EMPLOYMENT AGREEMENT
Exhibit
10.2
AMENDED and RESTATED EMPLOYMENT
AGREEMENT (the "Agreement") by and between FOREST LABORATORIES, INC., a Delaware
corporation (the “Company”) and Xxxxxxxx X. Xxxxxxx, M.D., Ph.D. (the
“Executive”), dated as of October 29, 2008.
A. The
Company and the Executive entered into an Employment Agreement dated as of the
Fifth day of September, 2006 (the "Employment Agreement") to make provision for
the Executive’s continued employment with the Company and its subsidiaries
following a Change of Control (as defined below) of the Company and to set forth
the compensation and benefits arrangements relating thereto, including
compensation and benefits payable in connection with a termination of employment
or a termination of the agreement in the event the Company’s successor does not
assume the agreement upon a Change of Control. The Board of Directors
of the Company has determined that it continues to be in the best interests of
the Company and its stockholders that these agreements be maintained in order to
assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control of
the Company.
B. Certain
revisions to the Employment Agreement have been necessitated by the enactment of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and
the final Treasury Regulations promulgated thereunder. These
Regulations provide certain restrictions on when payments and benefits can be
provided based on the circumstances giving rise to the Company’s obligation to
provide such payments and benefits and the status of the
recipient. Since January 1, 2008, the Company has been
administering the Agreement and the Offer Letter (as defined below) in
operational compliance with Section 409A of the Code, and the Company and the
Executive now wish to formally amend and restate the Agreement and amend the
Offer Letter as more fully set forth herein to ensure compliance with Section
409A of the Code.
NOW,
THEREFORE, the Employment Agreement is hereby amended and restated in its
entirety as follows:
1. Certain
Definitions:
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(a)
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The
“Effective Date” shall mean the first date during the Change of Control
Period (as defined in Section 1(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Executive’s employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to
effect the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of this
Agreement the “Effective Date” shall mean the date immediately prior to
the date of such termination of
employment.
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(b)
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The
“Change of Control Period” shall mean the period commencing on January 1,
2008 and ending on the third anniversary of such date; provided, however,
that commencing on January 1, 2009, and on each annual anniversary of such
date (such date and each annual anniversary thereof shall be hereinafter
referred to as the “Renewal Date”), unless previously terminated in
accordance with this Agreement, the Change of Control Period shall be
automatically extended so as to terminate three years after such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall
give notice to the Executive that the Change of Control Period shall not
be so extended.
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2. Change of
Control. For the purpose of this Agreement, a “Change of
Control” shall mean:
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(a)
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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”) (i) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of shares of common stock of the
Company which, when added to the common stock beneficially owned by such
Person, represents more than 50% of either (A) the total fair market value
of the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (B) 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”), or (ii) during any 12-month period, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
securities of the Company representing 30% or more of the Outstanding
Company Voting Securities; provided, however, that for purposes of this
subsection (a), the following acquisitions of securities of the Company
shall not constitute a Change of Control: (V) any acquisition directly
from the Company, (W) any acquisition by the Company, (X) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, (Y) any
acquisition made by a Person who is eligible under the provisions of Rule
13d-1 under the Exchange Act as in effect on the date hereof to report
such acquisition on Schedule 13G, or (Z) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2;
or
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(b)
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Individuals
who, as of the date hereof, constitute the Board of Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority
of the Board of Directors; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least
a majority of the directors then comprising the Board of Directors 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 of Directors;
or
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(c)
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Consummation
of a reorganization, merger or consolidation or sale or other disposition
of all or substantially all (defined as more than 50% of the total gross
fair market value) of the assets of the Company (a “Business
Combination”), in each case unless, following such Business Combination,
(i) Persons 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 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 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), (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 30% of 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 of the Directors providing such Business
Combination.
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The
Executive and the Company hereby acknowledge that there has been no Change of
Control (either as defined in the Employment Agreement or in this Agreement)
since the date of the Employment Agreement.
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 third anniversary of such
date or such lesser period as determined in accordance with this Agreement (the
“Employment Period”).
