AGREEMENT dated as of March 6, 2001 by and between AMERICAN HOME PRODUCTS
CORPORATION, a Delaware corporation, having its principal place of business at
Five Giralda Farms, Madison, New Jersey 07940 (the "Company") and JOHN R.
STAFFORD (the "Executive").
BACKGROUND
The Executive has been employed by the Company since June 1970
and has served as the Company's Chairman and Chief Executive Officer since 1986.
The Executive and the Company have determined that the parties shall make
provision for the Executive to step down as Chief Executive Officer of the
Company, to continue to serve as Chairman of the Company until December 31,
2002, and, thereafter, to continue rendering services to the Company as a
consultant during a specified consulting period. The Company and the Executive
have therefore entered into this Agreement on the terms and conditions set forth
herein.
1. Employment.
The Executive shall continue to serve as Chairman and Chief Executive
Officer of the Company until May 1, 2001. Thereafter, the Executive will serve
as Chairman of the Company until December 31, 2002 (the "Transition Date"), at
which time, the Executive shall (a) cease to be Chairman of the Company; (b)
cease to be a member of the Board of Directors of the Company (the "Board") and
its affiliated companies, unless otherwise determined by the Board and the then
Chairman of the Company; and (c) commence rendering consulting services to the
Company during the "Consulting Period" as set forth in Section 4 hereof. All of
the foregoing employment and consulting terms are subject to earlier termination
in accordance with Sections 6, 7 and 8 hereof.
2. Duties and Responsibilities as Chairman and Chief Executive Officer.
The Executive's titles, duties and responsibilities shall remain unchanged
until May 1, 2001. Thereafter, the Executive's duties and responsibilities as
Chairman shall be as the Board and the then Chief Executive Officer shall
reasonably request; provided, however, that for so long as the Executive remains
Chairman of the Company, the Executive shall continue to be the chairman of the
Board, the chairman of the Executive Committee of the Board, and the chairman of
all meetings of the Company's shareholders that will occur while the Executive
remains Chairman.
3. Compensation and Benefits until the Transition Date.
(a) Salary; Short-Term and Long-Term Incentive Compensation. From the
date hereof until the Transition Date, the Company shall continue to pay
the Executive his annual base salary and short-term and long-term incentive
compensation awards (including, without limitation, all annual bonuses and
equity grants), in each case at a level that is not less than the highest
level paid or granted to the Executive in any of the three calendar years
immediately preceding the date hereof during which the Executive was
employed as the Chief Executive Officer of the Company, which amounts shall
be paid through the Transition Date in accordance with the Company's past
practice of paying compensation to senior executives.
(b) Fringe Benefits. Through the Transition Date, the Company shall
continue to provide the Executive all fringe benefits and support services
to which the Executive is entitled and enjoys as of the date hereof.
(c) Welfare Benefit Plans. Through the Transition Date, the Executive
shall continue to participate in and receive benefits under all of the
Company's medical and other welfare benefit plans, including, without
limitation, the Company's life insurance and disability insurance benefit
plans, at the same levels as other senior executives (and their dependants)
of the Company are entitled to participate in and receive benefits under
such plans.
(d) Retirement Plans. Through the Transition Date, the Executive shall
continue to participate in and/or receive benefits under all qualified and
nonqualified pension plans (including, without limitation, the Company's
Supplemental Executive Retirement Plan, Executive Retirement Plan and
Deferred Compensation Plan). Except as otherwise provided in this
Agreement, any such participation shall be in accordance with the
provisions of such plans and nothing contained in this Agreement is
intended to, or shall be deemed to, affect adversely any of Executive's
rights as a participant under any such plans.
(e) Other Benefit Plans. Through the Transition Date, Executive shall
continue to participate in or receive benefits under any other benefit plan
generally made available by the Company to senior executives. Except as
otherwise provided in this Agreement, any such participation shall be in
accordance with the provisions of such plans and nothing contained in this
Agreement is intended to, or shall be deemed to, affect adversely any of
Executive's rights as a participant under any such plans.
