AMENDED AND RESTATED
TRANSITION AND SUCCESSION AGREEMENT
AGREEMENT, dated as of the [____] day of November 2001 (this "Agreement"),
by and between Mylan Laboratories Inc., a Pennsylvania corporation (the
"Company"), and [EXECUTIVE NAME] (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means the first date
during the Change of Control Period (as defined herein) on which a Change of
Control occurs. Notwithstanding anything in this Agreement to the contrary, if a
Change of Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (1)
was at the request of a third party that has taken steps reasonably calculated
to effect a Change of Control or (2) otherwise arose in connection with or
anticipation of a Change of Control, then "Effective Date" means the date
immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling or
under common control with the Company.
(d) "Change of Control" means:
(1) 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 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 1(d), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Affiliated Company or (iv) any acquisition by any corporation pursuant to a
transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) 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 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 Board.
(3) Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its subsidiaries, 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 that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 65% of 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 that, 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 the Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding 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
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(4) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to continue the
Executive in its employ, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of the Effective Date (the "Employment Period"). The Employment
Period shall terminate upon the Executive's termination of employment for any
reason.
Section 3. Terms of Employment. (a) Position and Duties. (1) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office where the Executive was employed immediately
preceding the Effective Date or at any other location less than 30 miles from
such office.
(2) 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 during normal business hours 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 (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) 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. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary") at an
annual rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall be paid at such intervals as the Company pays executive
salaries generally. During the Employment Period, the Annual Base Salary shall
be reviewed at least annually, beginning no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date. Any
increase in the Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base Salary" shall
refer to the Annual Base Salary as so increased.
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(2) Annual Bonus. In addition to the Annual Base Salary, the Executive
shall participate in a bonus program during the Employment Period and have a
bonus opportunity which is no less favorable than the bonus opportunity for
other employees of his level at the Company and its Affiliated Companies.
(3) Incentive, Savings and Retirement Plans. During the Employment Period,
the Executive shall be entitled to participate in all cash incentive, equity
incentive, savings and retirement plans, practices, policies, and programs
applicable generally to other peer executives of the Company and the Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and the Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(4) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies. If, on or prior to the Executive's Date of Termination, the Executive
has attained at least age 50 with at least 20 years of service with the Company
(including all cumulative service, notwithstanding any breaks in service) the
Executive shall be entitled to retiree medical and life insurance benefits at
least equal to those that were provided to peer executives of the Company and
the Affiliated Companies and their dependents (taking into account any required
employee contributions, co-payments and similar costs imposed on the executives
and the executives' dependents and the tax treatment of participation in the
plans, programs, practices and policies by the executive and the executives'
dependents) in accordance with the retiree medical plans, programs, practices
and policies of the Company and the Affiliated Companies in effect as of the
Date of Termination.
(5) Expenses. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
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(6) Fringe Benefits. During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.
(7) 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 exclusive personal secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
by the Company and the Affiliated Companies at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.
(8) Vacation. During the Employment Period, the Executive shall be entitled
to paid vacation in accordance with the most favorable plans, policies, programs
and practices of the Company and the Affiliated Companies as in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
Section 4. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of 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 Executive (the "Disability Effective Date"),
provided that, within 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. "Disability" means
the absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness that 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.
