EX-10.27



Table of Contents



Exhibit 10.27



Dated
24 October 2005




PLIVA d.d.




and




Željko Čović




 




AGREEMENT WITH THE




PRESIDENT OF THE MANAGEMENT BOARD




AND CEO





 









 








Table of Contents












	 	 	 	 	 	 	 
	Contents	 	 	 	Page	 
	1
	 	Interpretation	 	 	2	 
	2
	 	Commencement of Agreement	 	 	3	 
	3
	 	Appointment and Duties of the CEO	 	 	3	 
	4
	 	Hours	 	 	4	 
	5
	 	Interests of the CEO	 	 	4	 
	6
	 	Location	 	 	4	 
	7
	 	Salary	 	 	5	 
	8
	 	Bonus	 	 	5	 
	9
	 	Stock Options	 	 	6	 
	10
	 	Company Car	 	 	9	 
	11
	 	Pension	 	 	9	 
	12
	 	Insurance	 	 	9	 
	13
	 	Expenses	 	 	10	 
	14
	 	Holidays	 	 	10	 
	15
	 	Confidentiality	 	 	10	 
	16
	 	Intellectual Property Rights	 	 	11	 
	17
	 	Termination and Suspension	 	 	11	 
	18
	 	Change of Control	 	 	13	 
	19
	 	Full and Final Settlement	 	 	13	 
	20
	 	Garden Leave	 	 	13	 
	21
	 	Restrictions after Termination of Employment	 	 	14	 
	22
	 	Contractual penalty	 	 	15	 
	23
	 	Return of Company Property	 	 	15	 
	24
	 	Directorships	 	 	15	 
	25
	 	Notices	 	 	16	 
	26
	 	Miscellaneous	 	 	16	 










1









Table of Contents





     This
Agreement is made on 24 October 2005 between:




	(1)	 	PLIVA d.d whose registered address is Ulica grada Vukovara 49,10000, Zagreb Croatia (“PLIVA
d.d. ” or the “Company”); and
	 
	(2)	 	Željko Čović, Gajeva 59, 10000 Zagreb, Croatia (the “CEO”).




This agreement records the terms on which the CEO will serve and be employed by the Company.









	1	 	Interpretation
	 
	 	 	In this agreement (and any schedules to it):
	 
	1.1	 	Definitions
	 
	 	 	“Agreement” means this agreement entered into by and between CEO and the Company defining
rights and obligations of the President of the Management Board and CEO and the Company,
following decision of the Supervisory Board as of 13 July 2005 on appointment of the CEO for
a Term;
	 
	 	 	“Change of Control” means






	 	(a)	 	the acquisition of control of the composition of the board of directors of
PLIVA d.d. by a person (or group of persons acting together) not having such control as
at the date of this agreement;
	 
	 	(b)	 	the acquisition of control of the exercise of more than 50 per cent of the
voting rights attributable to the share capital of PLIVA d.d by a person (or group of
persons acting together) not having such control as at the date of this agreement;
	 
	 	(c)	 	a merger of the Company;
	 
	 	(d)	 	an offer for all or a majority of the equity shares of PLIVA d.d. having become
unconditional in all respects;
	 
	 	(e)	 	a person (or group of persons acting together) becoming a shadow director in
respect of at least one half in number of all the directors of PLIVA d.d. Board for the
time being;
	 
	 	(f)	 	the sale of the assets of PLIVA d.d. or substantially all of the assets of
PLIVA d.d. to an entity not being a Group Company; or






	 	 	but the following do not constitute a Change of Control:






	 	(i)	 	any change in the shareholders in PLIVA d.d. not within (a), (b) or (c) above;
	 
	 	(ii)	 	the winding up of PLIVA d.d. for the purpose of a reconstruction;
	 
	 	(iii)	 	the transfer of any ownership of associated company, or of any of PLIVA d.d.’s
operating assets, to another Group Company, provided that all or substantially all of
the associated company or operating assets remain within the Group Company; and






	 	 	“GDR” means PLIVA’s global depository receipt traded on the London Stock Exchange;
	 
	 	 	“Group” means PLIVA d.d. and its affiliated companies that are either directly or indirectly
controlled by PLIVA d.d.




