Exhibit 10.25
EXECUTIVE INCENTIVE COMPENSATION AGREEMENT
This Executive Incentive Compensation Agreement ("Agreement") is made
effective as of this 24th day of October, 1996, between Mallinckrodt
Inc. (the "Company") and Xxxx X. Xxxxxxx (the "Executive").
WHEREAS, Executive is currently an executive employee of
the Company's veterinary and animal products operations known as
Mallinckrodt Veterinary, Inc., i.e. hereinafter the "Business", who
is employed as its President and Chief Executive Officer and has
significant management responsibilities in the operation of that
Business;
WHEREAS, the Company has determined to divest itself of the
Business by selling or otherwise disposing of it;
WHEREAS, the Company recognizes that Executive is a
valuable resource to the Business and has determined that it requires
the continued service of the Executive to maximize the proceeds to be
realized from Divestiture of the Business;
WHEREAS, Executive is willing to remain as an employee of
the Business and the Company, as the Company determines, in exchange
for enhanced compensation to be paid under certain circumstances;
NOW, THEREFORE, in exchange for the promises and covenants
described below and for other valid consideration, whose receipt and
sufficiency is acknowledged, the Company and the Executive agree as
follows:
1. Continued Employment.
(a) The Company agrees to continue to employ
Executive, and the Executive agrees to remain employed by the Company
for such period as the Company determines appropriate. Executive
shall continue to use his best efforts to perform his duties as
President and Chief Executive Officer of the Business and such other
duties as the Company directs him/her to perform. While employed by
the Company, Executive agrees to devote his/her full business time,
energy and attention exclusively to the affairs of the Company and
performance of duties allocated to him.
(b) Executive agrees to use his best efforts to
cooperate with the Company, and to perform such tasks as allocated to
him, to divest the Business, to maximize the value to be obtained by
the Company upon the Business' Divestiture, to facilitate the
Divestiture and to retain and motivate employees of the Business
during the Divestiture process.
2. Compensation While an Employee. While an employee
of the Business, Executive shall receive his annual base salary as it
exists on the date of this Agreement and as established from the
Company from time to time. Executive shall be eligible to continue
to participate on a reasonable basis:
(a) In any annual incentive, stock option,
long-term incentive performance and other compensation plans and
programs of the Company which are applicable to his position in such
manner as established by the Company;
(b) In all employee benefit plans and programs
in accordance with their terms (including, but not limited to,
medical, life and accident insurance, disability, retirement,
investment and vacation plans) and perquisites applicable to his
position and as may be established or maintained by the Company.
All compensation, incentives and employee benefits shall be provided
to Executive in accordance with the terms of those programs as
administered by the Company.
3. Divestiture Incentive Compensation. If the
Executive remains employed by the Company through the Closing Date,
the Executive will be paid the compensations described below:
(a) Retention Incentive Payment. The Company
will pay to Executive an amount equal to one (1) time his/her annual
base salary rate in effect on the Closing Date. This amount will be
paid in cash to the Executive within 30 days following the Closing
Date.
(b) Sale Incentive Bonus. Immediately after the
Closing Date, the Company will determine a Sale Incentive Bonus Pool
as described below based upon the Value of Proceeds received by the
Company, during the period commencing with the date of this Agreement
and ending on the Closing Date, for the Business upon its
Divestiture. The Company will then pay to Executive a Sale Incentive
Bonus as described below based upon the size of the Bonus Pool
established.
Value of Proceeds Received Sale Incentive Amount of Executive's
or Divestiture of the Bonus Pool Sale Incentive Bonus
Business
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(Dollars in Millions)
Up to $400 1/2% of value of 35% of Sale Incentive
proceeds Bonus Pool
$400-plus $2M + 4% of value
of proceeds received
over $400
The amount of the Executive's Sale Incentive Bonus will be
paid to Executive in cash within sixty (60) days of the Closing Date.
(c) Attainment of Fiscal Year 1997 Performance
Objectives. Executive agrees that a critical aspect of his duties
during the Divestiture process is management of the Business to
attain its performance objectives under the Company's Management
Incentive Compensation Plan ("MICP") for the fiscal year starting
July 1, 1996 ("FY 97"). Accordingly, if the Closing Date occurs
during FY97 and the Business meets its performance objectives or is
on target when the Business is sold, then Executive shall receive, in
lieu of the amounts that he would have otherwise been eligible to
receive: (i) Two Hundred Percent (200%) of the payment that he would
have otherwise been entitled to receive under the MICP for FY 97 and
(ii) payment of amounts due him under the provisions of the Company's
Long Term Incentive Plan for Senior Management without reduction or
proration by reason of Divestiture of the Business or termination of
the Executive's employment (unless terminated as described under
subparagraph 4(b)) during FY97.
