This excerpt taken from the CEPH DEF 14A filed Apr 12, 2007.
We have entered into Executive Severance Agreements with each of our NEOs. These agreements provide for compensation and benefits in the event that the NEOs employment with us is terminated prior to a Change in Control of Cephalon or on account of a Change in Control of Cephalon. Any of the following situations would constitute a change of control under the Executive Severance Agreements:
· the consummation of certain transactions, including mergers, where more than fifty percent of the combined voting power of our outstanding securities or the sale of more than seventy-five percent of our assets is transferred;
· the acquisition by any person or entity of the beneficial ownership of securities representing thirty percent or more of the combined voting power of our then outstanding voting securities; or
· a change in the composition of our Board over a period of twenty-four months or less such that a majority of the Board members ceases to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period, or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time such election or nomination was approved by the Board.
To be covered by the Executive Severance Agreements, an NEO must be either terminated without cause or subject to a constructive termination. A termination of an NEO for cause would not trigger any liability to an NEO under the Executive Severance Agreement. Cause is when an NEO has engaged in any act of unethical conduct, willful misconduct, fraud or embezzlement, any unauthorized disclosure of confidential information or trade secrets or any other act that is materially and demonstrably detrimental to the Company.
The definition of a constructive termination depends on the NEO. For Dr. Baldino, he would be subject to a constructive termination if:
· prior to a change in control, he voluntarily resigns because either (i) we change his position, resulting in a material reduction in his level of responsibility or (ii) we reduce his base salary by more than twenty-five percent; or
· after or in connection with a change in control, he voluntarily resigns because we, or our successor, without his consent, (i) changes his position, resulting in a material reduction in his level of responsibility, (ii) reduces his aggregate level of compensation (including base salary, significant fringe benefits or any non-discretionary and objective-standard incentive payment or bonus award) by more than ten percent, or (iii) relocates his place of employment by more than fifty miles.
For our other NEOs, each is considered subject to a constructive termination if, after or in connection with a change in control, the NEO voluntarily resigns because we, or our successor, without the NEOs consent, (i) changes his or her position which materially reduces the level of responsibility, (ii) reduces his or her aggregate level of compensation (including base salary, significant fringe benefits or any non-discretionary and objective-standard incentive payment or bonus award) by more than ten percent, or (iii) relocates the NEOs place of employment by more than fifty miles.
The Executive Severance Agreements require, as a precondition to the receipt of any benefits, that the NEO sign a standard form of release waiving any and all current and future claims against the Company relating to his or her employment with, or termination by, the Company.
An NEO is not eligible for the benefits set forth in the Executive Severance Agreement if his or her employment is terminated due to a Disability. Instead, an NEO will receive disability benefits under any disability program maintained by the Company that covers the NEO. Likewise, in the case of a termination due to death of an NEO, an NEO will receive benefits only under any program (including life insurance) maintained by the Company that covers the NEO.