EXHIBIT 10.6
AGREEMENT REGARDING
CHANGE IN CONTROL
THIS AGREEMENT ("Agreement"), is made and entered into as of the 20th
day of June, 2003 (the "Effective Date") by and between Xxxxxx Laboratories (the
"Company") and _____________ (the "Executive") and amends and restates, in its
entirety, an Agreement regarding Change in Control dated as of the 1st day of
January, 2000, as amended and restated on the 8th day of December, 2000, also by
and between the Company and the Executive (the "Original Agreement");
WITNESSETH THAT:
WHEREAS, the Company considers it essential to the best interests of
its shareholders to xxxxxx the continuous employment of key management
personnel, and the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, a change in control
might occur and that such possibility, and the uncertainty and questions which
it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of the Company;
NOW, THEREFORE, to induce the Executive to remain in the employ of the
Company and in consideration of the premises and mutual covenants set forth
herein, IT IS HEREBY AGREED by and between the parties as follows:
1. AGREEMENT TERM. The initial "Agreement Term" shall begin on the
Effective Date and shall continue through December 31, 2005. As of December 31,
2003, and as of each December 31 thereafter, the Agreement Term shall extend
automatically to the third anniversary thereof unless the Company gives notice
to the Executive prior to the date of such extension that the Agreement Term
will not be extended. Notwithstanding the foregoing, if a Change in Control (as
defined in Section 7 below), occurs during the Agreement Term, the Agreement
Term shall continue through and terminate on the second anniversary of the date
on which the Change in Control occurs.
2. ENTITLEMENT TO CHANGE IN CONTROL BENEFITS. The Executive shall be
entitled to the Change in Control Benefits described in Section 3 hereof if the
Executive's employment by the Company is terminated during the Agreement Term
but after a Change in Control (i) by the Company for any reason other than
Permanent Disability or Cause, (ii) by the Executive for Good Reason or (iii) by
the Executive for any reason during the 30-day period commencing on the first
date which is six months after the date of the Change in Control. For purposes
of this Agreement:
(a) A termination of the Executive's employment shall be treated
as a termination by reason of "Permanent Disability" only
if, due to a mental or physical disability, the Executive is
absent from the full time performance of duties with the
Company for a period of at least twelve consecutive months
and fails to return to the full time performance of duties
within 30 days after receipt of a demand by the Company to
do so.
(b) The term "Cause" shall mean the willful engaging by the
Executive in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Company. For
purposes of this Agreement, no act, or failure to act, on
the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until
the Company delivers to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for
the Executive, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct set forth above and
specifying the particulars thereof in detail.
(c) The term "Good Reason" shall mean the occurrence of any of
the following circumstances without the Executive's express
written consent:
(i) a significant adverse change in the nature, scope or
status of the Executive's position, authorities or
duties from those in effect immediately prior to the
Change in Control, including, without limitation, if
the Executive was, immediately prior to the Change in
Control, an executive officer of a public company,
the Executive ceasing to be an executive officer of a
public company;
(ii) the failure by the Company to pay the Executive any
portion of the Executive's current compensation, or
to pay the Executive any portion of any installment
of deferred compensation under any deferred
compensation program of the
Company, within seven days of the date such
compensation is due;
(iii) a reduction in the Executive's annual base salary (or
a material change in the frequency of payment) as in
effect immediately prior to the Change in Control as
the same may be increased from time to time;
(iv) the failure by the Company to award the Executive an
annual bonus in any year which is at least equal to
the annual bonus, awarded to the Executive under the
annual bonus plan of the Company for the year
immediately preceding the year of the Change in
Control;
(v) the failure by the Company to award the Executive
equity-based incentive compensation (such as stock
options, shares of restricted stock, or other
equity-based compensation) on a periodic basis
consistent with the Company's practices with respect
to timing, value and terms prior to the Change in
Control;
(vi) the failure by the Company to continue to provide the
Executive with the welfare benefits, fringe benefits
and perquisites enjoyed by the Executive immediately
prior to the Change in Control under any of the
Company's plans or policies, including, but not
limited to, those plans and policies providing
pension, life insurance, medical, health and
accident, disability, vacation, executive automobile,
executive tax or financial advice benefits or club
dues;
(vii) the relocation of the Company's principal executive
offices to a location more than thirty-five miles
from the location of such offices immediately prior
to the Change in Control or the Company requiring the
Executive to be based anywhere other than the
Company's principal executive offices except for
required travel to the Company's business to an
extent substantially consistent with the Executive's
business travel obligations immediately prior to the
Change in Control; or
(viii) the failure of the Company to obtain a satisfactory
agreement from any successor to the Company to
assume and agree to perform this Agreement as
contemplated by Section 16.
