EMPLOYMENT AGREEMENT
THIS
AGREEMENT, dated as of this 7th day of December, 2005, (the “Effective Date”) by
and among ELAN PHARMACEUTICALS, INC., a Delaware corporation (the “Employer”),
and
ELAN CORPORATION, PLC, an Irish public limited company (the “Parent”,
together with the Employer, the “Company”)
and G.
XXXXX XXXXXX (the “Executive”).
WITNESSETH:
WHEREAS,
the Executive is willing to serve as the Chief Executive Officer of the Parent
and the Employer desires to retain the Executive in such capacity on the terms
and conditions herein set forth; and
NOW,
THEREFORE, in consideration of the promises and the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Employment
and Duties.
(a) General.
The
Company hereby continues to employ the Executive as the President and Chief
Executive Officer of the Parent, and the Executive agrees upon the terms and
conditions herein set forth to continue to be employed by the Employer. In
such
capacity, the Executive shall report directly to the Board of Directors of
the
Parent (the “Board”).
The
Executive shall perform all of the duties normally accorded to such position,
as
directed by the Employer or the Parent and shall have the full executive
authority to manage the Company, including the authority to manage the Company
in a manner consistent with applicable regulatory requirements and sound
business practices. During the Term, the Executive shall also serve as the
senior executive officer of such other subsidiaries of the Parent and the
Employer as designated by the Board and approved by the boards of directors
of
such subsidiaries.
(b) Services.
For so
long as the Executive is employed by the Employer, the Executive shall perform
his duties faithfully and shall devote his full business time, attention and
energies to businesses of the Company, and while employed, shall not engage
in
any other business activity that is in conflict with his duties and obligations
to the Company.
(c) No
Other Employment.
During
the Term, the Executive shall not, directly or indirectly, render services
to
any other person or organization for which he receives compensation; provided,
however, that upon the receipt of the Board’s prior written approval to be
granted in its sole discretion, which approval shall not unreasonably be
withheld, the Executive may accept an election to the board of directors of
no
more than two other companies without being deemed to have violated Section
1(b)
hereof, provided that such activities do not otherwise conflict with his duties
and obligations to the Company. No such approval will be required if the
Executive seeks to perform services without direct compensation therefore in
connection with the management of personal investments or in connection with
the
performance of charitable and civic activities, provided that such activities
do
not contravene the provisions of Section 1(b) and Section 5
thereof.
(d) Board
Membership.
The
Executive shall continue to be nominated for election to the Board for the
remainder of the Term.
2. Term
and Location of Employment.
(a) Term.
The term
of the Executive’s employment under this Agreement (the “Term”)
shall
commence on January 1, 2006 and shall continue until terminated pursuant to
the
provisions of Section 4 hereof. Notwithstanding anything herein to the contrary,
the Term of this Agreement shall be deemed to continue the “term” of the
employment agreement entered into by the Company and the Executive as of January
7, 2003, but effective
February 3, 2003 and amended December 3, 2004, but effective December 31,
2004.
(b) Location.
As of
the Effective Date, the Executive’s principal place of business shall be the
Company’s offices in New York, New York, however, the parties acknowledge that
the Executive shall be required to travel extensively in connection with the
business of the Company.
3. Compensation
and Other Benefits.
Subject
to the provisions of this Agreement, the Employer shall pay and provide the
following compensation and other benefits to the Executive during the Term
as
compensation for all services rendered hereunder:
(a) Salary.
The
Employer shall pay to the Executive a base salary (the “Salary”)
at an
initial annual rate of $798,000, payable to the Executive in accordance with
the
normal payroll practices of the Employer as are in effect from time to time.
The
amount of the Executive’s Salary shall be reviewed annually by the Employer in
the same manner as other senior executives of the Company and may be increased,
but not decreased, during the Term.
(b) Annual
Bonus.
The
Executive shall be eligible to participate in the Company’s annual bonus plan,
performance based stock awards, and merit award plans.
(c) Initial
Option Grant.
As soon
as possible after the Effective Date, the Parent shall grant the Executive
an
option to purchase 750,000 shares of the Parent’s common stock (the
“Stock”),
with
an exercise price equal to the fair market value of the Stock on the date of
grant and vesting in three equal annual installments on December 31, 2006,
2007
and 2008, and, except as otherwise provided herein, having post-termination
exercise periods and vesting provisions following termination of employment
that
are no less favorable than those provided to other senior executives of the
Company (the “2005 Options”).
