EXHIBIT 10.40
November 29, 1993
Paul Kleutghen
33 Coventry Road
Mendam, New Jersey 07945
Dear Paul:
We are pleased to confirm the terms of your ongoing employment with Schein
Pharmaceutical, Inc. (the "Company") as Vice President of Business Development.
1. The Company will employ you as Vice President of Business Development for
the period from the date of this Agreement and continuing until 60 days after
either you or the Company gives written notice to the other that you or it does
not wish to continue your employment hereunder (a "Non-Continuation Notice").
You accept such employment, and will devote your full time and effort to the
business and affairs of the Company, with such duties consistent with your
position as may be assigned to you from time to time by the President (or such
other officer) or Board of Directors of the Company.
2. In consideration of all services rendered by you during your employment
hereunder, the Company will pay you a base salary at the annual rate of
$180,000, payable in accordance with the Company's payroll practices from time
to time in effect. The Company will review your salary at least once each year
and may in its discretion increase your salary.
3. For as long as you are employed by the Company you will be entitled to
participate in all bonus, incentive, retirement, profit-sharing, life, medical,
disability and other benefit plans and programs of the Company as are from time
to time generally available to other executives of the Company with comparable
responsibilities, subject to the provisions of those programs.
4. Your employment by the Company: (a) shall terminate upon your death; (b)
shall terminate 60 days after a Non-Continuation Notice is given; (c) may be
terminated by the Company for cause at any time; and (d) may be terminated by
the Company if you fail to render the services provided for in this Agreement
for a continuous period of six months by reason of physical or mental illness or
disability.
For purposes of this Agreement, "cause" means (i) your willful and
continued failure substantially to perform your duties with the Company, (ii)
fraud, misappropriation or intentional material damage to the property or
business of the Company or (iii) commission of a felony.
5. If your employment is terminated by the Company's giving a Non-Continuation
Notice as provided in Section 1 hereof (the giving of such Notice being a
"Termination Event"), the Company will pay you, in full satisfaction of all of
its obligations hereunder (except for its obligations under paragraphs 6 and 8
hereof), 100% of the amount of compensation (base salary and annual cash bonus)
paid (or payable) by the Company to you in respect of the last full fiscal year
of the Company immediately preceding the date of termination (the "Termination
Payment"). If the Termination Event occurs at any time within two years after a
Significant Date, the Termination Payment will be two times the amount provided
in the preceding sentence reduced by the amount of all compensation actually
paid to you by the Company at any time after the sixth-month anniversary of a
Significant Date; provided that in no event will the Termination Payment be less
than 100% of your compensation for the last full fiscal year preceding
termination, as provided in the preceding sentence. Notwithstanding anything to
the contrary in this Agreement, the maximum amount payable under this Section 5
shall be limited to that amount which when added to all other payments (or the
value of all other benefits) that are "contingent on a change in control" (as
such term is defined in the Internal Revenue Code of 1986, as amended (the
"Code") of the Company, would not constitute a "parachute payment" (as such term
is defined in the Code). The Termination Payment will be paid in a lump sum and
will be subject to any applicable payroll or other taxes required to be
withheld.
Termination of your employment by the Company for any reason other than for
cause or disability, or your voluntary termination of employment on account of
(i) a 10% or more reduction of your base salary by the Company or (ii) the
Company's assigning you duties or responsibilities that are inconsistent, in any
significant respect, with the scope of duties or responsibilities associated
with Vice President of Business Development or (iii) relocation of your office
other than to a facility which, as of the date of this Agreement, the Company or
any of its subsidiaries conducts operations, will be deemed a Termination Event.
The Termination Payment will not be subject to offset on account of any
remuneration paid or payable to you for any subsequent employment you may
obtain, whether during or after the period during which the Termination Payment
is made and you shall have no obligation whatever to seek any subsequent
employment.
For purposes of this Agreement, a "Significant Date" means the date on
which the persons (or successors designated by such persons or successors)
presently entitled to elect a majority of the Board of Directors of the company
(the "Parent") controlling the Company, are no longer entitled to elect,
directly or indirectly, a majority of the Board of Directors of the Company,
other than as an immediate result of public sales of stock of the Parent or the
Company; provided however that a Significant Date shall not be deemed to have
occurred if on such date the present Chairman of the Company (including
successors designated by such Chairman or by successors) alone or pursuant to
joint authority with others, are entitled to so elect.
6. For one year following a Termination Event, the Company will also provide
you
with basic health and medical benefits on the terms that such benefits are
provided to all salaried employees of the Company as of the date of your
termination of employment. If the Termination Event occurs at any time within
two years after a Significant Date, the Company will provide the benefits
described in the preceding sentence until the later of (A) the first anniversary
of the Termination Event and (B) the second anniversary of the Significant Date.
These benefits will cease immediately upon your obtaining other full-time
employment. If the Company is unable to provide any of the foregoing benefits
under then existing plans without costs it considers excessive, the Company will
be entitled to satisfy any such obligation by making a payment to you equal to
two times the cost to the Company during the last full year immediately
preceding the Termination Event of providing such benefits to you.
7. At the time you execute this Agreement, you will also execute and deliver
to the Company the enclosed Confidentiality Undertaking.
8. The Company will reimburse you for reasonable attorneys fees and expenses
incurred by you if you are employed hereunder on a Significant Date and prevail
against the Company with respect to a claim hereunder arising on or after such
date.
9. This Agreement shall be binding upon and inure to the benefit of you and
your legal representatives and the Company and any assignee or successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company.
10. This Agreement: contains the entire agreement between the parties with
respect to the subject matter hereof, may not be modified or terminated orally,
and shall be construed and governed in accordance with the laws of the State of
New York.
If the foregoing is acceptable to you, please execute the enclosed copy of
this Agreement and return it to the undersigned.
Very truly yours,
SCHEIN PHARMACEUTICAL, INC.
By: [SIGNATURE ILLEGIBLE]
--------------------------
Authorized Officer
Agreed to and accepted:
/s/ Paul Kleutghen
- -----------------------------
Paul Kleutghen