Document:

Exhibit 10.1

 

AIRCRAFT TIME SHARING AGREEMENT

 

THIS
TIME SHARING AGREEMENT (this “Agreement”) is entered into on January 23,
2006 by Cephalon, Inc. (“Owner”), a Delaware corporation, with principal
offices at 41 Moores Road, Frazer, PA 19355 and Frank Baldino, Jr., Ph.D.
(“Lessee”).

 

BACKGROUND:

 

A.                                   Owner
is the registered owner of certain civil aircraft as described in the
Specification Sheet attached hereto and made a part hereof, as Exhibit A (the “Aircraft”).

 

B.                                     Owner
employs a fully qualified flight crew to operate the Aircraft;

 

C.                                     From
time to time, Lessee may desire to lease the Aircraft and flight crew from
owner for Lessee’s personal travel at Lessee’s discretion on a time sharing
basis as defined in Section 91.501(c)(1) of the Federal Aviation Regulations
(“FAR”).

 

D.                                    This
Agreement sets forth the understanding of the Parties as to the terms under
which Owner will provide Lessee with the use, on a periodic basis, of the
Aircraft; and

 

E.                                      The
use of the Aircraft will at all times be pursuant to and in full compliance
with the requirements of FAR Part 91 and particularly,
Sections 91.501(b)(6), 91.501(c)(1), and 91.501(d).

 

NOW,
THEREFORE, Owner and Lessee agree as follows:

 

1.                                       Subject
to the terms and conditions of this Agreement, Owner agrees to lease the
Aircraft to Lessee at Lessee’s discretion from time-to-time on a non-exclusive
basis and on an “as needed and as available basis” pursuant to the provisions
of FAR Section 91.501(b)(6), 91.501(c)(1), and 91.501(d) and to
provide a fully qualified flight crew for all operations for flights scheduled
in accordance with the terms of this Agreement.

 

2.                                       This
Agreement shall remain in effect unless and until terminated by either party
for any reason upon written notice to the other, such termination to become
effective ten (10) days from the date of the notice or upon the earlier of
(a) the termination of this Agreement by consent of Owner and Lessee, (b) the
date of Lessee’s termination of employment with Owner and (c) the date of
Lessee’s death.

 

3.                                       Lessee
may use the Aircraft from time-to-time, subject to the prior permission and
approval of Owner, for any and all purposes allowed by FAR Section 91.501(b)(6).  Lessee’s use shall include the use of the
Aircraft by his or her guests if

 

 

they accompany him or her
on the flight.  Lessee shall not accept
any compensation whatsoever for any flight conducted under this Agreement.

 

4.                                       Lessee
shall pay Owner for each flight conducted under this Agreement the actual
expenses of each specific flight as authorized by FAR Section 91.501(d) as
in effect from time to time.  On the date
of this Agreement these expenses include and are limited to:

 

(a)           fuel,
oil, lubricants and other additives;

 

(b)           travel
expenses of the crew, including food, lodging and ground transportation;

 

(c)           hangar
and tie down costs away from the Aircraft’s base of operation;

 

(d)           insurance
obtained for the specific flight;

 

(e)           landing
fees, airport taxes and similar assessments;

 

(f)            customs,
foreign permit and similar fees directly related to the flight;

 

(g)           in-flight
food and beverages;

 

(h)           passenger
ground transportation;

 

(i)            flight
planning and weather contract services; and

 

(j)            an
additional charge equal to one hundred percent (100%) of the expenses listed in
clause (a) above.

 

5.                                       Owner
will pay all expenses related to the operation of the Aircraft when incurred
and will provide monthly invoices to Lessee for the expenses enumerated in Section 4
hereof. Lessee shall pay the amounts invoiced within fifteen (15) days after
receipt of the related invoice.