(d) Subsequent
Option Grants.
Effective January 1, 2007, the Executive shall be considered for additional
option grants during the Term consistent with the Company’s annual option grant
practices.
(e) Expenses.
The
Employer shall reimburse the Executive for all reasonable out-of-pocket expenses
incurred by the Executive in connection with his employment hereunder upon
submission of appropriate documentation or receipts in accordance with the
policies and procedures of the Employer as in effect from time to time. In
addition, the Executive shall be eligible to receive financial planning, and
tax
support and advice from the provider of his choice, at a reasonable and
customary annual cost.
(f) Option,
Pension, Welfare and Fringe Benefits, etc.
During
the Term, the Executive shall be eligible to participate in the option
(consistent with subsections (c) and (d)),
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pension,
medical, disability and life insurance and other plans and programs applicable
to senior executives of the Company generally in accordance with the terms
of
such plans and programs as in effect from time to time. The foregoing shall
not
be construed to limit the ability of the Employer or any of its affiliates
to
amend, modify or terminate any such benefit plans, policies or programs at
any
time and from time to time.
4. Termination
of Employment.
Subject
to the notice and other provisions of this Section 4, the Employer shall have
the right to terminate the Executive’s employment hereunder, and the Executive
shall have the right to resign, at any time for any reason or for no stated
reason.
(a) Termination
for Cause; Resignation Without Good Reason.
(i) If
the
Executive’s employment is terminated by the Employer for “Cause” (as defined
below) or if the Executive resigns from his employment hereunder other than
for
“Good Reason” (as defined below), the Executive shall be entitled to the
following amounts: (A) payment of his Salary accrued up to and including the
date of termination or resignation, (B) payment in lieu of any accrued but
unused vacation time, and (C) payment of any unreimbursed expenses
(collectively, the “Accrued
Obligations”).
Except to the extent required by the terms of the programs described in Section
3(f) or applicable law, the Executive shall have no further right under this
Agreement or otherwise to receive any other compensation or to participate
in
any other plan, program or arrangement after such termination or resignation
of
employment.
(ii) “Cause”
means
that the Executive has (A) committed any act of willful misconduct, including
fraud, in connection with his employment by the Company; (B) materially breached
any provision of the Agreement, which breach has not been cured within 20 days
after receiving written notice of such breach; (C) failed, refused or neglected,
other than by reason of a Disability (as defined below), to timely perform
any
material duty or obligation under the Agreement or to comply with any lawful
directive of the Board, which failure, refusal or neglect has not been cured
within 10 business days after receiving written notice thereof; (D) been
formally indicted for a crime involving moral turpitude, dishonesty, fraud
or
unethical business conduct; or (E) been determined by a governmental body or
other appropriate authority to have violated any material law or regulation
that
is applicable to the Company’s businesses. Upon a cure of the acts set forth in
subsections (B) and (C) by the Executive within the 20 business day cure period
to the reasonable satisfaction of the Board, such event shall no longer
constitute Cause for purposes of this Agreement.
(iii) “Good
Reason”
means
(A) a breach by the Company of a material obligation under the Agreement,
including, without limitation, a material diminution in the Executive’s title,
duties, responsibilities or authority, and ceasing, other than voluntarily
or
for Cause, to be the sole chief executive officer of a company whose shares
are
publicly traded in an established securities market or on an established
securities exchange, without his consent, which breach has not been cured within
20 business days after providing the Company with written notice of such breach;
provided, however, that “Good Reason” shall exist, whether before or after a
Change in Control, even
if
Executive participates in the development or implementation of the Company's
strategic initiative to transition to a new chief executive officer,
(B) a
failure to
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provide
the Executive with an annual cash bonus and additional option grants in
accordance with the Company’s compensation guidelines for executive officers at
a level appropriate to the Executive’s performance, as determined by the
Committee in good faith, or a reduction in Executive’s Salary other than in
connection with a general reduction in the compensation of executives of the
Company generally, (C) the failure to nominate the Executive for membership
on
the Board during the Term, (D) the requirement that the Executive move his
principal place of business by more than 30 miles from that previously the
case
without his consent, (E) a request by the Board that the Executive follow a
directive that is unlawful, unless retracted within 20 business days after
providing the Board with written notice of the illegality of the directive,
or
(F) the failure of a successor to assume this Agreement as required by section
10(e). Upon a cure of the acts set forth in subsections (A) and (B) above within
the 20 business day cure period, such event shall no longer constitute Good
Reason for purposes of this Agreement.
