Exhibit 10.1
RESTATED EXECUTIVE SEVERANCE
AGREEMENT
This Severance
Agreement is made as of the 24th day of June 2008 by and
between Cephalon, Inc., a Delaware corporation (the
“Company”), and Frank Baldino, Jr., Ph.D.
(“Executive”).
WHEREAS, Executive
is an executive of the Company, currently serving as its Chairman
and Chief Executive Officer; and
WHEREAS, the
Company and Executive previously entered into that certain
Executive Severance Agreement, dated as of July 25, 2002, (the
“Severance Agreement”), pursuant to which Executive is
entitled to certain payments and benefits in the event that
Executive’s employment is terminated on account of a reason
set forth in the Severance Agreement; and
WHEREAS
, the Company and
Executive desire to restate the Severance Agreement to include the
terms of Amendment 2008-1 to the Severance Agreement dated
June 23, 2008.
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth and intending to be legally bound
hereby, the Company and Executive (individually a
“Party” and together, the “Parties”) agree
to restate the Agreement as follows:
1. Definitions
.
(a) “
Annual Base Salary ” shall mean twelve times the
greater of (i) the highest monthly base salary paid or payable
(including any base salary which has been earned but deferred) to
the Executive by the Company and its affiliates (as defined in
section 1504 of the Code without regard to subsection
(b) thereof), together with any and all salary reduction
authorized amounts under any of the Company’s benefit plans
or programs, or (ii) the monthly base salary paid or payable
to the Executive by the Company (including authorized deferrals,
salary reduction amounts and any car allowance) immediately prior
to the Executive’s Termination Date.
(b) “
Annual Bonus ” shall mean 100% of Executive’s
target annual bonus for the year in which Executive’s
Termination Date occurs, plus 100% of any other bonuses Executive
receives, or is entitled to receive, during the year in which
Executive’s Termination Date occurs, including, but not
limited to, bonuses under the Company’s executive special
bonus program.
(c) “
Board ” shall mean the Board of Directors of the
Company.
(d) “
Bonus Multiplier ” shall mean the quotient determined
by dividing the total number of months in which the Executive
performed services for the Company during the calendar year in
which his Termination Date occurs divided by 12.
(e) “
Cause ” shall mean Executive has engaged in any act of
unethical conduct, willful misconduct, fraud or embezzlement, any
unauthorized disclosure of confidential
information or trade
secrets, or any other act that is materially and demonstrably
detrimental to the Company.
(f) “
Change in Control ” shall be deemed to have occurred
if any of the following events occurs:
(i)
the direct or indirect acquisition by any person or related group
of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control
with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934) of
securities possessing more than thirty percent (30%) of the
combined voting power of the Company’s outstanding securities
pursuant to a tender or exchange offer made directly to the
Company’s shareholders which the Board does not recommend
such shareholders to accept;
(ii)
a change in the composition of the Board over a period of
twenty-four (24) months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either
(x) have been Board members continuously since the beginning
of such period, or (y) have been elected or nominated for
election as Board members during such period by at least a majority
of the Board members described in clause (x) who were still in
office at the time such election or nomination was approved by the
Board;
(iii)
a merger or consolidation in which securities possessing more than
fifty percent (50%) of the combined voting power of the
Company’s outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such transaction; or
(iv)
the sale, transfer or other disposition of more than seventy-five
percent (75%) of the Company’s assets in a single or related
series of transactions.
(g) “
Code ” means the Internal Revenue Code of 1986, as
amended.
(h) “
Constructive Termination ” means:
(i)
with respect to a termination of employment prior to a Change in
Control, Executive’s voluntary resignation following either
of the following events: (x) a change in his position with the
Company which materially reduces his level of responsibility or
(y) a reduction in his base salary by more than twenty-five
percent (25%); or
(ii)
with respect to a termination of employment after, or in connection
with, a Change in Control, Executive’s voluntary resignation
following any of the following events: (x) a change in his
position with the Company or the successor thereto which materially
reduces his level of responsibility; (y) a reduction in his
level of compensation (including base salary, significant fringe
benefits or any non-discretionary and objective-standard incentive
payment or bonus award) by more than ten percent (10%) in the
aggregate; or (z) a relocation of the Executive’s place
of employment by more than fifty (50) miles; provided, however,
such
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change, reduction or
relocation is effected by the Company or the successor thereto
without Executive’s consent.
