August 24, 2006 Dear Brad:
Exhibit 10.20
August 24, 2006
Dear Xxxx:
This letter agreement (“Agreement”) supersedes Xxxxx Xxxxxxxx’x letter to you dated July 12,
2006 concerning your employment status with Merck & Co., Inc. (“Merck” or the “Company”) and
incorporates revisions to the earlier letter discussed by your attorneys and Merck’s attorneys. As
you and Xxxxx discussed, as part of a general restructuring of Merck’s worldwide human health
business, your current position as President, U.S. Human Health will be eliminated at the close of
business on September 30, 2006 and you will be separated from employment. Merck is offering you
severance arrangements set forth below, contingent on your timely acceptance and nonrevocation of
the terms set forth in this Agreement:
1. Employment Status.
| (a) | Transition Assignment. Effective July 12, 2006 you were relieved of operational responsibilities and your sole assignment is to effectuate the full transition of your responsibilities as President, U.S. Human Health, under my direction. Your status as an “officer” as defined in Rule 16a-1(f) as defined under the Securities Exchange Act of 1934 ended at the close of business on July 12, 2006. You agree to use your best efforts to perform this assignment and such other duties as I may assign to you and to otherwise conduct yourself in the best interests of the Company. Your grade and base salary will remain at their current level and you will continue to be eligible to participate in the Company’s employee benefit plans and programs, as they may be amended from time to time, on the same terms and conditions applicable to Company employees at your grade level. At my sole discretion, your employment status may be converted at any time to paid inactive status prior to September 30, 2006. While on paid inactive status, your grade and base salary will be unchanged; you will continue to receive monthly salary payments; you will continue to accrue pension credit and be eligible to participate in the plans that you elected under the flexible benefits program; provided, however, that you will not be eligible to participate in the short term and long term disability benefit plans which benefits you agree to waive. | ||
| (b) | Termination of Employment. Your employment will terminate on September 30, 2006 (“Separation Date”), provided that you have not terminated your employment by resignation prior to the Separation Date. Your resignation will be deemed to occur in the event that you engage in conduct inconsistent with your responsibilities and obligations as a Merck employee or if you voluntarily terminate your employment by quitting or commencing employment elsewhere. The termination of your employment on the Separation Date will be a “Separation from Service” (“Separation”) under the Merck & Co., Inc. Separation Benefits Plan for Nonunion Employees (“Separation Plan”) and you will be eligible for the benefits applicable to a “Bridged Employee” described in the brochure entitled “Special Separation Program for Bridged Employees” (the “Bridged Employee Brochure”) under the Separation Plan. The summary plan description (“SPD”) that describes the benefits available to you under the Separation Plan and the Bridged Employee Brochure that describes the effect of a separation on other benefits for a “Bridged |
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| Employee” have been provided to you and are incorporated herein by reference. If there is any conflict between the SPD and this Agreement or between the Bridged Employee Brochure and this Agreement, the SPD or Bridged Employee Brochure, as the case may be, shall govern. |
2. Separation Benefits. Upon your Separation, you will receive the following separation
benefits all in accordance with the SPD and Bridged Employee Brochure:
| (a) | Separation Pay. Subject to paragraph 3(b) below, you will receive seventy-eight (78) weeks’ pay as described in the SPD, payable in periodic installments in accordance with the Company’s normal payroll periods, minus applicable deductions and withholdings. | ||
| (b) | Retirement Plan. You will receive the Bridged Pension Benefit described in the Bridged Employee Brochure, subject to paragraph 3(b) below. | ||
| (c) | Medical and Dental Benefits. You will be eligible to select retiree medical and dental benefits as described in the Bridged Employee Brochure. | ||
| (d) | Life Insurance. You will be eligible to be considered a retiree for life insurance plan purposes as described in the Bridged Employee Brochure. | ||
| (e) | Outplacement. You will eligible to receive Senior Executive Service outplacement services over a period of twelve (12) months. | ||
| (f) | Equity Grants. You will be considered “retired” for purposes of your outstanding unexercised stock options, restricted stock units, leader shares and performance share units, in each case, if any. It is your responsibility to familiarize yourself with the terms of your individual equity grants. | ||
| (g) | Special Payment in Lieu of EIP Bonus. Subject to paragraph 3(b) below, you will receive a special payment of $412,500, minus applicable deductions and withholdings, in lieu of an EIP bonus for your performance in 2006. Your deferral election, if any, with respect to such EIP bonus will not apply to this special payment. In the event that you die before this special payment is made, the payment will be made to your estate. |