(I) Entitlement to MICP and Long
Term Incentive Plan payments, and time and manner
of their payment, will otherwise be determined under
the MICP for FY 97 and Long Term Incentive Plan in
accordance with the MICP and Long Term Incentive Plan
terms.
(II) If the Business is divested prior
to June 30, 1997, determination of the level of MICP
entitlement will be evaluated based upon performance
against objectives as of the Closing Date. If the
Compensation Committee of the Board of Directors of
Mallinckrodt Inc. concludes, in its judgment, that the
Business would have attained 100% of its performance
objectives but for the shortened performance period,
the Business will be considered to have attained 100%
of its objectives.
(d) Definitions. For purposes of this Agreement,
the terms used herein shall have the following meaning unless
otherwise clearly provided.
(I) "Closing Date" means the date on
which the last of any and all transactions which
constitute the Divestiture of the Business is closed,
as such date is determined by the Company in its sole
and exclusive judgment. None of the incentives
described in paragraph 3 will be payable unless this
date and Divestiture occurs on or before June 30, 1997,
or if active negotiation with third parties for
divestiture of the Business is ongoing at June 30, 1997
such later date as the Company in its sole and exclusive
judgment may establish.
(II) "Divestiture" means all transactions
for the sale, disposition, exchange or other transfer of
all or substantially all of the ownership of (I) the
Business or (II) any entities owned directly or indirectly
by, or affiliated with,allinckrodt Inc. or Mallinckrodt
Veterinary, Inc. which own the Business, is transferred
to persons or entities other than the Company and its
affiliates.
(III) "Value of Proceeds" means the sum of
all amounts of cash received by the Company from all
Divestiture transactions as defined above including
the Fair Market Value of: (I) all real or personal,
tangible or intangible property or rights to property
of any type, negotiable or nonnegotiable securities of
any type, whether registered or not under any security
laws, and any rights to receive any other property and
(II) all indebtedness of any type issued by any
purchaser or entity which acquires all or part of the
Business which sums of indebtedness are received or
receivable by, paid or payable to the Company. Proceeds
received by the Company or Business for the sale or
deposition of assets of the Business in the ordinary
course of its operations shall not be included in the
Value of Proceeds.
(IV) Fair Market Value. Shall be the
value assigned by the Company to the Value of Proceeds
received by the Company as determined by the Company
in its sole and exclusive judgment.
(V) Use of male gender terms, e.g.
"he" or "him" shall be interpreted to also include
the female gender if appropriate.
(e) Treatment of Payments for Employee Benefit
Plan Purposes. Executive agrees that all amounts described in
paragraph 3, except for 50% of the amount of MICP payment, if any,
described in subparagraph 3(c)(i), shall not be considered to be
compensation, base compensation, earnings, annual incentive or bonus
payments for purposes of determining Executive's accrued benefit or
any other benefit entitlements under the Mallinckrodt Inc. Retirement
Plan, the Investment Plan for Employees of Mallinckrodt Inc. or any
other employee benefit or compensation plan or policy of the Company
and any of its affiliates.
4. Termination of Executive's Employment. The
following shall apply upon termination of Executive's employment with
the Company or any of its affiliates.
(a) Termination for Any Reason. If Executive's
employment with the Company or any of its affiliates terminates for
any reason and, unless otherwise provided pursuant to this or any
other agreement with the Executive specifically concerning payment of
compensation upon termination of employment, he shall only receive
the compensations and benefits due to him pursuant to the
compensation and employee benefit plans and policies of the Company
described in paragraph 2.
