Exhibit 99.2
EMPLOYMENT AGREEMENT
AGREEMENT, by and between Schering-Plough Corporation, a New Jersey
corporation (the "Company") and Xxxx Xxxxxx (the "Executive"), dated as of the
20th day of April, 2003.
1. EMPLOYMENT PERIOD. The Company agrees to employ the Executive and the
Executive agrees to remain in the employ of the Company, in accordance with the
terms and provisions of this Agreement, for the period (the "Employment Period")
beginning on April 20, 2003 (the "Commencement Date"), and ending as of the
close of business on December 31, 2005; provided, however, that unless on or
before the 90th day immediately preceding each December 31 on which the
Employment Period would otherwise end, either party delivers to the other party
a written notice of its election to terminate the Employment Period on such
December 31, the Employment Period shall be extended for an additional one-year
period commencing on the January 1 immediately succeeding such December 31 and
ending as of the close of business on the following December 31. In the event a
Change of Control (as defined in Section 11(c)) occurs during the Employment
Period, the Employment Period shall be extended for a three-year period
commencing on the Change of Control Date (as defined in Section 11(a)) and
ending on the third anniversary of the Change of Control Date. Notwithstanding
anything else herein, the Employment Period shall end upon the termination of
the Executive's employment as provided in Section 4; and if not previously
terminated, the Employment Period shall terminate in all events at the close of
business on December 31, 2010.
2. DUTIES AND POWERS OF EXECUTIVE.
(a) POSITION; LOCATION. During the Employment Period, the Executive
shall be employed as Chief Executive Officer of the Company, reporting directly
to the Board of Directors of the Company (the "Board"). The Executive shall be
appointed as a member of the Board and designated by the Board as its Chairman
at the first meeting of the Board following the Company's 2003 annual meeting,
and thereafter during the Employment Period the Executive shall continue as a
member and Chairman of the Board. In addition, the Executive shall serve as
President of the Company as of the Commencement Date; provided, however, that
the Company may at any time, with Executive's involvement and consent appoint
another individual to serve as President. During the Employment Period, the
Executive shall be responsible for the general operations of the Company with
duties and powers including, but not limited to, all of the duties and powers of
holding the offices described above pursuant to the Bylaws of the Company, as
the same may be amended from time to time, and such other duties not
inconsistent with such Bylaws and with the Executive's status and position as
are reasonably assigned to the Executive by the Board. The Executive's services
shall be performed at the Company's present headquarters in Kenilworth, New
Jersey or any office which hereafter becomes the headquarters of the Company.
(b) DUTIES. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time to the business and affairs of the
Company and, to the extent necessary to discharge the responsibilities assigned
to the Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the Executive to
(i) serve on corporate, civic or charitable boards or committees, (ii) deliver
lectures, fulfill speaking engagements or teach at educational institutions, and
(iii) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
as an employee of the Company in accordance with this Agreement.
3. COMPENSATION. The Executive shall receive the following compensation
for his services:
(a) SALARY. During the Employment Period, the Executive shall be paid a
base salary (the "Base Salary") at an annual rate of not less than $1,500,000,
payable in accordance with the Company's normal payroll practices as in effect
from time to time for its senior executives. The Board shall review the Base
Salary annually and may from time to time direct such upward adjustments to the
annual rate of the Base Salary (such rate as in effect from time to time, the
"Annual Base Salary") as the Board deems to be necessary or desirable; provided,
however, that during a Change of Control Period (as defined in Section 11(b)),
the Annual Base Salary shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary generally
awarded in the ordinary course of business to other senior executives of the
Company and its Affiliated Companies (as defined in the final sentence of this
Section 3(a)). Annual Base Salary shall not be reduced after any increase
thereof pursuant to this Section 3(a). Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation of the Company under this
Agreement. For purposes of this Agreement, the term "Affiliated Company" of the
Company shall mean any company controlled by, controlling or under common
control with the Company.
(b) INCENTIVE CASH COMPENSATION. For each year during the Employment
Period beginning with 2003, the Executive shall be eligible for cash incentive
awards (each, an "Annual Bonus") under the Company's Executive Incentive Plan or
any successor or replacement plan (collectively, the "Cash Bonus Plans"), in
accordance with the terms thereof; provided, however, that, during the Change of
Control Period, the Executive shall be awarded, for each fiscal year ending
during a Change of Control Period, an Annual Bonus at least equal to the greater
of (i) the highest Annual Bonus (annualized for any fiscal year consisting of
less than twelve full months) earned by the Executive under the Cash Bonus Plans
in respect of the three most recent full fiscal years ending on or prior to the
Change of Control Date, or (ii) the Executive's target Annual Bonus for the
fiscal year during which the Change of Control Date occurs. The Executive's
target Annual Bonus for 2003 shall be 125% of his Base Salary, and his maximum
Annual Bonus for 2003 shall be 200% of the target Annual Bonus. Thereafter
during the Employment Period, the Executive's target and maximum Annual Bonuses
shall be consistent with normal competitive pay practices for the group of
comparable pharmaceutical companies (as constituted from time to time) used by
the Company in determining compensation for its senior executives generally.
(c) EQUITY COMPENSATION.
(i) The Company shall grant to the Executive 200,000 restricted
shares of the Company's common stock (the "Shares"), in
accordance with the form of grant attached hereto as Exhibit A
and which Shares shall be subject to a duly filed registration
(Form S-8), and options to purchase 900,000 shares
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of the Company's common stock (the "Options") on the Commencement
Date. Except as otherwise provided in Sections 3(j), 5(a)(v),
5(b)(iii), and Exhibit A, the Shares shall vest on the third
anniversary of the Commencement Date, if the Executive remains
employed by the Company on that anniversary. The Options shall be
granted under the Schering-Plough Corporation 2002 Stock
Incentive Plan (the "2002 Stock Plan"). Except as otherwise
provided in Sections 3(j), 5(a)(iv), and 5(b)(ii), the Options
shall vest as to 600,000 shares on the first anniversary of the
Commencement Date, as to an additional 150,000 shares on the
second anniversary of the Commencement Date, and as to the
remaining 150,000 shares on the third anniversary of the
Commencement Date, if the Executive remains employed by the
Company on those anniversaries, and shall otherwise be subject to
the same terms and conditions as the stock option grants to other
senior executives of the Company for 2003.