3. Payments.
| (a) | Generally. All payments made pursuant this Agreement will be based on your current base salary and are subject to applicable deductions and withholding. Upon your Separation, except for the payments described in this Agreement and the attached Bridged Employee Brochure, no other compensation will be paid to you or on your behalf. | ||
| (b) | Section 409A. Payments generally may not be made on account of separation from service for six months following the termination of employment of a “Specified Employee” as defined in Prop. Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, which in general includes the top 50 employees of a company ranked by compensation. You are a “Specified Employee.” Thus, where payments are characterized in this Agreement as subject to this paragraph, no such payments will be made to you prior to the first day of the seventh month following termination of your employment. Instead, amounts that would otherwise have been payable during the six months immediately following your Separation will be accumulated and paid in a lump sum, without interest, as soon as administratively practicable following such six month period (i.e., on or after April 1, 2007). |
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4. Deferral Program Account. Your Deferred Program Account, if applicable, will be paid
out to you in accordance with the terms and conditions of the Merck deferral program applicable to
separated employees, subject to paragraph 3(b) of this Agreement.
5. Lump Sum Payment. As soon as practicable after your Separation, Merck will pay to you,
subject to appropriate tax withholding, a gross lump sum in the amount of $137,500. This lump sum
payment is not subject to the delay described in paragraph 3(b) of this Agreement. As a condition
of receiving this lump sum payment, you agree to execute and return to me the release of claims
attached hereto as Attachment “A” on or soon after September 30, 2006. Merck’s obligation to pay
this lump sum will not arise until the revocation period for such executed release has passed
without your revocation thereof.
6. Financial Counseling. You may continue to participate in the Company’s Executive
Financial Services Program through the end of 2007 at the level established for Management
Committee members from time to time (currently, reimbursement up to $10,000 per calendar year).
7. Nondisparagement. You agree not to disparage Merck, its affiliates, subsidiaries, or
joint ventures, and their products, officers, directors, employees, former employees,
representatives and agents, in any way whatsoever; provided, however, that nothing set forth herein
will prohibit you from making any statement or engaging in conduct to the extent such statement or
conduct is required by law, court order or legal process. The Company agrees that neither its
employees who were executive officers of the Company on July 12, 2006 nor members of the Company’s
Board of Directors will disparage you or your performance as a Merck employee.
8. Noncompete. For a period of eighteen months following your Separation Date, you agree
not to conduct business in competition with Merck. “Conduct business in competition with Merck”
means, for purposes of this Agreement,
(a) to be, or become being connected in any manner with, a Competitor as defined below,
directly or indirectly, as an individual or as a director, trustee, officer or employee
of, or debt or equity investor in, or consultant or other independent contractor to, a
Competitor, or through ownership, management, operation or control of a person or entity
that is a Competitor; provided that in no event shall ownership of 1% or less of the
outstanding equity securities of any issuer whose securities are registered under the
Securities Exchange Act of 1934, as amended, standing alone, be prohibited by this
subparagraph so long as you do not have, or exercise, any rights to manage, operate or
control the business of such issuer; or
(b) individually or in partnership or conjunction with any other person or entity to
engage in, work in, work for or with as an employee or consultant, advise, manage, lead,
be employed by or affiliated with, or own or operate any enterprise or endeavor, not
defined below as a Competitor, that discovers, develops, markets or sells pharmaceutical
or biological products or vaccines, unless you have first obtained the consent of
Merck’s General Counsel. Your request for consent must include the name of the company
for which you would like to work (or otherwise become associated), the nature of your
proposed employment, association or relationship with such company, and any other
information requested by the General Counsel. The consent of the General Counsel
required hereunder will not be unreasonably withheld, provided, however, that you
understand and agree that the decision whether to grant any such requested consent will
be determined by the General Counsel in the exercise of his or her sole discretion. No
such consent will be effective unless it is set forth in a signed, written communication
from the General Counsel to you.
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(c) “Competitor” means any of the following companies as well as their parents,
subsidiaries, affiliates and successors: Xxxxxx Laboratories, Amgen, AstraZeneca,
Bristol Xxxxx Squibb, Glaxo Xxxxx Xxxxx, Genentech, Xxxxxxx & Xxxxxxx, Xxx Xxxxx,
Novartis/Chiron, Pfizer, Roche/Xxxxxxxx-Xx Xxxxx, Sanofi/Adventis, Schering Plough and
Wyeth.