For purposes of any determination regarding the existence of
Good Reason, any good faith determination by the Executive
that Good Reason exists shall be conclusive.
3. CHANGE IN CONTROL BENEFITS. In the event of a termination of
employment entitling the Executive to benefits in accordance with Section 2, the
Executive shall receive the following:
(a) The Executive shall be entitled to receive the following
employee welfare benefits: medical, accident, dental,
prescription, and life insurance coverage for the Executive
(and, where applicable under the Company's welfare benefit
plans, the Executive's family) through the third anniversary
of the Executive's date of termination of employment, or, if
earlier, the date on which the Executive becomes employed by
another employer. The benefits provided by the Company shall
be no less favorable in terms of coverage and cost to the
Executive than those provided under the Company's welfare
benefit plans applicable to the Executive (and, where
applicable, the Executive's family) prior to the Change in
Control, determined as if the Executive remained in the
employ of the Company through such third anniversary. For
purposes of determining eligibility of the Executive for
retiree welfare benefits, the Executive shall be considered
to have remained in the employ of the Company through such
third anniversary.
(b) If the Executive's date of termination occurs after the end
of a performance period applicable to an annual incentive
(bonus) award, and prior to the payment of the award for the
period, the Executive shall be entitled to a lump sum
payment in cash no later than twenty (20) business days
after the date of termination equal to the greatest of (i)
the Executive's annual incentive (bonus) award for that
period, as determined under the terms of that incentive
award arrangement, (ii) the Executive's annual incentive
(bonus) award for that period, with the determination of the
amount of such award based on an assumption that the target
level of performance had been achieved or (iii) the
Participant's average annual incentive (bonus) award for the
three annual performance periods preceding that period
(provided that if the Participant was not a participant in
the incentive award arrangement for any of those three prior
years, the
averaging period shall be reduced from three years to the
number of years during the three year period in which the
Participant was a participant; and further provided that if
the Participant's award for any such year was reduced
because the Participant was not a participant for the full
year, such amount shall be annualized for purposes of the
computation in this clause (iii)).
(c) For any annual incentive (bonus) plan or arrangement in
which the Executive participates for the performance period
in which the Executive's termination of employment occurs,
the Executive shall be entitled to a lump sum payment in
cash no later than twenty (20) business days after the date
of termination equal to the greater of (i) the Executive's
annual incentive (bonus) award for the performance period
that includes the date of termination, with the
determination of the amount of such award based on an
assumption that the target level of performance has been
achieved or (ii) the Executive's average annual incentive
(bonus) award for the three annual performance periods
preceding the performance period that includes the date of
termination (provided that if the Executive was not a
participant in the incentive award arrangement for any of
those three prior years, the averaging period shall be
reduced from three years to the number of years during the
three year period in which the Executive was a participant;
and further provided that if the Executive's award for any
such year was reduced because the Executive was not a
participant for the full year, such amount shall be
annualized for purposes of the computation in this clause
(ii)); provided that such payment shall be subject to a
pro-rata reduction to reflect the number of days in the
performance period following the date of termination. The
amount payable under this paragraph (c) shall be in lieu of
any amounts that may otherwise be due to the Executive with
respect to any annual incentive (bonus) plan or arrangement
in which the Executive participates for the performance
period in which the Executive's date of termination occurs.
