Exhibit 10.7
February 21, 2001
Xxxxx X. Xxxxxxxx
00000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
PERSONAL AND CONFIDENTIAL
Dear Xxxxx:
Last October you and Xxxxxxx-Xxxxx Squibb Company ("Xxxxxxx-Xxxxx
Squibb") executed a letter agreement dated October 19, 2000 (the "2000
Agreement") that described the bonus payments and other incentives that you
would receive in the event that Xxxxxx, Inc. ("Xxxxxx") was sold to a
third-party entity on or before September 30, 2001. It now appears possible that
Xxxxxxx-Xxxxx Squibb may divest its interest in Xxxxxx through a "spin-off"
transaction involving the distribution of Xxxxxx stock to Xxxxxxx-Xxxxx Squibb
shareholders (the "Spin-Off"). The Spin-Off may be preceded by a public offering
of Xxxxxx shares (the "IPO"). During the divestiture process, we believe that
operating the Xxxxxx business as usual is in the best interests of Xxxxxxx-Xxxxx
Squibb, Xxxxxx and its employees. To provide assurance to you and to help ensure
that the Xxxxxx business is managed and operated efficiently and effectively
both before and after the divestiture, Xxxxxxx-Xxxxx Squibb and Xxxxxx wish to
offer you the incentives described in this letter. If these incentives are
satisfactory and you wish to participate, please sign and return this letter in
the manner described on the last page of this letter.
The terms and conditions of this letter agreement will apply in the
event of an IPO or Spin-Off of Xxxxxx that occurs on or before September 30,
2001 and, with respect to payments and benefits contingent upon a Spin-Off, the
consummation of the Spin-Off on or before March 31, 2002. In the event of a
disposition of Xxxxxx which is not an IPO or Spin-Off occurring on or before
September 30, 2001 and, with respect to payments and benefits contingent upon a
Spin-Off, if the Spin-Off is not completed on or before March 31, 2002, the
terms and conditions of this letter agreement will terminate and will not apply.
Please note that if Xxxxxx is sold to a third party entity on or before
September 30, 2001, you will receive the bonus payments and other incentives
subject to the conditions described in the 2000 Agreement.
As a member of the Xxxxxx management team, you are expected to carry
out the duties and responsibilities of your job during the coming months. In
addition, your assistance
Xxxxx X. Xxxxxxxx
February 21, 2001
Page 2
will be necessary to complete the divestiture process. For your extra efforts
and cooperation in helping Xxxxxxx-Xxxxx Squibb and Xxxxxx during this period,
you will be provided with the following incentives, subject to all of the terms
and conditions of this letter agreement:
1. SPECIAL STOCK OPTION AWARD. Effective on the date of the Spin-Off or, if it
occurs first, the IPO (the "Effective Date"), you will receive an option to
purchase shares of Xxxxxx stock with an economic value at the time of grant of
$175,000 using a generally accepted valuation methodology. This option will be
issued under a new option and equity compensation plan (the "Xxxxxx Stock
Incentive Plan") that will be adopted by Xxxxxx'x Board of Directors. Your
option will vest in equal installments over a period of four years provided that
you remain employed with Xxxxxx during that time, or as provided otherwise under
the Xxxxxx Stock Incentive Plan. The exercise price will equal the fair market
value of Xxxxxx stock at the time the option is granted.
2. SPECIAL RESTRICTED STOCK AWARD. As of the Effective Date, you will receive a
grant of Xxxxxx restricted stock with a value (determined as if no restrictions
applied) of $60,000. The restricted stock will vest in three equal installments
on the third, fourth and fifth anniversaries of the grant of the award provided
that you remain employed with Xxxxxx during that time. Any dividends that are
payable on Xxxxxx stock will be paid to you on this restricted stock on a
current basis. This restricted stock will also be issued under the Xxxxxx Stock
Incentive Plan.
