EXHIBIT 10.19
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
Ribapharm Inc., a Delaware corporation (the "Company"), and [INSERT NAME]
("Employee") and is entered as of the effective date of the initial public
offering of the Company (the "Start Date").
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the threat of an unsolicited takeover of the Company or ICN
Pharmaceuticals, Inc., a Delaware corporation ("ICN"), may occur which can
result in significant distractions of its management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of its key
management personnel in the event of a threat of a change in control and to
ensure their continued dedication and efforts in such event without undue
concern for their personal financial and employment security; and
WHEREAS, in order to induce Employee to remain in the employ of the
Company, particularly in the event of a threat of a change in control, the
Company desires by this writing to set forth the employment relationship of
Employee with the Company, and Employee is willing to enter into such employment
relationship on the terms and conditions set forth herein.
AGREEMENT
NOW THEREFORE, for consideration, the value, sufficiency, and receipt of
which are hereby acknowledged, the parties hereto agree as follows.
1. Employment.
(a) Position. The Company hereby employs Employee, and Employee
agrees to be employed by the Company, commencing on the Start Date and
continuing during the term (as defined in Section 2 below). Employee shall hold
the position of [INSERT TITLE] of the Company and such other positions as the
Board may designate. Employee's duties and responsibilities hereunder shall
include (a) providing senior executive management services as the Company may
designate through its Board consistent with the position of [INSERT TITLE], and
(b) such other duties and responsibilities as are assigned to Employee from time
to time by the Board and accepted by Employee.
(b) Performance of Duties. Except as otherwise provided herein or
hereafter agreed upon in writing, Employee shall devote reasonable attention and
time during usual business hours to the performance of his duties hereunder and
shall, except as provided herein, render his services solely and exclusively for
the Company during the employment term and agrees to serve the Company
diligently, in good faith, and to the best of his abilities. The Employee may
(i) serve on corporate, civil or charitable boards of committees, (ii) manage
personal investments and (iii) deliver lectures and teach at education
institutions, so long as such activities do not significantly interfere with the
performance of the Employee's responsibilities hereunder.
2. Term. The initial term of this Agreement shall be three (3) years from
the Start Date (the "Initial Term"); provided, however, that the term of this
Agreement shall be automatically extended for one (1) year on the expiration of
the Initial Term and on each anniversary thereof unless either the Company or
the Employee shall have given written notice to the other not less than ninety
(90) days prior thereto that the term of this Agreement shall not be so
extended; and provided, further, that, notwithstanding any such notice by the
Company given after a Change in Control (as defined below) not to extend the
term of this Agreement, the term of this Agreement shall not expire prior to the
expiration of the third anniversary of a Change in Control.
3. Base Salary. The Company shall pay Employee during the term of this
Agreement a base salary at the rate of $_________ per annum or such larger
amount as the Board may from time to time determine (hereinafter referred to as
the "Base Salary"). Such Base Salary shall be payable no less frequently than
monthly during the year in accordance with the Company's customary payroll
practices applicable to its executives. Employee agrees that the Company may
deduct and withhold from the payments to be made to Employee hereunder amounts
required to be deducted and withheld by the Company under the provisions of any
statute, law, regulation, or ordinance heretofore or hereafter enacted.
4. Benefits. (a) Employee shall be eligible to participate in all stock
option, stock bonus, incentive compensation, retirement, savings, fringe
benefit, disability insurance, group health and group life, vacation, and
similar health and benefit plans maintained by the Company or ICN in accordance
with the terms and conditions thereof on a basis which is no less favorable than
that applicable to employees of the Company who are similarly situated to
Employee. No additional compensation provided under any of such plans shall be
deemed to modify or otherwise affect the terms of this Agreement or any of
Employee's entitlements hereunder, unless such modification is explicitly
required herein or by any of such plans.
(b) In the event that any outstanding stock options granted under the
ICN Pharmaceuticals, Inc., Amended and Restated 1998 Stock Option Plan are
adjusted pursuant to the terms of such plan and any additional agreement
between the Company and ICN by reason of the "Spin-Off" (as defined below),
Employee shall be entitled to receive the same treatment of his unexercised
options (whether vested or not vested) as any existing employee of ICN who
holds any such options on the date of the Spin-Off (including, without
limitation, the grant of additional options to purchase ICN common stock, or
the grant of additional options to purchase Ribapharm common stock, or some
combination of the foregoing, in each case subject to the same terms as his
existing ICN or Ribapharm options (as applicable)); provided, however, that
Employee is employed by the Company, ICN or any subsidiary or affiliate of ICN
immediately prior to the Spin-Off. For purposes of this Agreement, "Spin-Off"
shall mean the distribution by ICN of its remaining interest in the Company to
ICN's shareholders in a tax-free spin-off following the Company's initial
public offering.
5. Vacation and Sick Leave. At such reasonable times as the Board shall in
its discretion permit, Employee shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, provided that:
(a) Employee shall be entitled to annual vacation in accordance with
the policies as periodically established by the Board for similarly situated
executives of the Company.
2
(b) The Board shall be entitled to grant to Employee a leave or
leaves of absence with or without pay at such time or times and upon such terms
and conditions as the Board in its discretion may determine.
