CHANGE OF CONTROL EMPLOYMENT AGREEMENT
Exhibit 10 (e)(xv)
AGREEMENT by and between Schering-Plough Corporation, a New Jersey corporation (the “Company”)
and
, (the “Executive”), is dated as of the ___ day of
,
(the
“Commencement Date”).
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 Section 409A Change in Control Event (as
defined in Appendix A) occurs and if the Executive’s employment with the Company is terminated
prior to the date on which such Section 409A Change in Control Event 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 a
Section 409A Change in Control Event or (ii) otherwise arose in connection with or in anticipation
of a Change of Control or Section 409A Change in Control Event, 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 Commencement Date
and ending on the earlier of (i) the third anniversary of the Commencement Date and (ii) except as
otherwise provided in Section 1(a), the date the Executive’s employment terminates for any reason
prior to the Effective Date; provided, however, that commencing on the third anniversary of the
Commencement Date, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as a “Renewal Date”), the Change of Control
Period shall be automatically extended so as to terminate on the earlier of (x) the first
anniversary of such Renewal Date and (y) except as otherwise provided in Section 1(a), the date the
Executive’s employment terminates for any reason prior to the Effective Date, unless at least three
months prior to such Renewal Date the Company shall have given 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 the happening of any of the following events:
(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 Commencement Date, 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 Commencement Date 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 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
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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) [third] [second] [first] 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
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, and in
the same state as, 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 appropriate 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 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 materially 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 without materially interfering with the performance of the
Executive’s responsibilities to the Company, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the Effective Date
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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, in
accordance with the Company’s normal payroll practices in effect from time to time for its other
similarly situated peer executives, an annual base salary (“Annual Base Salary”) at least equal to
the highest annualized rate of 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 during 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 in cash at least equal to
the Executive’s highest annual target incentive opportunity under the Company’s annual incentive
plan applicable to the Executive (the “Incentive Plan”), or any comparable bonus under any
predecessor or successor plan, for any of the immediately preceding three full fiscal years prior
to the Effective Date (the “Annual Bonus”). Each such Annual Bonus shall be paid no later than
March 15 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, in accordance with
Section 409A of the Code (“Section 409A”), pursuant to an applicable deferred compensation plan of
the Company.
(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, programs and arrangements applicable
generally to other similarly situated peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies, programs and arrangements provide the
Executive with incentive opportunities (cash or equity, and 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, programs and arrangements 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 similarly
situated 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
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receive all benefits under welfare benefit plans, practices, policies, programs and
arrangements 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, practices, policies, programs and arrangements) to the extent applicable
generally to other similarly situated peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies, programs and arrangements provide the
Executive with benefits which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies, programs and arrangements 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 similarly
situated peer executives of the Company and its affiliated companies. If, however, Executive’s
participation in any such plan, practice, policy, program or arrangement could result in adverse or
unintended tax consequences to any participant (including the Executive), the Company shall be
entitled to pay to Executive the cost of equivalent benefits outside such plan, practice policy,
program or arrangement, or provide Executive with substantially equivalent benefits through a
separate program (including the provision of such benefits through the purchase of insurance),
without regard to the tax treatment applicable to such payment or separate program, in lieu of
permitting the Executive to participate in such plan, practice, policy, program or arrangement.
(v) Expenses. The Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by the Executive during the Employment Period 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 similarly situated peer executives of the Company and its
affiliated companies. Such reimbursement shall be made no later than March 15 of the year
following the year in which such expense was incurred.
(vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled
to fringe benefits, including, without limitation, reimbursement for 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 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 similarly situated peer
executives of the Company and its affiliated companies. Any reimbursements to the Executive in
connection with fringe benefit costs shall be made no later than March 15 of the year following the
year in which such costs were incurred. To the extent required by applicable law, such fringe
benefits shall result in imputed income that shall be subject to withholding from the Executive’s
wages in the amount and manner prescribed by such law.
(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 substantially equivalent 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
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the Executive, as those provided generally at any time thereafter with respect to other
similarly situated peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be entitled to an
amount of paid vacation determined in accordance with the most favorable plans 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 similarly situated 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 14(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 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 termination initiated by the
Company or by the Executive incident to or connected with a finding that the Executive has engaged,
whether in connection with Executive’s employment with the Company or otherwise, in
misappropriation, theft, embezzlement, kick-backs, bribery, or other deliberate, gross or willful
misconduct or dishonest acts or omissions, including, but not limited to, commission of a felony.