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4.
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Terms of
Employment.
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(a)
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Position and
Duties.
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(i)
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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 and exercised by and assigned to
the Executive 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 such
location.
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(ii)
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During
the Employment Period, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve
on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed that
to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive’s responsibilities to
the Company.
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(iii)
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This
Agreement shall be canceled and will not be effective in any manner in the
event that the Executive’s employment with the Company terminates prior to
the Effective Date. As of and after such termination, this
Agreement shall be deemed to be null and void and may not be reinstated
except by the signature of the Chief Executive Officer of the
Company.
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(b) Compensation.
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(i)
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Base Salary.
During the Employment Period, the Executive shall receive an annual base
salary (“Annual Base Salary”), which shall be paid at a monthly rate, at
least equal to twelve times the highest monthly base salary paid or
payable, including any base salary which has been earned but deferred, to
the Executive by the Company and its affiliated companies in respect of
the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term “Annual Base Salary” as
utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term, “affiliated
companies” shall include any company controlled by, controlling or under
common control with the Company.
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(ii)
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Annual
Bonus. In addition to the Annual Base Salary, the
Executive shall be awarded, for each Bonus Year (as defined below) ending
during the Employment Period, an annual bonus (the “Annual Bonus”) in cash
at least equal to the highest aggregate amount awarded to the Executive
under all annual bonus, incentive and other similar plans of the Company
with respect to any of the last three full years prior to the Effective
Date (annualized in the event that the Executive was not employed by the
Company for the whole of such year) (the “Recent Annual
Bonus”). For purposes of this Agreement, each fiscal year
of the Company or calendar year during the Employment Period with respect
to which annual bonuses are paid generally by the Company to employees of
the Company shall be referred to as a "Bonus Year." Each such
Annual Bonus shall be paid as soon as practicable but no later than two
and one half months after the end of the Bonus Year with respect to which
the Annual Bonus is awarded, unless the Executive properly elects to defer
the receipt of such Annual Bonus in compliance with the terms of any plan
of the Company that is then in effect and which permits such
deferral.
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(iii)
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Incentive, Savings and
Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in
no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both
regular and special incentive opportunities to the extent, if any, that
such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate,
than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices and
policies and programs as in effect at any time during the 120-day period
immediately preceding the Effective Date or if more favorable to the
Executive, those provided at any time during the Employment Period to
other peer executives of the Company and its affiliated companies
generally.
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(iv)
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Welfare Benefit
Plans. During the Employment Period, the Executive
and/or the Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable in the aggregate than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided at any time during the
Employment Period to other peer executives of the Company and its
affiliated companies generally.
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(v)
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Expenses. During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and procedures of
the Company and its affiliated companies in effect for the Executive at
any time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect at any time
during the Employment Period with respect to other peer executives of the
Company and its affiliated companies
generally.
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(vi)
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Fringe
Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax
and financial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, in accordance with
the most favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect at any time during the
Employment Period with respect to other peer executives of the Company and
its affiliated companies generally.
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(vii)
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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 exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided at any time during the
Employment Period with respect to other peer executives of the Company and
its affiliated companies generally.
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(viii)
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Vacation. During
the Employment Period, the Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices
of the Company and its affiliated companies as in effect for the Executive
at any time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect at any time
during the Employment Period with respect to other peer executives of the
Company and its affiliated companies
generally.
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5. Termination of
Employment.
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(a)
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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 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 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.
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(c)
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Cause. The
Company may terminate the Executive’s employment during the Employment
Period for Cause. For purposes of this Agreement, “Cause” shall
mean:
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(i)
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the
willful and continuous failure of the Executive to
perform substantially the Executive’s duties with the Company
or one of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Board of
Directors or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board of Directors or Chief Executive
Officer believes that the Executive has not substantially performed the
Executive’s duties, or
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(ii)
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the
willful engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the
Company.