3. CONVERSION OF OUTSTANDING STOCK OPTIONS. Any Xxxxxxx-Xxxxx Squibb stock
options granted to you prior to the Effective Date (including, but not limited
to, the options awarded to you on January 3, 2000 pursuant to a 50% reduction in
target cash bonus under the Xxxxxxx-Xxxxx Squibb Company Performance Incentive
Plan ("PIP")) that are outstanding on the date of the Spin-Off, will be
converted into new Xxxxxx stock options. The number of shares and the exercise
price of your new Xxxxxx options will be determined by the Xxxxxxx-Xxxxx Squibb
Board of Directors based upon a conversion ratio that will be used for all
Xxxxxx employees and that preserves any gains earned through the date of
conversion. Your new Xxxxxx options will be vested in the same proportion that
your Xxxxxxx-Xxxxx Squibb options were vested and the nonvested portion of your
new Xxxxxx options will vest from the original grant date of your Xxxxxxx-Xxxxx
Squibb options according to the vesting schedule in such Xxxxxxx-Xxxxx Squibb
options. Certain of your Xxxxxxx-Xxxxx Squibb options were subject to a price
appreciation threshold of 30% for a period of eight years following grant. Your
new Xxxxxx options will also be subject to a 30% price appreciation threshold
that will be based upon the adjusted exercise price of your Xxxxxx options and
future share price appreciation of Xxxxxx shares subject to the requirement that
the price appreciation threshold be met for 15 consecutive trading days. Any
Xxxxxxx-Xxxxx Squibb stock options granted to you after the date of this letter
agreement that are converted into new Xxxxxx stock options will reflect any
applicable conditions to exercisability such as vesting requirements or price
appreciation thresholds.
Xxxxx X. Xxxxxxxx
February 21, 2001
Page 3
4. CONVERSION OF RESTRICTED STOCK AWARDS. Your Xxxxxxx-Xxxxx Squibb restricted
shares that are unvested as of the Effective Date, including those that you have
held less than one year from their date of grant, will be exchanged for Xxxxxx
restricted shares of equal value (in each case determined as if no restrictions
applied) determined on the Effective Date. Your restricted Xxxxxx shares shall
be subject to vesting based upon the vesting schedule of the original
Xxxxxxx-Xxxxx Squibb restricted share grant.
5. 2001 PERFORMANCE INCENTIVE PLAN. Your 2001 payment under the PIP will be
calculated in accordance with the following terms and conditions: (i) your full
target bonus will be in effect in 2001; (ii) your payment will be based upon
actual results versus targeted performance criteria through the Effective Date,
subject to the established PIP payout schedule; (iii) if the Effective Date is
on or before June 30, 2001, a six-month bonus payment will be made; (iv) if the
Effective Date occurs after June 30, 2001, you will accrue additional months of
bonus credit beyond six months subject to any applicable conditions of the PIP;
and (v) your 2001 PIP payment will be made on December 15, 2001 and February 15,
2002 consistent with the current plan provisions, provided that you remain
employed with Xxxxxx through the aforementioned payment dates.
6. SPECIAL SEVERANCE UPON TERMINATION OF EMPLOYMENT. In addition to the other
payments specified in this letter agreement, you may be eligible for special
severance payments pursuant to either (A) or (B) below (note that should you
become reemployed by Xxxxxxx-Xxxxx Squibb or any of its affiliates following
your receipt of severance payments, you may be obligated to repay a portion of
any severance payments as required by the Xxxxxxx-Xxxxx Squibb Company Severance
Plan ("BMS Severance Plan")). The special severance payments described in this
letter agreement will be in lieu of, and not in addition to, the severance (if
any) that might ordinarily have been payable to you under the terms of the BMS
Severance Plan.
A. EMPLOYMENT CONTINUED BY XXXXXX BUT TERMINATED WITHIN 12 MONTHS. In
the event that your employment with Xxxxxx is initially continued
after the Effective Date, but is subsequently terminated prior to
the first anniversary of the date of the Spin-Off, and you do not
at such time become reemployed by Xxxxxxx-Xxxxx Squibb or any of
its affiliates, you will receive severance "make-up" benefits (in
lieu of any amount payable pursuant to the BMS Severance Plan). The
severance benefits hereunder, when combined with any severance
payments from Xxxxxx for which you may be eligible, will increase
your total severance benefits under this paragraph to an amount
equal to one year of your base salary at the rate in effect on the
date immediately prior to the Effective Date (regardless of the
amount that you would otherwise be entitled to receive under the
terms of the BMS Severance Plan, unless such amount would be
greater than one year of your base salary, in which case your total
severance amount will be increased to such greater amount). The
severance make-up benefits described in this paragraph will be paid
to you in accordance with the payment schedule and subject to all
of the
Xxxxx X. Xxxxxxxx
February 21, 2001
Page 4
terms and conditions of the BMS Severance Plan in effect as of the
Effective Date, (including but not limited to the terms providing
for the eligibility for severance pay, and the determination of
which circumstances constitute a termination pursuant to which
severance pay would be payable).