(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 any of the events described
in (i)- (iii) below, that occur without the Executive’s express written consent, if the Company
fails to cure such events within 20 business days after receiving notice thereof from the
Executive:
(i) the assignment to the Executive of any duties that are materially inconsistent with the
Executive’s education, training and experience, or a significant diminution in the Executive’s
authorities, responsibilities, status or title (as described in this Agreement), it being
understood that (A) a change in the person to whom the Executive reports or (B) modifications to
organizational responsibilities resulting in changes to the Executive’s functional areas of
responsibility that do not significantly diminish Executive’s core role in the Company, do not
constitute “Good Reason”;
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(ii) any significant reduction by the Company of the Executive’s total compensation in the
aggregate, unless such reduction was part of a reduction approved by the Company’s Board of
Directors (or a Committee thereof) for one or more similarly situated peer executives in addition
to the Executive;
(iii) any failure by the Company to comply with any of the provisions of Section 4 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 14(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 that 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.
(e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, 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, (iii) if the Executive’s
employment is terminated by the Executive for Good Reason, the Date of Termination shall be the
close of the thirtieth calendar day after the Company receives notice from the Executive of the
basis for Good Reason if the Company has failed to cure such basis for Good Reason, and (iv) 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.
Notwithstanding the foregoing, the Date of Termination for purposes of determining the date that
any payment or benefit which is treated as nonqualified deferred compensation under Section 409A is
to be paid or provided (or in determining whether an exemption to such treatment applies), and for
purposes of determining whether the Executive is a Specified Employee on the Date of Termination
shall be the date on which the Executive has incurred a “separation from service” within the
meaning of Treasury Regulation section 1.409A-1(h), or in subsequent IRS guidance under Section
409A.
6. Obligations of the Company upon Termination.
(a) Involuntary and Good Reason Terminations. 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, then provided that the Executive signs a
Satisfactory Release (as defined below) within 21 days following the later of the Date of
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Termination and the date such Release is presented to the Executive, and does not revoke it
within 7 days after the date he executes such Release, the Company shall:
(i) pay to the Executive, within 90 days after the effective date of the Satisfactory Release,
a lump-sum cash payment equal to 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 Executive’s 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 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] [two] [one] 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 Executive’s Annual Bonus and (C) the greater of the highest contributions made under the
Company’s Employees’ Profit Sharing Incentive Plan and the Company’s Profit Sharing Benefits
Equalization Plan or the highest aggregate Company contribution to the Executive’s account
under the Company’s qualified and nonqualified defined contribution retirement plans, for
any of the three calendar years immediately preceding the Date of Termination; and
C. an amount equal to the excess of (1) the sum of (x) the lump-sum actuarial
equivalent (as of the date that this enhanced SERP benefit is paid to the Executive or his
beneficiaries (the “SERP Payout Date)) of the normal retirement 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 (y) the lump sum actuarial
equivalent of the normal retirement benefit under any excess or supplemental retirement
plans in which the Executive participates (together, the “SERP”) as of the SERP Payout Date
(utilizing actuarial assumptions no less favorable to the Executive than those in effect
under the SERP immediately prior to the Effective Date) that the Executive would have
received if the Executive’s employment had continued for [three] [two] [one] year 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 the [three]
[two] [one] year (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 (2) the lump sum actuarial equivalent
of the Executive’s actual normal retirement benefit (paid or payable), if any, under the
Retirement Plan and the SERP based on the Executive’s actual age, service and compensation
as of the Date of Termination;
(ii) for the lesser of (x) [three] [two] [one] year 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, policy or arrangement, continue health and
welfare benefits to the Executive (and the Executive’s family, if applicable)
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at least equal to those that would have been provided in accordance with the plans, programs,
practices, policies and arrangements described in Section 4(b)(iv) of this Agreement had the
Executive’s employment not been terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other similarly situated peer executives of the
Company and its affiliated companies and their families; provided, however, that such benefits
coverage shall be secondary to any health and welfare benefits coverage for which the Executive
becomes eligible under any plan or arrangement sponsored by a subsequent employer of the Executive;
and provided further, that if Executive’s participation in any such program could result in adverse
or unintended tax consequences to any participant in such program (including the Executive), the
Company shall be entitled to reimburse such Executive for the cost of equivalent benefits outside
such program (in a manner that complies with Section 409A) or provide Executive with substantially
equivalent benefits (in a manner that complies with Section 409A) through a separate program
(including the provision of such benefits through the purchase of insurance) without regard to the
tax treatment (other than additional taxes under Section 409A) applicable to such separate program
in lieu of permitting the Executive to participate in such program;
(iii) to the extent not theretofore paid or provided, timely pay or provide to the Executive,
in accordance with the terms of any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies, any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under such plan, program, policy or practice