(d) The Executive shall be entitled to a lump sum payment in
cash no later than twenty business days after the
Executive's date of termination equal to the sum of:
(i) an amount equal to three times the Executive's annual
salary rate in effect on the date of the
Change in Control or, or if greater, as in effect
immediately prior to the date of termination; plus
(ii) an amount equal to three times the greater of (x) the
Executive's annual incentive (bonus) award for the
performance period that includes the date of the
Executive's termination of employment, with the
determination of the amount of such award based on an
assumption that the target level of performance has
been achieved or (y) the Executive's average annual
incentive (bonus) award for the three annual
performance periods preceding the performance period
that includes the date of termination (provided that
if the Executive was not a participant in the
incentive award arrangement for any of those three
prior years, the averaging period shall be reduced
from three years to the number of years during the
three year period in which the Executive was a
participant; and further provided that if the
Executive's award for any such year was reduced
because the Executive was not a participant for the
full year, such amount shall be annualized for
purposes of the computation in this subparagraph
(ii)).
The amount payable under this paragraph (d) shall be
inclusive of the amounts, if any, to which the Executive
would otherwise be entitled as severance pay under any
severance pay plan, or by law and shall be in addition to
(and not inclusive of) any amount payable under any written
agreement(s) directly between the Executive and the Company
or any of its subsidiaries.
(e) The Executive shall be entitled to benefits under the Xxxxxx
Laboratories Supplemental Pension Plan (the "Supplemental
Plan") which shall be determined as if the Executive had
been credited for benefit accrual purposes with three
additional years of service and three additional years of
eligible earnings at the higher of the Executive's eligible
earnings on the date of termination or the Executive's
eligible earnings on the date of the Change in Control and,
for purposes of determining the Executive's eligibility for
subsidized early retirement benefits, determined as if the
Executive were three years older than the Executive's actual
age on the date of termination. For purposes of this
paragraph (e), "eligible earnings" shall include salary,
annual incentive (bonus) awards and all
other forms of compensation used to calculate benefits under
the Supplemental Plan. The amounts of the annual incentive
(bonus) awards shall be calculated in accordance with this
paragraph (e) and, to the extent applicable, paragraphs (b)
and (c) above. The Executive's benefits under the
Supplemental Plan shall be determined, paid and administered
without regard to any termination or amendment (including
any amendment affecting actuarial factors) of such plan or
of any other plan, which is adopted on or after a Change in
Control or in contemplation of a Change in Control and,
subject to paragraph (f) below, shall be paid in accordance
with the terms of that plan and the Executive's elections
under that plan. Within twenty (20) days of Executive's date
of termination, the Company shall provide the Executive with
all forms, elections and materials required in connection
with the funding or payment of the Executive's benefits
under that plan. Within twenty (20) days of the Company's
receipt of properly executed and completed forms, elections
and other required materials from the Executive, the Company
shall fund the additional benefits to the extent provided by
the terms of such plan.
(f) The Executive shall be entitled to elect that all or any
portion of the amounts payable under paragraphs 3(b) and
3(c) and subparagraph 3(d)(ii) above (less applicable tax
withholding) be paid directly to a grantor trust established
by the Executive to the same extent as bonuses payable under
the 1986 Xxxxxx Laboratories Management Incentive Plan, the
1998 Xxxxxx Laboratories Performance Incentive Plan, or any
successor plans thereto with all of the rights and
entitlements attendant thereto.
(g) The Company shall provide the Executive with outplacement
services and tax and financial counseling suitable to the
Executive's position through the third anniversary of the
date of the Executive's termination of employment, or, if
earlier, the date on which the Executive becomes employed by
another employer.
If the Executive is a participant in the 1998 Xxxxxx Laboratories
Performance Incentive Plan or any successor thereto, the Executive's annual
incentive (bonus) award for the performance period which includes the date of
termination under paragraphs (c) and (d)(ii) above and, if applicable, for the
period preceding the date of termination under paragraph (b) shall, be
determined under the bonus levels communicated in writing to the Executive by
the Company for such year and shall not be the Executive's individual base award
allocation as defined in Section 4.2 of the 1998
Xxxxxx Laboratories Performance Incentive Plan (or any corresponding provision
of any successor plan).
4. MITIGATION. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise. Except as set forth in paragraph 3(a) with respect to benefits,
the Company shall not be entitled to set off against the amounts payable to the
Executive under this Agreement any amounts owed to the Company by the Executive,
any amounts earned by the Executive in other employment after the Executive's
termination of employment with the Company, or any amounts which might have been
earned by the Executive in other employment had the Executive sought such other
employment.
