EXHIBIT 10.16
FORM OF CHANGE IN CONTROL AGREEMENT FOR CERTAIN OFFICERS
OF ▇▇▇▇▇▇▇ RIVER LABORATORIES, INC.
AGREEMENT
This Agreement, dated ___________, 2004 (the "EFFECTIVE DATE"), is made
by and between ▇▇▇▇▇▇▇ River Laboratories, Inc., a Delaware corporation (the
"COMPANY") and [NAME] (the "EXECUTIVE").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to ▇▇▇▇▇▇ the continuous employment of key management
personnel;
WHEREAS, the Board of Directors of the Company (the "BOARD") recognizes
that, as is the case with many publicly-held corporations, the possibility of a
Change in Control (as defined below) exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its shareholders;
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control; and
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINED TERMS. Capitalized terms, not elsewhere defined in this
Agreement, are defined in Section 16 hereof.
2. TERMS OF AGREEMENT. (a) This Agreement shall commence as of the
Effective Date and shall continue in effect while the Executive is employed
by the Company for a period of three years; PROVIDED, however, that
commencing on the third anniversary of the Effective Date and on each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than 90-days prior to any
such anniversary date either party shall have given notice that it does not
wish to extend this Agreement. Notwithstanding the foregoing, if a Change in
Control shall have occurred during the original or extended term of this
Agreement, (i) this Agreement shall continue in effect for a period of 36
months beyond the month in which such Change in Control occurred and (ii) any
notice of nonrenewal given by the Company during the twelve months prior to
such Change in Control shall be deemed
revoked and this Agreement shall be reinstated as if never terminated in
accordance with such notice.
(b) It is intended, and the parties hereto agree, that (i) the benefit, if
any, payable to the Executive under any other severance or termination pay plan,
arrangement or agreement of or with the Company shall be reduced by the amount
of any payment actually provided under Section 6.1 hereof, (ii) any option to
acquire shares of the Company's common stock awarded to the Executive under any
stock option or other long-term incentive plan of the Company shall become fully
exercisable upon the occurrence of a Change in Control during the term of the
Agreement, and (iii) and restrictions on any shares of restricted stock held by
the Executive shall fully lapse upon the occurrence of a Change in Control
during the term of this Agreement, provided that nothing herein shall otherwise
affect or modify the terms of any such option or restricted stock or the
Executive's right or obligations with respect thereof.
3. COMPANY'S COVENANTS SUMMARIZED. In order to induce the Executive to
remain in the employ of the Company, and in consideration of the Executive's
covenant set forth in Section 4 hereof, the Company agrees to compensate the
Executive as set forth herein, upon the terms and under the conditions described
herein, in the event the Executive's employment with the Company is terminated
under the circumstances described below following a Change in Control and during
the term of this Agreement. No amount or benefit shall be payable under this
Agreement unless there shall have been (or under the terms hereof, there shall
be deemed to have been) a termination of the Executive's employment with the
Company following a Change in Control.
4. THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in Control
during the term of this Agreement, the Executive will remain in the employ of
the Company until the earliest of (a) a date which is six (6) months after the
date of such Change in Control, (b) the date, after such Change in Control, of
termination by the Executive of the Executive's employment for Good Reason, or
termination of Executive's employment by reason of Death, Disability or
Retirement, or (c) the termination by the Company, after such Change in Control,
of the Executive's employment for any reason.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENT.
5.1. DISABILITY. Following a Change in Control during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall continue to pay the Executive's full salary to
the Executive at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period, until the Executive's employment is terminated
by the Company for Disability.
5.2. SALARY CONTINUATION. If the Executive's employment shall be
terminated for any reason following a Change in Control and during the term of
this Agreement, the Company shall pay the Executive's full salary to the
Executive through the Date of Termination at the rate in effect at the time the
Notice of Termination is given, together with all compensation and benefits
payable to the Executive through the Date of Termination under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period.
5.3. OTHER POST-TERMINATION COMPENSATION. If the Executive's
employment shall be terminated for any reason following a Change in Control and
during the term of this Agreement, the Company shall, except as provided in
Section 2 above, pay the Executive's normal post-termination compensation and
benefits to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other compensation or benefit
plans, programs, agreements or arrangements.