(b) Cause. The Company may terminate the Executive's employment during the
Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties (as contemplated by Section
3(a)(1)(A)) with the Company or any Affiliated Company (other than any such
failure resulting from incapacity due to physical or mental illness or
following the Executive's delivery of a Notice of Termination for Good
Reason), after a written demand for substantial performance is delivered to
the
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Executive by the Board or the Chief Executive Officer of the Company that
specifically identifies the manner in which the Board or the Chief
Executive Officer of the Company believes that the Executive has not
substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (excluding the Executive,
if the Executive is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good
Reason. "Good Reason" means:
(1) 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 3(a), or any other diminution in such position (or
removal from such position), authority, duties or responsibilities (whether
or not occurring solely as a result of the Company's ceasing to be a
publicly traded entity or becoming a subsidiary or a division of a publicly
traded entity), excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions of
Section 3(b), other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and that is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive (i) to be based at any
office or location other than as provided in Section 3(a)(1)(B), (ii) to be
based at a location other than the principal executive offices of the
Company if the Executive was employed at such location immediately
preceding the Effective Date, or (iii) to travel on Company
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business to a substantially greater extent than required immediately prior
to the Effective Date;
(4) the failure by the Company to pay to the Executive any portion of
any installment of deferred compensation, or lump sum under any deferred
compensation program of the Company within 7 days after the Executive
provides the Company with written notice of the failure to pay such
compensation when it is due;
(5) the failure by the Company to provide the Executive with the
number of paid vacation days and holidays to which the Executive was
entitled as of the Effective Date;
(6) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(7) any failure by the Company to comply with and satisfy Section
12(c);
(8) if the Company (or the entity effectuating a Change of Control)
continues to exist and be a company registered under the Securities
Exchange Act of 1934, as amended, after the Effective Date and continues to
have in effect an equity-compensation plan, the failure of the Company to
grant to the Executive equity-based compensation with respect to a number
of shares of common stock of the Company (or the entity effectuating the
Change of Control) at least as great as the average annual percentage of
the outstanding common stock of the Company with respect to which the
Executive received such equity-based compensation during the three calendar
years immediately prior to the Effective Date, which equity-based
compensation is on terms, including pricing relative to the market price at
the time of grant, that is at least as favorable to the Executive as the
terms of the grant last made to the Executive prior to the Effective Date;
(9) failure to include the Executive in any program or plan of
benefits (including, but not limited to stock option and deferred
compensation plans), and failure to provide the Executive similar levels of
benefit amounts or coverage, which benefits are either provided or
otherwise offered to peer executives following the Effective Date;
(10) the Executive's termination of employment for Disability.
For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason pursuant
to a Notice of Termination given during the 90-day period immediately following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement. The Executive's mental or
physical incapacity following the occurrence of an event described above shall
not affect the Executive's ability to terminate employment for Good Reason.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 11(b). "Notice of
Termination" means a written notice that (1) indicates the specific termination
provision in this Agreement relied upon, (2) to
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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 (3) if the Date of Termination
(as defined herein) is other than the date of receipt of such notice, specifies
the Date of Termination (which Date of Termination shall be not more than 30
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 that
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's respective rights hereunder.
(e) Date of Termination. "Date of Termination" means (1) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified in the Notice of Termination, (which date shall not be more than 30
days after the giving of such notice), as the case may be, (2) if the
Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
Section 5. Obligations of the Company upon Termination. (a) Good Reason,
Death; Other Than for Cause. If, during the Employment Period, the Company
terminates the Executive's employment other than for Cause or the Executive
resigns for Good Reason or if the Executive's employment is terminated as a
result of the Executive's death:
(1) the Company shall pay to the Executive (or the Executive's estate
or beneficiary, in the event of the Executive's death), in a lump sum in
cash within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, and (ii) any
compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case, to the extent not theretofore paid (the sum of the amounts
described in subclauses (i) and (ii) the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
amount of base salary and cash bonus paid to the Executive by the
Company as reflected on the Executive's W-2 in the tax year
immediately preceding the year in which the Date of Termination occurs
or the Change of Control occurs, whichever is greater;
(2) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's dependents at least equal to those that
were provided to them (taking into account any required employee
contributions, co-payments and similar costs imposed on the
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Executive and the Executive's dependents and the tax treatment of
participation in the plans, programs, practices and policies by the
Executive and the Executive's dependents) in accordance with the plans,
programs, practices and policies described in Section 3(b)(4) as of the
Date of Termination or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of
the Company and the Affiliated Companies and their dependents, provided,
however, that, if the Executive becomes reemployed with another employer
and is eligible to receive such 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. The eligibility of the Executive and the Executive's
dependents, if any, for "COBRA" continuation coverage under Section 4980B
of the Code shall begin on the date that the coverage described in this
Section 5(a)(2) ceases to be provided. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive
for retiree medical and life insurance benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to
have retired on the last day of such period in order to determine age and
service; and
(3) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any Other Benefits (as defined in
Section 6).