(ii) Notwithstanding Section 3(c)(i), if before the Shares or the
Options are granted there occurs an event resulting in an
adjustment pursuant to Section 11 of the 2002 Stock Plan, a
corresponding adjustment shall be made to the numbers of shares
set forth in Section 3(c)(i).
(iii) The Executive shall also receive regular grants of stock options
and/or other equity awards in accordance with the Company's
practices as in effect from time to time during the Employment
Period and consistent with normal competitive pay practices for
the group of comparable pharmaceutical companies (as constituted
from time to time) used by the Company in determining
compensation for its senior executives generally; provided,
however, that no such grants shall be required to be made to the
Executive before January 1, 2004.
(d) INCENTIVE, SAVINGS, AND RETIREMENT PLANS. In addition, the
Executive shall be entitled, during the Employment Period, to participate in all
other incentive, profit sharing, savings and deferred compensation plans, and
retirement plans, practices, policies and programs, that are applicable
generally to other senior executives of the Company and its Affiliated
Companies, as in effect from time to time. Without limiting the generality of
the foregoing, it is acknowledged that for purposes of the Schering-Plough
Corporation Supplemental Executive Retirement Plan (the "SERP"), the Executive
shall accrue years of Service in E-grade status (as defined in the SERP)
beginning on the Commencement Date, and his accrued benefit under the SERP shall
be fully vested at all times.
(e) Welfare Benefit Plans. During the Employment Period, the
Executive and, if applicable, the Executive's family, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other senior executives of the Company and its Affiliated Companies, as in
effect from time to time.
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(f) EXPENSES. The Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by him during the
Employment Period, in accordance with the policies, practices and procedures of
the Company and its Affiliated Companies from time to time in effect,
commensurate with his position and on a basis at least comparable to that
provided to other senior executives actively employed by the Company.
(g) FRINGE BENEFITS AND PERQUISITES. During the Employment Period,
the Executive shall be entitled to fringe benefits and perquisites in accordance
with the plans, practices, programs and policies of the Company and its
Affiliated Companies from time to time in effect, commensurate with his position
and at least comparable to those provided to other senior executives actively
employed by the Company, including, without limitation, tax and financial
planning services. In addition, during the Employment Period, the Company shall
provide the Executive with appropriate security measures, including, without
limitation, a car and driver, use of corporate aircraft (for business and
personal travel), and home security.
(h) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to an exclusive personal secretary of
his own choosing, and other assistance commensurate with his position and at
least comparable to those provided to other senior executives actively employed
by the Company.
(i) VACATION AND OTHER ABSENCES. During the Employment Period, the
Executive shall be entitled to paid vacation of at least four weeks per year,
and such other paid absences whether for holidays, illness, personal time or any
similar purposes, in accordance with the plans, policies, programs and practices
of the Company and its Affiliated Companies in effect from time to time,
commensurate with his position and at least comparable to those provided to
other senior executives actively employed by the Company.
(j) DURING CHANGE OF CONTROL PERIOD. Without limiting the
generality of the foregoing, during a Change of Control Period, the incentive,
savings and retirement benefit opportunities (measured with respect to both
regular and special incentive opportunities, to the extent, if any, that such
distinction is applicable) and the other benefits provided to the Executive
pursuant to Sections 3(d), (e), (f), (g), (h) and (i) shall in no event be less
than the most favorable such opportunities and benefits provided to the
Executive by the Company and its affiliates at any time during the 120-day
period immediately preceding the Change of Control Date. In addition,
notwithstanding anything herein or in the 2002 Plan to the contrary, upon the
Change of Control Date, the Shares and the Options shall immediately vest in
full, and the Options shall remain exercisable for the remainder of their stated
term.
(k) CERTAIN BENEFITS FOLLOWING RETIREMENT. From and after the
date of the Executive's retirement from employment with the Company, for a
period equal to the period from the Commencement Date to his retirement date,
the Company shall (i) provide the Executive with an office of a size and with
furnishings and other appointments and an exclusive personal secretary of his
own choosing, and other clerical assistance reasonably comparable to those
provided to other former senior executives of the Company, at a location not on
the premises of the Company but within 35 miles of the location of his office
immediately before his
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retirement, and (ii) continue to provide the Executive with home security and a
car and driver on terms and conditions reasonably comparable to those provided
to Executive prior to his retirement from employment with the Company. In
addition, the Company may provide the Executive with such other transportation
services as it may deem appropriate, by agreement with the Executive.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death. Either the Executive or the Company,
upon a determination in good faith that the Disability (as defined below) of the
Executive has occurred, may give written notice in accordance with Section 13(b)
of this Agreement of his or its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the Company
or the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean, after reasonable accommodations have been provided to
the Executive, the absence of the Executive from the Executive's duties with the
Company on a full-time basis for six consecutive months as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) DEFINITION OF CAUSE. For purposes of this Agreement, "Cause" shall
mean (i) repeated material violations by the Executive of the Executive's duties
under Section 2 of this Agreement (other than as a result of incapacity due to
physical or mental illness or injury) which violations (A) are demonstrably
willful and deliberate on the Executive's part, and (B) are not remedied in a
reasonable period of time after receipt of written notice from the Board
specifying such violations, (ii) willful misconduct by the Executive in the
course of performing his duties under Section 2 of this Agreement that results,
or could reasonably be expected to result, in material harm to the business or
reputation of the Company, or (iii) the Executive's conviction of (or plea of
nolo contendere to) a felony involving moral turpitude. An act shall be
considered "willful" if it is committed without reasonable belief that such act
is in the best interests of the Company. Any determination of "Cause" pursuant
to Section 4(b)(i) shall not be effective until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
a majority of the entire membership of the Board (other than the Executive) at a
meeting of the Board called and held for such purpose (after reasonable prior
notice is provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive has committed the violations described
at Section 4(b)(i) and specifying the particulars thereof in detail, provided,
however that during a Change of Control Period the affirmative vote must be by
not less than three-quarters of the entire membership of the Board (other than
the Executive).