(iv) Termination
of the Executive’s employment for Cause shall be communicated by delivery to the
Executive of a written notice from the Employer stating that the Executive
will
be terminated for Cause, specifying the particulars thereof and the effective
date of such termination; provided,
however,
that no
such written notice shall be effective unless the cure period specified in
Section 4(a)(ii)(B) or (C) (if applicable) has expired without the Executive
having corrected the event or events subject to cure. The date of a resignation
by the Executive without Good Reason shall be the date specified in a written
notice of resignation from the Executive to the Employer; provided,
however,
that
the Executive shall provide at least 30 days’ advance written notice of
resignation without Good Reason.
(b) Involuntary
Termination.
(i) If
the
Employer terminates the Executive’s employment for any reason other than
Disability or Cause or the Executive resigns from his employment hereunder
for
Good Reason (such a resignation or termination being hereinafter referred to
as
an “Involuntary
Termination”),
the
Executive shall be entitled to payment of the Accrued Obligations. In addition,
in the event of the Executive’s Involuntary Termination and execution and
non-revocation of a release of all claims against in the Company in the form
then customarily prescribed by the Company, the Executive shall be entitled
to
the following benefits:
(A) a
lump
sum equal to two times the sum of the Executive’s Salary and target bonus,
determined as of the Executive’s termination date plus, in the event that the
Involuntary Termination occurs on or after July 1 of a year, a pro rata bonus
for the year of the Involuntary Termination equal to the Executive’s target
bonus for that year multiplied by the number of completed months of employment
in that year divided by 12;
(B) all
of
the outstanding 2005 Options granted to the Executive shall immediately
accelerate and remain outstanding for two years following the Involuntary
Termination or, if shorter, the balance of the original term;
(C) for
a
period of two years following the Executive’s Involuntary Termination or until
the Executive obtains other employment, the
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Executive
shall continue to participate, on the same terms and conditions as are in effect
immediately prior to such termination or resignation, in the Employer’s health
and medical plans provided to the Executive pursuant to Section 3(f). In lieu
of
any or all of the coverages provided under this paragraph (C), the Employer
may
pay to the Employee a single lump sum equal to the then present value of the
cost of such coverages. Anything herein to the contrary notwithstanding, the
Employer shall have no obligation to continue to maintain any plan, program
or
level of benefits solely as a result of this Agreement; and
(D) a
lump-sum cash payment in the amount of $50,000.00 to cover extra costs due
to
tax return preparation, estate counseling, and miscellaneous expenses. Executive
shall also be entitled to obtain career transition assistance from a career
transition assistance firm selected and paid for by the Company. Executive
must
begin the available career transition assistance program within sixty (60)
days
following the Involuntary Termination. Said transition assistance shall include
the use of an office and the services of a full time secretary suitable for
the
Executive, as agreed to by the Company, for a reasonable period of time not
to
exceed two (2) years.
(ii) Payment
of the amounts described in subsection (i) above shall be made as soon as
administratively practicable following the latest of (A) the date of the
Executive’s Involuntary Termination, (B) the end of the revocation period for
the release described in subsection (i) or (C) to the extent required by section
409A of the Code, the six-month anniversary of the Executive’s Involuntary
Termination. In the event of the Executive’s death subsequent to his Involuntary
Termination, but before the payment of benefits, benefits shall be paid to
the
Executive’s Beneficiary (as hereinafter defined) as soon as administratively
practicable.
(iii) If
payments pursuant to subsection (i) are delayed pursuant to section 409A of
the
Code, the Employer shall pay interest on the postponed payments from the date
of
the Executive’s Involuntary Termination to the date of payment at the prime rate
quoted in the Wall Street Journal on the termination date or, if not available
on such date, the next prime rate quoted in the Wall Street Journal.