(i) “
Disability ” shall mean Executive is, by reason of any
medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of not less than
one year, unable to engage in any substantial gainful employment or
service.
(j) “
Notice of Termination ” means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, and (ii) briefly summarizes the facts
and circumstances deemed to provide a basis for termination of the
Executive’s employment under the provision so
indicated.
(k) “
Termination Date ” shall mean the last day of
Executive’s employment with the Company.
(l) “
Termination of Employment ” shall mean the termination
of Executive’s active employment relationship with the
Company.
2. Termination of
Employment Prior to a Change in Control .
(a) Termination
Prior to a Change in Control . In the event that
Executive’s employment with the Company is terminated prior
to a Change in Control on account of: (i) an involuntary
termination by the Company for any reason other than Cause, death
or Disability, or (ii) the Executive voluntarily terminates
employment with the Company on account of a Constructive
Termination, Executive shall be entitled to the benefits provided
in subsection (b) of this Section 2.
(b)
Compensation Upon Termination Prior to Change in Control
. Subject to the provisions of Section 5 hereof, in the
event a termination described in subsection (a) of this
Section 2 occurs, the Company shall provide Executive with the
following, provided that Executive executes and does not revoke the
Release (as defined in Section 5):
(i)
Executive shall receive a cash payment equal to the sum of
(x) three (3) times Executive’s Annual Base Salary
at the rate in effect immediately before Executive’s
Termination Date, (y) three (3) times Executive’s
Annual Bonus, and (z) the Bonus Multiplier times
Executive’s Annual Bonus. Except as provided in
Section 24(b), payment shall be made in a lump sum within
sixty (60) days after Executive’s Termination Date, but in no
event earlier than the date on which the revocation period for the
Release has expired.
(ii)
Executive shall receive a cash payment equal to the premium cost
that Executive would have to pay, at COBRA rates as in effect on
Executive’s Termination Date, to continue the Company’s
medical and dental coverage for Executive and, where applicable,
Executive’s spouse and dependents, if receiving such coverage
on Executive’s Termination Date, for a period of thirty-six
(36) months following Executive’s Termination Date, plus an
additional amount to fully gross-up Executive for any ordinary
income taxes that result from such payment, so that the after-tax
amount that Executive will receive will be equivalent to the COBRA
rates for such coverage.
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Except as provided in
Section 24(b), payment shall be made in a lump sum within
sixty (60) days after Executive’s Termination Date, but in no
event earlier than the date on which the revocation period for the
Release has expired.
(iii)
The Company shall cover the cost of reasonable outplacement
assistance services for Executive that are directly related to
Executive’s termination of employment with the Company and
are actually provided by an outplacement agency selected by
Executive, in an amount not to exceed $15,000; provided, however,
that the period during which the outplacement assistance services
will be covered and the reimbursements paid does not extend beyond
the period set forth in Treas. Reg.
§1.409A-1(b)(9)(v)(E).
(iv)
Executive shall receive any amounts earned, accrued or owing but
not yet paid to Executive as of Executive’s Termination Date,
payable in a lump sum, and any benefits accrued or earned in
accordance with the terms of any applicable benefit plans and
programs of the Company.
(c) Notice of
Termination . Any termination on account of this
Section 2 shall be communicated by a Notice of Termination to
the other Parties hereto given in accordance with Section 18
hereof.
3. Termination of
Employment on Account of a Change in Control .
(a) Termination
on Account of a Change in Control . In the event that
Executive’s employment with the Company is terminated after,
or in connection with, a Change in Control on account of:
(i) an involuntary termination by the Company following a
Change in Control for any reason other than Cause, death or
Disability, (ii) the Executive voluntarily terminates
employment with the Company following a Change in Control on
account of a Constructive Termination, (iii) by the Company
(other than for Cause, death or Disability) prior to or in
connection with an anticipated Change in Control at the request or
direction of the acquirer involved in the Change in Control, or
(iv) voluntarily by Executive for any reason (other than for
death, Disability, or under circumstances in which Executive
engaged in conduct that would constitute Cause) during the thirty
(30) day period immediately following the first anniversary of the
occurrence of a Change in Control, Executive shall be entitled to
the benefits provided in subsection (b) of this
Section 3. If Executive is entitled to benefits
described in subsection (b) of this Section 3 by reason
of clause (a)(iii) above, Executive shall be entitled to such
benefits upon his Termination of Employment regardless of whether
the Change in Control actually occurs.