(c) DEFINITION OF GOOD REASON. For purposes of this Agreement, "Good
Reason" shall mean the occurrence of any of the following without the
Executive's consent:
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(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
Section 2(a) of this Agreement, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(ii) the failure to elect or reelect the Executive to any of the
positions described in Section 2 or the removal of him from
any such position;
(iii) the Company's requiring the Executive (A) at any time
during the Employment Period, to be based at any office or
location other than as described in Section 2(a) of this
Agreement, (B) at any time during the Change of Control
Period, to be based at any office or location that is either
(1) not within the State of New Jersey or (2) within the
State of New Jersey, but 35 miles or further from the
previous office or location where the Executive was based,
or (C) during the Change of Control Period, to travel on
Company business to a substantially greater extent than
required prior to the Change of Control Date;
(iv) any failure by the Company to comply with any of the
provisions of Section 3 of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(v) notice by the Company at any time, pursuant to Section 1, of
its election to terminate or otherwise not extend the
Employment Period;
(vi) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(vii) any failure by the Company to comply with and satisfy
Section l0(c) of this Agreement, provided that the successor
has received at least ten days' prior written notice from
the Company or the Executive of the requirements of Section
10(c) of this Agreement.
For the avoidance of doubt, the parties agree that none of the following shall
give rise to a claim of Good Reason: (A) the appointment of another individual
to the position of President with the Executive's involvement and consent, so
long as the new President reports to the Executive; (B) the designation by the
Board of one of its non-employee members as lead director, so long as the
Executive remains Chairman of the Board; and (C) any change in the Company's
corporate governance practices required by applicable laws, rules, or
regulations. For purposes of this Section 4(c): (I) any good faith determination
of Good Reason made by the Executive shall be conclusive and binding on the
Company; and (II) the Executive shall be considered to have consented to an
action or failure to act by the Company described above if he either consents to
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such action or failure to act in writing or votes in favor of a resolution of
the Board approving such action or failure to act.
(d) PROCESS FOR TERMINATION. Any termination of the Executive's
employment, other than as a result of his death or Disability, shall be
implemented by the initiating party's giving a Notice of Termination to the
other party, in accordance with Section 13(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement (if any) relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined in Section 4(e)) is other than the date of receipt of such notice,
specifies the Date of Termination (which date shall be not more than fifteen
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. If the Executive's employment is terminated for
any reason other than the Executive's death or Disability, the "Date of
Termination" shall be the date of receipt of the Notice of Termination or any
later date specified therein, as the case may be. If the Executive's employment
is terminated by reason of the Executive's death, the "Date of Termination"
shall be the date of death. If the Executive's employment is terminated by
reason of the Executive's Disability, the "Date of Termination" shall be the
Disability Effective Date.
(f) NOTICES OF NON-RENEWAL. If the Company shall deliver to the
Executive a written notice of its election to terminate the Executive's
employment at the end of the Employment Period as provided in the proviso to
Section 1, then the Executive shall have the right to terminate his employment
for Good Reason. If the Executive shall deliver to the Company such a notice,
then his employment shall be deemed to have been terminated by him without Good
Reason.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON OR DURING THE WINDOW PERIOD; OTHER THAN FOR CAUSE,
DEATH OR DISABILITY. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for Cause (and other than due to
Disability), the Executive shall terminate his employment for Good Reason at any
time, or the Executive shall terminate his employment without any reason during
the 30-day period (the "Window Period") immediately following the first
anniversary of the Change of Control Date:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Base Salary through the Date
of Termination to the extent not theretofore paid; (2) any
compensation
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previously deferred by the Executive (together with any accrued
interest or earnings thereon) to the extent the Executive has
elected to accelerate such compensation on his termination; (3)
any accrued vacation pay; and (4) unreimbursed expenses due the
Executive pursuant to Section 3(f), in each case to the extent
not theretofore paid (the sum of the amounts described in clauses
(1)-(4) shall be hereinafter referred to as the "Accrued
Obligations");
(B) the product of (1) the greater of (I) the highest Annual
Bonus (annualized for any fiscal year consisting of less than
twelve full months) earned by the Executive under the Cash Bonus
Plans in respect of the three most recent full fiscal years
ending on or prior to the Date of Termination, or (II) the
Executive's target Annual Bonus for the fiscal year during which
the Date of Termination occurs (such greater amount, the "Highest
Annual Bonus") and (2) a fraction, the numerator of which is the
number of days in the fiscal year of such termination through the
Date of Termination, and the denominator of which is 365 (such
product, the "Pro-Rata Bonus"); and
(C) the amount (such amount shall be hereinafter referred to as
the "Severance Amount") equal to the product of (1) three and (2)
the sum of (x) the Executive's Annual Base Salary (determined
without regard to any reduction constituting Good Reason), (y)
the Highest Annual Bonus and (z) the highest of the amounts
contributed on behalf of the Executive under the Schering
Corporation Employee's Profit Sharing Plan or any successor or
replacement plan thereto and the Schering Corporation Profit
Sharing Excess Benefits Plan or any successor or replacement plan
thereto, for each of the three most recently completed fiscal
years preceding the Date of Termination (and annualized for any
fiscal year consisting of less than twelve full months);
provided, however, that at the Executive's election, either (p)
the Severance Amount shall be reduced by the present value
(determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) of any other
amount of severance relating to salary or bonus continuation to
be received by the Executive upon termination of employment of
the Executive under any severance plan, policy or arrangement of
the Company ("Other Severance") or (q) the Severance Amount shall
be payable in lieu of an amount of such Other Severance not
exceeding such present value;
(ii) for a period of three years from and after the Date of
Termination, or such longer period as any plan, program, practice
or policy may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 3(e)