 

6.                                       The
Parties acknowledge that with the exception of the expenses for in-flight food
and beverages and passenger ground transportation, the payment of expenses set
forth in Section 4 hereof are subject to the federal excise tax imposed
under Section 4261 of the Internal Revenue Code.  Lessee shall pay Owner for such expenses and
the amount of such taxes within fifteen (15) days of receipt of the applicable
invoice.  Owner agrees to collect and
remit to the Internal Revenue Service for the benefit of Lessee all such
federal excise taxes.

 

 

7.                                       In
the event that Lessee desires to use the Aircraft pursuant to this Agreement,
Lessee will so notify Owner and will provide Owner with requests for flight
time and proposed flight schedules as far as possible in advance of any given
flight. Requests for flight time shall be in a form, whether oral or written,
mutually convenient to and agreed upon by Owner and Lessee. In addition to
proposed schedules and flight times, Lessee shall provide at least the
following information for each proposed flight at some time prior to scheduled
departure as required by Owner or Owner’s flight crew:

 

(a)           departure
point;

 

(b)           destinations;

 

(c)           date
and time of flight;

 

(d)           the
number and identity of any anticipated passengers;

 

(e)           the
nature and extent of luggage and/or cargo to be carried;

 

(f)            the
date and time of a return flight, if any; and

 

(g)           any
other information concerning the proposed flight that may be pertinent or
required by Owner or Owner’s flight crew.

 

8.                                       Owner
shall have sole and exclusive authority over the scheduling of the Aircraft,
including which aircraft is used for any particular flight.

 

9.                                       Owner
shall be solely responsible for securing maintenance, preventive maintenance, and
required or otherwise necessary inspections on the Aircraft and shall take such
requirements into account in scheduling flights of the Aircraft.  No period of maintenance, preventive
maintenance, or inspection shall be delayed or postponed for the purpose of
scheduling the Aircraft, unless such maintenance or inspection can be safely
conducted at a later time in compliance with all applicable laws and
regulations, and within the sound discretion of the pilot-in-command. The
pilot-in-command shall have final and complete authority to cancel any flight
for any reason or condition that in his or her judgment would compromise the
safety of the flight.

 

10.                                 Owner
shall be responsible for the physical and technical operation of the Aircraft
and the safe performance of all flights and shall retain full authority and
control, including exclusive operational control, and possession of the
Aircraft at all times during the term of this Agreement.  Owner shall employ, pay for, and provide to
Lessee a qualified flight crew for each flight undertaken under this Agreement.
In accordance with applicable FAR, the qualified flight crew provided by Owner
will exercise all of its duties and responsibilities with respect to the safety
of each flight conducted under this Agreement. Lessee agrees that the flight
crew, in its sole discretion, may terminate any flight, refuse to commence any
flight, or take other action that in the considered judgment of the
pilot-in-command is necessitated by considerations of safety. Without limiting
the

 

 

generality of Section 11,
no such action of the pilot-in-command shall create or support any liability
for loss, injury, damage, or delay to Lessee or any other person.

 

11.                                 THE
OWNER AND LESSEE AGREE THAT OWNER SHALL IN NO EVENT BE LIABLE TO LESSEE OR HIS
EMPLOYEES, AGENTS, REPRESENTATIVES, GUESTS, OR INVITEES FOR ANY INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES AND/OR PUNITIVE DAMAGES OF ANY KIND OR NATURE
UNDER ANY CIRCUMSTANCES OR FOR ANY REASON INCLUDING ANY DELAY OR FAILURE TO
FURNISH THE AIRCRAFT OR CAUSED OR OCCASIONED BY THE PERFORMANCE OR
NON-PERFORMANCE OF ANY SERVICES COVERED BY THIS AGREEMENT.