5. MAKE-WHOLE PAYMENTS. If any payment or benefit to which the
Executive (or any person on account of the Executive) is entitled, whether under
this Agreement or otherwise, in connection with a Change in Control or the
Executive's termination of employment (a "Payment") constitutes a "parachute
payment" within the meaning of section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and as a result thereof the Executive is subject
to a tax under section 4999 of the Code, or any successor thereto, (an "Excise
Tax"), the Company shall pay to the Executive an additional amount (the
"Make-Whole Amount") which is intended to make the Executive whole for such
Excise Tax. The Make-Whole Amount shall be equal to (i) the amount of the Excise
Tax, plus (ii) the aggregate amount of any interest, penalties, fines or
additions to any tax which are imposed in connection with the imposition of such
Excise Tax, plus (iii) all income, excise and other applicable taxes imposed on
the Executive under the laws of any Federal, state or local government or taxing
authority by reason of the payments required under clauses (i) and (ii) and this
clause (iii).
(a) For purposes of determining the Make-Whole Amount, the
Executive shall be deemed to be taxed at the highest
marginal rate under all applicable local, state, federal and
foreign income tax laws for the year in which the Make-Whole
Amount is paid. The Make-Whole Amount payable with respect
to an Excise Tax shall be paid by the Company coincident
with the Payment with respect to which such Excise Tax
relates.
(b) All calculations under this Section 5 shall be made
initially by the Company and the Company shall provide
prompt written notice thereof to the Executive to enable the
Executive to timely file all applicable tax returns. Upon
request of the Executive, the Company shall provide the
Executive with sufficient tax and compensation data to
enable the Executive or the Executive's tax advisor to
independently make the calculations described in
subparagraph (a) above and the Company shall reimburse the
Executive for reasonable fees and expenses incurred for any
such verification.
(c) If the Executive gives written notice to the Company of any
objection to the results of the Company's calculations
within 60 days of the Executive's receipt of written notice
thereof, the dispute shall be referred for determination to
independent tax counsel selected by the Company and
reasonably acceptable to the Executive ("Tax Counsel"). The
Company shall pay all fees and expenses of such Tax Counsel.
Pending such determination by Tax Counsel, the Company shall
pay the Executive the Make-Whole Amount as determined by it
in good faith. The Company shall pay the Executive any
additional amount determined by Tax Counsel to be due under
this Section 5 (together with interest thereon at a rate
equal to 120% of the Federal short-term rate determined
under section 1274(d) of the Code) promptly after such
determination.
(d) The determination by Tax Counsel shall be conclusive and
binding upon all parties unless the Internal Revenue
Service, a court of competent jurisdiction, or such other
duly empowered governmental body or agency (a "Tax
Authority") determines that the Executive owes a greater or
lesser amount of Excise Tax with respect to any Payment than
the amount determined by Tax Counsel.
(e) If a Taxing Authority makes a claim against the Executive
which, if successful, would require the Company to make a
payment under this Section 5, the Executive agrees to
contest the claim with counsel reasonably satisfactory to
the Company, on request of the Company subject to the
following conditions:
(i) The Executive shall notify the Company of any such
claim within 10 days of becoming aware thereof. In
the event that the Company desires the claim to be
contested, it shall promptly (but in no event more
than 30 days after the notice from the Executive or
such shorter time as the Taxing Authority may specify
for responding to such claim) request the Executive
to contest the claim. The Executive shall not make
any payment of any tax which is the subject of the
claim before the Executive has given the notice or
during the 30-day period thereafter unless the
Executive receives written instructions from the
Company to make such payment together with an advance
of funds sufficient to make the requested payment
plus any amounts payable under this Section 5
determined as
if such advance were an Excise Tax, in which case the
Executive will act promptly in accordance with such
instructions.