of this Agreement if the Executive's employment had not been
terminated, in accordance with the most favorable plans,
practices,
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programs or policies of the Company and its Affiliated Companies
as in effect and applicable generally to other senior executives
of the Company and its Affiliated Companies and their families
during the 90-day period immediately preceding the Date of
Termination or, if more favorable to the Executive, as in effect
at any time thereafter or, if more favorable to the Executive, as
in effect generally at any time thereafter with respect to other
senior executives of the Company and its Affiliated Companies and
their families, and for purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be
considered to have remained employed until the third anniversary
of the Date of Termination and to have retired on the date of
such third anniversary; provided, however, that if the Executive
becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan
during such applicable period of eligibility; and, provided,
further, that to the extent that the Company's plans, programs
and arrangements do not permit such continuation of the
Executive's participation following his termination, the Company
shall provide the Executive, no less frequently than quarterly in
advance with an amount which, after taxes, is sufficient for him
to purchase equivalent benefits (the continuation of welfare
benefits for the applicable period set forth in this Section
5(a)(ii) shall be hereinafter referred to as "Welfare Benefit
Continuation");
(iii) for purposes of calculating the Executive's benefits (and
benefits due to the Executive's beneficiaries) under the SERP,
the following special rules shall apply: (A) the Executive's
Benefit (as defined in the SERP) shall be 32% of his Average
Final Earnings (as defined in the SERP), subject to clauses (B)
and (C) below); (B) the Executive's Average Final Earnings shall
be computed as if the Executive had continued to be employed by
the Company in E-grade status (as defined in the SERP) through
December 31, 2010, and as if he had continued, through December
31, 2010, to receive his Base Salary at the rate in effect
immediately before the Date of Termination (determined without
regard to any reduction thereof constituting Good Reason), and to
receive, for each fiscal year concluding after the Date of
Termination but on or before December 31, 2010, an Annual Bonus
equal to the Highest Annual Bonus; (C) no compensation paid
pursuant to this Section 5(a), other than pursuant to Section
5(a)(i)(A)(1) and Section 5(a)(i)(B), shall be taken into account
in determining the Executive's Average Final Earnings; and (D)
the reduction for early payment under Section 4.3 of the SERP
shall not apply;
(iv) notwithstanding any provision of this Agreement or of the 2002
Stock Plan to the contrary, the Options shall immediately vest in
full and the Executive shall be treated, for purposes of the
Options, as if he had
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incurred a "Termination of Employment by reason of retirement"
within the coverage of Section 6(f)(i) of the 2002 Stock Plan;
and
(v) notwithstanding any provision of this Agreement to the contrary,
all 200,000 Shares shall immediately vest in full.
(b) DISABILITY OR DEATH. If the Executive's employment is terminated
during the Employment Period by reason of the Executive's Disability or death:
(i) the Company shall pay the Accrued Obligations and the Pro-Rata
Bonus to the Executive (or, in the event of termination of
employment due to the death of the Executive, to the Executive's
estate or beneficiary) in a lump sum in cash within 30 days after
the Date of Termination;
(ii) notwithstanding any provision of this Agreement or of the 2002
Stock Plan to the contrary, the Options shall vest in full and
shall remain exercisable for the remainder of their stated term;
(iii) notwithstanding any provision of this Agreement to the contrary,
all 200,000 Shares shall vest in full;
(iv) if the Executive's termination of employment was by reason of
Disability, the Executive shall receive Welfare Benefit
Continuation under the same terms as if his termination of
employment had entitled him to such benefits pursuant to Section
5(a)(ii); and
(v) the Company shall have no further obligations to the Executive or
to the Executive's legal representatives under this Agreement
other than the timely payment or provision of Other Benefits, the
provision of retiree benefits, if applicable, as provided in
Section 3(k) and Section 5(d), and any indemnification and
insurance obligations pursuant to Section 13(h).
(c) CAUSE; OTHER THAN FOR GOOD REASON. If, during the Employment
Period, the Executive's employment shall be terminated for Cause, the Company
shall have no further obligations to the Executive under this Agreement other
than the obligation to pay to the Executive the Accrued Obligations, the timely
payment or provision of Other Benefits, and any indemnification and insurance
obligations pursuant to Section 13(h). If the Executive terminates employment
during the Employment Period, excluding any termination for Good Reason, any
termination during the Window Period for any reason or a termination due to
Disability, the Company shall have no further obligations to the Executive,
other than to pay all Accrued Obligations and the Pro-Rata Bonus, the timely
payment or provision of Other Benefits, and the provision of retiree benefits,
if applicable, as provided in Section 3(k) and Section 5(d), and any
indemnification and insurance obligations pursuant to Section 13(h). In either
such case, the Accrued Obligations and, if applicable, the Pro-Rata Bonus, shall
be paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(d) RETIREE TREATMENT UPON CERTAIN VOLUNTARY TERMINATIONS. If the
Date of Termination with respect to any termination of the Executive's
employment by the Executive for
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Good Reason or without Good Reason (whether or not during the Window Period)
occurs on or after the Executive's 62nd birthday, the termination shall be
treated as a retirement by the Executive for purposes of (i) the 2002 Stock Plan
and any successor plan thereto, (ii) eligibility for the benefits provided by
Section 3(k) and (iii) any financial counseling programs made available to the
Company's retired senior executives.
(e) RESOLUTION OF DISPUTES. If there shall be any dispute between the
Company and the Executive about (i) in the event of any termination of the
Executive's employment by the Company, whether such termination was for Cause,
or (ii) in the event of any termination by the Executive of his employment for
Good Reason, whether the Executive determined in good faith that Good Reason
existed, then, unless and until there is a final, nonappealable judgment by a
court of competent jurisdiction declaring that such termination was for Cause or
that such determination of Good Reason was not made in good faith, the Company
shall pay all amounts, and provide all benefits, to the Executive and/or his
family or other beneficiaries, as the case may be, that the Company would be
required to pay or provide pursuant to Section 5(a) as though such termination
were by the Company without Cause or by the Executive with Good Reason;
provided, however, that the Company shall not be required to pay any disputed
amounts pursuant to this Section 5(e) except upon receipt of an undertaking by
or on behalf of the Executive to repay all such amounts to which he is
ultimately adjudged by such court not to be entitled.
