Re: Amended and Restated Employment Letter Agreement (the “Agreement”)
Exhibit 10.1
December 31, 2008
Xxxxxx X. Xxxxxxx
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Re: |
Amended and Restated Employment Letter Agreement (the “Agreement”) |
Dear Xxx:
As a result of the passage of Section 409A of the Internal Revenue Code (the “Code”), Covance Inc. (“Covance” or the “Company”) is required to amend and restate your employment letter agreement. Accordingly, this Agreement completely supersedes and replaces any prior versions.
Position
As Chief Executive Officer of Covance your duties shall include such duties as are consistent with your title and position as Chief Executive Officer of a publicly-traded company. You will report to the Board of Directors of Covance (the “Board”). You will also serve as Chairman of the Board.
Salary and Bonus
Your salary will be determined annually by the Board or the Compensation and Organization Committee thereof (the “Compensation Committee”).
You will participate in the Covance Variable Compensation Plan (the “Bonus Plan”) subject to the terms and conditions thereof. Payouts under the Bonus Plan are contingent upon a number of factors, as specified in the Bonus Plan, including your performance and the Company’s performance. You will be eligible for a bonus equal to such amount as is determined annually by the Board (the “Target Bonus Award”). This Agreement does not constitute an amendment, modification or supplement to the Bonus Plan and to the extent there are any inconsistencies between this Agreement and the Bonus Plan, the latter shall govern. Further, the Bonus Plan is subject to modification or discontinuation at the discretion of Covance.
Supplemental Pension Plan
A supplemental executive retirement plan (as amended, modified or adopted from time to time, the “SERP”) has been adopted for the senior executives of Covance in which you currently participate. The SERP is a non-qualified, unfunded retirement plan designed to provide retirement benefits to you upon your retirement on or after attaining age 60, with provisions enabling you to receive reduced benefits if you retire after attaining age 55.
Investment and Benefit Plans
You are eligible to participate in all the Covance employee benefit plans, including medical, dental, life insurance, disability, 401(k) Savings Plan, and Employee Stock Purchase Plan (“ESPP”), in accordance with the terms and conditions of those plans. In addition, you will receive paid time off benefits consistent with the provisions of our Paid Time Off Plan.
Equity Awards
You may be awarded from time to time additional compensation (such as stock options or performance shares) pursuant to Covance’s 2007 Employee Equity Participation Plan (as amended, modified or supplemented from time to time, the “EEPP”) or any additional or replacement incentive compensation or long-term compensation program established by Covance for its senior officers. Any awards under such programs shall be at such levels or in such amounts as the Board or the Compensation Committee deems, in its sole discretion, appropriate for your position and the performance of your duties.
Severance
Should you be involuntarily terminated by the Company other than (1) for Cause (as defined below); (2) as a result of your Extended Disability (as defined below); (3) within the 24 month period following a Change in Control (as defined below), the Company shall pay you the following amounts (subject to the paragraph entitled “Specified Employee,” if applicable):
(i) An amount equal to the sum of (a) two years of base salary in effect at the time of termination plus (b) an amount equal to your target bonus award at the time of termination (the sum of (a) and (b) being, collectively, the “Termination Payments”), payable on the Company’s normal payroll cycle; and
(ii) In the event you elect COBRA continuation for you and your eligible dependents, the monthly premium for such coverage from the date of such involuntary termination until the date that is 18 months after the date of your involuntary termination from the Company (such period being the “Health Continuation Period”). Subsequent to the Health Continuation Period, the Company shall continue paying the equivalent premium payments until the date that is the second anniversary of your involuntary termination from the Company. In the event you are terminated for Cause and the COBRA election is still available to you under applicable law, and you so elect the COBRA continuation, you shall be responsible for all health benefit premium costs.
(iii) You will be given the option to convert your life insurance benefit to a personal life insurance policy, and if you so elect, the monthly premiums will be paid by the Company for the period during which the Company pays the monthly premiums for health coverage in accordance with subsection (ii) above.
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Notwithstanding anything in this Severance paragraph to the contrary, you agree that if you obtain or are provided with medical and dental benefits from a new employment position, then you shall promptly notify the Company that such benefits are being provided to you and the Company shall cease providing such coverage or discontinue paying the premiums for such insurance, as applicable. You agree to promptly update the Senior Vice President, Human Resources of the Company of any change in your employment or benefits coverage status during any period you are receiving benefits hereunder.