6. COMPANY OBLIGATIONS UPON TERMINATION. If, during the term of this
Agreement and on or before the first anniversary of a Change in Control, (i) the
Company shall terminate the Executive's employment other than for Cause, Death
or Disability or (ii) the Executive shall terminate his employment for Good
Reason, then the Company shall pay to the Executive the payments set forth in
Sections 6.1, 6.2, if applicable, 6.3 and 22.4 hereof (collectively, the
"SEVERANCE PAYMENTS") in addition to the payments and benefits described in
Sections 5 and 6.6 hereof. The Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason if the Executive's employment is terminated
without Cause prior to a Change in Control at the direction of a Person who has
entered into or has proposed to enter into an agreement with the Company the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment with Good Reason prior to a Change in Control if the
circumstances or event which constitutes Good Reason occurs at the direction of
such Persons; PROVIDED in either case that a Change in Control involving such
other Person is consummated within 12 months after any such direction.
6.1. SEVERANCE PAYMENT. In lieu of any further salary payments to the
Executive for periods subsequent to the date of Termination, the Company shall
pay the Executive a lump sum severance payment, in cash, equal to [ ] times
(i.e., [ ]% of) the sum of the Executive's then base salary plus the target
bonus contained in the Executive Bonus Plan for the fiscal year in which the
Date of Termination occurs.
6.2. GOLDEN PARACHUTE EXCISE TAX. The Company intends that the
Executive shall generally not bear the economic effect of the excise tax imposed
by Section 4999 of the Internal Revenue Code on so-called golden parachute
payments. This provision shall be implemented in accordance with the provisions
of Annex 1. However, if a small (up to 15%) reduction in the Executive's
entitlements would greatly minimize
the Company's costs in providing the excise tax protection, the Company will
reduce the amounts paid to the Executive hereunder to that small extent.
6.3. RETIREMENT PLAN PAYMENTS. In the event the Executive was a
participant in the ▇▇▇▇▇▇▇ River Laboratories, Inc. Pension Plan (or any
successor plan thereto) (the "PENSION PLAN") on or prior to the Date of
Termination, the Company shall pay to the Executive a separate lump-sum
supplemental retirement benefit (the "SUPPLEMENTAL RETIREMENT AMOUNT") equal to
the difference between (1) the actuarial equivalent of the benefit payable under
the Pension Plan which the Executive would receive if the Executive's employment
continued for the [ ] years following the Date of Termination and if his
compensation during such number of years increased at a rate of 4% per year from
the level in effect on the Date of Termination, and (2) the actuarial equivalent
of the Executive's actual benefit (paid or payable), if any, under the Pension
Plan. The amounts to be paid to the Executive under this Section shall be paid
out of the Pension Plan trust, to the extent permissible under applicable law.
For purposes of calculating the actuarial equivalents referred to in (1) and (2)
above, the Company shall use the actuarial assumptions utilized with respect to
the Pension Plan during the 90-day period immediately preceding the Change in
Control Date and shall assume that all accrued benefits are fully vested and
that benefit accrual formulas in effect during any years after the Date of
Termination are no less advantageous to the Executive than those in effect
during the 90-day period immediately preceding the Change in Control Date.
6.4. LIFE INSURANCE. For a period of two years following the
Executive's Date of Termination, the Company shall maintain at its expense for
the benefit of the Executive and his beneficiaries named therein coverage under
the life insurance policy maintained for his benefit on the date hereof,
providing a pre-retirement death benefit equal to four (4) times the Executive's
then current annual compensation (base salary plus target bonus) as of his Date
of Termination. Unless modified after the date hereof in accordance with its
terms, the coverage and other benefits under such policy shall not be less
favorable to the Executive and his beneficiaries during such period than as
currently in effect.
6.5. TIMING OF PAYMENT. The payment provided for in Section 6.1 hereof
shall be made not later than the fifth day following the Date of Termination,
provided, however, that if the amount of such payment, and the limitation on
such payment set forth in Section 6.2 hereof, cannot be finally determined on or
before such day, the Company shall pay to the Executive on such day an estimate,
as determined in good faith by the Company, of the minimum amount of such
payment to which the Executive is clearly entitled and shall pay the remainder
of such payment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the 30th day after the Date of Termination. In the event
that the amount of the estimated payment exceeds the amount subsequently
determined to have been due, such excess shall be paid back to the Company
within five business days after demand by the company and such payment shall not
be considered a loan, therefore no interest shall be due or payable. At the time
that payments are made
under this Section 6 the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and
the basis for such calculation including, without limitation, any opinions or
other advice the Company has received from outside counsel, auditors or
consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
6.6. PAYMENT OF LEGAL FEES AND EXPENSE. The Company shall pay to the
Executive all legal fees and expenses incurred by the Executive as a result of
or in connection with a termination of employment (other than any such
termination by the Company for Cause) following a Change in Control and during
the term of the Agreement (including all such fees and expenses, if any,
incurred in good faith in disputing any such termination or in seeking in good
faith to obtain or enforce any benefit or right provided by the Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five business days after delivery
of the Executive's written request for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require.
