[COVANCE LETTERHEAD]
March 31, 2000
Xxxxxx X. Xxxxxxx
[Address intentionally left blank]
RE: AMENDMENT NO. 1 TO EMPLOYMENT LETTER AGREEMENT (THE "AGREEMENT")
Dear Xxx:
Please refer to that certain Employment Letter Agreement dated September 8, 1999
between Covance Inc. ("Covance" or, the "Company") and you (the "Letter
Agreement"). In order to provide you with additional consideration for your
relocation to the Princeton, New Jersey area, Covance has agreed to amend the
Letter Agreement to provide you with certain additional benefits. This letter
will constitute Amendment No. 1 to the Letter Agreement and will amend the
Letter Agreement as follows (any capitalized terms which are not defined herein
are used herein as defined in the Letter Agreement):
1. The Section entitled "Change-of-Control" in the letter Agreement shall
be deleted in its entirety and a section entitled "Severance" shall be inserted
in replacement thereof as follows:
SEVERANCE
Except as provided below under the paragraph headed "CHANGE-OF-CONTROL", should
you be involuntarily terminated for reasons other than for Cause, the Company
shall pay you the following:
(i) an amount equal to the sum of (a) one year of base salary (payable
on the normal payroll cycle) determined at the time of termination and (b) one
year of the annual incentive bonus (payable on the normal bonus cycle) in an
amount equal for such year to the product of your base salary in effect at
termination and 55% (the sum of (a) and (b) being, collectively, the
"Termination Payments");
(ii) during the period between the first anniversary of the date of the
involuntary termination of your employment with the Company for reasons other
than Cause and the second anniversary of such event, your base salary (payable
on the normal payroll cycle) with the Company determined at the time of such
involuntary termination in the event that, after reasonable efforts by you, you
have been unable to obtain a suitable alternative vocation, as determined by
Company's Chief Executive Officer in his sole discretion;
(iii) your financial counseling and automobile allowance for the one
year period starting on the date of your involuntary termination from the
Company for reasons other than Cause and the first anniversary of the date of
such event on the terms and conditions of the Section of the Letter Agreement
entitled "AUTO AND FINANCIAL COUNSELING ALLOWANCE"; and
(iv) you shall be entitled to make the COBRA election for continued
medical and dental health insurance benefits for you and your eligible
dependents, subject to the terms and conditions of the applicable policies and
all COBRA requirements, for up to 18 months after the date of your termination
of employment. In the event you elect COBRA continuation, and such termination
was involuntary for reasons other than Cause, the Company shall pay you an
amount equal to the monthly premium for such coverage, less usual withholding
taxes and other customary withholdings, from the date of such involuntary
termination for reasons other than Cause until the date that is the later of (x)
the first anniversary of such involuntary termination and (y) the date you have
obtained a suitable alternative vocation, as determined in accordance with
Section 1(ii) hereof (such period, not to exceed 18 months after the date of
your involuntary termination from the Company for reasons other than Cause,
being the "Health Continuation Period"). For the remainder of such 18 month
period, if applicable, you shall be responsible for such costs. If you have not
found a suitable alternative vocation, as determined in accordance with Section
1(ii) hereof on or prior to the date that is 18 months after your involuntary
termination from the Company for reasons other than Cause, then the Company
shall continue paying to you the foregoing premium payments until the earlier of
(I) the date you find a suitable alternative vocation, as determined in
accordance with Section 1(ii) hereof and (II) the date that is the second
anniversary of your involuntary termination from the Company for reasons other
than Cause. Such payments will be made to you in equal installments on the dates
during the Health Continuation Period, or such later period, as applicable, that
Covance makes its regular payroll payments. In the event you were terminated for
Cause and the COBRA election is still available to you under applicable law, and
you so elect the COBRA continuation, you shall be responsible for all health
benefit premium costs. Life insurance coverage will continue, at the Company's
expense, for the period during which the Company pays the premiums for health
coverage provided above.
31 March 2000
Page 2
Notwithstanding anything in this Section 1 to the contrary, you agree that if
you obtain or are provided with medical, dental and life insurance from a new
employment position which provides comparable coverage and benefits to that
provided by the Company under the respective Company benefit plans and at an
equivalent or lesser expense (both deductible and direct) to you, then you shall
promptly notify the Company which of such insurance benefits is then being
provided to you and the Company shall cease providing such coverage or
discontinue paying the premiums for such insurance, as applicable.