or contract or agreement, including without limitation, any compensation previously deferred by the
Executive under an applicable deferred compensation plan of the Company, together with any accrued
interest or earnings thereon, (such other amounts and benefits shall be hereinafter referred to as
the “Other Benefits”);
(iv) waive any and all “reduction factors” imposed as a result of Executive’s age with respect
to the Executive’s nonqualified supplemental or excess employee pension benefit plan if the
Executive is at least age 50 as of the Date of Termination;
(v) in addition to the benefits provided in subparagraph (a)(ii) of this Section 6, if the
Executive is age 50 or older as of the Date of Termination, the Executive shall become immediately
eligible for coverage under the Company’s retiree medical plan or any replacement or successor plan
(including, without limitation, any supplemental coverage applicable to executives) provided,
however, that, if the Company is unable to provide the Executive with coverage under such plan, the
Company shall provide the Executive with separate comparable coverage (in a manner that complies
with Section 409A) but in no event less favorable, in the aggregate, than the most favorable of
such plans, policies, programs, practices or arrangements in effect for retirees immediately prior
to the Effective Date.
For purposes of this Section 6(a), “Satisfactory Release” shall mean a release of claims in a form
reasonably prescribed by the Company that (1) releases, and forever discharges, all claims that
Executive has or may have against the Company and its affiliated companies and its and their
employees, directors and agents (other than claims relating to Other Benefits), and (2) becomes
irrevocable if not revoked by Executive within seven (7) days after he signs it; provided that the
form of release shall not contain any post-employment covenants.
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(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 similarly situated peer executives of the Company and such affiliated companies
under such plans, programs, practices, policies and arrangements relating to death benefits and
survivor benefits, if any, as in effect with respect to other similarly situated 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 similarly situated peer
executives of the Company and its affiliated companies and their beneficiaries.
(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, policies and arrangement relating to disability, if any, as
in effect generally with respect to other similarly situated 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 similarly situated peer executives of the Company and its affiliated companies and
their families.
(d) Termination for Cause; or Voluntary Termination Without 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 and (y) 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 after 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, practice, policy or
arrangement provided by the Company or any of its affiliated companies and for which the
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Executive may qualify, nor, subject to Section 14(g), 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 that are vested benefits or that 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. Except as specifically expressed
herein, nothing contained herein is intended to alter the terms of any benefit plan or program.
Notwithstanding anything in this Agreement, the Company or its affiliated companies, as applicable,
reserves the right to amend or terminate any of its or their employee benefit plans at any time.
In the event that an amendment to an employee benefit plan adopted after the Effective Date
specifically conflicts with an express promise made in this Agreement, the Company shall have the
right to honor the promise through comparable means outside the affected employee benefit plan
without regard to any differences in the tax impact to the Executive.
8. Full Settlement. Except as otherwise provided in Sections 6, the Company’s
obligation to make the payments provided for in this Agreement and otherwise to perform its
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. The
Company’s obligation to make payments or provide benefits under this Agreement and otherwise to
perform its obligations hereunder shall be in lieu and in full settlement of all severance or
termination benefits or payments that the Executive has received or is entitled to receive under
any other any other plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies in connection with the Executive’s termination of
employment. 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, to the full extent permitted by law, all
legal fees and expenses up to $25,000 which the Executive may reasonably incur as a result of any
contest 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);
provided, however, that if the Company ultimately prevails in a court of competent jurisdiction
with regard to any such contest, the Executive agrees to reimburse the Company for any and all
legal fees and expenses paid by the Company in accordance with this sentence. Such amounts shall
become payable within 30 days after the expiration of the applicable period to appeal such outcome
or, if an appeal is taken, 30 days after final resolution of such appeal. Interest shall accrue on
any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of 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 benefit in the nature of compensation
(within the meaning of Section 280G(b)(2) of the Code) made or provided to or
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for the benefit of the Executive, whether under 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”),
at or before the time the Excise Tax is due (whether by withholding or otherwise) but in no event
later than December 31 of the calendar year following the year in which such Excise Tax is remitted
to the Internal Revenue Service, in an amount such that after payment by the Executive of all taxes
(and any interest or penalties imposed with respect to such taxes, other than any additional tax or
interest that may be imposed under Section 409A(a)(1)(B) of the Code and similar provisions of
state or local law), 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 such nationally recognized certified public accounting firm that the Company’s may
designate (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 a Change of Control, the 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 ten 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 no later than December 31 of
the calendar year following the year in which the related Excise Tax is remitted to the Internal
Revenue Service.