6.7. CONTINUATION OF BENEFITS. If the Executive's employment
terminates as provided in Section 6, (a) the Company shall, for [ ] years
following the Date of Termination, or such longer period as any plan, program,
practice or policy may provide, continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided had
the Executive's employment not been terminated, in accordance with the plans,
programs, practices and policies in effect and applicable generally to other
peer executives and their families during the 90-day period immediately
preceding the Effective Date that provided for group health, dental and life
insurance and other welfare-type plans, or if more favorable to the Executive,
in accordance with such plan, program, practice or policy as in effect generally
at any time thereafter with respect to other peer executives of the Company and
its affiliated companies; PROVIDED, however, that if the Executive becomes
employed by 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. 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 end of the [ ] year period following the Date of
Termination and to have retired on the last day of such period.
(b) Executive shall be permitted to purchase his then currently
Company-leased vehicle in accordance with the most attractive terms available
under such lease.
(c) The Company shall provide (or reimburse) Executive with 26 weeks of
fully paid outplacement services, up to a maximum of $[ ].
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1. NOTICE OF TERMINATION. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of Death) shall be communicated by written Notice of
Termination from one party hereto to the other party in accordance with Section
10 hereof. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive was guilty
of conduct set forth in the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2. DATE OF TERMINATION. "DATE OF TERMINATION" with respect to any
termination of the Executive's employment after a Change in Control and during
the term of this Agreement, shall mean (a) if the Executive's employment is
terminated for Disability, 30 days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such 30-day period), and (b) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of termination by the Company,
shall not be less than 30 days (except in the case of a termination for Cause),
and, in the case of a termination by the Executive, shall not be less than 15
days nor more than 60 days, respectively, from the date of such Notice of
Termination is given).
7.3. DISPUTE CONCERNING TERMINATION. Notwithstanding any provision of
Section 7.2 hereof to the contrary, if within 15 days after Notice of
Termination is received, or, if later, prior to the Date of Termination (as
determined without regard to this Section 7.3), the party receiving such Notice
of Termination notifies the other party in writing that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. For the purposes of the
preceding sentence, a dispute concerning termination shall be deemed finally
resolved if, within 30 days of an arbitration award concerning such dispute,
neither party commences an action in any court seeking the modification of or
other relief from such award.
7.4. COMPENSATION DURING DISPUTE. If a proposed termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof).
8. NO MITIGATION; SET-OFF. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to this
Agreement. Further, except as provided in Section 6.7, the amount of any payment
or benefit provided for in this Agreement shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company or otherwise. The Company's obligation to
make the payments provided 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.
9. SUCCESSORS. 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 expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place, unless such obligations are binding upon such successor by
operation of law. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that for purposes of implementing the
foregoing the date on which any such succession becomes effective shall be
deemed the Date of Termination.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by the US registered
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
TO THE COMPANY:
▇▇▇▇▇▇▇ River Laboratories, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Copy to: General Counsel
TO THE EXECUTIVE:
At the address then appearing on the
employment records of the Company.
11. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing an signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the company and the Executive under
Sections 5, 6 and 7 shall survive the expiration of this Agreement.
12. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
14. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration conducted before
a single arbitrator in Boston, Massachusetts in accordance with the commercial
rules of the American Arbitration Association ("AAA") then in effect. Unless a
mutually acceptable arbitrator shall have been selected by the parties within 30
days of the initiation of arbitration proceedings, then upon application of
either party to the Boston office of the AAA, the AAA shall designate such
arbitrator. 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 his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
15. CONFIDENTIALITY. The Executive shall keep secret and confidential and
shall not disclose to any third party in any fashion or for any purpose
whatsoever, any information regarding this Agreement which is (i) not available
to the general public, and/or (ii) not generally known outside the Company.