B. EMPLOYMENT NOT CONTINUED BY XXXXXX. In the event that your
employment is not continued by Xxxxxx as of the Effective Date, and
you have neither been retained nor reemployed by Xxxxxxx-Xxxxx
Squibb at such time, you will be eligible to receive a severance
benefit in an amount equal to one year of your base salary at the
rate in effect on the date immediately prior to the Effective Date,
(regardless of the amount that you would otherwise be entitled to
receive under the terms of the BMS Severance Plan, unless such
amount would be greater than one year of your base salary, in which
case your total severance amount will be increased to such greater
amount). The severance benefits described herein will be paid to
you in accordance with the payment schedule and subject to all of
the terms and conditions of the BMS Severance Plan in effect as of
the Effective Date, (including but not limited to the terms
providing for the eligibility for severance pay, and the
determination of which circumstances constitute a termination
pursuant to which severance pay would be payable). You acknowledge
and agree that, in the event that Xxxxxx provides severance
payments to you, whether through contractual obligation or
otherwise, the amount of severance payments that you actually
receive from Xxxxxx will set off and reduce Xxxxxxx-Xxxxx Squibb's
obligations under this subparagraph (B) on a dollar-for-dollar
basis.
7. VESTING IN PENSION PLAN AND SAVINGS PLAN. In addition to the incentives
specified in this letter agreement, your unvested benefits under the
Xxxxxxx-Xxxxx Squibb Company Retirement Income Plan and the Xxxxxxx-Xxxxx Squibb
Company Savings and Investment Program will become fully vested as of the
consummation of the Spin-Off.
8. CONDITIONS OF THIS LETTER AGREEMENT. The incentive payments and benefits
described in this letter agreement are contingent upon: (a) the Effective Date
occurring on or before September 30, 2001 and, with respect to payments and
benefits contingent upon a Spin-Off, the consummation of the Spin-Off on or
before March 31, 2002; (b) your continuous employment with Xxxxxx through and
including the date of the relevant award, and your cessation of employment
within the Xxxxxxx-Xxxxx Squibb controlled group (as defined under section
1563(a) of the Internal Revenue Code) as a result of the Spin-Off; (c) your
execution on the date of the consummation of the Spin-Off, and the
effectiveness, of a general release in favor of Xxxxxxx-Xxxxx Squibb, its
affiliates, and others related to such entities (including but not limited to
their directors, officers, employees) and a limited release of Xxxxxx, its
affiliates, and others related to such entities (including but not limited to
their directors, officers, employees) with respect to
Xxxxx X. Xxxxxxxx
February 21, 2001
Page 5
Xxxxxx'x obligations in connection with the Spin-Off, in form and substance
satisfactory to Xxxxxxx-Xxxxx Squibb and Xxxxxx, (d) your honoring the need for
strict confidentiality regarding the IPO and the Spin-Off and the terms of this
letter agreement, neither of which should be discussed with anyone (other than
your personal financial or legal advisors) without the express and specific
permission of Xxxxxx X. Xxxxxxxx, Senior Vice President, Corporate Development,
it being acknowledged that matters relating to the IPO and the Spin-Off (except
the terms of this letter agreement) may be discussed only with employees of
Xxxxxxx-Xxxxx Squibb and its affiliates and their legal and financial advisors
who are participating in the IPO and the Spin-Off process and no others (and
then only with those individuals on a "need to know" basis); (e) your providing
full support and cooperation in the best interests of Xxxxxxx-Xxxxx Squibb and
Xxxxxx up to and including the date of the Spin-Off; and (f) following the
Spin-Off, your taking no action, excluding normal competitive activity not
contrary to law and not inconsistent with your other contractual obligations to
Xxxxxxx-Xxxxx Squibb, Xxxxxx or their affiliates, but including any actions
prohibited by this letter agreement, which would be considered contrary to the
best interests of Xxxxxxx-Xxxxx Squibb, Xxxxxx or their affiliates.