(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
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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) 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 pay the amount of
such payment to the Executive, on an interest-free basis, as soon as practicable but in no event
later than December 31 of the calendar year following the year in which such payment is made 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, other than any additional tax or
interest that may be imposed under Section 409A(a)(1)(B) of the Code and similar provisions of
state or local law) imposed with respect to such payment or with respect to any imputed income in
connection with such payment; 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 paid by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with
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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 paid 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 payment shall be forgiven and shall not
be required to be repaid and the amount of such payment 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.
10. Code Section 409A Provisions.
(a) To the fullest extent applicable, amounts and other benefits payable under this Agreement
are intended to be exempt from the definition of “nonqualified deferred compensation” under Section
409A in accordance with one or more of the exemptions available under the final Treasury
regulations promulgated under Section 409A and, to the extent that any such amount or benefit is or
becomes subject to Section 409A due to a failure to qualify for an exemption from the definition of
nonqualified deferred compensation in accordance with such final Treasury regulations, this
Agreement is intended to comply with the applicable requirements of Section 409A with respect to
such amounts or benefits. This Agreement shall be interpreted and administered to the extent
possible in a manner consistent with the foregoing statement of intent.
(b) In each case where this Agreement provides for the payment of an amount that constitutes
nonqualified deferred compensation under Section 409A to be made to the Executive within a
designated period (e.g., within 30 days after the Date of Termination) and such period begins and
ends in different calendar years, the exact payment date within such range shall be determined by
the Company, in its sole discretion, and the Executive shall have no right to designate the year in
which the payment shall be made.
(c) Notwithstanding anything in this Agreement or elsewhere to the contrary, if the Executive
is a Specified Employee (as defined below) on the Date of Termination and the Company reasonably
determines that any amount or other benefit payable under this Agreement on account of the
Executive’s separation from service, within the meaning of Section 409A(a)(2)(A)(i) of the Code,
constitutes nonqualified deferred compensation that will subject the Executive to “additional tax”
under Section 409A(a)(1)(B) of the Code (together with any interest or penalties imposed with
respect to, or in connection with, such tax, a “409A Tax”) with respect to the payment of such
amount or the provision of such benefit if paid or provided at the time specified in the Agreement,
then the payment or provision thereof shall be postponed to the first business day of the seventh
month following the Date of Termination or, if earlier, the date of the Executive’s death (the
“Delayed Payment Date”). The Company and the Executive may
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agree to take other actions to avoid the imposition of a 409A Tax at such time and in such
manner as permitted under Section 409A. In the event that this Section 10 requires a delay of any
payment, such payment shall be accumulated and paid in a single lump sum on the Delayed Payment
Date together with interest for the period of delay, compounded monthly, equal to the prime or base
lending rate then used by CitiBank, N.A., in New York City and in effect as of the date the payment
would otherwise have been provided.
(d) For purposes of this Agreement, the term “Specified Employee” shall mean a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, as determined by the
Company’s Compensation Committee.
11. 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 11 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
12. Intellectual Property. To the fullest extent permitted by applicable law, all
intellectual property (including patents, trademarks, and copyrights) which are made, developed or
acquired by Executive in the course of Executive’s employment with the Company will be and remain
the absolute property of the Company, and Executive shall, upon the Company’s reasonable request,
assist the Company in perfecting and defending its rights to such intellectual property.
13. 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 other than by will or the laws of descent and
distribution. Except as otherwise required by law, no right to receive payments hereunder shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and
of no effect; except, however, that this Agreement shall inure to the benefit of and be enforceable
by the executors, administrators or other legal representatives of the Executive or the
Executive’s estate.
(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,
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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.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the internal
substantive 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.
(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:
[name and address]
If to the Company:
-Plough Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Corporate Secretary
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Corporate Secretary
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) No provisions of this Agreement may be waived, modified or discharged unless such waiver,
modification or discharge is agreed to in writing signed by both Executive and the Chief Executive
Officer of the Company. 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) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of
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this Agreement.