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For
purposes of this provision, no act or failure to act on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without a reasonable belief that the
Executive’s action or omission was in the best interests of the
Company. Any act or failure to act based upon authority given
pursuant to a resolution duly adopted by the Board of Directors or upon the
instructions of the Chief Executive Officer or a senior officer of the Company
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done or omitted to be done by the Executive in good faith and in
the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board of Directors at a meeting of the Board called and held for the purpose
(after reasonable notice is provided to the Executive and the Executive is given
an opportunity, together with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
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(d)
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Good
Reason. The Executive’s employment may be terminated by
the Executive for “Good Reason”. For purposes of this
Agreement, "Good Reason” shall mean a separation from employment occurring
no later than two years following the initial existence of one or more of
the following conditions arising without the consent of the
Executive:
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(i)
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any
action by the Company, including the assignment to the Executive of any
duties inconsistent in any material respect with the Executive’s position
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 4(a) of this
Agreement, which results in a material diminution in the Executive's
position, authority, duties or responsibilities;
or
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(ii)
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any
material failure by the Company to comply with any of the provisions of
Section 4(b)(i) and (ii) of this Agreement;
or
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(iii)
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any
material change in the geographic location at which the Executive must
perform services to the Company
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In each
case described above, in order to constitute "Good Reason" the Executive shall
be required to give notice to the Company of the existence of the condition
within 90 days after the initial existence of the condition (the failure to
timely give such notice shall negate the existence of such condition as a
condition giving rise to a "Good Reason" termination), which notice shall give
the Company 30 days within which to remedy the condition and which, if so
remedied, will negate the existence of the condition as a condition giving rise
to a "Good Reason" termination. Notwithstanding anything herein to
the contrary, the Executive shall not be deemed to have consented to any
condition described in this Section 5(d) unless such consent is in
writing.
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(e)
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With Adequate
Reason. The Executive’s employment may be terminated by
the Executive for any reason or no reason during the 30-day period
immediately following the first anniversary of the Effective Date, which
shall be referred to for purposes of this Agreement as a termination “With
Adequate Reason”.
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(f)
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Without
Cause. The Executive’s employment may be terminated by
the Company other than as a result of the Executive’s death or Disability
and other than for Cause, which termination (if it occurs at any time
other
than upon a Change of Control) shall be referred to for purposes of
this Agreement as a termination “Without
Cause”.
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(g)
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Notice of
Termination. Any termination (i) by the Company for
Cause, (ii) by the Company without Cause, (iii) by the Executive for Good
Reason, (iv) by the Executive With Adequate Reason, or (v) by the Company
upon a Change of Control shall be communicated by Notice of Termination to
the other party hereto given in accordance with 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 30 days after the
giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or preclude
the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights
hereunder.
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(g)
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Date of
Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated (A) by the Company for Cause, (B) by
the Executive for Good Reason, (C) by the Executive With Adequate Reason,
(D) by the Company upon the occurrence of a Change of Control, or (E) by
the Company Without Cause, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be, and
(ii) if the Executive’s employment is terminated by reason of death or
Disability, the date of death of the Executive or the Disability Effective
Date, as the case may be.
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6.
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Obligations of the
Company upon Termination.
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(a)
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Termination upon the
Occurrence of a Change of Control. Notwithstanding the
provisions of Section 6(b) of this Agreement, if the Company shall
terminate the Executive’s employment upon the occurrence (but not later
than 90 days after) a Change of
Control:
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(i)
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the
Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following
amounts:
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A.
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the
sum of (1) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x) the
higher of (i) the Recent Annual Bonus and (ii) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been earned but
deferred (and annualized for any year consisting of less than 12 full
months or during which the Executive was employed for less than 12 full
months), for the most recently completed Bonus Year during the Employment
Period for which an Annual Bonus was payable, if any (such higher amount
being referred to as the “Highest Annual Bonus”) and (y) a fraction, the
numerator of which is the number of days in the Bonus Year in which the
termination of employment occurs through the Date of Termination and the
denominator of which is 365 and (3) any accrued vacation pay to the extent
not theretofore paid (the sum of the amounts described in clauses (1), (2)
and (3) shall be hereinafter referred to for purposes of this Agreement as
the “Accrued Obligations”); and
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B.