(c) Employee shall be entitled to sick leave (without loss of pay)
in accordance with the Company's policies as in effect from time to time.
6. Expenses. Employee shall be entitled to reimbursement for reasonable
expenses necessary for the performance of his duties hereunder or for promoting,
pursuing, or otherwise furthering the business or interests of the Company. All
claims for expenses shall be reasonable and made on the basis of statements
thereof (together with vouchers or other documents evidencing such expenses)
furnished by Employee to the Company at monthly or more frequent intervals and
in accordance with the Company's expense reimbursement policy and standard
procedures as they exist from time to time.
7. Office and Facilities. Employee shall be provided with an appropriate
office in Costa Mesa, California, or such other place as may be mutually agreed
upon and with such secretarial and other support facilities as are commensurate
with Employee's status with the Company and adequate for the performance of his
duties hereunder.
8. Termination.
(a) Employee's employment hereunder may be terminated under the
following circumstances:
(1) Death. Employee's employment by the Company shall
automatically terminate upon Employee's death.
(2) Disability. The Company may terminate Employee's
employment after having established Employee's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which
impairs Employee's ability to substantially perform his duties under this
Agreement which continues for a period of at least one hundred eighty
(180) consecutive days. Employee shall be entitled to the compensation and
benefits provided for under this Agreement for any period during the term
of this Agreement and prior to the establishment of Employee's Disability
during which Employee's ability to substantially perform his duties under
this Agreement is impaired due to a physical or mental infirmity.
Notwithstanding anything contained in this Agreement to the contrary,
until the Termination Date specified in a Notice of Termination (as each
term is hereinafter defined) relating to Employee's Disability, Employee
shall be entitled to return to his position with the Company as set forth
in this Agreement in which event no Disability of Employee will be deemed
to have occurred.
(3) Cause. The Company may terminate Employee's employment for
Cause. A termination for "Cause" is a termination evidenced by a
resolution adopted in good faith by two-thirds (2/3) of the Board that
Employee --
3
(i) willfully and continually failed to substantially
perform his duties with the Company (other than a failure resulting
from Employee's incapacity due to physical or mental illness), which
failure or breach continued for a period of at least thirty (30)
days after a written notice of demand for substantial performance or
other correction has been delivered to Employee specifying the
manner in which Employee has failed to substantially perform,
(ii) willfully engaged in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise, or
(iii) has been convicted of an act which is defined as a
felony under federal or state law;
provided, however, that no termination of Employee's employment shall be
for Cause as set forth in clause (ii) above until (x) there shall have
been delivered to Employee a copy of a written notice setting forth that
Employee was guilty of the conduct set forth in clause (ii) and specifying
the particulars thereof in detail, and (y) Employee shall have been
provided an opportunity to be heard by the Board (with the assistance of
Employee's counsel if Employee so desires). No act, nor failure to act, on
Employee's part, shall be considered "willful" unless he has acted or
failed to act, with an absence of good faith and without a reasonable
belief that his action or failure to act was in the best interest of the
Company. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by Employee after Notice of Termination is
given by Employee shall constitute Cause for purposes of this Agreement.
(4) Without Cause. The Company shall have the right and
option, exercisable by giving written notice to Employee, to terminate
Employee's employment by the Company without Cause and for any reason or
for no reason, if such decision to terminate Employee's employment is
evidenced by a resolution adopted in good faith by two-thirds (2/3) of the
Board. This right is not limited or restricted by, and shall supersede,
any policy of the Company requiring or favoring continued employment of
its executives during satisfactory performance, any seniority system or
any procedure governing the manner in which the Company's discretion is to
be exercised. No exercise by the Company of this termination right shall,
under any circumstances, be deemed to constitute (i) a breach by the
Company of any term of this Agreement, express or implied (including
without limitation a breach of any implied covenant of good faith and fair
dealing), (ii) a wrongful discharge of Employee or a wrongful termination
of Employee's employment by the Company, (iii) a wrongful deprivation by
the Company of Employee's corporate office (or authority, opportunities or
other benefits relating thereto) or (iv) the breach by the Company of any
other duty or obligation, express or implied, which the Company may owe to
Employee pursuant to any principle or provision of law (whether contract
or tort); provided, however, that notwithstanding the foregoing, a breach
by the Company of its payment obligations pursuant to Section 9 shall be
deemed to be a breach of this Agreement.
4
The failure or refusal of the Company to renew or extend the
Employment Period shall not constitute a termination of Employee's
employment by the Company without Cause under this Agreement.