(f) Expense Reimbursement. Through the Transition Date, the Company
shall reimburse Executive for the ordinary and necessary business expenses
reasonably incurred by Executive in the performance of his duties under
this Agreement in accordance with the Company's customary practices
applicable to senior executives.
4. Consulting Period.
The Executive shall be employed by the Company as a consultant to render
advice to the Company on an "as needed" basis (but in no event more than
twenty-five (25) business days in any given calendar year) during the period
beginning on the day following the Transition Date and ending on December 31,
2007 (the "Consulting Period"). During the Consulting Period, the Executive's
duties shall be as requested by the Company's then Chief Executive Officer or
the Board but shall in all events be consistent with the duties to be performed
by a person of the Executive's experience and stature as a former Chief
Executive Officer and Chairman of the Company, shall be subject to reasonable
advance notice to the Executive, and shall be designed to accommodate the
Executive's reasonable scheduling needs. Subject to the covenants set forth in
Section 10 hereof, nothing contained herein shall preclude the Executive from
devoting substantial time and attention to his own personal investments or to
pursuing other business or investment opportunities during the Consulting
Period.
5. Compensation and Benefits During and After the Consulting Period.
(a) Consulting Fee. During the Consulting Period, the Company shall
pay the Executive an annual consulting fee of $250,000, payable in
quarterly installments.
(b) Fringe Benefits. During the Consulting Period, the Company shall
provide the Executive with substantially the same benefits set forth in
Section 3(b) above, subject to such modifications as the Company and the
Executive may otherwise agree from time to time. All of the fringe benefits
provided hereunder shall be provided to the Executive (and his spouse, as
applicable), at no cost to the Executive or his spouse. The benefits
described in this Section 5(b) shall hereinafter be referred to as the
"Consulting Fringe Benefits".
(c) Welfare, Retirement and other Benefit Plans. During and after the
Consulting Period, the Executive (and his spouse, as applicable) shall
continue to participate in or receive benefits under all pension, medical,
welfare and other benefit plans generally made available by the Company to
retired senior executives and their spouses, at levels that are in effect
for other retired senior executives and their spouses as of the date hereof
(or, if more favorable, at any time hereafter), for the Executive's and his
spouse's respective lifetimes. Except as otherwise provided in this
Agreement, any such participation shall be in accordance with the
provisions of such plans and nothing contained in this Agreement is
intended to, or shall be deemed to, affect adversely any of Executive's
rights as a participant under any such plans. The benefits described in
this Section 5(c) shall hereinafter be referred to as the "Retiree
Benefits".
(d) Replacement Benefits. Notwithstanding anything contained in
Section 3 or this Section 5 to the contrary, in the event that applicable
law or the terms of any Company benefit plan prohibit the provision of any
of the benefits set forth in subsections 3(a), (b), (c), (d) or (e) of this
Agreement, or in subsections 5 (b) or (c) above, the Company shall provide
such benefits to the Executive (and his spouse, as applicable) outside of
any such Company benefit plan, which benefits shall be at the same levels
and shall be economically equivalent to the prohibited benefits (the
"Replacement Benefits"). The Replacement Benefits shall be provided to the
Executive (and his spouse, as applicable), at no additional cost to the
Executive or his spouse.
6. Termination of Employment on Account of Executive's Death or Disability.
(a) Termination. Executive's employment under this Agreement (whether
prior to the Transition Date or during the Consulting Period) shall
terminate upon Executive's death or Disability. In the event of a
termination as a result of the Executive's Disability, either the Company
or the Executive (or the Executive's representative) shall give thirty (30)
days' advance written notice of such termination. For purposes of this
Agreement, "Disability" shall mean permanent and total disability, as such
term is defined under Section 22(e)(3) of the Internal Revenue Code of
1986, as amended (the "Code"). Any question as to the existence of the
Executive's Disability upon which the Company and the Executive cannot
agree shall be determined by a qualified independent physician selected by
the Executive (or, if the Executive is unable to make such selection, such
selection shall be made by any adult member of the Executive's immediate
family or the Executive's legal representative), and approved by the
Company, which approval shall not be unreasonably withheld. The
determination of such physician shall be made in writing to the Company and
to the Executive and shall be final and conclusive for all purposes of this
Agreement.