 

12.                                 Owner
may maintain such insurance coverage with respect to the Aircraft and any
flights made under this Agreement as Owner may elect in its sole discretion,
including all-risk physical damage insurance (hull Coverage), aircraft bodily
injury and property damage liability insurance. The risk of loss during the
period when the Aircraft is operated on behalf of Lessee under this Agreement
shall remain with Owner, and Owner will retain all rights and benefits with
respect to the proceeds payable under policies of hull insurance maintained by
Owner that may be payable as a result of any incident or occurrence while an
Aircraft is being operated on behalf of Lessee under this Agreement. Lessee
shall be named as an additional insured on liability insurance policies
maintained by Owner on the Aircraft with respect to flights conducted pursuant
to this Agreement. The liability insurance policies on which Lessee is named an
additional insured shall provide that as to Lessee coverage shall not be
invalidated or adversely affected by any action or inaction, omission or
misrepresentation by Owner or any other person (other than Lessee). Any hull
insurance policies maintained by Owner on any Aircraft used by Lessee under
this Agreement shall include a waiver of any rights of subrogation of the
insurers against Lessee.

 

13.                                 Lessee
agrees that the insurance specified in Section 12 shall provide its sole
recourse for all claims, losses, liabilities, obligations, demands, suits,
judgments or causes of action, penalties, fines, costs and expenses of any
nature whatsoever, including attorneys’ fees and expenses for or on account of
or arising out of, or in any way connected with the use of the Aircraft by
Lessee or its guests, including injury to or death of any persons, including
Lessee and its guests which may result from or arise out of the use or
operation of the Aircraft during the term of this Agreement.  This Section 13 shall survive
termination of this Agreement.

 

14.                                 A
copy of this Agreement shall be carried in the Aircraft and available for
review upon the request of the FAA on all flights conducted pursuant to this
Agreement.

 

15.                                 Lessee
represents, warrants and covenants to Owner that:

 

 

(a)           He
will use each Aircraft for and on his own account only and will not use any
Aircraft for the purposes of providing transportation of passengers or cargo in
air commerce for compensation or hire;

 

(b)           He
shall refrain from incurring any mechanics or other lien in connection with the
Aircraft, whether permissible or impermissible under this Agreement, and he
shall not attempt to convey, mortgage, assign, lease or any way alienate the
Aircraft or create any kind of lien or security interest involving the Aircraft
or do anything or take any action that might mature into such a lien, and
Lessee shall, at his own expense, promptly take such action as may be necessary
to discharge any such lien;

 

(c)           During
the term of this Agreement, he will abide by and conform to all such laws,
governmental, and airport orders, rules, and regulations as shall from time to
time be in effect relating in any way to the operation and use of the Aircraft
by a time-sharing lessee.

 

16.                                 For
purposes of this Agreement, the permanent base of operation of the Aircraft
shall be New Castle County Airport, 191 N. DuPont Highway, Wilmington, DE, 19720
unless changed by Owner, in which event Owner shall notify Lessee of the new
permanent base of operation of the Aircraft.

 

17.                                 Lessee
hereby indemnifies Owner and agrees to hold harmless Owner from and against any
Losses imposed on, incurred by or asserted against Owner (i) arising out
of or resulting from the willful misconduct or gross negligence of Lessee, (ii) to
the extent such Loss is a direct result of any failure of Lessee to comply with
any covenants required to be performed or observed by him, or (iii) to the
extent such Loss is a direct result of any breach by Lessee of any of Lessee’s
warranties or representations contained in this Agreement.  Losses shall be determined after taking into
account the available proceeds of any applicable insurance policies.

 

18.                                 Neither
this Agreement nor Lessee’s interest in this Agreement shall be assignable to
any other person or entity without the prior written consent of Owner.

 

19.                                 Owner
shall have the right to add or substitute aircraft, and to remove aircraft from
the fleet, from time to time during the term of this Agreement.  Any such change in aircraft will be provided
for in Schedule A to this Agreement.

 

20.                                 Legal
title to the Aircraft shall remain in the Owner at all times.

 

21.                                 This
Agreement shall be governed by and construed in accordance with the laws of
Pennsylvania (excluding the conflicts of law rules thereof).

 

22.                                 This
Agreement constitutes the entire understanding between Owner and Lessee with
respect to its subject matter, and there are no representations, warranties,
conditions, covenants, or Agreements other than as set forth expressly herein.
Any

 

 

changes or modifications
to this Agreement must be in writing and signed by authorized representatives
of both parties. This Agreement may be executed in counterparts, which shall,
singly or in the aggregate, constitute a fully executed and binding Agreement.