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the
amount equal to the product of (1) three and (2) the sum of the
Executive’s (x) Annual Base Salary and (y) Highest Annual Bonus
(hereinafter referred to for purposes of this Agreement as the “Severance
Obligations”); and
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C.
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an
amount equal to the excess of (1) the actuarial equivalent of the benefit
under the Company’s qualified defined benefit retirement plan (the
“Retirement Plan”) (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company’s Retirement Plan
immediately prior to the Effective Date), and any excess or supplemental
retirement plan in which the Executive participates (together, the “SERP”)
which the Executive would receive if the Executive’s employment continued
for three years after the Date of Termination assuming for this purpose
that all accrued benefits are fully vested and assuming that the
Executive’s compensation in each of the three years is that required by
Sections 4(b)(i) and 4(b)(ii), over (b) the actuarial equivalent of the
Executive’s actual benefit (paid or payable), if any, under the Retirement
Plan and the SERP as of the Date of Termination (the amount computed in
accordance with this subparagraph (C) shall be hereinafter referred to for
purposes of this Agreement as the "SERP
Benefit");
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(ii)
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subject
to the provisions of Section 6(h) below, for three years after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive’s family at least equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive’s employment had not been terminated or, if
more favorable to the Executive, as in effect generally at any time during
such three year period with respect to other peer executives of the
Company and its affiliated companies and their families, provided,
however, that if the Executive becomes employed with another employer who
provides medical and other welfare plans, the medical and other welfare
benefits described herein shall be secondary to those provided under such
other plans during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to
have remained employed until three years after the Date of Termination and
to have retired on the last day of such period. The benefits
described in this clause (ii) and the extent to which the Executive is
entitled to such benefits shall be hereinafter referred to for purposes of
this Agreement as the “Welfare
Benefits”;
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(iii)
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the
Company shall, at its sole expense as incurred, provide the Executive with
reasonable outplacement services directly related to the Executive's
termination of services to the Company, the provider of which shall be
selected by the Executive in his sole discretion, for a period ending no
later than the last day of the second taxable year of the Company
following the Company’s taxable year in which the Date of Termination
occurs, provided that any reimbursement by the Company of such expense
must be paid no later than the end of the third taxable year of the
Company following the taxable year of the Company in which the Executive's
termination of employment occurs. The reimbursement for
outplacement services described in this clause (iii), including the
restrictions on reimbursement set forth herein, shall be referred to for
purposes of this Agreement as the “Outpatient Assistance Benefit”;
and
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(iv)
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to
the extent not theretofore paid or provided, the Company shall timely pay
or provide to the Executive all other amounts or benefits required to be
paid or provided or which the Executive is eligible to receive under any
plan, program, policy, practice, contract or agreement of the Company and
its affiliated companies (other than this Agreement), which amounts or
benefits shall be paid or provided in accordance with the terms of such
plan, program, policy, practice, contract or agreement (such other amounts
and benefits shall be hereinafter referred to for purposes of this
Agreement as the “Other Benefits”).
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(b)
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Termination by the
Company Without Cause or by the Executive With Good
Reason. If, during the Employment Period, the Company
shall terminate the Executive’s employment Without Cause or the Executive
shall terminate the Executive’s employment for Good
Reason:
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(i)
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the
Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following
amounts:
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A.
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an
amount equal to the Accrued Obligations;
and
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B.
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an
amount equal to the Severance Obligations;
and
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C.
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an
amount equal to the SERP Benefit;
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(ii)
|
Subject
to the provisions of Section 6(h) below, for three years after the
Executive’s Date of Termination, or such longer period as may be provided
by the terms of the appropriate plan, program, practice or policy, the
Company shall continue the Welfare
Benefits;
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(iii)
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the
Company shall, at its sole expense as incurred, provide the Executive with
the Outplacement Assistance Benefit:
and
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(iv)
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to
the extent not theretofore paid or provided, the Company shall timely pay
or provide the Other Benefits to the
Executive.