9. Nonsolicitation. For a period of eighteen months following your Separation Date, you
agree not to solicit, entice, persuade, induce or otherwise attempt to influence any person, who is
employed by Merck, its subsidiaries or joint ventures on the date of this Agreement, to leave the
employ of Merck, its subsidiaries or joint ventures, by (1) making initial contact with a Merck
employee for such purpose or engaging in discussion with a Merck employee about such purpose or
result, (2) causing any third party to make initial contact with a Merck employee for the purpose
of soliciting, enticing, persuading or inducing them to leave the employ of Merck, or (3) providing
a third party information about any Merck employee for the purpose of recruitment of that employee.
10. Confidential Information. You acknowledge and agree that, in the course of your
employment with the Company, you had access to trade secrets, and confidential and proprietary
business information (“Confidential Information”) owned by, or pertinent to, the Company and its
subsidiaries or joint ventures. You agree not to disclose Confidential Information except as you
determine in good faith, with the advice of counsel, to be required of you by law or legal process,
subpoena or court order, provided that, prior to any such required disclosure, you will use your
reasonable best efforts to provide sufficient notice to the Company so as to enable the Company to
interpose an effective objection to such disclosure.
11. Litigation. In connection with litigation, investigation, inquiry or proceedings
before a court, arbitrator, government or administrative agency or other tribunal, you may be asked
by Merck to testify as a witness or to provide information concerning matters you were or might
have been involved in during the course of your employment with Merck. You agree to cooperate
fully with Merck’s counsel by making yourself available to such counsel, upon reasonable advance
notice, to discuss your information or to review your testimony reasonably in advance of such
litigation or proceedings, by making yourself available to testify at depositions or trial as
required or requested by Merck, and by notifying Merck immediately upon becoming aware of any
litigation, investigation, inquiry or proceedings involving Merck. Other than travel expenses and
applicable, or statutorily mandated, witness fees, you agree that you will not be paid in
connection with your testimony, appearance or participation pursuant to this paragraph in such
litigation or proceedings. You further agree that you will not participate in any lawsuit or other
legal action or administrative proceeding initiated by a third party against or involving Merck,
except as such participation is solicited by Merck or authorized by Merck, unless commanded to do
so by a valid and lawfully issued subpoena. You agree that if you are subjected to a subpoena
requiring you to bear witness on matters concerning your employment with or your knowledge about
Merck, you will contact the Company as soon as reasonably practicable and cooperate fully with the
Company in its chosen manner of proceeding. Nothing in this provision shall be construed as
precluding you from cooperating with law enforcement or regulatory agencies in connection with any
lawful government inquiries.
12. Breach of Agreement and Forfeiture of Benefits.
| (a) | The forfeiture of benefits provision set forth in the SPD is incorporated by reference into this Agreement with respect to all amounts and benefits payable hereunder. | ||
| (b) | Separate and apart from any other remedy that Merck may have, in the event that Merck reasonably determines that you have breached or violated paragraph 7, 8, 9, 10 or 11 of this Agreement, Merck’s obligation to pay amounts described in paragraphs 2(a), 2(g) and 5 of this Agreement will immediately cease as of the date of such breach or violation and Merck (i) will be |
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| relieved of any further obligation to make such payments and (ii) will be entitled to demand, and you agree to immediately tender, all benefits and payments previously made to you hereunder. |
| (c) | You agree that your breach of paragraph 8, 9 or 10 of this Agreement will cause immediate and irreparable injury to Merck and it is and will be impossible to estimate and determine the damage that will be suffered by Merck in the event of your breach. You agree that your breach of any of these paragraphs will cause immediate and irreparable injury to Merck and that it is and will be impossible to estimate and determine the damage that will be suffered in the event of a breach. Separate and apart from any other remedy that Merck may have, you further agree that, in the event of such a breach, Merck will be entitled, in addition to any other available remedies, to (i) temporary and permanent injunctive relief from any such breach by you and by your employers, employees, partners, agents and associates, of the terms set forth in this paragraph, without the necessity of proving actual damages, or immediate or irreparable harm, or of posting a bond, ii) an award of liquidated damages equal to all monies paid to you or received by you in accordance with paragraphs 2(a), 2(g) and 5 of this Agreement, and (iii) all associated attorney’s fees and costs. |
13. Reformation. You agree that if any portion(s) of paragraph(s) 8, 9, 10, 11 or 12 is
determined to be invalid, such determination will not affect the enforceability of the remaining
portions of such paragraph(s) and such paragraph(s) will be interpreted as if the invalid portions
had not been inserted. You agree that if such invalidity is caused by the length of any period of
time or the size of any area, then the period of time or the area, or both, will, without need of
further action by any party, be deemed to be reduced to a period or area that will cure the
invalidity.