Please refer to that certain Confidentiality and Non-Competition Agreement between you and the Company (the “Non-Competition Agreement”). You agree that any of the severance payments under subsection (i) or (ii) above shall constitute the payment of your base salary under Section 4(a)(ii) of the Non-Competition Agreement.
“Cause” shall mean (i) your conviction of, or plea of guilty or nolo contendere to, a felony or a misdemeanor if such misdemeanor involves moral turpitude; (ii) your commission of any act of gross negligence or intentional misconduct in the performance or non-performance of your duties as an employee of Covance or its affiliates, including without limitation, any actions which constitute sexual harassment under applicable laws, rules or regulations; (iii) your failure to perform your duties assigned for a period of thirty (30) or more days unless such failure is caused by an Extended Disability (as defined below); or (iv) your misappropriation of assets, personal dishonesty or intentional misrepresentation of facts which may cause Covance or its affiliates financial or reputational harm.
“Extended Disability” shall (i) mean you are unable, as a result of a medically determinable physical or mental impairment, to perform the duties and services of your position, or (ii) have the meaning specified in any disability insurance policy maintained by Covance, whichever is more favorable to you.
Except as may be otherwise provided herein or in any applicable Covance compensation and benefit plans, Covance shall not be liable for any salary or benefit payments to you beyond the date of your voluntary termination of employment with Covance. Upon the termination of your employment with Covance for Cause or for Extended Disability, you shall not be entitled to any compensation or other benefits not already earned and owing to you on account of your services on the date of such termination of employment. The provision of any benefits pursuant to this Agreement shall be in lieu of, and not in addition to, any payment or benefits you otherwise would have been entitled to pursuant to any severance pay plan of the Company, including, without limitation, the Company’s Amended and Restated Severance Pay Plan.
Change-of-Control
Upon an Event of Termination (as defined below), you will be entitled to a lump sum payment equal to the sum of (1) the product of (a) 3 and (b) your base annual salary in effect at the time of the Event of Termination and (2) the product of (a) 3 and (b) the amount that is your annual target bonus award in effect at the time of the Event of Termination. Except as
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otherwise provided under the paragraph entitled “Specified Employee,” such payment will be made within 60 days of the Event of Termination. In addition, upon an Event of Termination, (i) all of your stock options, restricted stock, deferred compensation and similar benefits which have not become vested on the date of an Event of Termination shall become vested upon such event and (ii) you shall be entitled to receive any payments calculated pursuant to the paragraph headed “Certain Additional Payments by Covance.”
For the purposes of this Agreement, an “Event of Termination” is defined to be a termination of your employment by Covance (for reasons other than Cause or Extended Disability) or a Constructive Termination (as defined below) of your employment, in each case within 24 months following a Change-of-Control (as defined below), or your voluntary termination of your employment with Covance for any reason or no reason during the one-month period commencing twelve months following a Change-of-Control and ending thirteen months after such Change-of-Control (a “Voluntary Termination”).
For purposes of this Agreement, a “Change-of-Control” shall mean:
(i) any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company;
(ii) any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) ownership of stock of the Company possessing 30 percent or more of the total voting power of the Company’s stock;
(iii) a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or
(iv) a person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions.
For purposes of this Agreement, a “Constructive Termination” is defined to be your termination of employment with Covance because of:
(i) a material breach by Covance of this Agreement, including, without limitation, a reduction in your then current salary or the percentage of base salary eligible for incentive compensation;
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(ii) a diminution of your responsibilities, status, title or duties hereunder;
(iii) a relocation of your work place which increases the distance between your principal residence and your work place by more than 25 miles;
(iv) a failure by Covance to provide you with benefits which are as favorable to you in all material respects as those provided immediately prior to a Change-of-Control; or
(v) the failure of any acquiror or successor in interest to the business of Covance to agree in writing to be bound by the terms of this Agreement within four months of any Change-of-Control;
provided, however, that a Constructive Termination will only occur upon (1) written notice by you to Covance of the existence of one or more of the conditions listed above and your intent to terminate employment with Covance, within 30 days of the commencement of such condition; and (2) Covance’s failure to cure such condition within 30 days of Covance’s receipt of such notice. Any such written notice by you shall specify the particular act or acts, or failure to act, which is or are the basis for your Constructive Termination.