(b) Compensation Due by Reason of Death or Disability. Subject to
Section 10 of this Agreement, in the event that Executive's employment is
terminated by reason of Executive's death or Disability (whether prior to
the Transition Date or during the Consulting Period), the Company shall
provide the following payments and benefits to the Executive (and his
spouse, as applicable) (or in the case of death, to the Executive's
beneficiary or estate):
(i) Earned But Unpaid Compensation. (A) Any accrued but unpaid
compensation for services rendered to the date of termination, (B) any
accrued but unpaid expenses required to be reimbursed under this
Agreement and (C) any vacation accrued to the date of termination
(such compensation in (A), (B) and (C), collectively, the "Accrued
Compensation").
(ii) Severance Payment. An amount equal to the cash compensation
for services that would have been payable to the Executive if the
Executive had continued in employment through the Transition Date (if
applicable) and had continued to provide consulting services through
the end of the Consulting Period. This amount will be paid in a single
lump sum within thirty (30) days after the date of death or
Disability, or, at the Company's option, can be paid in installments
through the Transition Date (if applicable) and through the end of the
Consulting Period, at the same time as payments would otherwise have
been made to the Executive.
(iii) Benefits. The Consulting Fringe Benefits (other than the
provision of office space and support staff) and the Retiree Benefits
to which the Executive (or his spouse, as applicable) may be entitled
pursuant to Sections 5(b) and (c) of this Agreement.
7. Termination for Cause by the Company; Without Good Reason by the Executive.
(a) Notice of Termination. The Company may terminate the Executive's
employment and provision of consulting services for Cause, and the
Executive may terminate the Executive's employment and provision of
consulting services without Good Reason (other than as a result of death or
Disability), at any time after the date hereof until the end of the
Consulting Period after written notice of such termination is given to the
other party.
(b) Compensation and Benefits in the Event of a Termination for Cause
by the Company or Without Good Reason by the Executive. Subject to Section
10 of this Agreement, in the event that the Executive's employment is
terminated for Cause by the Company or by the Executive without Good Reason
(other than as a result of death or Disability), in either case whether
prior to the Transition Date or during the Consulting Period), the Company
shall provide the Executive with the Accrued Compensation and the Retiree
Benefits.
(c) Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
"Cause" shall mean:
(i) On or prior to the Transition Date, (A) the Executive's
conviction of, or plea of guilty or nolo contendere to, a felony or
(B) the Executive willfully engages in gross misconduct, which is
materially and demonstrably injurious to the Company.
(ii) After the Transition Date through the Consulting Period, (x)
the Executive's conviction of, or plea of guilty or nolo contendere
to, a felony or (y) the Executive's consistent, willful and
unreasonable refusal to provide the services as reasonably requested
pursuant to Section 4 above, after the Board provides the Executive
with written demand for substantial performance and reasonable
opportunity to perform such duties.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated 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 (3/4) of the Incumbent
Directors (as hereinafter defined) of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, Executive was guilty of conduct
set forth above in this Section 7(c) and specifying the particulars
thereof in detail. For purposes hereof, "Incumbent Directors" shall
mean the persons who were members of the Board prior to the date
hereof, or their successors (if their successors were approved by at
least a majority of such persons who were members of the Board prior to
the date hereof).
"Change in Control" shall have the same meaning as such term
is defined in the Severance Agreement dated as of July 31, 1998 by and
between the Company and the Executive (the "Change in Control
Agreement").
"Good Reason" shall mean, without the Executive's express
written consent, the Company's breach of any material term of this
Agreement, including, without limitation, the terms contained in
Sections 1 through 5 and Sections 9, 12, and 15(a) of this Agreement;
provided, however, that in the case of a breach, if the Company fully
corrects such breach prior to the date specified as the date of
termination in the written notice of termination delivered by the
Executive to the Company given in respect thereof, the Executive shall
not have Good Reason to terminate his employment (or consulting
services, as applicable). The Company expressly acknowledges that the
Executive's continued employment or provision of consulting services
under this Agreement shall not constitute consent to, or a waiver of
rights with respect to, any circumstances constituting Good Reason.