14. Confidentiality. You agree to hold the existence of this Agreement and the terms and
conditions of this Agreement in strict confidence and you agree not to disclose, except as may be
required by law or legal process, any such information to any third party other than members of
your immediate family, your former spouse, financial advisors, outplacement firm, tax authorities,
tax consultants or anyone preparing your tax returns, or legal advisors. Notwithstanding the
foregoing, you may disclose to executive search firms and prospective employers the provisions of
this Agreement related to your agreement not to conduct business in competition with Merck.
15. Release. In consideration of the promises of the Company as set forth in this
Agreement, and with the intent to be bound legally, you agree to irrevocably RELEASE AND FOREVER
DISCHARGE Merck & Co., Inc., together with its benefit plans, subsidiaries and affiliates and their
officers, directors, employees, agents, predecessors, partners, successors, fiduciaries and assigns
(“Releasees”) from and with respect to any manner of actions, suits, debts, claims, demands
whatsoever in law or equity arising out of or in any way relating to your employment with the
Company or the termination of your employment, or arising out of or in any way relating to any
transaction, occurrence, act or omission or any loss, damage or injury occurring at any time up to
and including the date and time on which you sign this Agreement (“Claims”), including, but not
limited to (a) any and all Claims based upon any law, statute, ordinance, regulation, constitution
or executive order or based in contract, tort or common law or any other legal or equitable theory
of relief; (b) any and all Claims based on the Employee Retirement Income Security Act of 1974; (c)
any and all Claims arising under the civil rights laws of any federal, state or local jurisdiction,
including, but not limited to, Title VII of the Civil Rights Act of 1964; the Americans with
Disabilities Act; Sections 503 and 504 of the Rehabilitation Act; the Family and Medical Leave Act;
the Age Discrimination in Employment Act; the Pennsylvania Human Relations Act; and the New Jersey
Law Against Discrimination; (d) any and all Claims under any whistleblower laws or whistleblower
provisions of other laws including, but not limited to, the New Jersey Conscientious Employee
Protection Act; and (e) any and all Claims for counsel fees or costs.
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You understand that by signing this Agreement, you are waiving any and all Claims against any
and all Releasees released by this Agreement to the greatest extent allowable under law. Nothing
in this paragraph shall be read as a waiver of any vested rights in any savings or pension plan.
The foregoing release does not release or waive claims or rights that cannot be waived by law and
does not release or waive any claims or rights to indemnification under Merck’s by-laws, or by
applicable law, or under Merck’s directors and officers insurance, that you may have now or in the
future.
16. No Representation. You acknowledge that no promise, other than the promises in this
Agreement, have been made to you and that in signing this Agreement you are not relying upon any
statement or representation made by or on behalf of the Releasees and each or any of them
concerning the merits of any Claims or the nature, amount, extent or duration of any damages
relating to any Claims or the amount of any money, benefits, or compensation due you or claimed by
you, or concerning the Agreement or concerning any other thing or matter.
17. Voluntariness. You agree that you are relying solely upon your own judgment; that you
are legally competent to sign this Agreement; that you are signing this Agreement of your free
will; that you have read and understood the Agreement before signing it; and that you are signing
this Agreement in exchange for consideration that you believe is satisfactory and adequate.
18. No Admissions. You agree and acknowledge that neither the offer of these arrangements
nor this Agreement will be construed as an admission or as evidence that Merck or its agents have
failed in any way to act properly in connection with your employment or the termination thereof.
To the contrary, the Company specifically denies any wrongful or unlawful treatment towards you.
This Agreement has been proposed by the Company solely for the purpose of reaching a mutually
acceptable resolution of issues you have raised arising out of the termination of your employment.
19. Applicable Law. You acknowledge and agree that your employment relationship with
Merck is governed solely and exclusively under the laws of the State of New Jersey and the United
States and that any question as to the scope, interpretation and effect of this Agreement will be
resolved under the substantive and procedural laws of the State of New Jersey without giving effect
to any conflict of laws provisions.