 

23.                                 Any
notice, request, or other communication to any party by the other party under
this Agreement shall be conveyed in writing and shall be deemed given on the
earlier of the date (i) notice is personally delivered with receipt
acknowledged, (ii) a facsimile notice is transmitted, or (iii) three (3) days
after notice is mailed by certified mail, return receipt requested, postage
paid, and addressed to the party at the address set forth below. The address of
a party to which notices or copies of notice are to be given may be changed
from time to time by such party by written notice to the other party.

 

If to Owner:

 

Cephalon, Inc.

41 Moores Road

Frazer, PA 19355

Attention: General Counsel

FAX: 1-610-738-6258

 

If to Lessee:

 

Frank Baldino, Jr., Ph.D.

c/o Cephalon, Inc.

41 Moores Road

Frazer, PA 19355

 

24.                                 If
any one or more of the provisions of the Agreement shall be held invalid,
illegal, or unenforceable, the remaining provisions of this Agreement shall be
unimpaired, and the invalid, illegal, or unenforceable provision shall be
replaced by a mutually acceptable provision, which, being valid, legal, and
enforceable, comes closest to the intention of the parties underlying the
invalid, illegal, or unenforceable provision. To the extent permitted by
applicable law, the parties hereby waive any provision of law, which renders
any provision of this Agreement prohibited or unenforceable in any respect.

 

25.                                 The
failure of a party to require performance of any provision of this Agreement
shall in no way affect that party’s right thereafter to enforce such provision
nor shall the waiver by a party of any breach of any provision of this
Agreement be taken or held to be a waiver of any further breach of the same
provision or any other provision.

 

26.                                 NEITHER
OWNER (NOR ITS AFFILIATES) MAKES, HAS MADE OR SHALL BE DEEMED TO MAKE OR HAVE
MADE, AND OWNER (FOR ITSELF AND ITS AFFILIATES) HEREBY DISCLAIMS, ANY WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH

 

 

RESPECT TO ANY AIRCRAFT
TO BE USED HEREUNDER OR ANY ENGINE OR COMPONENT THEREOF INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, AIRWORTHINESS, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT
OR TITLE.

 

27.                                 Truth
in leasing statement under FAR Section 91.23:  Owner shall mail a copy of this Agreement for
and on behalf of both Parties to:  Flight
Standards Technical Division, P.O. Box 25724, Oklahoma City, Oklahoma
73125, within twenty-four (24) hours of its execution, as provided by FAR Section 91.23(c)(1).
Additionally, Owner agrees to comply with the notification requirements of FAR Section 91.23
by notifying by telephone or in person the FAA Flight Standards District Office
nearest the airport where the first flight will originate at least forty-eight
(48) hours prior to the first flight under this Agreement.

 

(a)           OWNER
HEREBY CERTIFIES THAT THE AIRCRAFT HAS BEEN INSPECTED AND MAINTAINED WITHIN THE
TWELVE (12) MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT, EXCEPT TO THE
EXTENT THE AIRCRAFT IS LESS THAN TWELVE (12) MONTHS OLD, IN ACCORDANCE WITH THE
PROVISIONS OF FAR PART 91 AND ALL APPLICABLE REQUIREMENTS FOR THE
MAINTENANCE AND INSPECTION THERE UNDER HAVE BEEN MET AND ARE VALID FOR THE
OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT.

 

(b)           OWNER
WHOSE ADDRESS APPEARS IN SECTION 23 ABOVE AND WHOSE AUTHORIZED SIGNATURE
APPEARS BELOW, AGREES, CERTIFIES, AND KNOWINGLY ACKNOWLEDGES THAT WHEN THE
AIRCRAFT IS OPERATED UNDER THIS AGREEMENT, OWNER SHALL BE KNOWN AS, CONSIDERED,
AND SHALL IN FACT BE THE OPERATOR OF THE AIRCRAFT AND THAT OWNER UNDERSTANDS
ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION
REGULATIONS.