In the event you are involved in any dispute about your rights under this Agreement arising on or after a Change-of-Control, Covance shall pay all reasonable legal costs and fees incurred by you during your lifetime in connection with such dispute promptly upon receipt of any invoice relating thereto, provided that any such reimbursement shall be made no later than December 31 of the year following the year during which such cost or expense is incurred.
With respect to an Event of Termination, medical and dental benefits will be continued, to the extent they are not otherwise prohibited under the respective plans and on the terms and conditions of the relevant provisions of this Agreement and the applicable plan, until you find other employment but not longer than three years from the date of the Event of Termination. In addition, you will be given the option to convert your life insurance benefit to a personal policy and if you so elect, Covance will pay such monthly premiums until you find other employment but not longer than three years from the date of the Event of Termination.
Notwithstanding the foregoing, to the extent applicable, any claims for reimbursement of medical and dental expenses under this Agreement shall be paid as soon as administratively feasible following the proper submission of the applicable expense; provided that all such claims must be submitted and paid by December 31 of the year following the year during which you incurred the applicable expense.
Specified Employee
Notwithstanding any other provision of the Agreement, if (i) you become entitled to receive payments or benefits under this Agreement as a result of your “separation from service” within the meaning of Code Section 409A, (ii) you are a “specified employee” within the meaning of Code Section 409A, and (iii) such payment or benefit would be subject to tax
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under Code Section 409A if the payment or benefit is paid within six months of your separation from service, then such payment or benefit required under this Agreement shall not be paid until the first day which is six months after your separation from service.
Certain Additional Payments by Covance
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by, to or for the benefit of you, whether made under this Agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”), then you shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by you of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under these provisions, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the accounting firm utilized by Covance for the preparation of its annual external financial statements (the “Accounting Firm”) which shall provide detailed supporting calculations both to Covance and you within 30 days of the Event of Termination, if applicable, or such earlier time as is requested by Covance. The Gross-Up Payment, if any, as determined pursuant to this item (b), shall be paid to you within 10 days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon Covance and you. If subsequent final determinations of the Excise Tax made by the Internal Revenue Service give rise to additional Excise Tax, then additional Gross-Up Payments shall be made by Covance to you within 10 days after the notice is received by Covance of such final determination.
(c) You shall notify Covance in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Covance of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after you know of such claim. You shall not pay such claim prior to the expiration of the thirty-day period following the date on which you give such notice to Covance (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Covance notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:
(i) give Covance any information reasonably requested by Covance relating to such claim,
(ii) take such action in connection with contesting such claim as Covance shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by Covance,
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(iii) cooperate with Covance in good faith in order effectively to contest such claim, and
(iv) permit Covance to participate in any proceedings relating to such claim; provided, however, that Covance shall bear all costs and expenses incurred in connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or income tax imposed as a result of such contest or representation and payment of costs and expenses. Covance shall control all proceedings taken in connection with such contest. Covance may, at its sole option, either direct you to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and you agree 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 Covance shall determine.
(d) Notwithstanding the foregoing, in no event shall any Gross-Up Payment, or any reimbursement of related costs and expenses within the meaning of Code Section 409A, be paid to you or on your behalf later than December 31 of the year following the year in which you paid the Excise Tax or other cost or expense on which such Gross-Up Payment or reimbursement is payable under this Agreement.
Injunctive Relief
You agree that the remedies available to Covance at law for any breach of any of your obligations under this Agreement may be inadequate, and you accordingly agree and consent that temporary or permanent injunctive relief, and/or an order of specific performance, may be granted in any proceeding which may be brought to enforce any provision hereof, without the necessity of proof of actual damage, in addition to any other remedies available to Covance at law.
Outplacement
If there has been an Event of Termination, Covance shall provide for you, at Covance’s cost, executive outplacement support for one year following such termination; provided that all reimbursements of costs and expenses under this paragraph shall be made to you no later than December 31 of the year following the year during which you incurred the applicable cost or expense.
Release
If there has been an Event of Termination or if there has been no Change-of-Control but you have been terminated without Cause, the obligation of Covance to make to you any or all of the payments specified under this Agreement (including, without limitation, the Termination Payments, the salary continuation payments described in subsection (i) of the paragraph entitled Severance of this Agreement or the payments specified under the paragraph headed “Change of Control,” as applicable) shall be subject to your execution and delivery to
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Covance of a release in form and substance reasonably satisfactory to Covance of all claims, demands, suits or actions, whether in law or at equity, you have or may have relating to or giving rise from such Event of Termination or non-Cause termination.