(5) Good Reason. Employee may terminate his employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (i) through (viii) below:
(i) a change in Employee's status, title, position or
responsibilities (including reporting responsibilities) which, in
Employee's reasonable judgment, does not represent a promotion from
his status, title, position or responsibilities as in effect
immediately prior to the Change in Control; the assignment to
Employee of any duties or responsibilities which, in Employee's
reasonable judgment, are inconsistent with such status, title,
position or responsibilities immediately prior to the Change in
Control; or any removal of Employee from or failure to reappoint or
reelect him to any of such positions, except in connection with the
termination of his employment for Disability, Cause, as a result of
his death or by Employee other than for Good Reason;
(ii) a reduction in Employee's Base Salary;
(iii) the Company's requiring Employee to be based at
any place outside a 30-mile radius from Costa Mesa, California,
except for reasonably required travel on the Company's business
which is not materially greater than such travel requirements prior
to the Change in Control;
(iv) the failure by the Company to (A) continue in
effect any material compensation or benefit plan in which Employee
was participating at the time of the Change in Control, or (B)
provide Employee with compensation and benefits at least equal (in
terms of benefit levels and/or reward opportunities) to those
provided for under each other employee benefit plan, program and
practice as in effect immediately prior to the Change in Control (or
as in effect following the Change in Control, if greater);
(v) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company;
(vi) any material breach by the Company of any material
provision of this Agreement; and
5
(vii) any purported termination of Employee's employment
for Cause by the Company which does not comply with the terms of
Section 8 of this Agreement.
Any event or condition described in this Section 8(a)(5)(i) through (vii)
which occurs prior to a Change in Control but which (x) was at the request
of a third party who has taken steps reasonably calculated to effect a
Change in Control, or (y) otherwise arose in connection with a Change in
Control, shall (provided that a Change in Control actually occurs)
constitute Good Reason for purposes of this Agreement notwithstanding that
it occurred prior to a Change in Control. Employee's right to terminate
his employment pursuant to this Section 8(a) shall not be affected by his
incapacity due to physical or mental illness.
(b) For purposes of this Agreement, a "Change in Control" shall mean
any of the following:
(1) an acquisition (other than directly from the Company in
the case of voting securities of the Company or from the Parent (as defined
below) in the case of voting securities of the Parent) of any voting securities
(the "Voting Securities") of the Company or its Parent by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act)
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
twenty-five percent (25%) of the then outstanding shares of common stock (the
"Shares") of the Company or its Parent (as applicable) or the combined voting
power of the then-outstanding Voting Securities of the Company or its Parent (as
applicable). For purposes of this Agreement, "Parent" shall mean an entity that
owns, directly or indirectly, more than fifty percent (50%) of the
then-outstanding Shares of the Company or the combined voting power of the
then-outstanding Voting Securities of the Company (including ICN prior to (but
only prior to) the "Spin-Off" (as defined below)); provided, however, in
determining whether a Change in Control has occurred pursuant to this Section
8(b)(1), Shares or Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
sponsored or maintained by (A) the Company or its Parent or (B) any corporation
or other Person of which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly, by the Company
(for purposes of this definition, a "Company Subsidiary") or its Parent (for
purposes of this definition, a "Parent Subsidiary"), (ii) the Company, a Parent,
any Company Subsidiary, any Parent Subsidiary or any of their affiliates, (iii)
any underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) any Person in connection with a "Non-Control Transaction"
(as hereinafter defined);
(2) The consummation of:
6
(i) a merger, consolidation or reorganization with or
into the Company or a Parent, as the case may be, or in which securities of the
Company or its Parent are issued (a "Merger"), unless such Merger is a
"Non-Control Transaction." A "Non-Control Transaction" shall mean a Merger
where:
(A) the stockholders of the Company or such Parent
immediately before such Merger own directly or indirectly immediately following
such Merger at least fifty percent (50%) of the combined voting power of the
outstanding voting securities of (x) the corporation resulting from such Merger
(the "Surviving Corporation"), if the Surviving Corporation has no Parent
immediately following such Merger, or (y) the ultimate Parent of the Surviving
Corporation, if there is one or more Parents of the Surviving Corporation
immediately following such Merger; and
(B) the members of the "Incumbent Board" (as
defined below) or the "ICN Incumbent Board" (as defined below), as the case may
be, immediately prior to the execution of the agreement providing for such
Merger, constitute at least a majority of the members of the board of directors
of (x) the Surviving Corporation, if the Surviving Corporation has no Parent
immediately following such Merger, or (y) the ultimate Parent of the Surviving
Corporation, if there is one or more Parents of the Surviving Corporation
immediately following such Merger;
(ii) a complete liquidation or dissolution of the
Company or a Parent, as the case may be; or
(iii) the sale or other disposition of all or
substantially all of the assets of the Company or a Parent, as the case may be,
to any Person (other than (A) a transfer to a Company Subsidiary or Parent
Subsidiary or (B) a transfer under conditions that would constitute a
Non-Control Transaction (with the transfer of assets being regarded as a Merger
for this purpose), (C) the Spin-Off or (D) any other distribution to the
stockholders of the Company or a Parent of the stock of a Company Subsidiary or
a Parent Subsidiary or any other assets); or
(3) the individuals who, at the time of the initial public
offering of the Company, are members of the Board (the "Incumbent Board") cease
for any reason to constitute a majority of the members of the Board or,
following a Merger which results in a Parent, the board of directors of the
ultimate Parent; provided, however, that if the appointment or election, or
nomination for election by the Company's stockholders, of any new director was
approved by a vote of at least two-thirds (2/3) of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(4) prior to (but only prior to) the Spin-Off, the
individuals who, as of May 1, 2001, are members of the board of directors of ICN
(the "ICN Incumbent Board")
7
cease for any reason to constitute a majority of the members of such board of
directors or, following a merger, consolidation or reorganization with or into
ICN that results in a Person owning, directly or indirectly, more than fifty
percent (50%) of the then-outstanding Shares of ICN or the combined voting power
of the then-outstanding Voting Securities of ICN (an "ICN Parent"), the board of
directors of the ultimate ICN Parent; provided, however, that if the appointment
or election, or nomination for election by ICN's stockholders, of any new
director was approved by a vote of at least two-thirds (2/3) of the ICN
Incumbent Board, such new director shall, for purposes of this Agreement, be
considered as a member of the ICN Incumbent Board; provided further, however,
that no individual shall be considered a member of the ICN Incumbent Board if
such individual initially assumed office as a result of either an actual or
threatened Election Contest or other actual or threatened Proxy Contest,
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then-outstanding Shares or
Voting Securities of the Company or a Parent as a result of the acquisition by
the Company or by a Parent of its Shares or Voting Securities which, by reducing
the number of Shares or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person;
provided, however, that, if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Shares or Voting
Securities by the Company, and after such share acquisition by the Company or by
such Parent, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities which increases the percentage of the
then-outstanding Shares or Voting Securities of the Company or of such Parent
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
In no event shall the Spin-Off, in and of itself, constitute a Change in
Control under this Agreement.