 

(c)           AN
EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FARS CAN BE
OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE, GENERAL
AVIATION DISTRICT OFFICE, OR AIR CARRIER DISTRICT OFFICE. EACH PARTY AGREES TO
UNDERSTAND AND ABIDE BY THESE REGULATIONS.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK.]

 

 

IN
WITNESS WHEREOF, Owner and Lessee caused the signatures of their authorized
representatives to be affixed below on the day and year first above written.

 

 

OWNER:

 

	
  CEPHALON, INC.

  
	
   

  
	
   

  
	
  /s/ Carl A.
  Savini

  	
   

  
	
  Name: Carl A.
  Savini

  
	
  Title: Sr. Vice
  President, Chief Adminstrative Officer

  

 

 

LESSEE:

 

	
  /s/ Frank
  Baldino, Jr., Ph.D.

  	
   

  
	
  Frank Baldino, Jr.,
  Ph.D.

  

 

 

EXHIBIT A

 

CEPHALON, INC.

 

Aircraft Subject to Time
Sharing Agreement

 

Each
of the undersigned is a party to the Time Sharing Agreement dated January 23,
2006, by and between Cephalon, Inc. (“Cephalon” or “Owner”), and Frank
Baldino, Jr., Ph.D. (“Lessee”) (collectively the «Parties»), and agrees
that from and after the date below, until this Exhibit A shall be
superseded and replaced through agreement of the Parties or the Time Sharing
Agreement shall be terminated pursuant to its terms, the Aircraft described
below shall constitute the «Aircraft» described in and subject to the terms of
the Time Sharing Agreement.

 

2001 Bombardier
Challenger CL-600-2B16

 

Manufacturer’s Serial
Number 5488

 

FAA Registration Number
N8570

 

Engine Model: General
Electric CF34-3B; Serial Numbers: 872952 and 872953

 

 

Dated: January 23, 2006

 

OWNER:

 

	
  CEPHALON, INC.

  
	
   

  
	
  /s/ Carl A.
  Savini

  	
   

  
	
   

  
	
  By:

  	
  Carl A. Savini

  	
   

  
	
   

  
	
  Its:

  	
  Sr. Vice
  President, Chief Administrative Officer

  	
   

  
				

 

 

LESSEE:

 

	
  Frank Baldino, Jr.,
  Ph.D.

  
	
   

  
	
   

  
	
  /s/ Frank
  Baldino, Jr., Ph.D.Exhibit 10.1

 

Arena
Pharmaceuticals

 

Summary of

 

—            2006
Annual Incentive Plan               —

 

 

2006 Annual Incentive Plan - Overview

 

Overview

 

•                  Each
participant is assigned a bonus target, expressed as a percentage of annual
salary.

 

•                  The
Company sets up to eight corporate and individual goals, each individually
weighted.

 

•                  Goals
will be specific and measurable.

 

•                  At
the end of the year, individual bonus awards are determined based upon the
level of goal achievement, the quality of achievement, and the weighting of
each goal.

 

•                  No
award is earned paid if weighted average goal completion is less than 50%.

 

•                  Certain
combinations of goal-achievement create “multipliers” of up to 125% of the
target award.

 

•                  The
CEO and Compensation Committee have the discretion to modify awards up to a
125%-of-target maximum funding level.

 

Individual Bonus Targets

 

•                  Targets are based on role, level, and the
market.

 

Target Award as a % Salary

 

	
  CEO

  	
   

  	
  50

  	
  %

  
	
  CSO, Gen Couns, CFO

  	
   

  	
  35

  	
  %

  
	
  CMO

  	
   

  	
  30

  	
  %

  
	
  VP Qlty, VP Mkt/Bus Dev

  	
   

  	
  25

  	
  %

  

 

2

 

Annual Incentive Plan – Mix of Goals

 

Corp. vs. Individual Goals

 

•                  Each
participant’s goals are divided into corporate and individual components,
weighted based on role.

