscal
year in excess of $10 million. This provision applies only to entities selling
the above specified products in competition with the Company through food, drug
or mass merchandiser channels of distribution in the United States.

    

    14.    Confidentiality
Obligations.  The Executive agrees to maintain all confidential
information and trade secrets obtained during the course of his employment with
the Company as confidential and to disclose the same to no one, other than in
the furtherance of the Company’s business in the normal course or to a fellow
employee with a reasonable need to know, unless the Executive can demonstrate by
documentary evidence that such information was (1) known to him prior to his
employment with the Company; (2) subsequently became part of the public domain
through no fault of his own; or (3) was subsequently disclosed to him by a third
party not in violation of any obligation of confidentiality and non-use with the
Company.  The Executive agrees to maintain such confidential
information and trade secrets as confidential during the term of this Agreement
and, for confidential information for a period of 18 months thereafter and, for
trade secrets for so long as the information remains a trade
secret.  It is agreed that, for purposes of this Agreement, the term
“confidential information” shall mean any and all information relative to the
Company which is unpublished or not readily available to the general public, and
the term “trade secrets” means information, without regard to form, that derives
independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, persons other than
the Company who can obtain economic value from its disclosure or use, and is the
subject of efforts by the Company that are reasonable under the circumstances to
maintain its secrecy.

    

    15.    Injunction.  Executive
expressly recognizes that any breach of the provisions of this Agreement is
likely to result in irreparable injury to Company and that monetary damages may
not adequately compensate Company for such breach.  Therefore,
Executive agrees that Company shall be entitled, if it so elects, to institute
and prosecute proceedings in any court of competent jurisdiction not only to
obtain damages for any breach of this Agreement, but also to enforce the
specific performance of this Agreement by Executive and to enjoin Executive from
activities in violation of this Agreement.  Further, Executive agrees
that any breach of the provisions of this Agreement shall automatically toll and
suspend the period of restraint for the amount of time that the breach
continues.

    

    
      
        
        

      

      
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    16.    Attorney Fees and Other
Costs.  If any legal action or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any provision of this
Agree­ment, Company shall be entitled to recover reasonable attorney fees as
well as court costs and all expenses not taxable as court costs.  This
remedy shall include, without limitation, all such fees, costs and expenses
incident to appeals.

    

    17.    No Waiver of
Breaches.  The failure of a party to require the performance of
a provision of this Agreement shall not constitute a waiver of a subsequent
breach or nullify the effect of such provision.

    

    18.    Governing
Law.  This Agreement shall be construed in accordance with the
laws of Tennessee.  Executive and the Company agree that any
proceeding arising out of or in connection with this Agreement may be brought in
the courts of Hamilton County, Tennessee, and Executive and the Company waive,
to the fullest extent permitted by applicable law, any objection either may have
to the appropriate venue of such court in any such proceeding.

    

    19.    Notices.  Any
notice required or permitted herein shall be in writing and shall be mailed,
postage prepaid, or sent by overnight courier, properly addressed to the other
party at the address set forth below, subject to change by written notice of
either party to the other:

    

    

    

    Company:

    

    Chattem,
Inc.

    1715 West
38th Street

    Chattanooga,
TN 37409

    Attention:  President

    

    Executive:

    

    Mr. Zan
Guerry

    503 Holly
Hill Road

    Lookout
Mountain TN  37350

    

    Any
notice shall be considered given when deposited in the U.S. Mail or delivered to
an overnight courier.

    

    20.    Survival of
Obligations.  All covenants, agreements, represen­tations
and warranties made herein or otherwise made in writing by either party to this
Agreement shall survive the execution and delivery of this Agreement and the
performance of the servic­es contemplated hereby.

    

    
      
        
        

      

      
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    21.    Severability.  If
any one or more of the provi­sions contained in this Agreement shall for any
reason be held to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and reducing it, so as
to be enforceable to the extent compati­ble with the applicable law as it
shall then appear.  If, more­over, any one or more of the
provisions contained in this Agree­ment shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been con­tained therein.

    

    22.    Entire
Agreement.  This Agreement and the Severance Agreement dated
simultaneously herewith constitute the full and complete understanding and
agreement of the parties with respect to the employment of Executive by Company
and supersede all prior understandings and agreements regarding Executive’s
employment.  This Agreement may be modified only by a written
instrument executed by both parties.

    

    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

    

    

     

    
      	 	

              CHATTEM,
      INC.