Notwithstanding the foregoing provisions of this Section 15, the Executive may
discuss this Agreement with the members of his immediate family and with his
personal legal and tax advisors, provided that prior to disclosing any term or
condition of this Agreement to any person, the Executive shall obtain from such
person for the benefit of the Company his or her agreement to observe the
foregoing confidentiality provisions.
16. DEFINITIONS. For purposes of this Agreement, the following shall have
the meanings indicated below:
16.1. "BENEFICIAL OWNER" and "BENEFICIAL OWNERSHIP" shall have the
meaning defined in, and shall be determined pursuant to, Rule l3d-3 under the
Securities Exchange Act of 1934, as amended.
16.2. "BOARD" shall mean the Board of Directors of the Company.
16.3. "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (a) the willful and
continued failure by the Executive to perform the Executive's duties with the
Company, (b) a substantial and not de minimis violation of the Company's Code of
Business Conduct and Ethics (and any successor policy), as the same are in
effect from time to time, (c) the Executive's conviction of a felony, or (d)
engaging in conduct that constitutes a violation of Section 15 hereof.
16.4. "CHANGE IN CONTROL" means any one of the following: (i) the
closing of the sale of all or substantially all of the Company's assets as an
entirety to any person or related group of persons; (ii) the merger or
consolidation of the Company with or into another corporation or the merger or
consolidation of another corporation with or into the Company or a subsidiary of
the Company, in either case with the effect that immediately after such
transaction the outstanding voting securities of the Company immediately prior
to such transaction represent less than a majority in interest of the total
voting power of the outstanding voting securities of the entity surviving such
merger or consolidation; or (iii) the closing of a transaction pursuant to which
Beneficial Ownership of more than 50% of the Company's outstanding Common Stock
(assuming the issuance of Common Stock upon conversion or exercise of all then
exercisable conversion or purchase rights of holders of outstanding convertible
securities, options, warrants, exchange rights and other rights to acquire
Common Stock) is transferred to a single person or entity, or a "group"
(within the meaning of Rule l3d-5(b)(l) under the Securities Exchange Act of
1934) of persons or entities, in a single transaction or a series or related
transactions.
16.5. "CHANGE IN CONTROL DATE." The effective date of the Change in
Control.
16.6. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
All references to the Code shall be deemed also to refer to any successor
provisions of such sections.
16.7. "COMPANY" shall mean ▇▇▇▇▇▇▇ River Laboratories, Inc. and any
successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise (except in determining, under
Section 16.4 hereof, whether or not a Change in Control of the Company has
occurred in connection with such succession).
16.8. "DATE OF TERMINATION" shall have the meaning stated in Sections
7.2 and 7.3 hereof.
16.9. "DISABILITY" shall be deemed the reason for termination by the
Company of the Executive's employment if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of [six (6)] consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and within 30 days after such
Notice of Termination is given, the Executive shall not have returned to the
full-time performance of his duties.
16.10. "EXECUTIVE" shall mean the individual named in the first
paragraph of this Agreement.
16.11. "GOOD REASON" for termination by the Executive of the
Executive's employment shall mean the occurrence after a Change in Control
(without the Executive's express written consent) of any one of the following
acts by the Company, or failures by the Company to act, unless in the case of
any act or failure to act described in paragraph (i), (iv), (v), (vi) or (vii)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's position and
responsibilities as in effect immediately prior to the
Change in Control;
(ii) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the
same may be increased from time to time except for
across-the-board salary reductions similarly affecting
all senior executives of the Company and all senior
executives of any Person in control of the Company;
(iii) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation except
pursuant to an across- the-board salary reductions
similarly affecting all senior executives of the
Company and all senior executives of any Person in
control of the Company, or to pay to the Executive any
portion of an installment of deferred compensation
under any deferred compensation program of the Company,
within 14 days of the date such compensation is due;
(iv) the failure by the Company to continue in effect any
compensation plan in which the Executive participates
immediately prior to the Change in Control which is
material to the Executive's total compensation, unless
an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to
continue the Executive's participation therein (or in a
substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's
participation relative to other participants, as
existed at the time of the Change in Control;
(v) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's
pension, life insurance, medical, health and accident,
or disability plans in which the Executive was
participating at the time of the Change in Control, the
taking of any action by the Company which would
directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of
the Change in Control, or the failure by the Company to
provide the Executive with the number of paid vacation
days to which the Executive is entitled on the basis of
years of service with the Company in accordance with
the Company's normal vacation policy in effect at the
time of the Change in Control;
(vi) any proposed termination of the Executive's employment
which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1,
for purposes of this Agreement, no such purported
termination shall be effective;
(vii) the failure by the Company to obtain a satisfactory
agreement from any successor to assume and agree to
perform this Agreement as contemplated in Section 9
hereof; or
(viii) the Company's requiring the Executive to relocate to an
office or location more than 50 miles distant from the
office or location at
which the Executive was based immediately prior to
the Date of Termination.