(b) Cause; Other Than for Good Reason. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall
provide to the Executive (1) the Executive's Annual Base Salary through the
Date of Termination, (2) the amount of any compensation previously deferred
by the Executive, and (3) the Other Benefits, in each case, to the extent
theretofore unpaid, and shall have no other severance obligations under
this Agreement. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, the Company
shall provide to the Executive the Accrued Obligations and the timely
payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30
days of the Date of Termination.
Section 6. Non-exclusivity of Rights. 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 the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 13(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any other
contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination ("Other Benefits") shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement. In the event that the
Executive's employment is terminated by reason of the Executive's Disability (or
death), with respect to the provision of the Other Benefits, the term "Other
Benefits" shall include, and the Executive (or the estate or beneficiary of the
Executive, in the event of the Executive's death) shall be entitled after the
Disability Effective Date (or upon the Executive's death) to receive, disability
(or death) benefits and other benefits at least equal to the most favorable of
those
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generally provided by the Company and the Affiliated Companies to disabled
executives (or to the estates and beneficiaries of deceased executives) and/or
their families in accordance with such plans, programs, practices and policies
relating to disability (or death), if any, as in effect generally with respect
to other peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and the
Affiliated Companies and their families. Notwithstanding the foregoing, if the
Executive receives payments and benefits pursuant to Section 5(a) of this
Agreement, the Executive shall not be entitled to any severance pay or benefits
under any severance plan, program or policy of the Company and the Affiliated
Companies, unless otherwise specifically provided therein in a specific
reference to this Agreement.
Section 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 that 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 such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred (within 10 days following the Company's
receipt of an invoice from the Executive), to the full extent permitted by law,
all legal fees and expenses that the Executive may reasonably incur 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), plus, in each case, interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
Section 8. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding and except as set forth below, in the
event it shall be determined that any Payment would be subject to the Excise
Tax, then the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount such that, after payment by the Executive of
all taxes (and any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) 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 obligation 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, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Deloitte and Touche
LLP, or such other nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm"). The Accounting Firm
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment or such earlier time as is requested by the
Company. In the event that the Accounting
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Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive may 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 5 days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments that
will not have been made by the Company should have been made (the
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event 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.
(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 10 business days after the Executive is informed
in writing of such claim. The Executive shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) 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,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) 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) 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
11
discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive 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) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the 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.
(e) Notwithstanding any other provision of this Section 8, the Company may,
in its sole discretion, withhold and pay over to the Internal Revenue Service or
any other applicable taxing authority, for the benefit of the Executive, all or
any portion of any Gross-Up Payment, and the Executive hereby consents to such
withholding.
(f) Definitions. The following terms shall have the following meanings for
purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section 4999 of the
Code, together with any interest or penalties imposed with respect to such
excise tax.
(ii) A "Payment" shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.
Section 9. Covenants of Executive. (a) Confidential Information. The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
12
confidential information, knowledge or data relating to the Company or the
Affiliated Companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the Affiliated Companies and which
information, knowledge or data shall not be or become public knowledge (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 the Company
and those persons designated by the Company. 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.
(b) Non-Competition. In consideration for the protections provided to the
Executive under this Agreement, the Executive agrees that from the Date of
Termination until the first anniversary thereof (the "Covenant Period"), the
Executive will not, directly or indirectly, own, manage, operate, control or
participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director or otherwise with, or
(other than through the ownership of not more than five percent (5%) of the
voting stock of any publicly held corporation) have any financial interest in,
or aid or assist anyone else in the conduct of, a business which at the time of
such termination competes in the United States with a business conducted by the
Company or any group, division or subsidiary of the Company ("Company Group") as
of the Date of Termination. Notwithstanding the foregoing, the Executive's
employment by a business that competes with the business of the Company, or the
retention of the Executive as a consultant by any such business shall not
violate this Section 9(b) if the Executive's duties and actions for the business
are solely for groups, divisions or subsidiaries that are not engaged in a
business that competes with a business conducted by the Company. No business
shall be deemed to be a business conducted by the Company unless the Company was
engaged in the business as of the Date of Termination and continues to be
engaged in the business and at least twenty-five percent (25%) of the Company's
consolidated gross sales and operating revenues, or net income, is derived from,
or at least twenty-five percent (25%) of the Company's consolidated assets are
devoted to, such business and no business shall be deemed to compete with a
business conducted by the Company unless at least twenty-five percent (25%) of
the consolidated gross sales and operating revenues, or net income, of any
consolidated group that includes the business, is derived from, or at least
twenty-five percent (25%) of the consolidated assets of any such consolidated
group are devoted to, such business.