              

              By:___________________________

              Title:__________________________

              

              

              ______________________________

              Zan
      Guerry 

            

    

     

     

     

    
      
        
        

      

      
        8WWW.EXFILE.COM, INC. -- 888-775-4789 -- CHATTEM, INC. -- EXHIBIT 10.3 TO FORM 10-Q

    EXHIBIT
10.3

     

    SECOND AMENDED AND RESTATED
SEVERANCE AGREEMENT

    

    

    This
Second Amended and Restated Severance Agreement (the “Agreement”) is made and
entered into as of the 8th day of July, 2008, by
and between CHATTEM, INC., a Tennessee corporation (the “Company”) and ZAN
GUERRY (the “Executive”).

    

    WITNESSETH

    

    WHEREAS,
the Company is desirous of assuring itself of continuity of management through
the hiring and retention of certain key executives, and to foster their unbiased
and analytical assessment of any offer to acquire control of the
Company;

    

    WHEREAS,
the Company believes it is in the best interests of the Company and its
stockholders to provide the Executive with adequate financial security and
sufficient encouragement to the Executive to remain with the Company
notwithstanding the possibility of a change of control of the
Company;

    

    WHEREAS,
the Company and the Executive have previously entered that certain
Non-Competition and Severance Agreement dated November 6, 1985, as amended May
31, 1995, and as further amended by that certain Amended and Restated Severance
Agreement dated August 1, 2000, which provides certain benefits in the event of
a change in control of the Company;

    

    WHEREAS,
the Company desires to amend and restate the Agreement in the form hereinafter
set forth to comply with the provisions of Section 409A of the Internal Revenue
Code of 1986, as amended, (the “Code”) and to make certain other beneficial
changes; and

    

    WHEREAS,
the Executive is willing to continue to provide services for the long-term
benefit of the Company and its shareholders and to agree to the changes set
forth herein in exchange for the specified additional severance benefits
provided hereunder.

    

    NOW,
THEREFORE, the Company and the Executive do hereby agree as
follows:

    

    1.    Term.  The
term of this Agreement shall commence as of the day and year first above written
and continue indefinitely thereafter for a period ending with the termination of
the Executive’s employment with
the Company.  Notwithstanding the foregoing, the expiration of the
term of this Agreement shall not affect any rights or obligations continuing
thereafter as specifically set forth herein.

    

    2.    Severance
Benefits.  If the Company Discharges or Constructively
Discharges the Executive during the term of this Agreement within twenty-four
(24) months after the occurrence of a Change in Control, the Executive shall
receive the Severance Benefit.  

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    If the
Company’s shareholders approve a merger or other transaction which results in a
Change in Control and the Company Discharges or Constructively Discharges the
Executive on or after the date of the related shareholder meeting but before the
actual date of the Change in Control, Executive shall be deemed to have been
Discharged or Constructively Discharged immediately following the Change in
Control.  In addition, after a Change in Control, the Executive shall
be entitled to resign his employment with the Company and receive the Severance
Benefit (a “Resignation”) at any time during the period commencing one-hundred
and eighty (180) days after the Change in Control and ending two-hundred and
forty (240) days after the Change in Control notwithstanding the fact that no
Discharge or Constructive Discharge has occurred.  These terms are
hereby defined as follows:

    

    
      
        	
              	
                A.

              	
                “Change
      in Control” shall mean the occurrence of any one of the following
      events:

              

      

    

    

    
      
        	
              	
                (i)

              	
                the
      sale by the Company of all or substantially all of its assets or the
      consummation by the Company of any merger, consolidation, reorganization,
      or business combination with any person, in each case, other than in a
      transaction:

              

      

    

    

    
      
        	
              	
                (a)

              	
                in
      which persons who were shareholders of the Company immediately prior to
      such sale, merger, consolidation, reorganization, or business combination
      own, immediately thereafter, (directly or indirectly) more than 50% of the
      combined voting power of the outstanding voting securities of the
      purchaser of the assets or the merged, consolidated, reorganized or other
      entity resulting from such corporate transaction (the “Successor
      Entity”);

              

      

    

    

    
      
        	
              	
                (b)

              	
                in
      which the Successor Entity is an employee benefit plan sponsored or
      maintained by the Company or any person controlled by the Company;
      or

              

      

    

    

    
      
        	
              	
                (c)

              	
                after
      which more than 50% of the members of the board of directors of the
      Successor Entity were members of the Board of Directors of the Company
      (the “Board”) at the time of the action of the Board approving the
      transaction (or whose nominations or elections were approved by at least
      2/3 of the members of the Board at that
time);

              

      

    

    

    
      
        	
              	
                (ii)

              	
                the
      acquisition directly or indirectly by any “person” or “group” (as those
      terms are used in Sections 13(d), and 14(d) of the Securities Exchange Act
      of 1934 (the “Exchange Act”), including without limitation, Rule 13d-5(b))
      of “beneficial 

              

      

    