(iv) The
date
of termination of employment without Cause shall be the date specified in a
written notice of termination to the Executive. The date of resignation for
Good
Reason shall be the date specified in a written notice of resignation from
the
Executive to the Employer; provided,
however,
that no
such written notice shall be effective unless the cure period specified in
Section 4(a)(iii)(A) (if applicable) above has expired without the Employer
having corrected the event or events subject to cure.
(c) Involuntary
Termination in Connection with Certain Changes in Control.
(i) If
(A)
the Parent undergoes a “Change in Control” (as defined below), (B) either (x)
the Executive’s employment is thereafter terminated within 24 months of the
Change in Control under circumstances that would constitute an Involuntary
Termination or (y) the Executive undergoes an Involuntary Termination and within
180 days of the Involuntary
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Termination,
the Parent executes a definitive agreement to enter into a transaction the
consummation of which would result in a “Change in Control” and such transaction
is actually consummated and (C) the Executive executes, and does not revoke,
a
release of all claims against in the Company in the form then customarily
prescribed by the Company, the Executive shall be entitled to the following
benefits in lieu of any benefits under Subsection (b) above:
(I) the
Accrued Obligations;
(II) a
lump
sum equal to three times the sum of the Executive’s Salary and target bonus,
determined as of the Executive’s termination date plus, in the event that the
Involuntary Termination occurs on or after July 1 of a year, a pro rata bonus
for the year of the Involuntary Termination equal to the Executive’s target
bonus for that year multiplied by the number of completed months of employment
in that year divided by 12;
(III) all
of
the outstanding 2005 Options granted to the Executive shall immediately
accelerate and remain outstanding for three years following the Involuntary
Termination or, if shorter, the balance of the original term;
(IV) for
a
period of three years following the Executive’s Involuntary Termination or until
the Executive obtains other employment, the Executive shall continue to
participate, on the same terms and conditions as are in effect immediately
prior
to such termination or resignation, in the Employer’s health and medical plans
provided to the Executive pursuant to Section 3(f). In lieu of any or all of
the
coverages provided under this paragraph (C), the Employer may pay to the
Employee a single lump sum equal to the then present value of the cost of such
coverages. Anything herein to the contrary notwithstanding, the Employer shall
have no obligation to continue to maintain any plan, program or level of
benefits solely as a result of this Agreement; and
(V) a
lump-sum cash payment in the amount of $50,000.00 to cover extra costs due
to
tax return preparation, estate counseling, and miscellaneous expenses. Executive
shall also be entitled to obtain career transition assistance from a career
transition assistance firm selected and paid for by the Company. Executive
must
begin the available career transition assistance program within sixty (60)
days
following the Involuntary Termination. Said transition assistance shall include
the use of an office and the services of a full time secretary suitable for
the
Executive, as agreed to by the Company, for a reasonable period of time not
to
exceed three (3) years.
(ii) “Change
in Control”
means
(A) the consummation of a merger or consolidation of the Parent with or into
another entity or any other corporate reorganization (including without
limitation, the acquisition by any person of a majority of the voting shares
in
the Parent), if more than 50% of the combined voting power of the continuing
or
surviving entity’s issued shares or securities outstanding immediately after
such merger, consolidation or other reorganization is held by persons who were
not shareholders of the Parent immediately
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prior
to
such merger, consolidation or other reorganization; (B) the sale, transfer
or
other disposition of all or substantially all of the Parent’s assets; (C)
individuals who
on
the date of this Agreement constitute the Board (the “Incumbent
Directors”)
cease
for any reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a majority
of the Board, provided, however, that any individuals who becomes a director
of
the Company subsequent to the date of this Agreement shall be considered an
Incumbent Director if such person's election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors; but,
provided further
that any
such person whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of members of the Board
or other actual or threatened solicitation of proxies or consents by or on
behalf of a person other than the Board, including by reason of agreement
intended to avoid or settle any such actual or threatened contest or
solicitation, shall not be considered an Incumbent Director;
or (D)
any transaction as a result of which any person becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”)),
directly or indirectly, of securities of the Parent representing at least 50%
of
the total voting power represented by the Parent’s then outstanding voting
securities (e.g., issued shares). The term “person” shall have the same meaning
as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude
(i) a trustee or other fiduciary holding securities under an employee benefit
plan of the Parent or of any subsidiary of the Parent and (ii) a company owned
directly or indirectly by the shareholders of the Parent in substantially the
same proportions as their ownership of the ordinary shares of the
Parent.