(b) Termination for Cause or Resignation. If
prior to the Closing Date or at any time prior to payment of sums due
under paragraph 3 (except for sums whose payment has been deferred),
Executive resigns his employment with the Company or any of its
affiliates for any reason or Executive's employment with the Company
or any of its affiliates is terminated for Cause, Executive shall
not be entitled to receive any amounts described in paragraph 3 which
have not yet been paid to him. Cause shall be defined as:
(I) The Executive's neglect of, or failure
to satisfactorily or substantially perform, any of the duties of his
position and any other duties assigned to him by the Company unless
such failure is due to physical or mental incapacity; or
(II) Any act or omission to act of the
Executive which is determined to be inconsistent with the best
interests of the Company or which has the effect of embarrassing or
injuring the Company, its business or business relationships.
For purposes of this Agreement, whether Executive has been terminated
for Cause shall be determined in the sole and exclusive judgment of
the Chairman of the Board of the Company and that determination shall
be binding and final on all parties. In the event Executive is
terminated for Cause, the Executive shall have an opportunity to meet
with the Chairman of the Board before a final determination is made.
(c) Termination Prior To The Closing Date For
Reasons Other Than Cause or Resignation. If prior to the Closing
Date Executive's employment with the Company or any of its affiliates
terminates for any reason other than Cause or resignation, (e.g.
because of death, disability, Divestiture of a part of the Business
by which Executive is employed), Executive shall receive payment of
the amounts described in paragraph 3, if any, determined as if he
remained employed through the Closing Date.
5. Deferral Provisions. Any amounts payable under
paragraph 3(c) with respect to the Company's MICP will be paid or
deferred pursuant to elections previously made by Executive under
that Plan, if any. Payment of any other amounts which become payable
to Executive under paragraph 3 may be deferred until a later date.
If Executive wishes to defer all such payments, Executive must elect,
simultaneously with the execution of this Agreement, to defer them in
the manner required by the Company. Any deferral election shall be
irrevocable. The provisions of the MICP applicable to payments
deferred thereunder will govern such deferrals. All sums deferred
shall be credited with interest at the prime rate, compounded
monthly, as established at the beginning of each month by Bankers
Trust Company of New York.
6. Release. As a condition precedent to the Company
having any obligation to pay the Executive or his Beneficiaries any
of the amounts described in paragraph 3, the Company may demand that
Executive first execute and shall not revoke an agreement wherein the
Executive releases and waives any and all claims which the Executive
may have against the Company and its affiliates and others as
specified in the waiver and release. The Company may propose any
form of release and waiver agreement which it deems appropriate and
Executive and/or his Beneficiaries shall be obligated to execute it
as a condition precedent to entitlement to any of the payments
described in paragraph 3.
7. Payments Upon Death. Upon the death of the
Executive, amounts due to Executive under paragraph 3 shall be
distributed to his designated Beneficiary upon becoming payable.
Executive may designate one or more Beneficiaries to whom benefits
will be paid prior to distribution of such amounts. Each designation
shall be in writing as prescribed by the Company and will become
effective only when filed with the Company during the Executive's
lifetime. Any designation may be changed by filing a new designation
and all prior designations shall become void. If the Executive has
made no effective designation or all designated Beneficiaries have
predeceased the Executive, payments shall be made to the Executive's
estate.
8. General Provisions.
(a) Source of Payments. This Agreement shall not
give the Executive or any person, any right to any specific property
or assets of the Company. The Company's obligation hereunder is an
unfunded, unsecured promise to pay money in the future and the
Executive's claim shall be that of a general, unsecured creditor.
(b) Nonalienation. Except for the Company's
right to offset or forfeit payments stated below, neither Executive
nor any other person, prior to the payment or distribution of amounts
hereunder, may pledge, sell, anticipate, assign or in any way create
a lien upon any amounts payable under this Agreement either by
voluntary or involuntary acts or by operation of law. No amounts
payable may be attached or subject to seizure for the payment of any
debts, judgments, alimony or separate maintenance owed by the
Executive or any other person. However, if the Executive is indebted
to the Company in any manner when payments are due, the Company may
offset such indebtedness against the payments and withhold it from
any sums due hereunder.
(c) No Contract of Employment. This Agreement is
not a contract of employment for any term and shall not be
interpreted as providing the Executive the right to continue to be
retained in the employ of the Company or any of its affiliates or,
upon the Executive's termination of employment, to have any right to
any amount or benefit except as granted herein. This document shall
not be interpreted to imply that the Executive, while employed by the
Company, is anything other than an employee at will whose employment
may be terminated at any time for any or no reason.