(c) Notice of Termination. Any purported termination by the Company
or by Employee shall be communicated by written Notice of Termination to the
other. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which indicates the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment under the
provision so indicated. For purposes of this Agreement, no such purported
termination of employment shall be effective without such Notice of Termination.
(d) Termination Date. "Termination Date" shall mean in the case of
Employee's death, his date of death, or in all other cases, the date specified
in the Notice of Termination subject to the following:
(1) if Employee's employment is terminated by the Company for
Cause or due to Disability, or voluntarily by Employee (other than for Good
Reason), the date specified in the Notice of Termination shall be at least
thirty (30) days from the date the Notice
8
of Termination is given to Employee, provided that in the case of Disability
Employee shall not have returned to the full-time performance of his duties
during such period of at least thirty (30) days; and
(2) if Employee's employment is terminated for Good Reason or
without Cause, the date specified in the Notice of Termination shall not be more
than sixty (60) days, and shall not be less than thirty (30) days, from the date
the Notice of Termination is given to the Company.
(e)Transfer of Employment.
(1) A transfer of Employee's employment between the Company
and the Parent, any subsidiaries or other affiliates of the Company, or between
any divisions of the Company, shall not be deemed a termination of employment
for purposes of this Agreement. In the event of any such transfer of
employment, this Agreement shall remain in full force and effect, unless
otherwise provided in another agreement between Employee and the Company, the
Parent or any of the subsidiaries or affiliates of the Company to which
Employee's employment is so transferred.
(2) Neither the Spin-Off, the IPO, nor the transfer of
Employee's employment to the Company from ICN at any time prior to or upon the
Start Date, shall constitute a termination of employment for purposes of the
ICN Pharmaceuticals, Inc. Amended and Restated 1998 Stock Option Plan or the
ICN Pharmaceuticals, Inc. Long-Term Incentive Plan, and any grants of options
or other awards made thereunder shall continue (whether vested or not vested)
pursuant to the terms of such plans and any of the agreements evidencing such
grants.
9. Compensation Upon Termination. Upon termination of Employee's
employment during the term of this Agreement (including any extensions thereof),
Employee shall be entitled to the following benefits:
(a) Cause, Disability, Death or Voluntary Termination (Other Than
for Good Reason). If Employee's employment is terminated by the Company for
Cause or Disability or by Employee (other than for Good Reason), or by reason of
Employee's death, the Company shall pay Employee all amounts earned or accrued
hereunder through the Termination Date but not paid as of the Termination Date,
including (1) Base Salary, (2) reimbursement for any and all monies advanced or
expenses incurred in connection with Employee's employment for reasonable and
necessary expenses incurred by Employee on behalf of the Company for the period
ending on the Termination Date, (3) vacation pay, (4) any bonuses or incentive
compensation and (5) any previous compensation which Employee has previously
deferred (including any interest earned or credited thereon) (collectively,
"Accrued Compensation"). In addition to the foregoing, if Employee's employment
is terminated by the Company for Disability or by reason of Employee's death,
the Company shall pay to Employee or his beneficiaries (as the case may be) an
amount equal to the annual bonus or incentive award that Employee would have
been entitled to receive in respect of the fiscal year in which Employee's
Termination Date occurs had he continued in employment until the end of such
fiscal year, calculated as if all performance targets and goals (if applicable)
had been fully met by the Company and by Employee, as applicable, for such year,
multiplied by a fraction the numerator of which is the number of days in such
fiscal year through the Termination Date and the denominator of which is 365 (a
"Pro Rata Bonus"). Employee's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans and
other applicable programs and practices then in effect.