(iii) Payment
of the amounts described in subsection (i) above shall be made as soon as
administratively practicable following the latest of (A) the date of the
Executive’s Involuntary Termination, (B) the end of the revocation period for
the release described in subsection (i) or (C) to the extent required by section
409A of the Code, the six-month anniversary of the Executive’s Involuntary
Termination. In the event of the Executive’s death subsequent to his Involuntary
Termination, but before the payment of benefits, benefits shall be paid to
the
Executive Beneficiary (as hereinafter defined) as soon as administratively
practicable.
(iv) If
payments pursuant to subsection (i) are delayed pursuant to section 409A of
the
Code, the Employer shall pay interest on the postponed payments from the date
of
the Executive’s Involuntary Termination to the date of payment at the prime rate
quoted in the Wall Street Journal on the termination date or, if not available
on such date, the next prime rate quoted in the Wall Street Journal.
(d) Termination
Due to Disability.
In the
event of the Executive’s Disability, the Employer shall be entitled to terminate
his employment. In the case that the Employer terminates the Executive’s
employment due to Disability, the Executive shall be entitled to payment of
(i)
the Accrued Obligations, (ii) in the event that the termination occurs on or
after July 1 of a year, a pro rata bonus for the year of the Disability equal
to
the Executive’s target bonus for that year multiplied by the number of completed
months of employment in that year divided by 12, and (iii) any disability
benefits that are provided under the terms of any plan, program or arrangement
referred to in Section 3(f) applicable to the Executive at the time of his
Disability. In addition, all of the outstanding 2005 Options granted to the
Executive shall immediately accelerate and remain outstanding for two years
following the Executive’s
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termination
of employment under this subsection or, if shorter, the balance of the original
term. “Disability”
shall
mean a physical or mental impairment that substantially prevents him from
performing his duties hereunder and that has continued for either (1) 180
consecutive days or (ii) any 180 days within a consecutive 360 day period.
Any
dispute as to whether or not the Executive is disabled within the meaning of
the
preceding sentence shall be resolved by a physician reasonably satisfactory
to
the Executive and the Employer, and the determination of such physician shall
be
final and binding upon both the Executive and the Employer.
(e) Death.
Except
as provided in Sections 4(b)(ii), 4(c)(iii) and this Section 4(e), no
Salary or benefits shall be payable under this Agreement following the date
of
the Executive’s death. In the event of the Executive’s death, the Accrued
Obligations and in the event that the Executive’s death occurs on or after July
1 of a year, a pro rata bonus for that year equal to the Executive’s target
bonus for that year multiplied by the number of completed months of employment
in that year divided by 12, shall be paid to the Executive’s Beneficiary within
30 days of such termination. In addition, all of the outstanding 2005 Options
granted to the Executive shall immediately accelerate and remain outstanding
for
two years following the Executive’s death or, if shorter, the balance of the
original term. The Executive’s Beneficiary shall also be entitled to any death
benefits that are provided under the terms of any plan, program or arrangement
referred to in Section 3(f) applicable to the Executive at the time of
death.
(f) Beneficiary.
For
purposes of this Agreement, “Beneficiary”
shall
mean the person or persons designated in writing by the Executive to receive
benefits under a plan, program, arrangement or this Agreement, if any, in the
event of the Executive’s death, or, if no such person or persons are designated
by the Executive, the Executive’s estate. No Beneficiary designation shall be
effective unless it is in writing and received by the Employer prior to the
date
of the Executive’s death.
5. Protection
of the Employer’s Interests.
(a) No
Interference.
For so
long as the Executive is employed by the Employer and for one year following
his
termination of employment for any reason (such period being referred to
hereinafter as the “Restricted
Period”),
the
Executive shall not, either himself or through any agent, whether for his own
account or for the account of any other individual, partnership, firm,
corporation or other business organization (other than the Company or its
affiliates), intentionally solicit, endeavor to entice away from the Company,
or
otherwise interfere with the relationship of the Company with, any individual
who is employed by or otherwise engaged to perform services for the Company
(other than those individuals who are personally recruited by the Executive)
or
any person or entity who is, or was within the then most recent twelve-month
period, a customer or client of the Company or its affiliates.
(b) Secrecy.