16.12. "NOTICE OF TERMINATION" shall have the meaning stated in
Section 7.1 hereof.
16.13. "PERSON" shall have the meaning defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended.
16.14. "RETIREMENT" shall mean retirement after attaining "normal
retirement age" under any pension or retirement plan maintained by the Company
in which the Executive participates.
16.15. "SEVERANCE PAYMENTS" shall mean the payment(s) described in
Section 6 hereof.
▇▇▇▇▇▇▇ RIVER LABORATORIES, INC.
By:
--------------------------------------------
Name:
Title:
Agreed and Accepted:
--------------------------
[NAME]
Annex 1
(a) Anything in the Agreement to the contrary notwithstanding but subject
to paragraph (b) of this Annex, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
the Agreement or otherwise (a "PAYMENT"), would be subject to the excise tax
imposed by Section 4999 of the Code or similar section or any interest or
penalties 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"), Executive shall be entitled to receive an additional payment (a
"GROSS-UP PAYMENT") in lump sum in an amount such that after payment by
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Notwithstanding paragraph (a) of this Annex, if the aggregate value of
the Payment is less than 315% of the Executive's "base amount" (as defined in
Section 280G(b)(3) of the Code), then the Executive shall not be entitled to any
Gross-Up Payment and, instead, the Payment shall be reduced to an amount equal
to $1.00 less than 300% of the "base amount".
(c) Subject to the provisions of paragraph (d) of this Annex, all
determinations required to be made under this Annex, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made at the Company's expense by an accounting firm selected by the Company and
acceptable to the Executive which is designated as one of the four (4) largest
accounting firms in the United States (the "ACCOUNTING FIRM") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of termination of employment under the Agreement, if
applicable, or such earlier time as is requested by the Executive or the
Company. When calculating the amount of the Gross-Up Payment, the Executive
shall be deemed to pay:
(vii) federal income taxes at the highest applicable marginal rate of
federal income taxation for the calendar year in which the Gross-Up Payment
is to be made, and
(viii) any applicable state and local income taxes at the highest
applicable marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes if paid in such year.
If the Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall state in writing to Executive that Executive has substantial
authority not to report any Excise Tax on Executive's federal income tax return.
Any determination by the Accounting Firm shall be binding upon the Company and
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 paragraph (d) of this Annex, and Executive is
thereafter 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.
(d) 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 Executive knows of such
claim and shall notify the Company of the nature of such claim and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which
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 Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(ix) give the Company any information reasonably requested by the
Company relating to such claim,
(x) 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,
(xi) cooperate with the Company in good faith in order effectively to
contest such claim, and
(xii) 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 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 paragraph (d), the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego 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 Executive to pay the tax
claimed and ▇▇▇ for a refund or contest the claim in any permissible manner, and
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 Executive to pay such claim and ▇▇▇ for a refund, the Company
shall advance the amount of such payment to Executive, on an interest-free basis
and shall indemnify and hold 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 further provided that any extension of the statute
of limitations relating to payment of taxes for Executive's taxable year 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 a Gross-Up Payment would be payable
hereunder and
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.
(e) If after the receipt by Executive of an amount advanced by the Company
pursuant to paragraph (d) of this Annex, Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of paragraph (d) of this Annex) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon by the taxing authority after deducting any taxes applicable
thereto). If, after the receipt by Executive of an amount advanced by the
Company pursuant to paragraph (d) of this Annex, a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify 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 under paragraph (d) of this Annex. The
forgiveness of such advance shall be considered part of the Gross-Up Payment and
subject to gross-up for any taxes (including interest or penalties) associated
therewith.