8. Termination Without Cause by the Company or for Good Reason by the
Executive. The Company may terminate this Agreement and the Executive's
employment and provision of consulting services without Cause, and the Executive
may terminate this Agreement and the Executive's employment and provision of
consulting services for Good Reason, at any time after the date hereof until the
end of the Consulting Period after thirty (30) days' advance written notice of
termination is delivered to the other party. Subject to Section 10 of this
Agreement, in the event that the Executive's employment is terminated without
Cause by the Company or by the Executive for Good Reason (in either case whether
prior to the Transition Date or during the Consulting Period), the Company shall
provide the Executive with the following payments and benefits:
(a) Severance Payments. An amount equal to the Accrued Compensation
plus the compensation for services which would have been payable to the
Executive if the Executive had continued in employment through the
Transition Date (if applicable) and had continued to provide consulting
services through the end of the Consulting Period. This amount will be paid
in installments through the Transition Date (if applicable) and through the
end of the Consulting Period, at the same time as payments would otherwise
have been made to the Executive.
(b) Other Benefits. All benefits as provided in Sections 5(b) and (c),
above, to which the Executive (and his spouse, as applicable) would have
been entitled if the Executive had continued in employment through the
Transition Date (if applicable) and had continued to provide consulting
services through the end of the Consulting Period, and thereafter as
provided in Sections 5(b) and (c), above.
9. Occurrence of a Change in Control. In the event of a Change in Control:
(a) If a Change in Control occurs on or prior to the Transition Date,
(i) the Executive shall be entitled to continue to receive the compensation
and benefits provided for in Sections 3 and 5 of this Agreement and (ii) in
addition to the payments and benefits provided for under Sections 6, 7, or
8, as applicable, the Executive shall be entitled to exercise his rights
pursuant to the Change in Control Agreement and to receive the compensation
and benefits provided for in such Change in Control Agreement; or
(b) If a Change in Control occurs during the Consulting Period, (i)
the Company may not terminate this Agreement other than for Cause, (ii) the
Executive shall continue to receive all compensation and benefits provided
for in Section 5 of this Agreement and (iii) effective as of the Transition
Date, the Change in Control Agreement shall be of no further force and
effect, and Executive shall have no rights thereunder.
10. Restrictive Covenants.
(a) Confidential Information. The Executive recognizes and
acknowledges that he has had access to confidential or proprietary
information concerning the Company and entities affiliated with the Company
(collectively, the "Protected Information"). The Executive therefore
covenants and agrees that the Executive shall not, without the prior
written consent of the Company, use, divulge, disclose or make accessible
to any other person, firm, partnership, corporation or other entity any
Confidential Information pertaining to the business of the Company or any
of its affiliates, except (i) while employed by the Company, in the
business of and for the benefit of the Company, or (ii) when required to do
so by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee thereof)
with jurisdiction to order the Executive to divulge, disclose or make
accessible such information. For purposes of this Section 10, "Confidential
Information" shall mean any trade secret or other non-public information
concerning the financial data, strategic business plans, product
development (or other proprietary product data), customer lists, marketing
plans and other non-public, proprietary and confidential information of the
Company or its affiliates, that, in any case, is not otherwise available to
the public (other than by the Executive's breach of the terms hereof) or
known to persons in the industry generally.
(b) Competitive Activity. The Executive covenants and agrees that at
all times during his period of employment with the Company, including
during the Consulting Period, he will not, directly or indirectly, engage
in, or have any active interest or involvement whether as an employee,
agent, consultant, officer, or director, in any person, firm, or business
entity which is engaged in, the same business as that conducted and
principally carried on by the Company without the Company's specific
written consent to do so, all of the foregoing in any geographic area in
which the Company does business.