(d) Successors. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and
assigns, by operation of law or otherwise, including any entity or
person which shall succeed (whether directly or indirectly, by
purchase, merger, or otherwise) to all or substantially all of the
business and/or assets of the Company. This Agreement shall be
binding upon and inure to the benefit of Executive and his other
legal representatives, heirs, and assigns. The duties of the
Executive to perform services for the Company are personal and may
not be assigned.
(e) Amendment and Waiver. This Agreement may not
be amended except in a writing which is executed by Executive and a
duly authorized officer of the Company. No waiver by either party of
any breach or any provision of this Agreement shall be deemed a
waiver of a similar or dissimilar provision nor shall the failure of
or delay by either party in exercising any right or privilege or
operate as a waiver to preclude further exercise thereof or of any
other right.
(f) Withholding. All payments made by the
Company pursuant to this Agreement shall be subject to withholding of
such amounts of income and other taxes as the Company may reasonably
determine is appropriate.
(g) Entire and Exclusive Agreement. This
Agreement constitutes the entire agreement of the parties in respect
of the subject matter hereof and supersedes any and all negotiations,
representations and prior agreements by and between the parties with
respect to its subject matter. It specifically supersedes and
replaces any other agreements which the Executive may have with the
Company and its affiliates concerning payment of any compensation as
a result of any Divestiture of the Business.
(h) Severability. If any provision of this
Agreement is determined to be invalid or unenforceable for any
reason, the remaining provisions shall be unaffected and shall be
construed and enforced in accordance with the terms of this
Agreement.
(i) Governing Law. This Agreement shall be
governed by the law of the State of Missouri.
(j) Notices. Any notice to be given will be in
writing and delivered personally or sent by first class or certified
mail addressed to the party concerned at the address below or at such
other address as maybe subsequently provided:
If to the Company:
Xx. Xxxxx Xxxxxx
Vice President, General Counsel
Mallinckrodt Inc.
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
If to the Executive:
Xxxx X. Xxxxxxx
000 Xxxxxxxxx Xx.
Xxxx Xxxxx, XX 00000
(k) Administration and Interpretation. The
Chairman of the Board of the Company shall have the power to
discharge all duties hereunder except that he may delegate them as he
sees fit. The Chairman shall be allocated complete discretion to
interpret this Agreement and to resolve any and all questions or
issues arising under it. The Chairman's determinations shall be
final, conclusive and binding on all parties and shall be accorded
the maximum possible deference by any reviewing court or agency.
(l) Payment to Guardian. If a distribution is
payable to a minor or person declared incompetent or to a person that
the Company concludes is incapable of handling the disposition of
property, the Company may direct payment to the guardian, legal
representative or person having the care and custody of such person.
The Company may require proof of incompetency, minority, incapacity
or guardianship as it may deem appropriate. Such distribution shall
completely discharge the Company from all liability with respect to
such benefit.
9. Breach. If it is determined by the Company, in its
sole determination, that Executive has breached any term of this
Agreement, all obligations which the Company may have to pay any
amounts under this Agreement will cease and the Company shall be
excused from performance of any and all other obligations contained
in this Agreement. The right to cease future payments shall not
preclude the Company from requesting any other remedies available,
either at law or equity.
10. Termination. This Agreement shall terminate upon
the earliest to occur of:
(a) the day following the last date for
incentives established in subparagraph 3(d)(I); however, if the
Divestiture of the Business has occurred prior to that date then
amounts which would be due pursuant to paragraph 3 may be paid or
deferred thereafter as provided herein;
(b) Payment to the Executive or his Beneficiary
of all amounts due and payable pursuant to paragraph 3; or
(c) Except as provided in subparagraph 4(c), upon
termination of the Executive from the employment of the Company if as
a result, or at the time, of that termination the Executive is not
then entitled to receive any amounts under paragraph 3.
However, the provisions of paragraphs 4, 5, 6, 8, and 9 shall survive
the termination of the Agreement if any amounts are paid under
paragraph 3.
IN WITNESS WHEREOF, the Executive has executed this
Agreement and, pursuant to authorization from its Board of Directors,
the Company has caused this Agreement to be executed on its behalf,
all as of the day and year first shown above.
MALLINCKRODT INC.
By: /s/ C. Xxx Xxxxxx /s/ Xxxx X. Xxxxxxx
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C. Xxx Xxxxxx Executive
Chairman of the Board and CEO
ATTEST:
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