EMPLOYMENT AGREEMENT
Exhibit 10(e)(viii)
AGREEMENT by and between Schering-Plough Corporation, a New Jersey corporation (the
“Company”) and Xxxxxx X. Xxxxxxxx, Xx., (the “Executive”), dated as of the 15th day of April,
2004.
The Board of Directors of the Company (the “Board”), has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the Executive’s full attention and
dedication to the Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The “Effective Date” shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything
in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the
Executive’s employment with the Company is terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change
of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date
immediately prior to the date of such termination of employment.
(b) The “Change of Control Period” shall mean the period commencing on the date hereof and
ending on the third anniversary of the date hereof; provided, however, that commencing on the date
one year after the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be
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hereinafter referred to as the “Renewal Date”), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a “Change of Control”
shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of securities of the Company where such acquisition causes such Person to own 20% or more of
either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (a), the following
acquisitions shall not be deemed to result in a Change of Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; and provided,
further, that if any Person’s beneficial ownership of the Outstanding Company Voting Securities
reaches or exceeds 20% as a result of a transaction described in clause (i) or (ii) above, and
such Person subsequently acquires beneficial ownership of additional voting securities of the
Company, such subsequent acquisition shall be treated as an acquisition that causes such Person to
own 20% or more of the Outstanding Company Voting Securities; or
(b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened 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 other than the Board; or
(c) Consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction
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involving the Company or any of its subsidiaries, or a sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case,
unless, following such Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company.
3. Employment Period. The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing on the Effective Date and ending
on the earlier of (x) the third anniversary of such date and (y) the Executive’s 65th birthday
(the “Employment Period”).
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the
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Executive’s services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35 miles from such
location.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement for the Executive to
(A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall receive an annual
base salary (“Annual Base Salary”), which shall be paid at a semi-monthly rate, at least equal to
twenty-four times the highest semi-monthly base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the Company and its affiliated companies
in respect of the twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used in this Agreement, the term
“affiliated companies” shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual
Bonus”) in cash at least equal to the Executive’s highest bonus under the Company’s Executive
Incentive Plan, or any comparable bonus under any predecessor or successor plan, for the last
three full fiscal years
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prior to the Effective Date (annualized in the event that the Executive was not employed by
the Company for the whole of such fiscal year) (the “Recent Annual Bonus”). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all incentive, profit-sharing, stock option, stock
award, savings and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to the extent, if any,
that such distinction is applicable), savings opportunities and retirement benefit opportunities,
in each case, less favorable, in the aggregate, than the most favorable of those provided by the
Company and its affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 120-day period immediately preceding the Effective
Date or if more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies and programs provide
the Executive with benefits which are less favorable, in the aggregate, than the most favorable of
such plans, practices, policies and programs in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer executives of the
Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its affiliated companies.
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(vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled
to fringe benefits, including, without limitation, tax and financial planning services, payment of
club dues, and, if applicable, use of an automobile and payment of related expenses and use of
Company aircraft, in accordance with the most favorable plans, practices, programs and policies of
the Company and its affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as
in effect generally at any time thereafter with respect to other peer executives of the Company
and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and other appointments, and to
personal secretarial and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives of the Company and
its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of the Company and
its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive’s employment shall terminate automatically
upon the Executive’s death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s
employment. In such event, the Executive’s employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s duties with the Company on a
full-time basis for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician selected by the
Company or its
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insurers and acceptable to the Executive or the Executive’s legal representative.
(b) Cause. The Company may terminate the Executive’s employment during the
Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean:
(i) the willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not substantially performed the
Executive’s duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be
considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer
of the Company or based upon the advice of counsel for the Company shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) Good Reason. The Executive’s employment may be terminated by the Executive for
Good Reason. For purposes of this Agreement, “Good Reason” shall mean:
(i) the assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
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insubstantial and inadvertent action not taken in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of Section 4(b) of
this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(iii) the Company’s requiring the Executive to be based at any office or location other
than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the Executive to
travel on Company business to a substantially greater extent than required immediately prior
to the Effective Date;
(iv) any purported termination by the Company of the Executive’s employment otherwise
than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of this
Agreement.
For purposes of this Section 5(c), any good faith determination of “Good Reason” made by the
Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason during the 30-day period immediately following the
first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement,
a “Notice of Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the termination date (which
date shall be not more than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights
hereunder.