    
      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
        
          	
                	
                   

                	
                  ownership”
      (as determined pursuant to Rule 13d-3 under the Exchange Act) of
      securities entitled to vote generally in the election of directors
      (“voting securities”) of the Company that represent 30% or more of the
      combined voting power of the Company’s then-outstanding voting securities,
      other than:

                

        

      

       

    

    
      
        	
              	
                (a)

              	
                an
      acquisition by a trustee or other fiduciary holding securities under any
      employee benefit plan (or related trust) sponsored or maintained by the
      Company or any person controlled by the Company or by any employee benefit
      plan (or related trust) sponsored or maintained by the Company or any
      person controlled by the
Company;

              

      

    

    

    
      
        	
              	
                (b)

              	
                an
      acquisition of voting securities by the Company or a person owned,
      directly or indirectly, by the holders of at least 50% of the voting power
      of the Company’s then outstanding securities in substantially the same
      proportions as their ownership of the stock of the
  Company;

              

      

    

    

    
      
        	
              	
                (c)

              	
                an
      acquisition of voting securities from the Company;
  or

              

      

    

    

    
      
        	
              	
                (d)

              	
                an
      acquisition of voting securities pursuant to a transaction described in
      clause (i) of this definition that would not be a Change in Control under
      clause (i); and

              
	 	 	 
	 	 	

                for
      purposes of clarification, an acquisition of the Company’s securities by
      the Company that causes the Company’s voting securities beneficially owned
      by a person or group to represent 30% or more of the combined voting power
      of the Company’s then-outstanding voting securities is not to be treated
      as an “acquisition” by any person or group for purposes of this clause
      (ii); 

              

      

    

     

    
      
        	
              	
                (iii)

              	
                a
      change in the composition of the Board that causes less than a majority of
      the directors of the Company to be directors that meet one or more of the
      following descriptions:

              

      

    

    

    
      
        	
              	
                (a)

              	
                a
      director who has been a director of the Company for a continuous period of
      at least 24 months;

              

      

    

    

    
      
        
        

      

      
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                (b)

              	
                a
      director whose election or nomination as director was approved by a vote
      of at least 2/3 of the then directors described in clauses (iii)(a), (b)
      or (c) of this definition by prior nomination or election, but excluding,
      for the purposes of this subclause (b), any director whose initial
      assumption of office occurred as a result of an actual or threatened
      (i) election
      contest with respect to the election or removal of directors or other
      actual or threatened solicitation of proxies or consents by or on behalf
      of a person or group other than the Board or (ii) tender offer,
      merger, sale of substantially all of the Company’s assets, consolidation,
      reorganization, or business combination that would be a Change in Control
      under clause (i) on the consummation thereof;
or

              

      

    

    

    
      
        	
              	
                (c)

              	
                a
      director who was serving on the Board as a result of the consummation of a
      transaction described in clause (i) that would not be a Change in Control
      under clause (i); or

              

      

    

    

    
      
        	
              	
                (iv)

              	
                the
      approval by the Company’s shareholders of a liquidation or dissolution of
      the Company other than in connection with a transaction described in
      clause (i) of this definition that would not be a Change in Control
      thereunder.

              

      

    

    

    Except as
otherwise specifically defined in this definition, the term “person” means an
individual, corporation, partnership, trust, association or any other entity or
organization.

    

    
      
        	
              	
                B. 

              	
                “Discharges”:
      terminates the Executive for any reason other than indictment or
      conviction for a felony or other crime involving substantial moral
      turpitude, disability, death, alcoholism, drug addiction or the gross,
      active misfeasance of the Executive with regard to his duties with the
      Company.

              

      

    

    

    
      
        	
              	
                C.

              	
                “Constructively
      Discharges”: changes location or reduces the Executive’s status, duties,
      responsibilities or direct or indirect compensation, (including future
      increases commensurate with those given other managers of the Company), or
      so alters the style or philosophy of the conduct of the Company’s
      business, in the opinion of the Executive, as to cause it to be
      undesirable to the Executive to remain in the employ of the Company, any
      of which events shall be deemed to occur on the date the Executive
      provides

              

      

    

    
      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
        
          	
                	
                   

                	
                  written
      notice to the Company of the circumstances constituting a Constructive
      Discharge.

                

        

      

       

    

    
      
        	
              	
                D.

              	
                “Severance
      Benefit”:  a payment equal to two-hundred ninety-nine (299%)
      percent of the Executive’s “annualized includible compensation for the
      base period” as defined in Section 280G(d) of the Code.