Plans and Conflicts
As in the case with the Bonus Plan, the Agreement does not constitute an amendment, modification or supplement to any other plan or policy (benefit, compensation or otherwise, including without limitation the EEPP, SERP, 401(k) Savings Plan, and ESPP) of Covance, whether or not described in the Agreement, and to the extent there is any inconsistency between the Agreement and any other plan (benefit, compensation or otherwise, including without limitation the EEPP, SERP, 401(k) Savings Plan, and ESPP), of Covance, whether or not described herein, such plans or policies shall govern. Further, nothing in this Agreement shall constitute a limitation on Covance’s right to modify or discontinue any such plans or policies.
The provisions of employment relating to health benefits, vacation and reimbursement for business expenses, professional dues, etc. will be administered in accordance with company policies, as they may be amended, modified or supplemented from time to time.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without reference to any conflicts of law provisions.
Conditions to Effectiveness
This Agreement will become effective as of the date first written above upon which all of the following conditions have been satisfied:
a) The Board has approved this Agreement; and
b) The Agreement has been executed and delivered by each of you and Covance.
Representations and Warranties
You hereby represent and warrant to Covance the following:
a) You are not currently party to any contract of employment that might impede or impair your ability to execute this Agreement or perform the services contemplated hereof;
b) You are not subject to any non-competition agreement, arrangement or understanding or any other restrictive covenants that might restrict your employment by Covance pursuant to this Agreement or otherwise; and
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c) You shall hold the terms and conditions of your employment with Covance, including this Agreement, in strict confidence and will not divulge the terms thereof to anyone else except employees or agents of Covance who have a need to know or your spouse, accountant, investment advisor, lawyer or others who have a need to know, provided, they are under similar obligations of confidentiality.
Waivers
The failure of either party at any time to require performance by the other party of any provision hereof shall not affect in any way the full right to require such performance at any time thereafter, nor shall a waiver by either party of a breach of any provision hereof be taken or held to be a waiver of future performance under the provision itself.
Scope of Restrictions Reasonable
You hereby expressly agree that all of the covenants in this Agreement are reasonable and necessary in order to protect Covance and its business. If any provision or any part of any provision of this Agreement shall be invalid or unenforceable under applicable law, such part shall be ineffective only to the extent of such invalidity or unenforceability and shall not affect in any way the validity or enforceability of the remaining provisions of this Agreement, or the remaining parts of such provision.
Assignment; Amendments
This Agreement shall be binding on and inure to the benefit of the parties hereto and their heirs, executors, legal representatives, successors and assigns. Except in the event of a transfer to a successor corporation or other entity or affiliate of Covance, neither party shall have the right to assign its rights or delegate its obligations, or all or any portion of its rights or interests under this Agreement without the prior written consent of the other party hereto. This Agreement may be amended only by a written instrument signed by both parties hereto making specific reference to this Agreement and expressing the plan or intention to modify it.
Notification
Any notice, request, demand, or other communication required or permitted by this Agreement shall be deemed to be properly given if delivered by hand or when mailed certified, registered or first class mail or overnight courier with postage or shipping charge prepaid, addressed to Covance at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, Attention: Corporate Senior Vice President, General Counsel & Secretary, and to you at your address specified above, and all such notices shall be deemed effective at the time of delivery. The addresses for the purpose of this paragraph may be changed only by giving written notice of such change in the manner provided herein for giving notices.
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Captions
The captions of the paragraphs herein are inserted as a matter of convenience only and in no way define, limit or describe the scope of this Agreement or any provisions hereof.
Entire Agreement
This Agreement sets forth the entire agreement and understanding between the parties hereto as to the subject matter hereof, and as such supersedes in its entirety any existing agreement or offer letters, whether oral or written, between you and Covance, except for any confidentiality and/or non-competition agreements between you and Covance which shall continue in full force and effect in addition to any of the provisions contained in this Agreement.
Employee at Will
This Agreement is not a contract of employment. Your employment by Covance is for no fixed term, and either you or Covance may terminate the employment relationship at any time for no reason or any reason not prohibited by applicable laws.
Please indicate your agreement with the terms and conditions of this Agreement by signing two copies of this Agreement and returning them to my attention.
Withholding
All payments made by Covance under this Agreement will be reduced by any tax or other amounts required to be withheld by Covance under applicable law.
Very truly yours,
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Accepted as of the date first above specified:
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By: |
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Xxxxxx X. Xxxxxxx |
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