(c) Non-Solicitation. During the Covenant Period, the Executive shall not
solicit on the Executive's behalf or on behalf of any other person the services,
as employee, consultant or otherwise of any person who on the Date of
Termination is employed by the Company Group, whether or not such person would
commit any breach of his contract of service in leaving such employment, except
for any employee (i) whose employment is terminated by the Company or any
successor thereof prior to such solicitation of such employee, (ii) who
initiates discussions regarding such employment without any solicitation by the
Executive, (iii) who responds to any public advertisement unless such
advertisement is designed to target, or has the effect of targeting, employees
of the Company, or (iv) who is initially solicited for a position other than by
the Executive and without any suggestion or advice from the Executive. Nothing
herein shall restrict businesses that employ the Executive or retain the
Executive as an
13
executive from soliciting from time to time employees of the Company, if (A)
such solicitation occurs in the ordinary course of filling the business's
employment needs, and (B) the solicitation is made by persons at the business
other than the Executive who have not become aware of the availability of any
specific employees as a result of the advice of the Executive
(d) Continuation of Employment. The Executive agrees not to voluntarily
terminate employment with the Company (other than as a result of an event that
would constitute Good Reason that is at the request of a third party that has
taken steps reasonably calculated to effectuate a Change of Control or otherwise
arose in connection with or in anticipation of a Change of Control) from such
time as the Company has entered into an agreement that would result in a Change
of Control until the Change of Control; provided, that such provision shall
cease to apply upon the termination of such agreement or if the Change of
Control has not occurred within one year following the execution of such
agreement.
Section 10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
specific performance of the Executive's right to be paid any amounts or provided
with any benefits due to the Executive hereunder during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
Section 11. Rabbi Trust. Immediately prior to a Change of Control, the
Company shall deposit in a trust designed in accordance with Revenue Procedure
92-64 or any successor thereto having a trustee independent of the Company and
any successor thereto an amount equal to the total amount necessary to make the
payments to the Executive or the Executive's estate as contemplated by Sections
5 and 8. The Executive shall be entitled to receive funds held in such trust
from the trustee upon the Executive's delivery to the trustee of a written
certification by the Executive that a termination of the Executive's employment
has occurred and that, as a result, the Executive is entitled to payment under
Section 5 or 8 hereof. Any funds which the Executive so receives shall be
credited against the amount owed by the Company to the Executive pursuant to
this Agreement. The Company shall pay any and all expenses of establishing and
maintaining the trust.
Section 12. Successors. (a) This Agreement is personal to the Executive,
and, without the prior written consent of the Company, shall not be
assignable by the Executive other 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) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. Except as provided in Section 12(c),
without the prior written consent of the Executive this Agreement shall not be
assignable by the Company.
(c) The Company will require 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
14
succession had taken place. "Company" means the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law or otherwise.
Section 13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania, 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 or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At the most recent address on
record at the Company.
if to the Company:
Mylan Laboratories Inc.
1030 Century Building
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
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 United States federal, state or local or foreign 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 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
under Sections 4(c), shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and,
subject to Section
15
1(a), prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under this Agreement.
From and after the Effective Date, except for any agreements providing for
retirement benefits and as otherwise specifically provided herein, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, including, without limitation, any employment
agreement and the Transition and Succession Agreement, dated as of November 10,
1999 between the parties.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
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EXECUTIVE
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MYLAN LABORATORIES INC.