6. NON-EXCLUSIVITY OF RIGHTS; OTHER BENEFITS. Except as provided in
Sections 5(a)(ii), 5(b) and 5(c) of this Agreement, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
Affiliated Companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement entered into after the date hereof with the Company or any
of its Affiliated Companies. Amounts which are vested (or earned) benefits or
incentive compensation or which the Executive (or his family) is otherwise
entitled to receive under any plan, policy, practice or program of, or any
contract or agreement entered into after the date hereof with, the Company or
any of its Affiliated Companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement ("Other
Benefits"). Without limiting the generality of the foregoing, if the Executive's
employment is terminated by reason of the Executive's Disability or death during
the Employment Period, the Executive and/or the Executive's legal
representatives and beneficiaries shall be entitled to receive all disability,
death and/or other benefits provided for under the Company's employee benefit
plans in which the Executive was a participant before such termination (which
also are considered "Other Benefits").
7. FULL SETTLEMENT. 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 set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as provided
in Section 5(a)(ii) of this Agreement, such amounts shall not be reduced whether
or not the Executive obtains other employment.
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8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision) 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, are 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, all income taxes, employment
taxes and Excise Tax, 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. The Company's obligations to make Gross-Up Payments under this Section
8 shall not be conditioned upon the Executive's termination of employment.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, 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 Deloitte &
Touche (or such other certified accounting firm as may be designated by the
Executive) (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
notice from the Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). 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 8, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence, substantial
understatement or similar penalty. 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 which 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
Section 8(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.
-12-
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service 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 he 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,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim; 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 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 Section 8(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 to contest the claim in any
permissible manner, and the Executive agrees 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 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
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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 Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(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 Section 8(c)) promptly pay 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
advanced by the Company pursuant to Section 8(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 advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. CONFIDENTIAL INFORMATION AND COMPETITIVE CONDUCT.
(a) The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company or any of its Affiliated Companies and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its Affiliated Companies and
which shall not be or become public knowledge or generally known within the
pharmaceutical industry (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than to the Executive's attorneys or to the Company and to those
designated by the Company.
(b) During the Noncompetition Period (as defined below), the Executive
shall not, without the prior written consent of the Board (which consent shall
not be unreasonably withheld), engage in or become associated with a Competitive
Activity. For purposes of this Section 9(b): (i) the "Noncompetition Period"
means (A) the period during which the Executive is employed by the Company, plus
(B) one year following the termination of such employment by the Executive
without Good Reason (if before a Change of Control) or by the Company for Cause;
(ii) a "Competitive Activity" means any venture, enterprise, company, business
or endeavor which is in competition with the Company or any of its Affiliated
Companies in fields in which the Company and its Affiliated Companies have
annual sales of more than $10,000,000; and (iii) the Executive shall be
considered to have become "associated with a Competitive Activity" if the
Executive becomes directly or indirectly involved as an owner, principal,
employee, officer, director, independent contractor, representative,
stockholder, financial backer, agent, partner, advisor, lender, or in any other
individual or representative capacity with any individual, partnership,
corporation or other organization that is engaged in a Competitive
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Activity. Notwithstanding the foregoing: (x) the Executive may make and retain
investments during the Noncompetition Period which do not constitute a
controlling interest of any entity engaged in a Competitive Activity, if such
investment is made on a passive basis and the Executive does not act as an
employee, officer, director, independent contractor, representative, agent or
advisor with respect to such entity, and so long as the making or retaining of
such investment is not contrary to the best interests of the Company, as
determined in good faith by a majority of the Board (excluding the Executive);
(y) if as a result of a reorganization, merger or consolidation the Executive is
assigned a position (including status, offices, title, reporting requirements
and prospects), authority, duties or responsibilities which diminish the
Executive's position, authority, duties or responsibilities relative to the
120-day period immediately preceding such reorganization, merger or
consolidation, then this Section 9(b) shall not apply; and (z) the Executive
shall not be considered to violate this Section 9(b) as a result of his
complying with law or legal process or as a result of his cooperating with any
of his prior employers in connection with litigation relating to matters in
which he was substantially involved, provided that (A) the Executive does not
receive any compensation for such cooperation, other than reimbursement of his
expenses, (B) neither the Company nor any of its Affiliated Companies is a party
adverse to such prior employer in such litigation, and (C) the Executive
notifies the Board before beginning such cooperation and provides the Board with
any information it may reasonably request, from time to time, regarding such
cooperation.
(c) The Executive acknowledges and agrees that: (i) the purpose of the
foregoing covenants is to protect the goodwill, trade secrets and other
confidential information of the Company; (ii) because of the nature of the
business in which the Company and its Affiliated Companies are engaged and
because of the nature of the confidential information to which the Executive has
access, it would be impractical and excessively difficult to determine the
actual damages of the Company and its Affiliated Companies in the event the
Executive breached any of the covenants of this Section 9; and (iii) remedies at
law (such as monetary damages) for any breach of the Executive's obligations
under this Section 9 would be inadequate. The Executive therefore agrees and
consents that if he commits any breach of a covenant under this Section 9 or
threatens to commit any such breach, the Company shall have the right (in
addition to, and not in lieu of, any other right or remedy that may be available
to it) to temporary and permanent injunctive relief from a court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage. With respect to any provision of this
Section 9 finally determined by a court of competent jurisdiction to be
unenforceable, the Executive and the Company hereby agree that such court shall
have jurisdiction to reform this Agreement or any provision hereof so that it is
enforceable to the maximum extent permitted by law, and the parties agree to
abide by such court's determination. If any of the covenants of this Section 9
are determined to be wholly or partially unenforceable in any jurisdiction, such
determination shall not be a bar to or in any way diminish the Company's right
to enforce any such covenant in any other jurisdiction.