(b) Without Cause or Good Reason. If Employee's employment by the
Company shall be terminated by the Company other than for Cause, death or
Disability, or by Employee for Good Reason, then Employee shall be entitled to
the benefits provided below:
(i) the Company shall pay Employee all Accrued Compensation
and a Pro Rata Bonus;
(ii) the Company shall pay Employee as severance pay and in
lieu of any further salary for periods subsequent to the Termination Date, in a
single payment, an amount in cash equal to three (3) times the sum of (A)
Employee's Base Salary at the highest rate in effect at any time within the
ninety (90) day period ending on the date the Notice of
9
Termination is given (or if Employee's employment is terminated after a Change
in Control, Employee's Base Salary immediately prior to the Change in Control,
if greater) and (B) the "Bonus Amount" (as defined below). The term "Bonus
Amount" shall mean (x) the greatest amount of any annual cash bonus or annual
incentive compensation received by Employee during the three (3) fiscal years
immediately preceding the Termination Date or (y) if no such bonus was received
by Employee during any of such three (3) years, then an amount equal to
Employee's maximum annual bonus which could be awarded for the fiscal year in
which the Termination Date occurs had he continued in employment until the end
of such fiscal year, assuming all performance targets and goals (if applicable)
had been fully met by the Company and by Employee, as applicable, for such year;
(iii) during the thirty-six (36) month period following the
Termination Date, the Company shall at its expense continue on behalf of
Employee and his dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits which were being provided to
Employee at the time Notice of Termination is given (or, if Employee is
terminated following a Change in Control, the benefits provided to Employee at
the time of the Change in Control, if greater). The benefits provided in this
Section 9(b)(iii) shall be no less favorable to Employee, in terms of amounts
and deductibles and costs to him, than the coverage provided Employee under the
plans providing such benefits at the time Notice of Termination is given (or, if
Employee is terminated following a Change in Control, at the time of the Change
in Control if more favorable to Employee). The Company's obligation hereunder
with respect to the foregoing benefits shall be limited to the extent that
Employee obtains any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of any benefits it is
required to provide Employee hereunder as long as the aggregate coverage of the
combined benefit plans is no less favorable to Employee, in terms of amounts and
deductibles and costs to him, than the coverage required to be provided
hereunder. This subsection (iii) shall not be interpreted so as to limit any
benefits to which Employee or his dependents may be entitled under any of the
Company's employee benefit plans, programs or practices following Employee's
termination of employment, including without limitation, retiree medical and
life insurance benefits;
(iv) the Company shall pay in a single payment an amount in
cash equal to the excess of (A) the actuarial equivalent of the aggregate
retirement benefit Employee would have been entitled to receive under the
Company's supplemental and excess retirement plans had (x) Employee remained
employed by the Company for an additional three (3) complete years of credited
service, (y) his annual compensation during such period been equal to his Base
Salary (at the rate used for purposes of subsection (ii)) and the Bonus Amount,
and (z) he been fully (100%) vested in his benefit under each such retirement
plan, over (B) the actuarial equivalent of the aggregate retirement benefit
Employee is actually entitled to receive under such retirement plans. For
purposes of this subsection (iv), "actuarial equivalent" shall be determined in
accordance with the actuarial assumptions used for the calculation of benefits
under any retirement plan as applied prior to the Termination Date in accordance
with such plan's past practices (but shall in any event take into account the
value of any subsidized early retirement benefit); and
10
(v) notwithstanding anything contained in the Ribapharm Inc.
2002 Stock Option and Award Plan, the ICN Pharmaceuticals, Inc. Amended and
Restated 1998 Stock Option Plan, the ICN Pharmaceuticals, Inc. Long-Term
Incentive Plan, or any grant agreement to the contrary, (A) all restrictions on
any outstanding awards (including restricted stock awards) granted by ICN, the
Company or any subsidiary of the Company to Employee will lapse and such awards
will become fully (100%) vested, and (B) all stock options and stock
appreciation rights granted by ICN, the Company or any subsidiary of the Company
to Employee will become fully (100%) vested and will become immediately
exercisable for the duration of the term thereof; provided, however, that,
except as otherwise provided in the next sentence, in no event shall any such
options or stock appreciation rights granted by the Company be exercisable prior
to the earlier of (x) the Spin-Off and (y) September 30, 2003 (the "First
Exercise Date"). The restriction on exercise contained in the proviso in the
preceding sentence shall lapse if, prior to September 30, 2003, ICN abandons its
plans to proceed with or complete the Spin-Off (as such abandonment is described
in Section 3.4 of that certain Affiliation and Distribution Agreement by and
between ICN and the Company (the "Distribution Agreement")). In the event of any
such lapse, any option or stock appreciation right granted by the Company shall
become immediately exercisable upon the termination of the Employee's employment
as described in this Section 9(b) without regard to any such restriction on
exercise prior to the First Exercise Date. The effective date of any such lapse
of the restriction shall be the date of the written notice provided by ICN to
the Company indicating its determination to abandon the Spin-Off, provided that
no "Distribution Date" (as defined in the Distribution Agreement) has occurred
as of such date.
(c) The amounts provided for in Sections 9(a) and 9(b)(i), (ii) and
(iv) shall be paid within five (5) days after Employee's Termination Date.
(d) Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to Employee in any subsequent employment.