(c) Non-solicitation. The Executive covenants and agrees that at all
times during his period of employment with the Company, including during
the Consulting Period, he will not, without the Company's prior written
consent, directly or indirectly, offer, solicit or encourage to leave the
employment or other service of the Company, or any of its affiliates, any
employee of the Company or its affiliates or any person who was so employed
within the six months prior to such offer or solicitation.
11. Enforcement of Covenants.
(a) Right to Injunction. The Executive acknowledges that a breach of
the covenants set forth in Section 10 hereof will cause irreparable damage
to the Company with respect to which the Company's remedy at law for
damages will be inadequate. Therefore, in the event of a breach or an
anticipatory breach of the covenants set forth in this section by the
Executive, the Executive and the Company agree that the Company shall be
entitled to cease making any cash payments due hereunder and shall also be
entitled to the following particular forms of relief, in addition to
remedies otherwise available to it at law or equity: injunctions, both
preliminary and permanent, enjoining or retraining such breach or
anticipatory breach and the Executive hereby consents to the issuance
thereof forthwith and without bond by any court of competent jurisdiction;
provided, however, that the Company shall only be entitled to take any of
the foregoing actions after providing the Executive with (i) reasonable
notice of its intention to take such action, (ii) the reasonable
opportunity to cure the behavior or conduct in question and (iii) the
opportunity to meet with the Board (after consultation with legal counsel)
to be heard in defense of such behavior or conduct.
(b) Separability of Covenants. The covenants contained in Section 10
hereof constitute a series of separate covenants, one for each county and
city included within each State in the United States and the District of
Columbia, and one for each applicable foreign city or province included
within each foreign country. If in any judicial proceeding, a court shall
hold that any of the covenants set forth in Section 10 exceed the time,
geographic, or occupational limitations permitted by applicable laws, the
Executive and the Company agree that such provisions shall and hereby
reformed to the maximum time, geographic, or occupational limitations
permitted by such laws. Further, in the event a court shall hold
unenforceable any of the separate covenants deemed included herein, then
such unenforceable covenant or covenants shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced
in such proceedings.
12. Withholding; Tax Gross-Up.
(a) Withholding Taxes. The Company shall withhold from any
compensation and benefits payable under this Agreement all applicable
federal, state, local or other taxes.
(b) Benefits Tax Gross-Up. In the event that the Company's provision
of the Replacement Benefits pursuant to Section 5(d) and/or the fringe
benefits to the Executive (and his spouse, as applicable) pursuant to
Sections 3(b) and 5(b) results in the Executive incurring income or other
employment tax liability on such benefits, the Company shall pay to the
Executive an additional amount such that after payment of all such taxes
(and including the payment of any taxes imposed on such additional amount),
the Executive shall have received the Replacement Benefits and the fringe
benefits at no cost to the Executive (or his spouse, as applicable) (other
than as may be otherwise required pursuant to Section 5(b) above).
(c) Excise Taxes. (i) In the event that any payment or benefit
received or to be received by the Executive pursuant to the terms of this
Agreement (the "Contract Payments") or in connection with the Executive's
termination of employment or contingent upon a change in ownership or
control of the Company (as defined in Section 280G of the Code) pursuant to
any plan or arrangement or other agreement with the Company (or any
affiliate thereof) ("Other Payments" and, together with the Contract
Payments, the "Payments") would be subject to the excise tax (the "Excise
Tax") imposed by Section 4999 of the Code, as determined as provided below,
the Company shall pay to Executive, at the time specified in Section
12(c)(ii) below, an additional amount (the "Gross-Up Payment") such that
the net amount retained by Executive, after deduction of the Excise Tax on
Contract Payments and Other Payments and any federal, state and local
income or other tax and Excise Tax upon the payment provided for by this
Section 12(c)(i), and any interest, penalties or additions to tax payable
by the Executive with respect thereto, shall be equal to the total present
value of the Contract Payments and Other Payments at the time such Payments
are to be made. For purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amounts of such Excise Tax, (1)
the total amount of the Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code
shall be treated as subject to the Excise Tax, except to the extent that,
in the opinion of independent tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive ("Tax
Counsel"), a Payment (in whole or in part) does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code, or such
"excess parachute payments" (in whole or in part) are not subject to the
Excise Tax, (2) the amount of the Payments that shall be treated as subject
to the Excise Tax shall be equal to the lesser of (A) the total amount of
the Payments or (B) the amount of "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code (after applying clause (1)
hereof), and (3) the value of any noncash benefits or any deferred payment
or benefit shall be determined by Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income tax at the highest marginal rates of federal
income taxation applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
highest effective rates of taxation applicable to individuals as are in
effect in the state and locality of the Executive's residence in the
calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 12(c)(i)
hereof shall be made upon the earlier of (x) the payment to the
Executive of any Contract Payment or Other Payment or (y) the
imposition upon the Executive or payment by the Executive of any
Excise Tax.