(d) It is acknowledged that during the course of his employment with
Pharmacia Corporation ("Pharmacia"), the Executive was granted options (the
"Prior Options") to acquire Pharmacia stock, which have now been converted into
options to acquire stock of Pfizer Inc. ("Pfizer") as a result of the merger of
Pharmacia and Pfizer. The Executive also currently holds certain stock of Pfizer
(the "Prior Stock"). The Prior Options shall be exercised, and the Prior Stock
and any securities acquired upon exercise of the Prior Options shall be
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disposed of, in accordance with the rules set forth in Exhibit B hereto (the
"Rules"). The Executive shall use his reasonable best efforts to ensure that, as
soon as is reasonably practicable after the date hereof, the Prior Options are
contributed to a blind trust meeting the following requirements: (i) the
Executive shall not retain any authority to direct the exercise of the Prior
Options or the sale or other disposition of the securities acquired upon such
exercise; (ii) the trustee of such trust shall be required to follow the Rules;
and (iii) the other terms and trustee of such trust shall be reasonably
acceptable to the Company. If the Executive complies with the foregoing
provisions of this Section 9(d), then (x) his retention of the Prior Options
until such time (if any) as such contribution occurs, and of a beneficial
interest in such trust thereafter, and (y) his retention of the Prior Stock to
the extent permitted by the Rules, shall not be deemed to violate Section 9(b).
The Company shall reimburse the Executive for his expenses incurred in
establishing such a blind trust, but not in excess of $10,000.
(e) In no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
10. SUCCESSORS AND ASSIGNABILITY.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the business and
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns.
(c) The Company will cause any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly 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 had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
11. CERTAIN DEFINITIONS. The following defined terms used in this Agreement
shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first date on which a
Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a
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Change of Control occurs and if the Executive's employment with the Company is
terminated or the Executive ceases to have the position of Chairman of the Board
and Chief Executive Officer of the Company prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination or cessation (i) was at the request of a third party who has
taken steps reasonably calculated to effect the Change of Control or (ii)
otherwise arose in connection with or anticipation of the Change of Control,
then for all purposes of this Agreement the "Change of Control Date" shall mean
the date immediately prior to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period commencing on
the Change of Control Date and ending on the last day of the Employment Period.
(c) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of securities of the
Company where such acquisition causes such Person to own 20% or
more of either (A) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this Section 11(c)(i),
the following acquisitions shall not be deemed to result in a
Change of Control: (1) any acquisition directly from the Company,
(2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company or
(4) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B), and (C) of Section
11(c)(iii); and provided, further, that if any Person's
beneficial ownership of the Outstanding Company Voting Securities
reaches or exceeds 20% as a result of a transaction described in
clause (A) or (B) above, and such Person subsequently acquires
beneficial ownership of additional voting securities of the
Company, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20% or more of the
Outstanding Company Voting Securities; or
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
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assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Incumbent Board; or
(iii) Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar corporate transaction
involving the Company or any of its subsidiaries, or a sale or
other disposition of all or substantially all of the assets of
the Company or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, a
"Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
12. LEGAL FEES.
(a) The Company shall reimburse the Executive for all legal fees and
expenses which the Executive may reasonably incur in connection with negotiation
of this Agreement, but not in excess of $90,000. If any payment made to the
Executive pursuant to this
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Section 12(a) results in the Executive being subject to any federal, state, or
local income tax, the Company shall pay to the Executive an additional amount
(the "Additional Amount") such that the net amount that the Executive receives
from payments (including the Additional Amount) pursuant to this Section 12(a)
after paying all applicable federal, state, and local income and employment
taxes thereon (including on the Additional Amount) equals the amount that he
would have received from payments pursuant to this Section 12(a) if no federal,
state, or local income or employment taxes applied to any such payments.
(b) The Company shall pay the Executive promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which the Executive
may reasonably incur (together with interest thereon at the prime rate from time
to time published in The Wall Street Journal, minus one percentage point, for
any amount incurred and not paid within sixty days after Executive's request
therefor) as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), unless the trier of fact in such
contest determines that the Executive's position in such contest was frivolous
or not maintained in good faith; provided, however, that in no event shall the
Company be required to make reimbursements pursuant to this Section 12(b) that
exceed $250,000 in the aggregate, other than for any such contest by the Company
unless the Company prevails as asserted on all material claims forming the basis
for the Company's contest.
13. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended,
modified, repealed, waived, extended or discharged except by an agreement in
writing signed by the party against whom enforcement of such amendment,
modification, repeal, waiver, extension or discharge is sought. No person, other
than pursuant to a resolution of the Board or a committee thereof, shall have
authority on behalf of the Company to agree to amend, modify, repeal, waive,
extend or discharge any provision of this Agreement or anything in reference
thereto.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party, by registered or
certified mail, return receipt requested, postage prepaid, or by reputable
overnight courier, addressed as follows:
IF TO THE EXECUTIVE:
Xxxx Xxxxxx
c/o Schering-Plough Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
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IF TO THE COMPANY:
Schering-Plough Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 4(c) of this Agreement, shall not
be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(f) When used herein in connection with plans, programs and policies
relating to the Executive, employees, compensation, benefits, perquisites,
executive benefits, services and similar words and phrases, the word "Company"
shall be deemed to include Schering Corporation and Plough, Inc., wholly-owned
subsidiaries of the Company.
(g) This instrument contains the entire agreement of the parties, and
all promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.
(h) The Company shall indemnify the Executive and hold him harmless to
the fullest extent provided under the Certificate of Incorporation of the
Company and its Bylaws, and shall maintain one or more policies of directors and
officers liability insurance insuring the Executive, in each case to the fullest
extent as similarly situated members or former members of the Board and
similarly situated statutory officers or former statutory officers of the
Company; provided, however, that for the avoidance of doubt, if at any point no
such policies are in place for the applicable similarly situated individuals,
the Company shall have no obligation to provide any such policies to the
Executive. The obligations of the Company to the Executive under this Section
13(h) shall continue to be valid, binding and enforceable both before and after
the Executive has ceased to be a director, officer, employee or agent of the
Company and its Affiliated Companies and all other corporations, partnerships,
joint ventures, trusts and other enterprises for which the Executive served in
such capacity at the Company's request for as long as the Executive may be
subject to the claims for which such indemnification applies.