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(e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date
of receipt of the Notice of Termination or any later date specified therein, as the case may be,
(ii) if the Executive’s employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company notifies the Executive
of such termination and (iii) if the Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for
Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the
Executive’s employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the
Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive’s Annual Base Salary through the Date of Termination
to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent
Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred (and annualized for any fiscal year consisting
of less than twelve full months or during which the Executive was employed for less than
twelve full months), for the most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the “Highest Annual Bonus”) and (y)
a fraction, the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the
sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to
as the “Accrued Obligations”); and
B. the amount equal to the product of (1) the lesser of (x) three and (y) the number
of days after the Date of Termination and on or before the Executive’s 65th birthday,
divided by 365, times (2) the sum of (A) the Executive’s Annual Base Salary, (B) the
Highest Annual Bonus and (C) the highest contributions made under the Company’s Employees’
Profit Sharing Incentive Plan and the Company’s Profit Sharing Benefits Equalization Plan
or any successor or replacement plans thereto, for any of the three calendar years
preceding the Date of Termination; and
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C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under
the Company’s qualified defined benefit retirement plan (the “Retirement Plan”) (utilizing
actuarial assumptions no less favorable to the Executive than those in effect under the
Company’s Retirement Plan immediately prior to the Effective Date), and any excess or
supplemental retirement plans in which the Executive participates (together, the “SERP”)
which the Executive would have received if the Executive’s employment had continued for
three years after the Date of Termination or through age 65, if sooner, assuming for this
purpose that all accrued benefits were fully vested, and, assuming that the Executive’s
compensation in each of the three years (or the shorter period to age 65, if applicable)
would have been that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
(ii) for the lesser of (x) three years after the Executive’s Date of Termination and (y) the
period through the Executive’s 65th birthday, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to
the Executive and/or the Executive’s family at least equal to those which would have been provided
to them in accordance with the plans, programs, practices and policies described in Section
4(b)(iv) of this Agreement if the Executive’s employment had not been terminated or, if more
favorable to the Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families, provided, however,
that if the Executive becomes reemployed with another employer and is eligible to receive medical
or other welfare benefits under another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained employed until three
years after the Date of Termination and to have retired on the last day of such period;
(iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the “Other Benefits”);
(iv) notwithstanding anything to the contrary in any employee pension benefit plan or any
supplemental or excess employee pension benefit plan of the Company (including without limitation
the Retirement Plan, the SERP, the Company’s Retirement Benefits
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Equalization Plan (the “BEP”) or any successor or replacement plan thereto), all benefits
payable to the Executive under any supplemental or excess employee pension benefit plan of the
Company (including without limitation the SERP, the BEP or any successor or replacement plan
thereto) following a Change of Control (as defined therein) if, on the Date of Termination, the
Executive is then age 50 or over shall not be reduced by any “reduction factors” or similar
formulae or otherwise because such benefits are payable prior to a specified age or because the
Executive has not yet reached a specified age (including, without limitation, the Executive’s
earliest or normal retirement age under the terms of the relevant plan); and
(v) in addition to the benefits provided in subparagraph (a)(ii) of this Section 6, if the
Executive is age 45 or over on the Date of Termination, the Executive shall, upon attainment of age
55 and upon termination of the three year period after the Executive’s Date of Termination, become
eligible for all benefits under medical plans, practices, policies and programs made available
immediately prior to the Date of Termination (or, if greater, immediately prior to the Effective
Date) to retired peer executives of the Company (including without limitation any supplemental
coverage under the Executive Medical Benefits Plan) as if the Executive had at the Date of
Termination satisfied the age and service conditions for coverage under the applicable provisions
of such plans, practices, policies and programs. If the Company is unable to provide the Executive
with coverage under such plans, practices, policies and programs, the Company shall provide the
Executive with separate comparable coverage but in no event less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect for retirees
immediately prior to the Effective Date.
(b) Death. If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, this Agreement shall terminate without further obligations to
the Executive’s legal representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s
estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits and survivor benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s
estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death
with respect to other peer executives of the Company and its affiliated companies and their
beneficiaries.
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(c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Period, this Agreement shall terminate without
further obligations to the Executive, other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, without
limitation, and the Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable of those generally provided by
the Company and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive’s family, as in effect at any time thereafter generally with respect to other
peer executives of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive’s employment shall be
terminated for Cause during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base
Salary through the Date of Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the
Executive voluntarily terminates employment during the Employment Period, excluding a termination
for Good Reason, this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or practice provided
by the Company or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement.
8. Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its
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obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the
“Code”).
9. Certain Additional Payments.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution in the nature of compensation
(within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise (each, a “Payment”) would be subject to the excise tax imposed by Section 4999 of the
Code (together with any interest or penalties imposed with respect to such excise tax, the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (“Gross-Up Payment”)
in an amount such that after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. The Company’s obligation to make Gross-Up Payments under this Section 9 shall
not be conditioned upon the Executive’s termination of employment.
(b) Subject to the provisions of Section 9(c), all determinations required to be made under
this Section 9, including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by Deloitte & Touche or such other certified public accounting firm that is serving as the
Company’s primary independent auditors at the time (the “Accounting Firm”). The Accounting Firm
shall provide detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change of Control, the
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Executive may appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event the Company exhausts or does not seek to
pursue its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit
of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on which the Executive
gives such notice to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties)
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incurred in connection with such contest, and shall indemnify and hold the Executive harmless, on
an after-tax basis, for any Excise Tax, income tax or other tax (including interest and penalties
with respect thereto) imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole discretion, may pursue or forgo
any and all administrative appeals, proceedings, hearings and conferences with the applicable
taxing authority in respect of such claim and may, at its sole discretion, either direct the
Executive to pay the tax claimed and xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that, if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed income in connection
with such advance; and further provided, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of a Gross-Up Payment or an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect
to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Section 9(c), if
applicable) promptly pay to the Company the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the expiration of 30
days after such determination, then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(e) Notwithstanding any other provision of this Agreement, the Company may, in its sole
discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing
authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.
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10. Confidential Information. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive’s employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement). After termination
of the Executive’s employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey, without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
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(b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Xxxxxx X. Xxxxxxxx, Xx.
[Address]
[Address]
If to the Company:
Schering-Plough Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Chief Executive Officer
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect
the validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law
or regulation.
(e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 5(c) (i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise be provided under
any other written agreement between the Executive and the Company, the employment of the Executive
by the Company is “at will” and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive’s employment may be terminated by either the Executive or the Company at any time prior
to the Effective Date, in which case the Executive shall have no further rights under this
Agreement. From and after the Effective Date this Agreement shall supersede any prior agreement
between the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s 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, all as of the day and year first above written.
| Xxxxxx X. Xxxxxxxx, Xx. | ||||||
| SCHERING-PLOUGH CORPORATION | ||||||
| By | ||||||
| Xxxx Xxxxxx Chairman of the Board and Chief Executive Officer |
||||||
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