(iii) 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 a 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 and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period
following the date on which 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 it
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 and reasonably satisfactory to the Executive;
3) cooperate with the Company in good faith in order to
effectively 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, but not limited to, additional
interest and penalties and related legal, consulting or other similar
fees) incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise Tax
or other tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses.
(iv) 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 the Executive to pay the tax
claimed and sue 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 sue 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 other tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that if the Executive
is required to extend the statute of limitations to enable the Company
to contest such claim, the Executive may limit this extension solely
to such contested amount. The Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority. In addition, no
position may be taken nor any final resolution be agreed to by the
Company without the Executive's consent if such position or resolution
could reasonably be expected to adversely affect the Executive
(including any other tax position of the Executive unrelated to the
matters covered hereby).
(v) As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the
Company or the Tax Counsel 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 and the Executive thereafter is required to pay to the
Internal Revenue Service an additional amount in respect of any Excise
Tax, the Company or the Tax Counsel shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall
promptly be paid by the Company to or for the benefit of the
Executive.
(vi) If, after the receipt by Executive of the Gross-Up Payment
or an amount advanced by the Company in connection with the contest of
an Excise Tax claim, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall 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 in
connection with an Excise Tax claim, a determination is made that
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 the denial of such refund prior to the expiration of
30 days after such determination, such advance shall be forgiven and
shall not be required to be repaid.
13. Source of Payments; Indemnification.
(a) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid from the general funds of the Company, and no
special or separate fund shall be required to be established, and no
other segregation of assets shall be required to be made, to assure
payment; provided, however, that nothing herein shall prevent or
preclude the Company from establishing any trust or other arrangement
which it deems necessary or desirable to provide for the payments
required hereunder.
(b) Indemnification and Insurance Coverage. The Company shall at
all times maintain in full force and effect all agreements, provisions
and insurance coverage necessary to provide to the Executive
indemnification in respect of all positions held by the Executive at
the Company (or any of its affiliates) to the fullest extent permitted
by state law and the articles of incorporation and the by-laws of the
Company as in effect on the date hereof, or, if more favorable to the
Executive, as in effect at any time thereafter.
14. Facility of Payment; Entire Agreement; No Mitigation; Further Action.
(a) Facility of Payment. In the event of the Executive's legal
incapacity, the Company may make any payments due under this Agreement
to his legal representative. In the event of Executive's death, the
Company may make any payment due under this Agreement to his surviving
spouse or, if none, to the Executive's estate, subject to Sections
15(b) and (c) hereof.
(b) Entire Agreement. Except for the Change in Control Agreement,
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.
Except for the Change in Control Agreement, this Agreement constitutes
the entire understanding between the parties with respect to the
Executive's severance pay in the event of a termination of the
Executive's employment with the Company, superseding all negotiations,
prior discussions and preliminary agreements, written or oral,
concerning said severance pay. Further, notwithstanding any provision
of this Agreement: (i) the Executive shall not be required to mitigate
the amount of any payment provided by this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided by this Agreement be reduced by any compensation
earned by the Executive as the result of employment by another
employer or by retirement benefits received after the date the
Executive ceases to perform services hereunder or otherwise, and (ii)
except as otherwise provided in this Agreement, the obligations of the
Company to make payments to the Executive and to make the arrangements
provided for herein are absolute and unconditional and may not be
reduced by any circumstances, including without limitation any
set-off, counterclaim, recoupment, defense or other right which the
Company may have against the Executive or any third party at any time.