10. Effect of Section 280G of the Internal Revenue Code.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or distribution of any type to or for
the benefit of Employee by the Company, any affiliate of the Company, any person
who acquires ownership or effective control of the Company or ownership of a
substantial portion of the Company's assets (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Payments") is or will be subject to the excise tax imposed
under Section 4999 of the Code (the "Excise Tax"), then the Payments shall be
reduced (but not below zero) if and to the extent that a reduction in the
Payments would result in Employee retaining a larger amount, on an after-tax
basis (taking into account federal, state and local income taxes and the Excise
Tax), than if Employee received the entire amount of such Payments. Unless
Employee shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments, by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any
notice given by Employee pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing Employee's rights and entitlements to any benefits or compensation.
(b) The determination of whether the Payments shall be reduced as
provided in Section 10(a) and the amount of such reduction shall be made at the
Company's expense by an accounting firm selected by the Company from among the
five largest accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"), together
with detailed supporting calculations and documentation to the Company and
Employee within ten (10) days of the Termination Date. If the Accounting Firm
determines that no Excise Tax is payable by Employee with respect to the
Payments, it shall furnish Employee with an opinion reasonably acceptable to
Employee that no Excise Tax will be imposed with respect to any such payments
and, absent manifest error, such Determination shall be binding, final and
conclusive upon the Company and Employee. If the Accounting Firm determines that
an Excise Tax would be payable, Employee shall have the right to accept the
Determination of the Accounting Firm as to the extent of the reduction, if any,
pursuant to Section 10(a), or to have such Determination reviewed by an
accounting firm selected by
11
Employee, at the expense of the Company, in which case the determination of such
second accounting firm shall be binding, final and conclusive upon the Company
and Employee.
11. Employee Covenants.
(a) Non-Solicit. Employee will not, directly or indirectly (whether
for compensation or otherwise), alone or in concert with others, for the
Non-Solicit Period (defined below), (a) solicit for employment any employee of
the Company or any person who was an employee of the Company during any part of
the two (2) year period preceding Employee's termination or otherwise encourage
any employee to leave the Company's employ, or (b) solicit any client or
customer of the Company or any client or customer which was a client or customer
of the Company during any part of the two (2) year period preceding Employee's
termination. The "Non-Solicit Period" means the term of this Agreement plus two
(2) years from the end thereof.
(b) Non-Compete. During the term of the Agreement, Employee will
not, directly or indirectly (whether for compensation or otherwise), alone or in
concert with others, own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or furnish any capital to, or
be connected in any manner with (whether alone or as a partner, officer,
director, employee, agent or shareholder), or provide any advice or services as
a consultant for, any business which competes with the Company's business or
that of any subsidiary, partnership, corporation, joint venture, or other
similar entity of which the Company is a shareholder, partner, or member as such
business may be conducted from time to time. Notwithstanding the foregoing,
Employee may be a passive investor in a business which competes with the
Company's business, provided Employee's equity holding does not exceed 2% of
such business.
(c) Proprietary Information. Employee agrees to execute and deliver
simultaneously herewith a Proprietary Information and Inventions Agreement in
the form attached hereto as Exhibit A.
12. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against Employee or others.
13. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which Employee may qualify, nor shall anything herein limit
or reduce such rights as Employee may have under any other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
Employee is otherwise entitled to receive under any plan or program of the
Company or any of its subsidiaries shall be payable in accordance with such plan
or program, except as explicitly modified by this Agreement.
14. Arbitration.
12
(a) Procedure. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, will be settled by arbitration in
accordance with the Commercial Rules of the American Arbitration Association
("AAA"), and those provisions of the AAA Employment Arbitration Rules determined
by the arbitrators as necessary under applicable law. The arbitration will be
binding and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. For controversies or claims involving
employment matters only, there will be one (1) arbitrator mutually selected by
the parties within ten (10) business days from the date of notification made to
one of the parties of the other party's request for arbitration. If the parties
fail to agree upon an arbitrator within such ten (10) days, the AAA will
promptly appoint the arbitrator in accordance with its rules. For all other
controversies or claims, there will be three (3) arbitrators, one arbitrator
selected by the Company and one arbitrator selected by Employee, which
arbitrators will then jointly select the third arbitrator. If any party fails to
nominate an arbitrator within thirty (30) days from the date of notification
made to it of a party's request for arbitration, then the AAA will appoint the
arbitrator in accordance with its rules. The place of the arbitration will be
Los Angeles, California. All arbitrators will have at least ten (10) years
experience in commercial or employment-related transactions. The arbitration
will commence within sixty (60) days after appointment of the arbitrators and
will continue uninterrupted, unless otherwise suspended by the arbitrators for
good cause, for not longer than one hundred twenty (120) days (including without
limitation any discovery permitted by the arbitrators). The arbitrators will,
within such one hundred twenty (120) day period, render a written decision with
findings of fact and conclusions of law and deliver such decision to the
parties.
(b) Judicial Relief. Notwithstanding Section 14(a), nothing
contained in this Agreement will prevent or be construed to prevent any party
from seeking a temporary restraining order, preliminary injunction, other form
of interim, provisional, or temporary equitable relief, or the enforcement of
any award delivered pursuant to Section 14(a) in any court of competent
jurisdiction.