(ii) If the Company so requests, the Executive will
contest the claim by either paying the tax claimed
and suing for a refund in the appropriate court or
contesting the claim in the United States Tax Court
or other appropriate court, as directed by the
Company; PROVIDED, HOWEVER, that any request by the
Company for the Executive to pay the tax shall be
accompanied by an advance from the Company to the
Executive of funds sufficient to make the requested
payment plus any amounts payable under this Section 5
determined as if such advance were an Excise Tax. If
directed by the Company in writing the Executive will
take all action necessary to compromise or settle the
claim, but in no event will the Executive compromise
or settle the claim or cease to contest the claim
without the written consent of the Company; PROVIDED,
HOWEVER, that the Executive may take any such action
if the Executive waives in writing the Executive's
right to a payment under this Section 5 for any
amounts payable in connection with such claim. The
Executive agrees to cooperate in good faith with the
Company in contesting the claim and to comply with
any reasonable request from the Company concerning
the contest of the claim, including the pursuit of
administrative remedies, the appropriate forum for
any judicial proceedings, and the legal basis for
contesting the claim. Upon request of the Company,
the Executive shall take appropriate appeals of any
judgment or decision that would require the Company
to make a payment under this Section 5. Provided that
the Executive is in compliance with the provisions
of this section, the Company shall be liable for and
indemnify the Executive against any loss in
connection with, and all costs and expenses,
including attorneys' fees, which may be incurred as a
result of, contesting the claim, and shall provide to
the Executive within 30 days after each written
request therefor by the Executive cash advances or
reimbursement for all such costs and expenses
actually incurred or reasonably expected to be
incurred by the Executive as a result of contesting
the claim.
(f) Should a Tax Authority finally determine that an additional
Excise Tax is owed, then the Company shall pay an additional
Make-Whole Amount to the Executive in a manner consistent
with this Section 5 with respect to any additional Excise
Tax and any assessed interest, fines, or penalties. If any
Excise Tax as calculated by the Company or Tax Counsel, as
the case may be, is finally determined by a Tax Authority to
exceed the amount required to be paid under applicable law,
then the Executive shall repay such excess to the Company
within 30 days of such determination; provided that such
repayment shall be reduced by the amount of any taxes paid
by the Executive on such excess which is not offset by the
tax benefit attributable to the repayment.
6. TERMINATION DURING POTENTIAL CHANGE IN CONTROL. If a Potential
Change in Control (as defined in Section 8) occurs during the Agreement Term,
and the Company terminates the Executive's employment for reasons other than
Permanent Disability or Cause during such Potential Change in Control, the
Executive shall be entitled to receive the benefits that the Executive would
have received under Section 3, such benefits to be calculated based upon the
Executive's compensation prior to the actual termination of employment but paid
within 20 business days of the date of such termination.
7. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred on the earliest of the following
dates:
(a) the date any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such
Person any securities acquired directly from the Company or
its Affiliates) representing 20% or more of the combined
voting power of the Company's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (i) of
paragraph (c) below; or
(b) the date on which the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a
director whose initial assumption of office is in connection
with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or
election by the Board or nomination for election by the
Company's shareholders was approved or recommended by a vote
of at
least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose
appointment, election or nomination for election was
previously so approved or recommended; or
(c) the date on which there is consummated a merger or
consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation or
other entity, other than (i) a merger or consolidation (A)
immediately following which the individuals who comprise the
Board immediately prior thereto constitute at least a
majority of the board of directors of the Company, the
entity surviving such merger or consolidation or, if the
Company or the entity surviving such merger or consolidation
is then a subsidiary, the ultimate parent thereof and (B)
which results in the voting securities of the Company
outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any subsidiary of the Company, at least 50% of the combined
voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including
in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its
Affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities; or
(d) the date on which the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of
the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's
assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by
shareholders of the Company, in combination with the
ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company
or any subsidiary of the Company, in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately
following which the record holders of the common stock of the
Company immediately prior to such transaction or series of
transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
For purposes of this Agreement: "Affiliate" shall have the
meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act; "Beneficial Owner" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act; "Exchange Act" shall
mean the Securities Exchange Act of 1934, as amended from time to
time; and "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include
(i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any of its Affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly,
by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
8. POTENTIAL CHANGE IN CONTROL. A "Potential Change in Control" shall
exist during any period in which the circumstances described in paragraphs (a),
(b), (c) or (d), below, exist (provided, however, that a Potential Change in
Control shall cease to exist not later than the occurrence of a Change in
Control):
(a) The Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control,
provided that a Potential Change in Control described in
this paragraph (a) shall cease to exist upon the expiration
or other termination of all such agreements;
(b) Any Person (without regard to the exclusions set forth in
subsections (i) through (iv) of such definition) publicly
announces an intention to take or to consider taking actions
the consummation of which would constitute a Change in
Control; provided that a Potential Change in Control
described in this paragraph (b) shall cease to exist upon
the withdrawal of such intention, or upon a determination by
the Board that there is no reasonable chance that such
actions would be consummated;
(c) Any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or
more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company's
then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates);
(d) The Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control
exists; provided that a Potential Change in Control
described in this paragraph (d) shall cease to exist upon a
determination by the Board that the reasons that gave rise
to the resolution providing for the existence of a Potential
Change in Control have expired or no longer exist.