 

	
   

  	
   

  	
  Corporate

  	
   

  	
  Individual (MBOs)

  	
   

  
	
  CEO

  	
   

  	
  75

  	
  %

  	
  25

  	
  %

  
	
  CSO, Gen Couns, CFO

  	
   

  	
  60

  	
  %

  	
  40

  	
  %

  
	
  CMO, VP Qlty, VP Mkt/Bus Dev

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  

 

•                  All
participants have the same corporate goals, which aligns their interests with
one another and shareholders.

 

•                  Corporate
goals are proposed by the CEO and approved by the Compensation Committee and/or
the Board.

 

•                  Individual
goals are set by the CEO in partnership with each participant and reviewed by
the Committee.  The CEO’s individual
goals are proposed by the CEO and approved by the Compensation Committee and/or
the Board.

 

•                  The
categories of corporate goals are set forth on Annex I

 

Plan-year Goal Adjustment

 

•                  If
a goal becomes irrelevant during the year or if a strategic change affects a
goal (or more than one), then the Compensation Committee, in concert with the
CEO, will:

 

1.               Substitute a new goal with an appropriate
weighting (the weighting of the existing goals will be proportionately adjusted
if the new goal has a different weighting than its predecessor); or,

 

2.               Eliminate the irrelevant goal and re-weight
all other goals proportionately.

 

3

 

Annual Incentive Plan - Funding

 

Threshold

 

•                  The
minimum total weighted average completion percentage is 50% for any award to be
earned.

 

Cap

 

•                  Total
award funding is capped at 125% of target.

 

Funding Relationship

 

•                  When
total weighted average completion is above 50%, the funded award will equal
weighted average completion percentage.

 

•                  For
example, if weighted average completion is 95% of the total, then the award
would fund at 95% of target (subject to the review and approval of the
Compensation Committee).

 

Discretionary Adjustment

 

•                  The
Compensation Committee may use its judgment and discretion to modify or adjust
the annual bonus award.

 

4

 

Rules Governing the Plan

 

•                  Eligible
plan participants must be actively employed at Arena Pharmaceuticals on the
last day of the fiscal year to receive an annual payout.  Plan participants who leave Arena prior to
the end of the fiscal year are not eligible to receive an award.

 

•                  Eligible
plan participants whose first date of employment is between January 1,
2006 and September 30, 2006 will participate on a prorated basis based on
their date of hire.

 

•                  Plan
participants who are promoted to incentive-eligible positions (or positions
with a higher incentive target) before December 31, 2006 will participate
in the plan on a prorated basis, based on the effective date of the promotion.

 

•                  Payment
of an incentive to eligible plan participants who take a leave of absence for
any reason during the year will be prorated based on the time worked during the
year.

 

•                  The
Compensation Committee and the Board have the right to exclude participants and
exercise discretion, including canceling the plan or any earned awards.

 

•                  Awards
earned under this plan will be paid prior to the 15th day of March 2007.

 

•                  Participation
in the Annual Incentive Plan is not a guarantee of continued employment.  Arena reserves the right to terminate
employment and/or participation in the Annual Incentive Plan at any time and
for any reason.

 

•                  The
Company and the Board reserve the right to change or waive a provision in the
incentive plan at any time, including (but not limited to) its award formula,
performance measures and payout schedule. 
Although the Company intends to pay incentives at levels indicated by
the plan, this plan shall not obligate the Company or its management to grant
the benefits contemplated under its provisions.

 

•                  This
plan is not a contract and in no way represents a contractual obligation to pay
any amount under the plan, regardless of the performance achieved during the
plan period.

 

5

 

Annex I

 

The
corporate goals relate to the following categories:

 

(i) development
of internal clinical programs;

 

(ii) progress
of partnered programs;

 

(iii) financial
goals; and

 

(iv) progress
of research programs.

 

6

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