15. Fees and Expenses. The Company shall pay all legal fees, arbitration
costs and related expenses (including the costs of experts, evidence and
counsel) incurred by Employee as they become due as a result of (i) Employee's
termination of employment (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination of employment), (ii)
Employee's hearing before the Board as contemplated in Section 8(a)(3) of this
Agreement, or (iii) Employee's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company under which Employee is or may be entitled to receive benefits.
16. Survival. In the event that Employee's employment by the Company is
terminated pursuant to the provisions set forth under Section 8 hereof or
otherwise, this Agreement shall then also terminate; provided, however, that the
rights and obligations set forth under Sections 9, 10, 11, 14 and 15 of this
Agreement shall survive until such rights and obligations are fully satisfied in
accordance with the terms set forth herein.
17. Miscellaneous.
13
(a) Amendment; Waiver. This Agreement may not be amended or
otherwise modified or its provisions waived except by an instrument in writing
signed, in the case of an amendment or modification, by all parties hereto and,
in the case of waiver, by the party sought to be charged. 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.
(b) Severability. In the event that any one or more of the
provisions of this Agreement are held to be invalid, illegal, or unenforceable
by a court of competent jurisdiction in a jurisdiction, such invalidity,
illegality, or unenforceability in such jurisdiction will not affect any of the
other provisions hereof, which will nevertheless remain in full force and
effect, this Agreement will be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein, and such determination
will have no effect on this Agreement in any other jurisdiction.
(c) Successors and Assigns.
(1) Company. This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns and the Company
shall require any successor or assign 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 such succession or assignment had taken place.
The term "the Company" as used herein shall include such successors and assigns.
The term "successors and assigns" as used herein shall mean a corporation or
other entity acquiring all or substantially all the assets and business of the
Company (including this Agreement) whether by operation of law or otherwise.
(2) Employee. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by Employee, his beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
Employee's legal personal representative.
(d) Third Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors-in-interest and
permitted assigns. No other person is entitled to rely upon or receive any
benefit from this Agreement.
(e) Entire Agreement. This Agreement, the Proprietary Information
and Inventions Agreement, and the other documents and certificates delivered
pursuant to the terms hereof, constitute the entire agreement of the parties
hereto in respect of the subject matter contemplated herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings,
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior discussions, negotiations, correspondence, agreements, and
understandings between the Employee and Company and/or any of its affiliates
with respect to the subject matter contemplated herein. [Without limiting the
generality of the immediately foregoing sentence, as of the Start Date, the
employment agreement by and between Employee and ICN, dated [INSERT DATE], shall
be terminated in all respects without any liability to the Company, ICN or any
of their affiliates therefore.]
(f) Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by
14
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of address
shall be effective only upon receipt.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(h) Captions. The headings of the sections of this Agreement are
inserted for convenience of reference only, do not constitute a part hereof, and
do not affect in any way the meaning, interpretation, or enforcement of this
Agreement.
(i) Governing Law. This Agreement and the rights and obligations of
the parties hereunder will be governed by, and construed and interpreted in
accordance with, the laws of the State of California without giving effect to
the choice of law provisions thereof. Solely for purposes relating to seeking
equitable relief set forth in Section 14 hereof, each party hereby submits to
the non-exclusive jurisdiction of the federal or state courts located in
California with respect to any claim or matter arising under this Agreement.
15
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and Employee has executed this Agreement as of
the Start Date.
RIBAPHARM INC.:
ATTEST: By:________________________________
[INSERT NAME]
Title:_______________________________
__________________________
Secretary
EMPLOYEE:
By:________________________________
[INSERT NAME]
16
EXHIBIT A
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
("AGREEMENT")
A. I recognize that Ribapharm Inc. (the "Company"), a Delaware
corporation, is engaged in a continuous program of research, development, and
production respecting its present and future business.
B. I understand that as part of my employment by the Company I am expected
to make new contributions and inventions of value to the Company;
C. I understand that my employment creates a relationship of confidence
and trust between me and the Company with respect to any information
(i) applicable to the business of the Company or
(ii) applicable to the business of any client or customer of the
Company
which may be made known to me by the Company or by a client or customer of the
Company, or learned by me during the period of my employment;
D. I understand that the Company possesses and will continue to possess
information that has been created, discovered, or developed, or has otherwise
become known to the Company (including without limitation information created,
discovered, developed, or made known by or to me during the period of or arising
out of my employment by the Company), or in which property rights have been
assigned or otherwise conveyed to the Company, which information has commercial
value in the business in which the Company is engaged (all of the aforementioned
information is hereinafter called "Proprietary Information"; by way of
illustration, but not limitation, Proprietary Information includes trade
secrets, processes, formulae, data and know-how, improvements, inventions,
manufacturing and other techniques, marketing plans, strategies, forecasts, and
customer lists); and
E. I understand that, as used herein, the period of my employment includes
any time in which I may be retained by the Company as an employee or as a
consultant.
In consideration of my employment and the compensation received by me from
the Company from time to time, I hereby represent and agree as follows.
1. Prior to entering the employ of the Company, I have terminated
employment with one or more prior employers. I represent that my performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence proprietary information
acquired by me in confidence or in trust prior to my employment by the Company.