9. STOCK AND OPTION AWARDS. With respect to any award granted to the
Executive under the Company's 1996 Incentive Stock Program (the "Program"), any
Prior Program (as defined in the Program) or any successor program, the
following shall apply:
(a) if the award (other than incentive stock options granted
pursuant to Section 422 of the Internal Revenue Code (each
an "Incentive Stock Option") prior to the first date on
which the Original Agreement was executed) includes a
provision substantially similar to the provision contained
in the first paragraph in Appendix A, then after a Change in
Control no forfeiture shall be effected pursuant to such
provision unless the Executive shall have been terminated
for "Cause" within the meaning of paragraph 2(b) above;
(b) if the award (other than an Incentive Stock Option granted
prior to the Effective Date) includes a provision
substantially similar to the provision contained in the
second paragraph in Appendix A, then after a Change in
Control no forfeiture shall be effected pursuant to such
provision unless the Executive shall have been terminated
for "Cause" within the meaning of paragraph 2(b) above; and
(c) if the Executive becomes entitled to Change in Control
Benefits under Section 2 above, then in determining the
Executive's rights with respect to that award, other than
Incentive Stock Options granted prior to the later of:
(i) December 8, 2000, or
(ii) the first date on which the Original Agreement was
executed, the Executive shall be treated as having
incurred a termination of employment due to
retirement.
10. WITHHOLDING. All payments to the Executive under this Agreement
will be subject to withholding of applicable taxes. The Company shall withhold
the applicable taxes in an amount calculated at the minimum statutory rate and
shall pay the amount so withheld to the appropriate tax authority.
11. NONALIENATION. The interests of the Executive under this Agreement
are not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Executive or the Executive's beneficiary.
12. AMENDMENT. This Agreement may be amended or canceled only by
mutual agreement of the parties in writing without the consent of any other
person. So long as the Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement or the subject
matter hereof.
13. APPLICABLE LAW. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Illinois, without regard
to the conflict of law provisions of any state.
14. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, and this Agreement will be construed as if such
invalid or unenforceable provision were omitted (but only to the extent that
such provision cannot be appropriately reformed or modified).
15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party of any similar or dissimilar provisions and conditions at the same or any
prior or subsequent time. The failure of any party hereto to take any action by
reason of such breach will not deprive such party of the right to take action at
any time while such breach continues.
16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement shall be
binding upon and inure to the benefit of the Company and any successor of the
Company. 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 expressly assume 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 succession had taken place. This Agreement is personal to the
Executive and may not be assigned by the Executive without the written consent
of the Company. However, to the extent that rights or benefits under this
Agreement otherwise survive the Executive's death, the Executive's heirs and
estate shall succeed to such rights and benefits pursuant to the Executive's
will or the laws of descent and distribution; provided that the Executive shall
have the right at any time and from time to time, by notice delivered to the
Company, to designate or to change the beneficiary or beneficiaries with respect
to such benefits.
17. NOTICES. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below. Such notices, demands, claims and other
communications shall be deemed given:
(a) in the case of delivery by overnight service with guaranteed
next day delivery, the next day or the day designated for
delivery;
(b) in the case of certified or registered U.S. mail, five days
after deposit in the U.S. mail; or
(c) in the case of facsimile, the date upon which the
transmitting party received confirmation of receipt by
facsimile, telephone or otherwise;
provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service or two-day delivery
service are to be delivered to the addresses set forth below:
to the Company:
Senior Vice President, Human Resources
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
with a copy (which shall not constitute notice) to:
General Counsel and Secretary
Xxxxxx Laboratories
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
or to the Executive:
Name
Address
City, State Zip
Each party, by written notice furnished to the other party, may modify the
applicable delivery address, except that notice of change of address shall be
effective only upon receipt.