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(v)
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In
the event that during the Employment Period (A) the Executive's employment
is terminated by the Company Without Cause or by the Employee for Good
Reason and (B) the Company has securities which are publicly traded on an
“established securities market” and the Executive is a “specified
employee,” in each case within the meaning of Section 409A of the Code, as
of the Date of Termination, then notwithstanding the preceding provisions
of this Section 6(b), the payments and benefits to be made or provided to
the Executive pursuant to clauses (i)B. and C. and clauses (ii) and (iv)
of this Section 6(b) prior to the date which is six months and one day
after the Date of Termination shall not exceed the sum of (X) two times
the lesser of (1) the Executive’s annualized salary for the Company’s
taxable year in which the Date of Termination occurs, or (2) the amount
described in Section 401(a)(17) of the Code for the calendar year in which
the Date of Termination occurs (the "Termination Year"), plus (Y) the
applicable dollar amount under Section 402(g)(1)(B) of the Code for the
Termination Year, plus (Z) the medical and dental benefits to be provided
in accordance with Section 4(b)(iv) of this Agreement (collectively, the
“Permitted Payments”). To the extent that the preceding
provisions of this Section 6(b) would require payment to the Executive
during the six month period commencing on the Date of Termination of any
amount in excess of the Permitted Payments, such excess shall be paid to
the Executive (without interest) on the date that is six months plus one
day after the Date of Termination. The provisions of this
clause (v) shall apply only in the event and to the extent necessary to
prevent the imposition of any accelerated or additional tax under Section
409A of the Code.
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(vi)
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Notwithstanding
anything in this Section 6(b) to the contrary, if the termination of the
Executive's employment by the Company Without Cause or by the Executive
with Good Reason occurs more than two years after the Change of Control,
then in the event that the provisions of this Section 6(b) are subject to
aggregation with any other separation pay plan of the Company offering
involuntary termination benefits to the Executive pursuant to Section 409A
of the Code and the Treasury Regulations thereunder, the payments required
to be made by the Company to the Executive pursuant to clauses (i)B. and
C. of this Section 6(b) shall be paid to the Executive at the time and in
accordance with the provisions of such other separation pay plan of the
Company (but subject to the provisions of clauses (v) of this Section
6(b), if applicable).
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(c)
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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 after the Date of
Termination. With respect to the provision of Other Benefits,
the term “Other Benefits” as utilized in this Section 6(c) only shall
include, without limitation, and the Executive’s estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and affiliated companies
to the estates and beneficiaries of peer executives of the Company and
such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to
other peer executives and their beneficiaries at any time during the
120-day period immediately preceding the Effective Date or, if more
favorable to the Executive’s estate and/or the Executive’s beneficiaries,
as in effect on the date of the Executive’s death with respect to other
peer executives of the Company and its affiliated companies and their
beneficiaries.
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(d)
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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 after the Date of
Termination. With respect to the provision of Other Benefits,
the term “Other Benefits” as utilized in this Section 6(d) only shall
include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to
the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding Effective Date or, if more favorable to the
Executive and/or the Executive’s family, as in effect on the Disability
Effective Date with respect to other peer executives of the Company and
its affiliated companies and their
families.
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(e)
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For
Cause. If the Executive’s employment is terminated
during the Employment Period by the Company for Cause, this Agreement
shall terminate without further obligations to the Executive other than
the obligation to pay to the Executive within 30 days after the Date of
Termination (i) his Annual Base Salary through the Date of Termination,
and (ii) the Other Benefits, in each case to the extent theretofore
unpaid.
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(f)
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Termination by the
Executive With Adequate Reason. If the Executive's
employment is terminated during the Employment Period by the Executive
With Adequate Reason:
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(i)
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the
Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following
amounts:
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A.
|
an
amount equal to the Accrued Obligations;
and
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B.
|
an
amount equal to the Severance Obligations;
and
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C.
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an
amount equal to the SERP Benefit;
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(ii)
|
Subject
to the provisions of Section 6(h) below, for three years after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
the Welfare Benefits;
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(iii)
|
the
Company shall, at its sole expense as incurred, provide the Executive with
the Outplacement Assistance Benefit;
and
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(iv)
|
to
the extent not theretofore paid or provided, the Company shall timely pay
or provide the Other Benefits to the
Executive.