20. Severability. All provisions and portions of this Agreement are severable. If any
provision or portion of this Agreement or the application of any provision or portion of the
Agreement will be determined to be invalid or unenforceable to any extent or for any reason, all
other provisions and portions of this Agreement will remain in full force and effect and will
continue to be enforceable to the fullest and greatest extent permitted by law.
21. Amendment, Termination of Plans. Merck retains the right (to the extent permitted by
law) to amend or terminate the Separation Plan and any benefit or plan described in the SPD and/or
the Bridged Employee Brochure (or otherwise) at any time, and nothing in this Agreement affects or
alters that right. While it has no current intention to do so, Merck also may extend, or enhance,
the Separation Plan in the future. If you sign and return the Agreement, any later amendment or
termination will not decrease the amount of Separation Pay or the other Separation Benefits you are
eligible to receive as described in this Agreement.
22. Complete Agreement. This Agreement constitutes the complete and final agreement
between the parties and supersedes and replaces all prior or contemporaneous agreements,
negotiations, or discussions relating to the subject matter of this Agreement.
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In accordance with the federal Older Workers’ Benefit Protection Act of 1990, you have
forty-five (45) days from your initial receipt of this Agreement within which to consider whether
to sign the Agreement. Should you choose to sign this Agreement, you are entitled to revoke your
acceptance at any time within seven (7) calendar days after signing it. If revoked by you within
that time period, the Agreement will be null and void for all purposes. The Agreement will not
become effective or enforceable until the revocation period has expired. Lastly, you have the
right to consult with an attorney before signing this Agreement.
Please indicate your acceptance of this Agreement by signing and dating this letter and
returning it to me. A duplicate of this letter, signed by me, is enclosed for your records.
| Very truly yours, |
||||
| /s/ Xxxxxxx X. Xxxxx | ||||
| Xxxxxxx X. Xxxxx | ||||
| Chief Executive Officer and President | ||||
ACCEPTED: |
||||||||
| Dated: | ||||||||
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Attachment “A”
RELEASE AND WAIVER OF CLAIMS
In consideration of the lump sum to be paid to me by Merck & Co., Inc. (“Merck” or “the
Company”), as set forth in paragraph 5 of the agreement between me and Merck dated August 24, 2006
(“the Agreement”), and with the intent to be bound legally, I agree to irrevocably RELEASE AND
FOREVER DISCHARGE Merck & Co., Inc., together with its benefit plans, subsidiaries and affiliates
and their officers, directors, employees, agents, predecessors, partners, successors, fiduciaries
and assigns (“Releasees”) from and with respect to any manner of actions, suits, debts, claims,
demands whatsoever in law or equity arising out of or in any way relating to my employment with the
Company or the termination of my employment, or arising out of or in any way relating to any
transaction, occurrence, act or omission or any loss, damage or injury occurring at any time up to
and including the date and time on which I sign this Release (“Claims”), including, but not limited
to (a) any and all Claims based upon any law, statute, ordinance, regulation, constitution or
executive order or based in contract, tort or common law or any other legal or equitable theory of
relief; (b) any and all Claims based on the Employee Retirement Income Security Act of 1974; (c)
any and all Claims arising under the civil rights laws of any federal, state or local jurisdiction,
including, but not limited to, Title VII of the Civil Rights Act of 1964; the Americans with
Disabilities Act; Sections 503 and 504 of the Rehabilitation Act; the Family and Medical Leave Act;
the Age Discrimination in Employment Act; the Pennsylvania Human Relations Act; and the New Jersey
Law Against Discrimination; (d) any and all Claims under any whistleblower laws or whistleblower
provisions of other laws including, but not limited to, the New Jersey Conscientious Employee
Protection Act; and (e) any and all Claims for counsel fees or costs.
I understand that by signing this Release, I am waiving any and all Claims against any and all
Releasees released by this Release to the greatest extent allowable under law. Nothing in this
Release shall be read as a waiver of any vested rights in any savings or pension plan. This
Release does not release or waive claims or rights that cannot be waived by law and does not
release or waive any claims or rights (i) to indemnification under Merck’s by-laws, or by
applicable law, or under Merck’s directors and officers insurance, or (ii) arising under the
Agreement, that I may have now or in the future. I have had 45 days to consider the terms of this
Release and I have been advised of my right to have my counsel review this Release before I sign
it. I have the right to revoke my agreement to the terms of this Release by notifying Merck in
writing within 7 calendar days after executing the Release.
| Accepted: | ||||||
Dated: |
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