2









Table of Contents






	 	 	“Group Company” means a member of the Group and “Group Companies” will be interpreted
accordingly;
	 
	 	 	“Listing Rules” means the Listing Rules made by the UK Listing Authority relevant for
listing on the London Stock Exchange and Listing Rules of the Zagreb Stock Exchange, and any
other listing rules of any other regulated market that may be applicable to PLIVA d.d.;
	 
	 	 	“Management Board” means the Management Board of PLIVA d.d. from time to time;
	 
	 	 	“Material Change” means the assignment to, or the withdrawal from, the CEO of any duties the
effect of which constitutes a material change in the CEO’s job or a material reduction in
his responsibilities, status or authority which is related or follows the Change of Control;
	 
	 	 	“Supervisory Board” means the Supervisory Board of PLIVA d.d. from time to time or any
person or committee nominated by the Supervisory Board as its representative for the
purposes of this agreement;
	 
	 	 	“Term” means the period from 9 December 2005 to 30 June 2010 for which the CEO is appointed
President of the Management Board and CEO of PLIVA d.d.;
	 
	 	 	“Termination Date” means the date on which this Agreement terminates; and
“ZSE” means the Zagreb Stock Exchange.










	2	 	Commencement of Agreement
	 
	2.1	 	The CEO is employed by the Company as of 02 June 1980 and is employed for
indefinite period of time.
	 
	2.2	 	This Agreement will be effective from 9 December 2005 on which date the agreement
dated 7 September 2000 and its amendments as of 13 November 2001 and 13 November 2002 between
PLIVA d.d. and the CEO (the “Superseded Agreement”) will terminate by mutual agreement and
will cease to have any further force or effect, save (i) where the contrary is stated in this
agreement; and (ii) that the termination of the Superseded Agreement will not affect any
rights accrued by the CEO under that agreement in the period prior to 9 December 2005.
	 
	2.3	 	The employment will continue under the terms of this Agreement until end of the
Term, and after the Term if so determined by this Agreement.










	3	 	Appointment and Duties of the CEO
	 
	3.1	 	The CEO will serve as President of the Management Board and Chief Executive
Officer, with the roles and responsibilities as defined by the law, Articles of Association of
the Company, regulations pertaining to Management Board and other by-laws of PLIVA.
	 
	3.2	 	The CEO may also serve in any other executive capacity in any of the Group
Companies as the CEO and the Company agree from time to time.
	 
	3.3	 	The CEO will:






	 	3.3.1	 	devote the whole of his working time, attention and skill to performing
position of the President of the Management Board and CEO;




3









Table of Contents






	 	3.3.2	 	properly perform his duties and exercise his powers;
	 
	 	3.3.3	 	accept any offices or directorships as reasonably required by the
Supervisory Board;
	 
	 	3.3.4	 	comply with all rules, regulations and policies issued by PLIVA d.d.
including any handbook issued and amended by PLIVA d.d. from time to time. In the
event of any inconsistency between the rules, regulations and policies of PLIVA d.d.
and any Group Company the rules, regulations and policies of PLIVA d.d. shall prevail;
	 
	 	3.3.5	 	obey the reasonable and lawful directions of the Supervisory Board; and
	 
	 	3.3.6	 	use all reasonable endeavours to promote the interests and reputation of
every Group Company.






	3.4	 	The CEO accepts that with his consent (which he will not unreasonably withhold or
delay) that the Company may require him to perform CEO or other executive duties of equivalent
status to those referred to at clause 3.1 for any other Group Company.
	 
	3.5	 	The CEO will keep the Supervisory Board fully informed of his conduct of the
business, finances or affairs of the Company or any other Group Company in a prompt and timely
manner. He will provide information to the Supervisory Board in writing if requested.










	4	 	Hours




The CEO and the Company agree that the CEO’s working time shall be regular working time in the
Company, provided however that the CEO will not be entitled to additional remuneration for hours
worked in excess of usual business hours.









	5	 	Interests of the CEO
	 
	5.1	 	Subject to clause 5.2, while this Agreement is in force, the CEO will not be
directly or indirectly engaged or concerned in the conduct of any activity nor he will accept
any directorship in any company not being a Group Company, (except as a representative of the
Company or Group Companies) without first obtaining the written consent of the Supervisory
Board, such consent not the be unreasonably withheld or delayed.
	 