As a
condition of his employment, the Executive shall be required to execute the
Company’s standard proprietary inventions and confidentiality agreement. In
addition, the Executive recognizes that the services to be performed by him
hereunder are special, unique and extraordinary in that, by reason of his
employment hereunder, he may acquire confidential information and trade secrets
concerning the operation of the Company or its affiliates or subsidiaries,
the
use or disclosure of which could cause the Company or its affiliates or
subsidiaries substantial losses and damages which could not be readily
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calculated
and for which no remedy at law would be adequate. Accordingly, the Executive
covenants and agrees that he will not at any time, except in performance of
his
obligations hereunder or with the prior written consent of the Board, directly
or indirectly disclose to any person any secret or confidential information
that
he may learn or has learned by reason of his association with the Company,
or
any of its predecessors, subsidiaries and affiliates. The term “confidential
information”
means
any information not previously disclosed or otherwise available to the public
or
to the trade with respect to the Company’s, or any of its predecessors’,
affiliates’ or subsidiaries’, products, facilities and methods, trade secrets
and other intellectual property, systems, procedures, manuals, confidential
reports, product price lists, customer lists, financial information, business
plans, prospects or opportunities.
(c) Exclusive
Property.
The
Executive confirms that all confidential information is and shall remain the
exclusive property of the Company, its affiliates and subsidiaries. All business
records, papers and documents kept or made by the Executive relating to the
business of the Company, its predecessors, affiliates and subsidiaries shall
be
and remain the property of the Company. Upon the termination of his employment
with the Company or upon the request of the Company at any time, the Executive
shall promptly deliver to the Company, and shall not without the consent of
the
Board retain copies of, any written materials not made available to the public,
or records and documents made by the Executive or coming into his possession
concerning the business or affairs of the Company or any of its affiliates
or
subsidiaries.
(d) Injunctive
Relief.
Without
intending to limit the remedies available to the Company, the Executive
acknowledges that a breach of any of the covenants contained in this Section
5
may result in material irreparable injury to the Company or its affiliates
or
subsidiaries for which there is no adequate remedy at law, that it will not
be
possible to measure damages for such injuries precisely and that, in the event
of such a breach or threat thereof, the Company, its affiliates or subsidiaries,
shall be entitled to obtain a temporary restraining order and/or a preliminary
or permanent injunction restraining the Executive from engaging in activities
prohibited by this Section 5 or such other relief as may be required to
specifically enforce any of the covenants in this Section 5.
6. Certain
Additional Payments by the Company.
(a) Gross-Up
Payment.
Anything in this Agreement to the contrary or any termination of this Agreement
notwithstanding, in the event it shall be determined that any payment or
distribution or benefit received or to be received by the Executive pursuant
to
the terms of this Agreement or any other payment or distribution or benefit
made
or provided by the Company or any of its affiliates, to or for the benefit
of
the Executive (whether pursuant to this Agreement or otherwise) (a “Payment”)
would
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”),
or
any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties,
is
hereinafter collectively referred to as the “Excise
Tax”),
then
the Executive shall be entitled to receive an additional payment (a
“Gross-Up
Payment”)
in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income and employment taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax
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imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Gross-Up
Payment Calculation.
Subject
to the provisions of Subsection (c) below, all determinations required to
be made under this Section 6, including whether and when a Gross-Up Payment
is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by such certified
public accounting firm as may be jointly designated by the Executive and the
Company (the “Accounting
Firm”),
which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne solely
by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 6,
shall be paid by the Company to the Executive within five days of the receipt
of
the Accounting Firm’s determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Subsection (c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) Claim
by the IRS.
The
Executive shall notify the Company in writing of any claim by the U.S. Internal
Revenue Service (the “IRS”)
that,
if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and
shall
apprise the Company of the nature of such claim and the date on which such
claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the date that
any
payment of taxes with respect to such claim is due). If the Company notifies
the
Executive in writing prior to the expiration of such period that it desires
to
contest such claim, the Executive shall:
(i) give
the
Company any information reasonably requested by the Company relating to such
claim;
(ii) take
such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company; and
(iii) cooperate
with the Company in good faith in order effectively to contest such
claim;
-10-
provided,
however,
that
the Company shall bear and pay directly all costs and expenses; (including
additional interest and penalties) incurred in connection with such contest
and
shall indemnify and hold the Executive harmless, on an after-tax basis, for
any
Excise Tax or income and employment tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of
costs
and expenses. Without limitation on the foregoing provisions of this Subsection
(c), the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive shall agree to prosecute such contest
to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided,
however,
that if
the Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on
an
after-tax basis, from any Excise Tax or income and employment tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and
provided further,
that
any extension of the statute of limitations relating to payment of taxes for
the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall
be
entitled to settle or contest, as the case may be, any other issue raised by
the
IRS or any other taxing authority.