(b)
Compensation in Connection With a Termination on Account of a
Change in Control . Subject to the provisions of
Section 5 hereof, in the event a termination described in
subsection (a) of this Section 3 occurs, the Company
shall provide Executive with the following, provided that Executive
executes and does not revoke the Release:
(i)
Executive shall receive a cash payment equal to the sum of
(x) three (3) times Executive’s Annual Base Salary
at the rate in effect immediately before Executive’s
Termination Date, (y) three (3) times Executive’s
Annual Bonus, and (z) the Bonus Multiplier times
Executive’s Annual Bonus. Except as provided in
Section 24(b),
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payment shall be made
in a lump sum within sixty (60) days after Executive’s
Termination Date, but in no event earlier than the date on which
the revocation period for the Release has expired.
(ii)
Executive shall receive a cash payment equal to the premium cost
that Executive would have to pay, at COBRA rates as in effect on
Executive’s Termination Date, to continue the Company’s
medical and dental coverage for Executive and, where applicable,
Executive’s spouse and dependents, if receiving such coverage
on Executive’s Termination Date, for a period of thirty-six
(36) months following Executive’s Termination Date ,
plus an additional amount to fully gross-up Executive for any
ordinary income taxes that result from such payment, so that the
after-tax amount that Executive will receive will be equivalent to
the COBRA rates for such coverage. Except as provided in
Section 24(b), payment shall be made in a lump sum within
sixty (60) days after Executive’s Termination Date, but in no
event earlier than the date on which the revocation period for the
Release has expired.
(iii)
All stock options and restricted stock held by Executive will
become fully vested and/or exercisable, as the case may be, on the
Termination Date, and all stock options shall remain exercisable
after Executive’s Termination Date as set forth in the
applicable option agreements with the Company.
(iv)
The Company shall cover the cost of reasonable outplacement
assistance services for Executive that are directly related to
Executive’s termination of employment with the Company and
are actually provided by an outplacement agency selected by
Executive, in an amount not to exceed $15,000; provided, however,
that the period during which the outplacement assistance services
will be covered and the reimbursements paid does not extend beyond
the period set forth in Treas. Reg.
§1.409A-1(b)(9)(v)(E).
(v)
Executive shall receive any amounts earned, accrued or owing but
not yet paid to Executive as of Executive’s Termination Date,
payable in a lump sum, and any benefits accrued or earned in
accordance with the terms of any applicable benefit plans and
programs of the Company.
(c) Notice of
Termination . Any termination on account of this
Section 3 shall be communicated by a Notice of Termination to
the other Parties hereto in accordance with Section 18
hereof.
4. Termination of
Employment on Account of Disability . Notwithstanding
anything in this Agreement to the contrary, if Executive’s
employment terminates on account of Disability, Executive shall be
entitled to receive disability benefits under any disability
program maintained by the Company that covers Executive, and
Executive shall not be considered to have terminated employment
under this Agreement and shall not receive benefits pursuant to
Sections 2 and 3 hereof.
5. Release
. Notwithstanding the foregoing, no such payments shall be
made unless Executive executes, and does not revoke, the
Company’s standard written release (the
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“Release”),
of any and all claims against the Company and all related parties
with respect to all matters arising out of Executive’s
employment by the Company (other than any entitlements under the
terms of this Agreement or under any other plans or programs of the
Company in which Executive participated and under which Executive
has accrued or become entitled to a benefit) or the termination
thereof.
6. Other
Payments . The payments due under Sections 2 and 3 hereof
shall be in addition to and not in lieu of any payments or benefits
due to Executive under any other plan, policy or program of the
Company, except that no cash payments shall be paid to Executive
under the Company’s then current severance pay
policies.
7. Enforcement
.
(a) In the event
that the Company shall fail or refuse to make payment of any
amounts due Executive under Sections 2, 3 and 6 hereof within the
respective time periods provided therein, the Company shall pay to
Executive, in addition to the payment of any other sums provided in
this Agreement, interest, compounded daily, on any amount remaining
unpaid from the date payment is required under Sections 2, 3 and 6,
as appropriate, until paid to Executive, at the rate from time to
time announced by First Union Bank as its “prime rate”
plus 2%, each change in such rate to take effect on the effective
date of the change in such prime rate.
(b) It is the
intent of the Parties that Executive not be required to incur any
expenses associated with th
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