(f) Except as herein otherwise specifically provided, references in this Agreement to
employment by the Company shall include employment by affiliates of the Company, and the obligation
of the company to make any payment or provide any benefit to the Executive hereunder shall be
deemed satisfied to the extent that such benefit is made or such payment is provided by an
affiliate of the Company.
(g) 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.
15. Disputes. All disputes arising out of or relating to this Agreement, or to the
Executive’s employment by the Company, will be determined by arbitration conducted before a single
arbitrator selected by the parties, in accordance with the labor and employment rules of the
American Arbitration Association then in effect, and at the office of the Association located
closest to the Company’s headquarters. The costs of arbitration will be borne by the losing party.
The arbitrator shall be empowered by the parties to enter all relief that a court could enter.
16. Entire Agreement. This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto in respect of the subject
matter contained herein. There shall be no contractual or similar restrictions on Executive’s
right to terminate his employment with the Company, or on his post-employment activities, other
than those expressly set forth in this Agreement. Except as otherwise set forth in this Agreement,
the respective rights and obligations of the parties under this Agreement shall survive any
termination of Executive’s employment. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall be deemed to be one and the same
document. Signatures delivered by facsimile shall be effective for all purposes.
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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.
| EXECUTIVE |
||||
| By: | ||||
| [name of Executive] | ||||
| SCHERING-PLOUGH CORPORATION |
||||
| By: | ||||
| C. Xxx Xxxxxxx | ||||
| Senior Vice President, Global Human Resources |
||||
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Appendix A
Section 409A Change in Control Event
For purposes of Section 1(a), the term “Section 409A Change in Control Event” shall mean any
of the following events:
(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of 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 more than 50% of either (x) the then outstanding Shares of the Company
(the “Outstanding Shares”) or (y) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of directors (the “Outstanding
Voting Securities”); provided, however, that for purposes of this subsection (a) the following
acquisitions will not constitute a Section 409A Change in Control Event: (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) below; and provided, further,
that if any Person’s beneficial ownership of the Outstanding Shares or Outstanding Voting
Securities reaches or exceeds 50% as a result of a prior transaction, and such Person subsequently
acquires beneficial ownership of additional Shares or additional voting securities of the Company,
such subsequent acquisition will not be treated as an acquisition that causes such Person to own
more than 50% of the Outstanding Shares or Outstanding Voting Securities;
(b) during any 12-month period, individuals who, as of the first day of such period,
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
beginning of such 12-month period 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 will be considered as though such individual were a member of the Incumbent Board;
(c) consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company, or the acquisition of assets or stock of
another entity by the Company (each a “Business Combination”), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and entities who were
beneficial owners, respectively, of the Outstanding Shares or Outstanding Voting Securities
immediately prior to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectfully, the then outstanding shares of the 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 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 Shares and Outstanding Voting Securities, as the
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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, more than 50%
of, respectfully, 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 on the
later of (x) the time of the execution of the initial agreement, (y) the action of the Board
providing for such Business Combination or (z) the beginning of the 12-month period ending on the
effective date of the Business Combination; or
(d) any one Person acquires (or has acquired during any 12-month period ending on the date of
the most recent acquisition by such Person) assets of the Company having a fair market value equal
to or more than 40% of the total gross fair market value of all of the assets of the Company
immediately prior to such sale, other than an acquisition by (i) a Person who was a shareholder of
the Company immediately before the asset acquisition in exchange for or with respect to such
Person’s Shares, (ii) an entity whose total or voting power immediately after the transfer is at
least 50% owned, directly or indirectly, by the Company, (iii) a person or group that, immediately
after the transfer, directly or indirectly owns at least 50% of the total value or voting power of
the outstanding stock of the Company or (iv) an entity whose total value or voting power
immediately after the transfer is at least 50% owned, directly or indirectly, by a person described
in clause (c) above.
The definition of Section 409A Change in Control Event for purposes of Section 1(a) of this
Agreement is intended to conform to the description of “Change in Control Events” in Treasury
Regulation section 1.409A-3(i)(5), or in subsequent IRS guidance describing what constitutes a
Change in Control Event for purposes of Section 409A. Accordingly, no Section 409A Change in
Control Event will be deemed to occur with respect to a transaction or event described in
paragraphs (a) through (d) above unless the transaction or event would constitute a “Change in
Control Event” as described in Treasury Regulation section 1.409A-3(i)(5), or in subsequent IRS
guidance under Section 409A.
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