(d) Entitlement
to Refund.
If,
after the receipt by the Executive of an amount paid by the Company pursuant
to
Subsection (c), the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the Company’s complying
with the requirements of Subsection (c) promptly repay to the Company the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount paid
by
the Company pursuant to Subsection (c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
the
Company does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such payment shall be forgiven and shall not be required to be repaid
and
the amount of such payment shall offset, to the extent thereof, the amount
of
Gross-Up Payment required to be paid.
(e) Compliance
with 409A. Notwithstanding
any provision of this Section to the contrary, the payment of the Gross-up
Payment shall comply with the applicable provisions of section 409A of the
Code
and regulations issued thereunder.
7. Indemnification. The
Company agrees that (i) if the Executive is made a party, or is threatened
to be
made a party, to any threatened or actual claim, action, suit or proceeding,
whether civil, criminal, administrative, investigative, appellate or other
(each, a “Proceeding”),
including an action by or in the right of the Company, by reason of the fact
that he is or was a director, officer, employee, agent, manager, or
representative of the Company or is or was serving at the request of the Company
as a director, officer, member, employee, agent, manager, or representative
of
any subsidiary or affiliate of the Company, or of another
-11-
corporation,
partnership, joint venture, trust or other enterprise, or (ii) if any claim,
demand, request, investigation, dispute, controversy, threat, discovery request
or request for testimony or information (each, a “Claim”)
is
made, or threatened to be made, that arises out of or relates to the Executive's
service in any of the foregoing capacities, then the Executive shall be
indemnified and held harmless by the Company to the fullest extent legally
permitted or authorized by the Company's certificate of incorporation, by-laws,
Board resolutions or, if greater, by applicable law,
against
any and all costs, expenses, liabilities and losses (including, without
limitation, attorney's fees, judgments, interest, expenses of investigation,
penalties, fines, ERISA excise taxes or penalties and amounts paid or to be
paid
in settlement) incurred or suffered by the Executive in connection therewith,
and such indemnification shall continue as to the Executive even if he has
ceased to be a director, officer, member, employee, agent, manager, or
representative of the Company and shall inure to the benefit of the Executive’s
heirs, executors and administrators. Except to the extent prohibited by
applicable law, the Company shall advance to the Executive all costs and
expenses incurred by him in connection with any such Proceeding or Claim within
15 days after receiving written notice requesting such an advance. Such notice
shall include, to the extent required by applicable law, an undertaking by
the
Executive to repay the amount advanced if he is ultimately determined not to
be
entitled to indemnification against such costs and expenses. The
Company agrees to maintain director’s and officer’s liability insurance covering
the Executive for services rendered to the Company and its subsidiaries and,
if
reasonably available, its affiliates covering the Executive for his services
as
a director officer, member, employee, agent, manager or representative of the
Company or any of its subsidiaries and affiliates, if applicable.
8. No
Mitigation or Offset.
The
Executive shall not be required to mitigate the amount of any payment provided
for herein by seeking other employment or otherwise, and any such payment will
not be reduced in the event such other employment is obtained.
9. Attorneys’
Fees and Costs.
In the
event that any action or other proceeding is instituted to enforce any right
or
obligation under this Agreement, the prevailing party shall be entitled to
receive, in addition to any other relief granted, the costs of enforcement
of
this Agreement, including reasonable attorneys’ fees and court costs; provided,
however, that following a Change in Control, the Company shall pay the
Executive’s reasonable attorneys’ fees and court costs if it is determined that
the Executive brought an action in good faith and with a bona fide position
without regard to whether the Executive prevails.
10. General
Provisions.
(a) No
Other Severance Benefits.