If there has been an Event of Termination (as defined below) or should you be
involuntarily terminated for reasons other than Cause (as defined below), at any
time prior to two years from the date of your business and residential
relocation to the Princeton, NJ area, Covance will reimburse you for the costs,
expenses and fees of moving your household goods from the Princeton, NJ area to
Madison, Wisconsin, as well as the travel expenses of your immediate family, all
in accordance with applicable Covance transfer policies and upon submission of
proper documentation.
Please refer to that certain Confidentiality and Non-Competition Agreement
between you and the Company (the "Non-Competition Agreement"). You agree that
any of the severance payments under Section 1(i) or (ii) of this Letter
Agreement shall constitute the payment of your base salary under Section
4(a)(ii) of the Non-Competition Agreement.
"CAUSE" shall mean (i) your convictions of a felony or a misdemeanor if such
misdemeanor involves moral turpitude; (ii) your committing any act of gross
negligence or intentional misconduct in the performance or non-performance of
your duties as an employee of Covance or its affiliates, including, any actions
which constitute sexual harassment under applicable laws, rules or regulations;
(iii) your failure to perform your duties assigned for a period of thirty (30)
or more days unless such failure is caused by an Extended Disability; or (iv)
misappropriation of assets, personal dishonesty or intentional misrepresentation
of facts which may cause Covance or its affiliates financial or reputational
harm.
Notwithstanding anything else in the Letter Agreement to the contrary, in the
event that you do not relocate your business and domestic residence to the
Princeton, New Jersey area on or before September 30, 2000 or such later date as
the Company's Chief Executive Officer may determine in his sole discretion and
you are terminated as a result of such failure, you shall not be entitled to the
severance benefits specified under SEVERANCE in Section 1 hereof; PROVIDED,
HOWEVER, that if you have not relocated as specified above on or prior to the
occurrence of a Change-of-Control (as defined below), and a Change-of-Control
shall occur, then you shall not be required to relocate and any request to
relocate shall be considered a Constructive Termination, all as specified more
fully below under the Section "Change-of-Control" below.
Should your employment be terminated by Covance because of an Extended
Disability (as defined below), and not for any other reason that constitutes
Cause, for 120 consecutive days where you have not returned to your duties on a
full-time basis after the expiration of such 120 day period within 30 days after
written notice of termination is given to you, Covance shall pay to you an
amount equal to the sum of (a) two years base salary (payable on the normal
payroll cycle) determined at the time of termination, and (b) two years of the
annual incentive bonus (payable on the normal bonus cycles) in an amount equal
for each such year to the product of your base salary in effect at termination
and 55% (the sum of (a) and (b) being, collectively, the "Extended Disability
Payments").
EXTENDED DISABILITY shall (i) mean you are unable, as a result of a medically
determinable physical or mental impairment, to perform the duties and services
of your position, or (ii) have the meaning specified in any disability insurance
policy maintained by Covance, whichever is more favorable to you.
Except as may be otherwise provided in applicable Covance compensation and
benefit plans, Covance shall not be liable for any salary or benefit payments to
you beyond the date of your voluntary termination of employment with Covance. In
the event of a termination of employment for Cause or Extended Disability, you
shall not be entitled to any compensation or other benefits not already earned
and owing to you on account of your services on the date of such termination of
employment except as provided above with respect to a termination for Extended
Disability. The provision of any benefits pursuant to this Agreement shall be in
lieu of, and not in addition to, any payment or benefits you otherwise would
have been entitled to pursuant to any severance pay plan of Company, including,
without limitation, that certain Amended and Restated Severance Pay Plan.
CHANGE-OF-CONTROL
31 March 2000
Page 3
In the event of an Event of Termination (as defined below), you will be entitled
to a lump sum payment equal to the sum of (1) the product of (a) 3 and (b) your
base annual salary in effect at the time of the Event of Termination and (2) the
product of (a) 3 and (b) number that is 55% of your base annual salary in effect
at the time of the Event of Termination. Such payment will be made within 60
days of the Event of Termination. In addition to, and as a result of, the
foregoing (i) all of your stock options, restricted stock, deferred compensation
and similar benefits which have not become vested on the date of an Event of
Termination shall become vested upon such event and (ii) you shall be entitled
to receive any payments calculated pursuant to the paragraph headed "CERTAIN
ADDITIONAL PAYMENTS BY COVANCE".