I have not entered into, and I agree that I shall not enter into, any agreement
either written or oral in conflict herewith.
2. I understand, as part of the consideration for the offer of
employment extended to me by the Company and of my employment or continued
employment by the Company, that I have not brought and shall not bring with me
to the Company or use in the performance of my responsibilities at the Company
any materials or documents of a former employer which are not generally
available to the public, unless I have obtained written authorization from the
former employer for their possession and use. Accordingly, I advise the Company
that the only materials or documents of a former employer which are not
generally available to the public that I have brought or shall bring to the
Company or have used or shall use in my employment are identified on Attachment
I hereto, and, as to each such item, I represent that I have obtained prior to
the effective date of my employment with the Company written authorization for
their possession and use in my employment with the Company. I also understand
that, in my employment with the Company, I am not to breach any obligation of
confidentiality that I have to former employers, and I agree that I shall
fulfill all such obligations during my employment with the Company.
3. I agree to indemnify and hold harmless the Company, its
stockholders, directors, officers, employees, and agents against any and all
liabilities and expenses, including amounts paid in settlement, incurred by any
of them in connection with any claim by any of my prior employers that the
termination of my employment with such employer, my employment by the Company,
or use of any skills and knowledge by the Company is a violation of contract or
law.
3. All Proprietary Information will be the sole property of the
Company and its assigns, and the Company and its assigns will be the sole owner
of all patents and other rights in connection therewith. I hereby assign to the
Company any rights I may have or acquire in all Proprietary Information. At all
times, both during my employment by the Company and after its termination, I
shall keep in confidence and trust all Proprietary Information, and I shall not
use or disclose any Proprietary Information or anything relating to it without
the written consent of the Company, except as may be (i) reasonably necessary or
appropriate in the ordinary course of performing my duties as an employee of the
Company, (ii) known generally to the public (or than as a result of disclosure
by me in violation of this Section 2), or (iii) legally required.
4. In the event of the termination of my employment by me or by the
Company for any reason or no reason, I shall deliver to the Company all
documents and data of any nature pertaining to my work with the Company and I
shall not take with me any documents or data of any description or any
reproduction of any description containing or pertaining to any Proprietary
Information.
5. I shall promptly disclose to the Company, or any persons
designated by it, all improvements, inventions, formulae, processes, techniques,
know-how, and data, whether or not patentable, made or conceived or reduced to
practice or learned by me, either alone or jointly with others, during the
period of my employment which are related to or useful in the business of the
Company, or result from tasks assigned me by the Company, or result from use of
premises owned, leased, or contracted for by the Company (all said improvements,
inventions, formulae, processes, techniques, know-how, and data will be
collectively hereinafter called "Inventions").
6. I agree that all Inventions will be the sole property of the
Company and its assigns, and the Company and its assigns will be the sole owner
of all patents and other rights in connection therewith. I hereby assign to the
Company any rights I may have or acquire in all Inventions. I further agree as
to all Inventions to assist the Company in every proper way (but at the
Company's expense) to obtain and from time to time enforce patents on Inventions
in any and all countries, and to that end I shall execute all documents for use
in applying for and obtaining such patents thereon and enforcing same, as the
Company may desire, together with any assignments thereof to the Company or
persons designated by it. My obligation to assist the Company in obtaining and
enforcing patents for Inventions in any and all countries will continue beyond
the termination of my employment, but the Company will compensate me at a
reasonable rate after such termination for time actually spent by me at the
Company's request on such assistance.
I understand that, in accordance with Section 2872 of the California
Labor Code, the assignment provisions in this paragraph 7 do not apply to
inventions for which no equipment, supplies, facility, or trade secret
information of the Company was used, which were developed entirely on my own
time, and (i) which do not relate (a) to the business of the Company or (b) to
the Company's actual or demonstrably anticipated research or development or (ii)
which do not result from any work performed by me for the Company.
7. I have identified on Attachment II hereto all inventions or
improvements relevant to the subject matter of my employment by the Company
which have been made or conceived or first reduced to practice by me alone or
jointly with others prior to my engagement by the Company which I desire to
remove from the operation of this Agreement; and I covenant that such list is
complete. If there is no such list on Attachment II, I represent that I have
made no such inventions and improvements at the time of signing this Agreement.
8. I agree that in addition to any other rights and remedies
available to the Company for any breach by me of my obligations hereunder, the
Company will be entitled to enforcement of my obligations hereunder by court
injunction.
9. If any provision of this Agreement is declared invalid, illegal
or unenforceable, such provision shall be severed and all remaining provisions
will continue in full force and effect.
10. This Agreement will become effective as of the effective date of
the initial public offering of the Company.
11. This Agreement is binding upon me, my heirs, executors, assigns
and administrators and shall inure to the benefit of the Company, its successors
and assigns.
12. This Agreement will be governed in all respects by the laws of
the State of California.
Dated: ___________________ ______________________________
Name:
ACCEPTED AND AGREED TO:
Ribapharm Inc.,
a Delaware corporation
By:__________________________
Name:
Title:
ATTACHMENT I
Materials or Documents of Former Employer
Not Generally Available to Public
ATTACHMENT II
Inventions or Improvements Made Prior
to Engagement by Company