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(i) The Company represents and warrants that (i) it is fully authorized by
action of its Board (and of any other person, entity or body whose action is
required) to enter into this Agreement and to perform its obligations under it;
(ii) the execution, delivery and performance of this Agreement by it will not
violate any applicable law, regulation, order, judgment or decree or any
agreement, plan or corporate governance document to which it is a party or by
which it is bound; and (iii) upon the execution and delivery of this Agreement
by the Parties, this Agreement shall be a valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally. The
Executive represents and warrants that (x) he has the free and unfettered right
to enter into this Agreement and to perform his obligations under it; (y) the
execution, delivery and performance of this Agreement by him will not violate
any contract or agreement to which he is a party or by which he is bound, and
(z) upon the execution and delivery of this Agreement by the Parties, this
Agreement shall be a valid and binding obligation of the Executive, enforceable
against him in accordance with its terms.
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IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from
its Board of Directors, the Company have caused this Agreement to be executed as
of the day and year first above written.
/s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
SCHERING-PLOUGH CORPORATION
By: /s/ Xxxxxxx de X. Xxxxxxx
-------------------------------
Xxxxxxx de X. Xxxxxxx
Chairman of the Board of Directors
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EXHIBIT A
RESTRICTED SHARES AGREEMENT
THIS AGREEMENT, dated as of April 20, 2003, between the
Schering-Plough Corporation, a New Jersey corporation (the "Company"), and Xxxx
Xxxxxx (the "Executive").
WHEREAS, the parties hereto have entered into an Employment Agreement,
dated April 20, 2003 (the "Employment Agreement") (all capitalized terms used in
this Agreement but not defined herein shall have the meanings given to them in
the Employment Agreement");
WHEREAS, pursuant to Section 3(c) of the Employment Agreement, the
Company has promised to grant restricted Common Shares of the Company to the
Executive;
NOW, THEREFORE, in order to effectuate such grant, the parties hereto
agree as follows:
1. GRANT AND VESTING OF RESTRICTED SHARES.
(a) Subject to the provisions of this Agreement, the Company hereby
grants to the Executive, as of April 20, 2003 (the "Grant Date"), 200,000 of
the Common Shares, par value $.50 per share, of the Company (the "Restricted
Shares").
(b) The Restricted Shares, if not forfeited earlier pursuant to
Section 1(c), shall vest upon the first to occur of (i) the termination of the
Executive's employment by the Company other than for Cause, (ii) the termination
of the Executive's employment with the Company as a result of the death or
Disability of the Executive, (iii) the termination of the Executive's employment
by the Executive for Good Reason, (iv) the Change of Control Date, and (v) the
third anniversary of the Grant Date.
(c) If the Executive terminates his employment with the Company
without Good Reason or the Company terminates the Executive's employment for
Cause, in either case before the Restricted Shares vest, the Executive shall
forfeit the Restricted Shares, effective on the Date of Termination.
(d) The period from the Grant Date until the Restricted Shares vest
or are forfeited, as applicable, is referred to below as the "Restriction
Period."
(e) The Company represents and warrants that the grant and issuance
of the Restricted Shares have been duly authorized by the Board of Directors of
the Company, and that upon the issuance thereof, the Restricted Shares shall be
fully paid, validly issued and non-assessable.
------------------
2. ISSUANCE OF SHARES.
The Restricted Shares shall be evidenced by a stock certificate or
by book entry, as the Company may determine, in the Executive's name. If the
Restricted Shares are evidenced by a stock certificate, then during the
Restriction Period, such certificate may be issued to the Executive with such
customary legends as the Company may deem appropriate, or held in escrow by the
Company on behalf of the Executive. Upon the vesting of the Restricted Shares,
the Company shall promptly deliver to the Executive a certificate evidencing the
Restricted Shares, free of all legends, or shall promptly cause any restrictions
noted in the book entry to be removed.
3. NONTRANSFERABILITY OF THE RESTRICTED SHARES.
During the Restriction Period, the Restricted Shares shall not be
transferable by the Executive by means of sale, assignment, exchange,
encumbrance, hypothecation, pledge or otherwise.
4. CHANGES IN CAPITAL.
If the Common Shares of the Company shall at any time be changed or
exchanged by declaration of a stock dividend, stock split, combination of
shares, spin-off, recapitalization, merger, consolidation or other corporate
reorganization in which the Company is the surviving corporation, or if the
Company shall pay an extraordinary dividend on its Common Shares, or in the
event of a similar corporate event (each, a "Corporate Event"), the number
and/or kind of shares represented by the Restricted Shares may be appropriately
adjusted, at the discretion of the Company; provided, however, that no
adjustment pursuant to this Section 4 may cause a diminution (measured
immediately following such adjustment) in the market value of the Restricted
Shares.
5. DIVIDENDS AND DISTRIBUTIONS.
The Executive shall be entitled to receive all dividends and
distributions made with respect to the Restricted Shares, the record dates for
which occur during the Restriction Period, and that do not result in an
adjustment pursuant to Section 4, in the same form, and at the same time, as
holders of the Company's Common Shares generally.
6. OTHER RIGHTS AS A STOCKHOLDER.
Except as otherwise specifically provided in this Agreement, during
the Restriction Period the Executive shall have all the rights of a stockholder
with respect to the Restricted Shares, including without limitation the right to
vote the Restricted Shares.
7. MISCELLANEOUS.
(a) The Executive acknowledges and agrees that the Restricted
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act"), and accordingly, the Restricted Shares may not be transferred
except pursuant to a valid registration statement under the Act and applicable
state securities laws or pursuant to an exemption therefrom.
-2-
(b) The Company agrees that:
(i) no later than the six-month anniversary of the issuance of
the Restricted Shares, it shall file with the Securities and Exchange Commission
(the "SEC") and applicable state securities commissioners a registration
statement on Form S-8 (or such applicable successor form) under the Act
registering the resale of the Restricted Shares;
(ii) the Company will use all reasonable efforts and will
cooperate with the SEC in order to cause the SEC to declare the registration
statement including the Restricted Shares to be effective within a reasonable
period of time after the filing thereof;
(iii) the Company will maintain the effectiveness of the
registration statement including the Restricted Shares through (A) if the
Restricted Shares vest pursuant to Section 1(b), the first anniversary of the
conclusion of the Restriction Period or (B) if the Restricted Shares are
forfeited pursuant to Section 1(c), the conclusion of the Restriction Period;
(iv) simultaneously with the filing with the SEC of the
registration statement that includes the Restricted Shares, the Company will
apply to list the Restricted Shares for trading on the national securities
exchange on which the Company's Common Shares are traded; and
(v) the Company will bear all costs of the registration and the
listing of the Restricted Shares.