9. NON-COMPETE AND NON-SOLICITATION. As a condition to your receipt of any
payments or benefits under this letter agreement, you agree that, for a period
commencing on the date of your execution of this letter agreement and ending on
the date which is one year after the consummation of the Spin-Off you will not,
directly or indirectly, (i) own, manage, control or participate in the
ownership, management or control of, be employed or engaged by or otherwise
affiliated or associated as a consultant, independent contractor or otherwise
with, any other corporation, partnership, proprietorship, firm, association, or
other business entity, or otherwise engage in any business, which is engaged in
any manner in, or otherwise competes with, the business of Xxxxxx or any of its
affiliates in the United States of America or any of the countries in which
Xxxxxx or any of its affiliates is doing business, (ii) solicit on behalf of any
other corporation, partnership, proprietorship, firm, association, or other
business entity, any person or business that is a customer or supplier of Xxxxxx
or any of its affiliates, or (iii) solicit for employment, hire, employ, or
retain in any capacity (including but not limited to as an employee, director,
independent contractor, consultant or otherwise), other than for employment
within Xxxxxx or its affiliates in conjunction with the IPO and Spin-Off or
within Xxxxxxx-Xxxxx Squibb or its affiliates, any person who is employed or
otherwise engaged on a full or part-time basis by Xxxxxxx-Xxxxx Squibb or its
affiliates (including but not limited to Xxxxxx). You understand and agree that
a breach by you of this paragraph would be a material breach of your obligations
under this letter agreement, and that, if any amounts have been provided to you
under the terms of this letter agreement prior to any such breach, in addition
to any other remedy that may be available to Xxxxxxx-Xxxxx Squibb in law or at
equity, upon demand, you will promptly return all such amounts to Xxxxxxx-Xxxxx
Squibb or Xxxxxx as appropriate.
10.NOT AN EMPLOYMENT AGREEMENT. The terms of this letter agreement neither bind
you to continued employment with Xxxxxxx-Xxxxx Squibb, Xxxxxx, their affiliates
or any successor
Xxxxx X. Xxxxxxxx
February 21, 2001
Page 6
thereto, nor confer any rights upon you with respect to the continuation of
employment by Xxxxxxx-Xxxxx Squibb, Xxxxxx, their affiliates or any successor
thereto.
11.WITHHOLDING. It is understood and agreed that all amounts, payments or
benefits payable to you as described in this letter agreement represent gross
amounts (as opposed to net after-tax amounts), and that Xxxxxxx-Xxxxx Squibb,
Xxxxxx or its affiliates or agents are hereby authorized to withhold any and all
applicable withholdings and taxes from any such amounts, payments or benefits.
12.EXCLUSIVE RETENTION AND SEVERANCE BENEFIT. In the event that any or all
other employees of Xxxxxx receive or are offered either a retention or similar
bonus payable upon or in connection with the IPO or the Spin-Off (a "Retention
Bonus"), or an enhanced severance benefit payable upon or in connection with the
IPO or the Spin-Off, you understand and agree that you will not be eligible to
receive such Retention Bonus or enhanced severance benefit, except as explicitly
set forth in this letter agreement.
13.RETURN OF COMPANY PROPERTY AND USE OF COMPANY PERQUISITES. In the event of
your separation from Xxxxxxx-Xxxxx Squibb, Xxxxxx or their affiliates (whether
prior to or in connection with the IPO or Spin-Off), you agree to return all
property belonging to Xxxxxxx-Xxxxx Squibb, Xxxxxx or their affiliates
(including but not limited to any company laptop or computers, and other
equipment, documents and property belonging to Xxxxxxx-Xxxxx Squibb, Xxxxxx or
their affiliates) upon such separation (in accordance with the normal practice
relating thereto); provided, however, at Xxxxxx'x discretion, you may continue
to retain use of your employer-provided automobile.
14.GOVERNING LAW; JURISDICTION. This letter agreement will be governed by and
construed under the laws of the State of New York, without regard to its
principles of conflict of laws. You and Xxxxxxx-Xxxxx Squibb agree to submit to
the jurisdiction of the courts of the state of New York in the event of any
dispute regarding this letter agreement.
Please acknowledge your understanding of and agreement to the provisions of this
letter agreement by signing and returning a copy of this letter to me by March
9, 2001.
Very truly yours,
Xxxxxx X. Xxxxxxxx
Senior Vice President
Corporate Development
Xxxxxxx-Xxxxx Squibb Company
Xxxxx X. Xxxxxxxx
February 21, 2001
Page 7
Xxxxx X. Xxxxxxxx
Xxxxxx, Inc.
AGREED TO AND ACCEPTED:
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DATE:
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