For the purposes of this Agreement, an Event of Termination is defined to be a
termination of your employment by Covance (for reasons other than Cause) or a
Constructive Termination (as defined below) of your employment, in each case
within 24 months following a Change-of-Control (as defined below), or your
voluntary termination of your employment for any reason or no reason during the
one-month period commencing twelve months following a Change-of-Control and
ending thirteen months after such Change-of-Control (a "Voluntary Termination");
PROVIDED, HOWEVER, that a Voluntary Termination shall not be an Event of
Termination if it arises from a Change-of-Control pursuant to clause (iv) under
the definition of Change-of-Control unless the tender offer or exchange offer is
a tender or exchange offer for securities representing 20% or more of the
combined voting power of Covance's then outstanding securities.
For purposes of this Agreement, a Change-of-Control is defined to occur when:
(i) any person (including as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the beneficial owner,
directly or indirectly, of Covance's securities representing 20% or more of the
combined voting power of Covance's then outstanding securities; or
(ii) as a result of a proxy contest or contests or other forms of
contested shareholder votes (in each case either individually or in the
aggregate), a majority of the individuals elected to serve on Covance's Board of
Directors are different than the individuals who served on Covance's Board of
Directors at any time within the two years prior to such proxy contest or
contests or other forms of contested shareholder votes (in each case either
individually or in the aggregate); or
(iii) Covance shareholders approve a merger, or consolidation (where in
each case Covance is not the survivor thereof), or sale or disposition of all or
substantially all of Covance's assets or a plan or partial or complete
liquidation; or
(iv) an offeror (other than Covance) purchases shares of Covance common
stock pursuant to a tender or exchange offer for such shares.
For purposes of this Agreement, a Constructive Termination is defined to be:
(i) a material breach by Covance of this Agreement, including, without
limitation, a reduction in your then current salary or the percentage of base
salary eligible for incentive compensation;
(ii) a diminution of your responsibilities, status, title or duties
hereunder;
(iii) a relocation of your work place which increases the distance
between your principal residence and your work place by more than 25 miles;
(iv) a failure by Covance to provide you with benefits which are as
favorable to you in all material respects as those provided immediately prior to
the Change-of- Control; or
(v) the failure of any acquiror or successor in interest to the
business of Covance to agree in writing to be bound by the terms of this
Agreement within four months of any Change-of-Control.
In the event you are involved in any dispute about your rights under this
Agreement arising on or after a Change-of-Control, Covance shall pay all legal
costs and fees incurred by you in connection with such dispute promptly upon
receipt of any invoice relating thereto.
31 March 2000
Page 4
With respect to an Event of Termination, the benefits set forth under the
paragraph headed AUTO AND FINANCIAL COUNSELING ALLOWANCE and medical, dental,
disability and life insurance will be continued, to the extent they are not
otherwise prohibited under the respective plans, until you find other employment
but not longer than three years from the date of the Event of Termination.
2. The Section entitled "Release" shall be amended to read in its entirety
as follows:
RELEASE
If there has been an Event of Termination or if there has been no
Change-of-Control but you have been terminated without Cause, the obligation of
Covance to make to you any or all of the payments specified under this Agreement
(including, without limitation, the Termination Payments, the salary
continuation payments described in Section 1(ii) of this Letter Agreement or the
payments specified under the paragraph headed "CHANGE OF CONTROL", as
applicable) shall be subject to your execution and delivery to Covance of a
release in form and substance reasonably satisfactory to Covance of all claims,
demands, suits or actions, whether in law or at equity, you have or may have
relating to or giving rise from such Event of Termination or non-Cause
termination.
3. Except as expressly modified hereby, the Letter Agreement shall remain
in full force and effect.
Please indicate your agreement with the terms and conditions of this Amendment
No. 1 by signing one copy of this letter and returning it to my attention.
Very truly yours,
Xxxxxxxxxxx X. Xxxxxxx
President and CEO
Accepted as of the date first above specified:
By:
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