Except
as specifically set forth in this Agreement, the Executive covenants and agrees
that he shall not be entitled to any other form of severance benefits from
the
Employer, including, without limitation, benefits otherwise payable under any
of
the Employer’s regular severance plans or policies, in the event his employment
ends for any reason and, except with respect to obligations of the Employer
expressly provided for herein, the Executive unconditionally releases the
Employer and its subsidiaries and affiliates, and their respective directors,
officers, employees and stockholders, or any of them, from any and all claims,
liabilities or obligations under any severance or termination arrangements
of
the Employer or any of its subsidiaries or affiliates.
-12-
(b
) Tax
Withholding.
All
amounts paid to Employee hereunder shall be subject to all applicable federal,
state and local wage withholding.
(c) Notices.
Any
notice hereunder by either party to the other shall be given in writing by
personal delivery, or certified mail, return receipt requested, or (if to the
Employer) by telex or facsimile, in any case delivered to the applicable address
set forth below:
(i) To
the
Company: Xxxxxxxx
Xxxxxxxx
Xxxxx
Xxxxx Xxxxx Xxxxxx
Xxxxxx
0
Xxxxxxx
Attention:
Secretary
With
a copy to:
Xxxxxx,
Xxxxx & Xxxxxxx LLP
0000
Xxxxxx Xxxxxx
Xxxxxxxxxxxx,
XX
Attn: Xxxxxx
X.
Xxxxxxxxxxxx, Esq.
(ii) To
the
Executive: G.
Xxxxx
Xxxxxx
0000
Xxxxx Xxxxxx, Xxx. 0X
Xxx
Xxxx, Xxx Xxxx 00000
With
a copy
to:
Loeb & Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000-0000
Attn: Xxxxx
X.
Xxxxxxxxx
or
to
such other persons or other addresses as either party may specify to the other
in writing.
(d) Representation
by the Executive.
The
Executive represents and warrants that his entering into this Agreement does
not, and that his performance under this Agreement will not, violate the
provisions of any agreement or instrument to which the Executive is a party
or
any decree, judgment or order to which the Executive is subject, and that this
Agreement constitutes a valid and binding obligation of the Executive in
accordance with its terms. Breach of this representation will render all of
the
Employer’s obligations under this Agreement void ab initio.
(e) Assignment;
Assumption of Agreement.
No
right, benefit or interest hereunder shall be subject to assignment,
encumbrance, charge, pledge, hypothecation or setoff by the Executive in respect
of any claim, debt, obligation or similar process. The Employer will require
any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Employer
to assume expressly and to agree to perform this Agreement in the same manner
and to the same extent that the Employer would be required to perform it if
no
such succession had taken place.
-13-
(f) Amendment.
No
provision of this Agreement may be amended, modified, waived or discharged
unless such amendment, modification, waiver or discharge is agreed to in writing
and signed by the parties. No waiver by either party hereto at any time of
any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any
prior or subsequent time.
(g) Severability.
If any
term or provision hereof is determined to be invalid or unenforceable in a
final
court or arbitration proceeding, (i) the remaining terms and provisions hereof
shall be unimpaired and (ii) the invalid or unenforceable term or provision
shall be deemed replaced by a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
(h) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York (determined without regard to the choice of law provisions
thereof), and the parties consent to jurisdiction in the United States District
Court for the Southern District of New York.
(i) Entire
Agreement.
This
Agreement contains the entire agreement of the Executive, the Employer and
any
predecessors or affiliates thereof with respect to the subject matter hereof
and
all prior agreements and term sheets are superseded hereby except as expressly
provided herein. Notwithstanding the foregoing, this Agreement shall not
supersede or effect any of the stock option grants to the Executive made prior
to the date hereof.
(j) Counterparts.
This
Agreement may be executed by the parties hereto in counterparts, each of which
shall be deemed an original, but both such counterparts shall together
constitute one and the same document.
-14-
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
day and year first written above.
|
ELAN
PHARMACEUTICALS, INC.
By:
/s/ Xxxxxxx X. Xxxxxxx
Name:
Xxxxxxx X. Xxxxxxx
Title:
EVP & Secretary
|
|
|
ELAN
CORPORATION, PLC
By:
/s/ Xxxx Xxxxxx
Name:
Xxxx Xxxxxx
Title:
EVP & Secretary
|
|
|
EXECUTIVE
/s/
G. Xxxxx Xxxxxx
G.
Xxxxx Xxxxxx
|