(c) Further Action. The Company shall take any further action
necessary or desirable to implement the provisions of this Agreement
or perform its obligations hereunder (including, without limitation,
amending the Company's Supplemental Executive Retirement Plan, the
Employee Retirement Plan, any stock option or stock bonus plan, or any
other applicable plan, program or arrangement or obtaining any
necessary consents or approvals in connection therewith).
15. Successors Assignment.
(a) Company Successor. 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 is required
to perform it. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(b) Executive's Successor. The payments and benefits to be
provided to the Executive (or his spouse) under this Agreement shall
inure to the benefit of, and the right of the Executive (or his
spouse) to receive any payments and/or benefits to which either of
them becomes entitled shall be enforceable by, the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to the
Executive hereunder if Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's devisee, legatee
or other designee or, if there is no such designee, to the Executive's
estate.
(c) Assignment. Nothing in this Section 15 shall preclude the
Executive from designating a beneficiary or beneficiaries to receive
any benefit payable on his death or from transferring any of his
rights and benefits hereunder to (i) his executors, administrators,
testamentary trustees, legatees or beneficiaries, (ii) the executors,
administrators, testamentary trustees, legatees or beneficiaries of
any of the persons in clause (i) above or (iii) a trust or
custodianship, the beneficiaries of which include only the Executive,
his spouse or his lineal descendants by blood or adoption.
16. Governing Law; Jurisdiction.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey
applicable to agreements made and to be performed in that State,
without regard to its conflict of laws provisions.
(b) Jurisdiction; Venue. Any suit, action or proceeding against
the Executive or the Company, with respect to this Agreement, or any
judgment entered by any court in respect of any thereof, may only be
brought in any court of competent jurisdiction in the State of New
Jersey, and the Company and the Executive each hereby submits to the
exclusive jurisdiction of such courts for the purpose of any such
suit, action, proceeding or judgment. The Company and the Executive
hereby irrevocably waive any objections which either of them may now
or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in any
court of competent jurisdiction in the State of New Jersey, and hereby
further irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in any
inconvenient forum. Each of the Company and the Executive hereto
hereby irrevocably and unconditionally waives trial by jury in any
legal action or proceeding in relation to this Agreement and for any
counterclaim therein.
17. Notices.
Any notice, consent, request or other communication made or given in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return
receipt requested, or by facsimile or by hand delivery, to those listed below at
their following respective addresses or at such other address as each may
specify by notice to the others:
To the Company:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Fax: (973) 660-7050
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Alvin H. Brown, Esq.
Fax: (212) 455-2000
To Executive:
At the most recent address set forth in the personnel
records of the Company.
18. Miscellaneous.
(a) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other
terms of this Agreement.
(b) Amendment. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer 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 conditions 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 at any prior or
subsequent time.
(c) Separability. If any term or provision of this Agreement is
declared illegal or unenforceable by any court of competent
jurisdiction and cannot be modified to be enforceable, such term or
provision shall immediately become null and void, leaving the
remainder of this Agreement in full force and effect.
(d) Headings. Section headings are used herein for convenience of
reference only and shall not affect the meaning of any provision of
this Agreement.
(e) Rules of Construction. Whenever the context so requires, the
use of the singular shall be deemed to include the plural and vice
versa.
(f) 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.
[Continued on next page.]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year set forth below.
AMERICAN HOME PRODUCTS CORPORATION:
By: /s/ Louis L. Hoynes, Jr.
Name: Louis L. Hoynes, Jr.
Title: Executive Vice President
and General Counsel
EXECUTIVE:
/s/ John R. Stafford
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John R. Stafford