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(v)
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In
the event that (A) the Executive's employment is terminated with Adequate
Reason and (B) the Company has securities which are publicly traded on an
“established securities market” and the Executive is a “specified
employee,” in each case within the meaning of Section 409A of the Code, as
of the Date of Termination, then notwithstanding the preceding provisions
of this Section 6(f), the payments and benefits which may be made or
provided to the Executive pursuant to clauses (i)B. and C. and clauses
(ii) and (iv) of this Section 6(f) prior to the date which is six months
and one day after the Date of Termination shall be limited to the medical
and dental benefits to be provided in accordance with Section 4(b)(iv) of
this Agreement plus such benefits (to be selected by the Employee from the
benefits to be provided under this Section 6(f)) in an aggregate amount
not to exceed the amount described in Section 402(g)(1)(B) of the Code for
the Termination Year. To the extent that the preceding
provisions of this Section 6(f) would require payment to the Executive
during the six month period commencing on the Date of Termination in
excess of this limitation, then any such excess shall be paid to the
Executive (without interest) on the date that is six months plus one day
after the Date of Termination. The provisions of this clause
(v) shall apply only in the event and to the extent necessary to prevent
the imposition of any accelerated or additional tax under Section 409A of
the Code.
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(g)
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Termination by
Executive Other Than For Good Reason or With Adequate
Reason. If the Executive voluntarily terminates his
employment during the Employment Period, excluding a termination for Good
Reason or With Adequate 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 and all Other
Benefits shall be timely paid to the Executive in accordance with the
terms of the appropriate plan, program, practice or
policy.
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(h)
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Special Rules for
In-Kind Benefits or Reimbursements. For purposes of
Sections 6(a)(ii), 6(b)(ii), and 6(f)(ii), the provision of Welfare
Benefits in kind to the Executive and/or the Executive's family or the
provision of reimbursement to the Executive therefore shall be subject to
the following conditions: (i) the expenses eligible for reimbursement and
the in-kind benefits to be provided are objectively determinable and
non-discretionary under applicable plans and programs of the Company ;
(ii) the amount of expenses eligible for reimbursement or in-kind benefits
provided during the Executive's taxable year may not affect the expenses
eligible for reimbursement or in-kind benefits to be provided to the
Executive in any other taxable year; (iii) the reimbursement of an
eligible expense must be made on or before the last day of the Executive's
taxable year following the taxable year in which the expense was incurred;
and (iv) the right to reimbursement or in-kind benefits may not be subject
to liquidation or exchange for another benefit. The provisions
of this subsection (h) shall apply only in the event and to the extent
necessary to prevent the imposition of any accelerated or additional tax
under Section 409A of the Code.
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7. Non-exclusivity of
Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with the Company or any of its affiliated companies
at or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
8. Full
Settlement. The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the "Applicable Federal Rate" provided for in Section
7872(f)(2)(A) of the Code.
9. Certain Reductions of
Payments.
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(a)
|
Anything
in this Agreement to the contrary notwithstanding, in the event it shall
be determined that any payment or distribution by the Company to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
“Payment”) would be nondeductible by the Company for Federal income tax
purposes because of Section 280G of the Code, then the aggregate present
value of amounts payable or distributable to or for the benefit of the
Executive pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as “Agreement
Payments”) shall be reduced (but not below zero) to the Reduced
Amount. The “Reduced Amount” shall be an amount expressed in
present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the Company
because of Section 280G of the Code. For purposes of this
Section 9 present value shall be determined in accordance with Section
280G(d)(4) of the Code.
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(b)
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All
determinations required to be made under this Section 9 shall be made by
the independent registered public accounting firm retained by the
Company immediately prior to the Effective Date (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company
and the Company shall elect which and how much of the Agreement Payments
shall be eliminated or reduced consistent with the requirements of this
Section 9 and shall notify the Executive promptly of such
election. Within five business days thereafter, the Company
shall pay to or distribute to or for the benefit of the Executive such
amounts as are then due to the Executive under this
Agreement.