18. RESOLUTION OF ALL DISPUTES. Any controversy or claim arising out
of or relating to this Agreement (or the breach thereof) (a "Dispute") shall be
settled by alternative dispute resolution procedures in accordance with Appendix
B hereto. During the pendency of any Dispute, the Company shall continue to pay
the Executive the full compensation in effect when the notice giving rise to the
Dispute was given (including, but not limited to, salary) and continue the
Executive (and, where applicable, the Executive's family) as a participant in
all compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the Dispute was given, until such
Dispute is resolved.
19. LEGAL AND ENFORCEMENT COSTS. The provisions of this Section 19
shall apply if it becomes necessary or desirable for the Executive to retain
legal counsel or incur other costs and expenses in connection with enforcing any
and all rights under this Agreement or any other compensation plan maintained by
the Company, including, but not limited to, the Xxxxxx Laboratories Deferred
Compensation Plan, the Xxxxxx Laboratories 1991 Incentive Stock Program, the
Xxxxxx Laboratories 1996 Incentive Stock Program, the 1998 Xxxxxx Laboratories
Performance Incentive Plan, the Xxxxxx Laboratories 401(k) Supplemental Plan,
the Xxxxxx Laboratories Supplemental Pension Plan, the 1986 Xxxxxx Laboratories
Management Incentive Plan or, in each case, any trust adopted pursuant thereto:
(a) The Executive shall be entitled to recover from the Company
reasonable attorneys' fees, costs and expenses incurred in
connection with such enforcement or defense.
(b) Payments required under this Section 19 shall be made by the
Company to the Executive (or directly to the Executive's
attorney) promptly following submission to the Company of
appropriate documentation evidencing the incurrence of such
attorneys' fees, costs, and expenses.
(c) The Executive shall be entitled to select legal counsel;
provided, however, that such right of selection shall not
affect the requirement that any costs and expenses
reimbursable under this Section 19 be reasonable.
(d) The Executive's rights to payments under this Section 19
shall not be affected by the final outcome of any dispute
with the Company.
20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in
this Agreement, the rights and obligations of the parties to this Agreement
shall survive the termination of the Executive's employment with the Company.
21. ENTIRE AGREEMENT. Except as otherwise provided herein, this
Agreement constitutes the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior or contemporaneous agreements,
between the parties relating to the subject matter hereof including but not
limited to the Original Agreement; provided, however, that nothing in this
Agreement shall be construed to limit any policy or agreement that is otherwise
applicable relating to confidentiality, rights to inventions, copyrightable
material, business and/or technical information, trade secrets, solicitation of
employees, interference with relationships with other businesses, competition,
and other similar policies or agreement for the protection of the business and
operations of the Company and the subsidiaries.
22. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
IN WITNESS THEREOF, the Executive has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
and its corporate seal to be hereunto affixed on this _____ day of ___________,
2003, all as of the Effective Date.
----------------------------------------
EXECUTIVE
XXXXXX LABORATORIES
By
----------------------------------------
Its
----------------------------------------
ATTEST:
------------------------------
(Seal)
APPENDIX A
AGREEMENT REGARDING CHANGE IN CONTROL
FORFEITURE PROVISION REFERENCED IN SECTION 9
Notwithstanding paragraphs (x*), (y*) and (z*), these options (this
restricted stock award, etc.) shall immediately terminate (be forfeited), if in
the sole opinion and discretion of the Compensation Committee or its delegate,
the employee (a) engages in a material breach of the company's Code of Business
Conduct; (b) commits an act of fraud, embezzlement or theft in connection with
the employee's duties or in the course of employment; or (c) wrongfully
discloses secret processes or confidential information of the company or its
subsidiaries.
Notwithstanding paragraphs (x*), (y*) and (z*), these options shall
immediately terminate in the event the employee engages directly or indirectly,
for the benefit of the employee or others, in any activity, employment or
business during employment or within twelve (12) months after the date of
termination or retirement which, in the sole opinion and discretion of the
compensation committee or its delegate, is competitive with the company or any
of its subsidiaries.
----------
* Provisions contained in the agreements pertaining to nonforfeiture for death,
disability, etc.