(c) The Executive acknowledges and agrees that notwithstanding the
registration of the Restricted Shares with the SEC, the Restricted Shares shall
not be transferable during the Restriction Period.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax purposes
with respect to any Restricted Share, the Executive shall pay to the Company, or
make arrangements satisfactory to the Company regarding the payment of, all
federal, state, local and foreign taxes that are required by applicable laws and
regulations to be withheld with respect to such amount. To the extent the
Executive does not pay to the Company the required withholding taxes with
respect to the Restricted Shares, the Company shall, to the extent permitted by
law and upon notice to Executive, have the right to deduct any such taxes from
any payment otherwise due to the Executive, including by withholding the
distribution of some of the Restricted Shares.
(e) The Company agrees to pay any and all original issue taxes and
share transfer taxes that may be imposed on the issuance of the Restricted
Shares received by the Executive, together with any and all other fees and
expenses necessarily incurred by the Company in connection therewith.
-3-
(f) All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
facsimile, overnight courier, or registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Xxxx Xxxxxx
c/o Schering-Plough Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
If to the Company:
Schering-Plough Corporation
0000 Xxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: General Counsel
or to such other address or facsimile number as any party shall have furnished
to the other in writing in accordance with this Section 7(f). Notice and
communications shall be effective when actually received by the addressee.
(g) Except as otherwise provided hereunder, this Agreement shall be
binding upon and shall inure to the benefit of any successor or successors of
the Company.
(h) The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of New Jersey without
reference to principles of conflict of laws, as applied to contracts executed in
and performed wholly within the State of New Jersey.
(i) For purposes of this Agreement, employment with the Company
shall include employment with any of the Company's affiliates, predecessors, or
successors. This Agreement is not an employment agreement, and nothing in this
Agreement shall confer upon the Executive any right to continue in the employ of
the Company or any of its affiliates, predecessors, or successors, or interfere
in any way with the right of the Company or any such entities to terminate the
Executive's employment at any time.
(j) The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(k) This Agreement may not be modified, amended or waived except by
an instrument in writing signed by both parties hereto. The waiver by either
party of compliance with any provision of this Agreement shall not operate or be
construed as a waiver of any other provision of this Agreement, or of any
subsequent breach by such party of a provision of this Agreement.
(l) The headings of paragraphs herein are included solely for
convenience of reference and shall not affect the meaning or interpretation of
any of the provisions of this Agreement.
-4-
(m) This Agreement may be executed in counterparts, which together
shall constitute one and the same original.
-5-
IN WITNESS WHEREOF, as of the date first above written, the Company
has caused this Agreement to be executed on its behalf by a duly authorized
officer and the Executive has hereunto set the Executive's hand.
SCHERING-PLOUGH CORPORATION INC.
By: /s/ Xxxxxxx de X. Xxxxxxx
---------------------------------
Xxxxxxx de X. Xxxxxxx
Chairman of the Board of Directors
/s/ Xxxx Xxxxxx
---------------------------------
Xxxx Xxxxxx
-6-
EXHIBIT B
RULES FOR EXERCISE OF PRIOR OPTIONS AND
DISPOSITION OF PRIOR STOCK
RULE 1: The Executive or the trustee of the blind trust referred to in
Section 9(d), as applicable (the "Responsible Party"), shall exercise each Prior
Option subsequent to the 91st day following the Commencement Date as soon
thereafter as the market price per share (the "Stock Price") of the underlying
securities reaches two times the price per share (the "Option Exercise Price")
at which such Prior Option is exercisable.
RULE 2: If a Prior Option is not required to be exercised pursuant to Rule 1 on
or before the ninth anniversary of the date of its grant, and the Stock Price
exceeds the applicable Option Exercise Price on such ninth anniversary, the
Responsible Party shall exercise such Prior Option in ten equal installments on
the first ten trading days following such ninth anniversary.
RULE 3: If a Prior Option is not required to be exercised pursuant to Rule 1 or
Rule 2 on or before the eleventh trading day before the Prior Option is
scheduled to expire, and the Stock Price exceeds the applicable Option Exercise
Price on such trading day, the Responsible Party shall exercise such Prior
Option in ten equal installments on the final ten trading days before the
scheduled expiration of the grant.
RULE 4: Notwithstanding the provisions of Rules 1-3, the Responsible Party may
exercise all of the remaining Prior Options at any time with the express
approval of the Company's Compensation Committee (which approval shall not be
unreasonably withheld).
RULE 5: The Responsible Party shall sell or otherwise dispose of, to an
unrelated third party, all securities acquired upon any exercise of a Prior
Option upon or immediately following such exercise.
RULE 6: The Executive shall sell, or otherwise dispose of, all Prior Stock to an
unrelated third party as soon as practicable subsequent to the 91st day
following the Commencement Date, in one transaction or a series of transactions;
provided, however, that the Executive shall not be required to sell Prior Stock
on any date when the Stock Price is less than the Stock Price for such
securities on the effective date of the merger between Pharmacia and Pfizer. In
any event, however, all Prior Stock must be sold or otherwise disposed of by the
Executive by December 31, 2003.
RULE 7: Notwithstanding the provisions of Rules 1-6, if the Responsible Party
determines in good faith that any securities law or regulation prohibits (i) the
exercise of the Prior Options required by Rules 1-3, (ii) the sale of the
securities acquired upon the exercise of the Prior Options required by Rule 5,
or (iii) the sale of the Prior Stock required by Rule 6, then such Rule shall be
suspended from operation until such exercise or sale (or both) is not so
prohibited, as determined by the Responsible Party in good faith. Thereupon, the
Responsible Party shall implement such exercise or sale (or both) on the next
occurring trading day on which (x) the conditions described in Rule 1, 2 or 3
are satisfied after such exercise ceases to be prohibited or (y) the conditions
described in Rule 5 or 6 are satisfied after such sale ceases to be prohibited.
RULE 8: The above Rules shall apply only during any period when the Executive is
either an employee or director of the Company (or both).