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(c)
|
As
a result of the uncertainty in the application of Section 280G of the Code
at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Agreement Payments will have been made by the Company
which should not have been made (“Overpayment”) or that additional
Agreement Payments which will have not been made by the Company could have
been made (“Underpayment”), in each case, consistent with the calculations
required to be made hereunder. In the event that the Accounting
Firm determines that an Overpayment has been made, any such Overpayment
shall be treated for all purposes as a loan to the Executive which the
Executive shall repay to the Company together with interest at the
Applicable Federal Rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Executive to the
Company (or if paid by the Executive to the Company shall be returned to
the Executive) if and to the extent such payment would not reduce the
amount which is subject to taxation under Section 4999 of the
Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive together with interest
at the Applicable Federal Rate provided for in Section 7872(f)(2) of the
Code.
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10. Confidential
Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during
the Executive’s employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this
Agreement), After termination of the Executive’s employment with the
Company, the Executive shall not, without prior written consent of the Company
or as may otherwise be required by law or legal process, communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it. In no event shall an asserted violation of
the provisions of this Section 10 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement. This Section 10 shall survive the termination or
expiration of this Agreement.
11. Termination of Change of
Control Agreements. At any time during the period commencing
30 days preceding and ending 12 months following a Change of Control, the
Company, by irrevocable action of its Board of Directors, may elect to terminate
this Agreement and all other similar agreements then in effect and that would be
considered as a single plan for purposes of Treasury Regulation Section
1.409A-3(j)(4)(ix)(B) (collectively, the "Change of Control Agreements"), so
that under the terms of such termination all employees (including the Executive)
who are parties to then effective Change of Control Agreements will receive the
compensation and benefits specified by the terms of such
Agreements. In the event of such a termination of the Change of
Control Agreements at any time that this Agreement is in effect, the Executive
shall be entitled to the payments and benefits set forth in Section 6(b)
hereof.
12. Limited Right of the Company
to Accelerate Payments or Benefits. Except as otherwise
provided herein, the Company may not accelerate the payment of any benefits or
amounts that constitute "deferred compensation" for purposes of Section 409A of
the Code (as in effect at the time of such acceleration), except that the
Company may accelerate the time or schedule of a payment hereunder and a payment
hereunder may be made at any time that the provisions of this Agreement fail to
meet the requirements of Section 409A of the Code and the Treasury Regulations
thereunder, but not to exceed the amount required to be included in income as a
result of the failure to comply with the requirements of Section 409A of the
Code and the Treasury Regulations thereunder.
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13.
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Successors.
|
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(a)
|
This
Agreement is personal to the Executive and without the prior written
consent of the Company shall not be assigned by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representative.
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(b)
|
This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns.
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(c)
|
The
Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had
taken place. As used in this Agreement, “Company” shall mean
Forest Laboratories, Inc. with respect to the period prior to the
Effective Date and Forest Laboratories, Inc. or any successor to its
business and/or assets for the period on or after the Effective
Date.
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14.
|
Miscellaneous.
|
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(a)
|
This
Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
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(b)
|
All
notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the
Executive:
Xxxxxxxx X. Xxxxxxx
c/o Forest Laboratories,
Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the
Company:
Forest Laboratories, Inc.
Attention: Vice President-
General Counsel
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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 addressee.
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(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.
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(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.
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(e)
|
The
Executive’s or the Company’s failure to insist upon strict compliance with
any provision of this Agreement or the failure to assert any right the
Executive or the Company may have hereunder shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
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(f)
|
The
Executive and the Company acknowledge that, except as may otherwise be
provided under any written agreement between the Executive and the
Company, the employment of the Executive by the Company is “at will” and,
subject to Sections 1(a) and 6(a) hereof, prior to the Effective Date, the
Executive’s employment and/or this Agreement 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 other agreement between the parties with respect to
the subject matter hereof, including but not limited to any Offer Letter
between the Company and the Executive and any right of the Executive to
continuation or severance benefits
thereunder.