              
	 	 	 
	 	 	

                    Notwithstanding
      the foregoing Severance Benefit formula, any payments to which the
      Executive is entitled upon Discharge or Constructive Discharge or
      Resignation from the Company shall be adjusted so that the aggregate
      present value of all “parachute payments” (as defined in Section
      280G(b)(2) of the Code) to which the Executive is entitled is less than
      300% of the Executive’s “annualized includible compensation for the base
      period” as defined in Section 280G(d) of the Code, unless, taking into
      account the applicable federal, state and local income taxes and the
      excise tax imposed by Section 4999, the payment of the full Severance
      Benefit results in the receipt by the Executive on an after-tax basis of
      the greatest amount of benefit under this Section 2D notwithstanding that
      all or some portion of such Severance Benefit may be taxable under Section
      4999 of the Code.  The determination as to whether there is any
      adjustment (and the extent thereof) in the payments due the Executive
      because of this paragraph shall be made in writing within thirty (30) days
      after Discharge or Constructive Discharge or Resignation, by the Company’s
      independent accountants, compensation consultants or legal counsel
      (“Independent Advisor”) on the date of the Change in Control and shall be
      final and binding on the Executive and the Company.  The Company
      shall furnish said Independent Advisor with all data required to make said
      determination within ten (10) days after Discharge, or Constructive
      Discharge or Resignation.  If there is any such adjustment, the
      Executive may request which payments or distributions shall be reduced and
      the Company may acquiesce in such request if permitted under applicable
      law. 

              
	 	 	 
	 	 	

                
                      If, in
      accordance with the foregoing the Severance Benefit is reduced and,
      notwithstanding such reduction, it is established pursuant to the final
      determination of a court or the Internal Revenue Service that payments
      have been made to, or provided for the benefit of, Executive by the
      Company which are subject to the excise tax of Section 4999, the Company
      shall reimburse, or pay for the benefit of, the Executive such excise tax
      and indemnify and hold the Executive harmless, on an after-tax basis, for
      any additional excise, income or employment taxes, including
      interest

                

              

      

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

        	 	 	

                
                  and
      penalties, imposed as a result of such final determination with any such
      reimbursements being made no later than the end of the taxable year of the
      Executive following the taxable year in which the excise tax is
      remitted. 

                

              

      

    

     

    3.    Payment.  The
Severance Benefit shall be paid to the Executive in a lump sum not later than
thirty (30) days after Discharge or Constructive Discharge or
Resignation.  No interest shall be due upon the Severance Benefit
unless it is not paid when due and in which case interest shall accrue thereon
at the applicable Federal rate used to determined present value under Section
280G of the Code.

    

    Notwithstanding the foregoing, in the
event the Executive is a “specified employee” within the meaning of Section 409A
of the Code and the regulations thereunder as of the date of Discharge,
Constructive Discharge or Resignation, the Severance Benefit under this Section
3 shall be paid six (6) months after the date of Discharge, Constructive
Discharge or Resignation as required by Section 409A, or, if earlier, the date
of death of the Executive.

    

    4.    Notices.  Any
notices, requests, demands and other communications provided for 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 executive offices
addressed to the President.

    

    5.    Non-Alienation.  The
Executive shall not have any right to pledge, hypothecate, anticipate or in any
way create a lien upon any amounts provided under this Agreement; and no
benefits payable hereunder shall be assignable in anticipation of payment either
by voluntary or involuntary acts, or by operation of
law.  Notwithstanding the foregoing provisions, in the event that the
Executive dies following Discharge or Constructive Discharge or Resignation
after a Change in Control but before receiving all of his Severance Benefit, the
unpaid Severance Benefit shall be paid to his Estate in accordance with the
terms of this Agreement.

    

    6.    Governing
Law.  The provisions of this Agreement shall be construed in
accordance with the laws of the State of Tennessee.  Executive and the
Company agree that any proceeding arising out of or in connection with this
Agreement may be brought in the courts of Hamilton County, Tennessee, and
Executive and the Company waive, to the fullest extent permitted by applicable
law, any objection either may have to the appropriate venue of such court in any
such proceeding.

    

    7.    Amendment.  This
Agreement may not be amended or cancelled except by the mutual agreement of the
parties in writing.

    

    8.    Successors to the
Company.  Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the Company and any successor
of the Company.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    9.    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.

    

    

    IN
WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the
authorization from its Board of Directors, the Company has caused these presents
to be executed in its name on its behalf, and its corporate seal to be hereunto
affixed and attested by its Secretary, all as of the day and year first above
written.

    

     

    
      	 	

               

              _____________________________________

              Zan
      Guerry

              

              

              CHATTEM,
      INC.

              

              By:__________________________________

              Title:________________________________ 

            

    

    

    ATTEST:

    

    ____________________________

    Secretary

    (SEAL)

    
 

    
      
        
        

      

      
        7

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