APPENDIX B
AGREEMENT REGARDING CHANGE IN CONTROL
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
The parties to the Agreement Regarding Change in Control dated as of
the 20th day of June, 2003 (the "Agreement") recognize that a bona fide dispute
as to certain matters may arise from time to time during the term of the
Agreement which relates to either party's rights and/or obligations. To have
such a dispute resolved by this Alternative Dispute Resolution ("ADR")
provision, a party first must send written notice of the dispute to the other
party for attempted resolution by good faith negotiations between the Executive
and the Company within twenty-eight (28) days after such notice is received (all
references to "days" in the ADR provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of
the notice of dispute, or if the parties fail to meet within such twenty-eight
(28) days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice
to the other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within the
same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, either party may
request the President of the CPR Institute for Dispute Resolution ("CPR"), 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, to select a neutral
pursuant to the following procedures:
(a) The CPR shall submit to the parties a list of not less than
five (5) candidates within fourteen (14) days after receipt
of the request, along with a CURRICULUM VITAE for each
candidate. No candidate shall be an employee, director or
shareholder of either party or any of their subsidiaries or
affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest
preference) and shall deliver the list to the CPR within
seven (7) days following receipt of the list of candidates.
If a party believes a conflict of interest exists regarding
any of the candidates, that party shall provide a written
explanation of the conflict to the CPR along with its list
showing its order of preference for the candidates. Any
party failing to return a list of preferences on time shall
be deemed to have no order of preference.
(d) If the parties collectively have identified fewer than three
(3) candidates deemed to have conflicts, the CPR immediately
shall designate as the neutral the candidate for whom the
parties collectively have indicated the greatest preference.
If a tie should result between two candidates, the CPR may
designate either candidate. If the parties collectively have
identified three (3) or more candidates deemed to have
conflicts, the CPR shall review the explanations regarding
conflicts and, in its sole discretion, may either (i)
immediately designate as the neutral the candidate for whom
the parties collectively have indicated the greatest
preference, or (ii) issue a new list of not less than five
(5) candidates, in which case the procedures set forth in
subparagraphs 2(a)-2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principal place of business of either
party or any of the subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to rely
in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of
each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy
for each issue. The proposed rulings and remedies shall not
contain any recitation of the facts or any legal arguments
and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty
(20) pages. This page limitation shall apply regardless of
the number of issues raised in the ADR proceeding. Except as
expressly set forth in subparagraphs 4(a) - 4(d), no
discovery shall be required or permitted by any means,
including deposition, interrogatories, requests for
admissions or production of documents.
5. The hearing shall be conducted on two (2) consecutive days and
shall be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine
whether each party has had the five (5) hours to which it is
entitled.
(b) Each party shall be entitled, but not required, to make an
opening statement, to present regular or rebuttal testimony,
documents or other evidence, to cross-examine witnesses and
to make a closing argument. Cross-examination of witnesses
shall occur immediately after their direct testimony, and
cross-examination time shall be charged against the party
conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing and, if
it chooses to make an opening statement, shall address not
only issues it raised, but also any issues raised by the
responding party. The responding party, if it chooses to
make an opening statement, also shall address all issues
raised in the ADR. Thereafter, the presentation of regular
and rebuttal testimony and documents, other evidence and
closing arguments shall proceed in the same sequence.
(d) Except when testifying, witnesses shall be excluded from the
hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also
shall not be admissible. As to all other matters, the
neutral shall have sole discretion regarding the
admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief shall not
contain or discuss any new evidence and shall not exceed ten (10) pages. This
page limitation shall apply regardless of the number of issues raised in the ADR
proceeding.
7. The neutral shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each disputed
issue but may adopt one party's proposed rulings and remedies on some issues and
the other party's proposed
rulings and remedies on other issues. The neutral shall not issue any written
opinion or otherwise explain the basis of the ruling.
8. The neutral shall be paid a reasonable fee plus expenses by the
Company. The Company shall bear its own fees and expenses. The Executive's fees
and expenses shall be paid or reimbursed by the Company to the extent provided
by the Agreement.
9. The rulings of the neutral and the allocation of fees and
expenses shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in Section 9 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and briefs), and
the rulings shall be deemed Confidential Information. The neutral shall have the
authority to impose sanctions for unauthorized disclosure of Confidential
Information.