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(g)
|
The
date for payments payable under this Agreement or the Offer Letter shall
be determined in accordance with the terms of this Agreement or the Offer
Letter, as applicable, and shall not be subject to direct or indirect
designation by the Executive.
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(h)
|
Each
payment under this Agreement shall be treated as a separate payment for
purposes of Code Section 409A.
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15.
|
Amendments to the
Offer Letter.
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(a)
|
The
fifth paragraph of the Offer Letter dated September 5, 2006 by
and between the Executive and the Company is hereby replaced with the
following three paragraphs:
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"Pursuant
to this agreement, if your employment by Forest is terminated by Forest
'Without Cause' or you terminate your employment 'for Good Reason' (as
such terms are defined in the Amended and Restated Employment Agreement
between you and the Company dated as of October 29, 2008), then commencing
upon such termination of employment (but subject to the limitation of the
next paragraph), Forest will provide you with semi-monthly payments of
your then current Base Salary for the remainder of the three-year period
that commenced as of your start date (the 'Three-Year Period’) or, if
longer, for a one-year period following your termination of employment
(the longer of such periods to be referred to as the 'Salary Continuation
Period'). You will also be entitled to receive a bonus for the
year in which the termination of your employment occurs (which bonus will
be determined with respect to the calendar or fiscal year with respect to
which Forest then computes bonuses to employees generally) equal to the
greater of the last bonus that you received from Forest or 40% of your
salary target. The bonus will be payable to you as soon as
practicable but within 2½ months after the end of the year for which it is
paid. You agree to be reasonably available to management for
consultation during the Salary Continuation Period, subject to your
availability, it being understood that you will not be required to perform
such consultation for any specified minimum number of
hours. Further, Forest will continue health care coverage
(medical and dental) for you and any eligible family members for the
Salary Continuation Period or until alternate coverage is obtained by you,
whichever is earlier. Such continued health care coverage will
be on the same terms and conditions and at the same cost as for active
senior executive officers of
Forest.
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In
the event that the Company has securities which are publicly traded on an
‘established securities market’ and you are a 'specified employee,' in
each case within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended (the 'Code'), as of the date your employment
terminates, then the Base Salary and bonus payment to be paid to you in
accordance with the provisions of the preceding paragraph of this
Agreement during the period that ends six months from the date of the
termination of your employment shall not exceed the sum of (A) two times
the lesser of (i) your annualized Base Salary for the year in which
your termination of employment occurs, or (ii) the amount described in
Section 401(a)(17) of the Code for the calendar year in which your
employment terminates, plus (B) the applicable dollar amount under Section
402(g)(1)(B) of the Code for the calendar year in which your employment
terminates (collectively, the 'Payment Limitation') and any amount payable
to you in accordance with the provisions of the preceding paragraph during
such six-month period in excess of the Payment Limitation shall be paid to
you, without interest, on the date that is six months plus one day after
the date of your employment termination. The provisions of this
paragraph shall apply only in the event and to the extent necessary to
prevent the imposition of any accelerated or additional tax under Section
409A of the Code. Each payment under this agreement shall be
treated as a separate payment for purposes of Code Section
409A.
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Notwithstanding
a termination of your employment by Forest 'Without Cause' or by you 'for
Good Reason' during the Three-Year Period, nothing set forth herein shall
cause the acceleration of the vesting of any Forest stock options owned by
you. Any Forest stock options owned by you at the time of such
termination of employment will continue to vest (in accordance with the
vesting schedule to which those options were subject) and will remain
exercisable during the Three-Year Period, notwithstanding anything in the
option agreement to the contrary; provided however that nothing herein
shall extend the term of such options beyond the term set forth in your
related option agreement."
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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.
/s/ Xxxxxxxx X.
Xxxxxxx
Xxxxxxxx X. Xxxxxxx, M.D.,
Ph.D.
Date: October 29, 2008
FOREST LABORATORIES, INC.
By:/s/ Xxxxxx
Xxxxxxx
Xxxxxx Xxxxxxx
Chairman and Chief Executive
Officer