	5.2	 	The CEO may not hold or be interested in investments which amount to more than one
per cent of the issued investments of any class of any one company whether or not those
investments are listed or quoted on any recognised Stock Exchange or dealt in on the
Alternative Investments Market, without first obtaining the written consent of the Supervisory
Board, such consent not to be unreasonably withheld or delayed.
	 
	5.3	 	The CEO will (and will procure that his spouse and dependent children) comply with
all rules of law, including Croatian Securities Act, Criminal Law and Listing rules and any
other rules or policies applicable to PLIVA d.d. from time to time in relation to the holding
or trading of securities.










	6	 	Location
	 
	 	 	The CEO’s place of work will be in the seat of the Company. The CEO will be required to
travel abroad when necessary and to the extent the reasonable business needs require so, the
CEO shall also work in other PLIVA’s locations or places where PLIVA operates.




4









Table of Contents
















	7	 	Salary
	 
	7.1	 	The Company will pay the CEO a gross base salary of EUR 430,000 per annum (“Base
Salary”). Salary will be paid monthly in 12 equal instalments, when all PLIVA d.d. employees’
salaries are paid, for the previous month, and the equivalent will be payable in HRK according
to the average exchange rate of Croatian National Bank on the date of calculation of the
salary for each particular month.
	 
	7.2	 	The salary referred to in clause 7.1 includes director’s fees from PLIVA d.d. and
any other Group company in which the CEO is required to accept a directorship from time to
time.










	8	 	Bonus
	 
	8.1	 	Subject to the terms of this clause 8, the CEO shall be eligible for payment of an
annual bonus subject to and in accordance with the following conditions. The “Target Amount”
for this annual bonus shall be 60 per cent. of the CEO’s Base Salary from the clause 7 for the
Bonus Year. The amount of the annual bonus to be paid shall be determined in accordance with
the provisions below. The amount of the bonus may vary in a range from 0 to 150 per cent. of
the Target Amount. The maximum annual bonus which may be paid to the CEO is 90 per cent. of
the Base Salary for the relevant Bonus Year.
	 
	8.2	 	The CEO’s bonus entitlement for the whole Bonus Year 2005 will be calculated in
accordance with the provisions of the Superseded Agreement.
	 
	8.3	 	The annual bonus for Bonus Years commencing 1 January 2006 and thereafter shall be
determined in accordance with the following bonus scheme:






	 	 	 	Bonus = kb x competencies coeff x Target Amount
	 
	 	 	 	where:






	 	•	 	kb = (0.5 x EBITDA) + (0.5 x EBIT)
	 
	 	•	 	EBITDA = realised Group EBITDA ÷ planned Group EBITDA;
	 
	 	•	 	EBIT = realised Group EBIT ÷ planned Group EBIT;
	 
	 	•	 	Planned Group EBITDA and Planned Group EBIT = projected PLIVA Group earnings
before interest, taxes, depreciation and amortisation and PLIVA Group earnings
before interest and taxes, respectively, in the financial plan for the year in
subject, as approved by the Supervisory Board solely for the purposes of this
agreement
	 
	 	•	 	Realised Group EBITDA and Realised Group EBIT = Pliva Group EBITDA and EBIT
as determined in the Pliva Group Consolidated Financial Statements approved by
the Board and the Management Board for the year in subject;
	 
	 	•	 	Competencies coeff. = coefficient of assessment of contribution to the
performance of the Company, in the range from 1.0 — 1.25. Competencies
coefficient shall be determined by the Supervisory Board.






	 	 	The CEO shall not be entitled to a bonus if the kb value calculated by applying the above
formula is less than 0.7. If the kb value calculated by applying the above formula is equal
to or higher than 1.2, the kb value shall nonetheless remain at 1.2, meaning that, if the




5









Table of Contents






	 	 	CEO achieves the maximum competencies coefficient, he shall be entitled to the maximum bonus
as stated above (i.e. 150 per cent. of the Target Amount).




In the event that the Agreement is terminated, the following provisions will apply:





	 	8.3.1	 	if the Agreement is terminated by the Company (other than by reason of the
CEO’s misconduct or in accordance with clause 17.7) the CEO shall be entitled to unpaid
bonus for the year in which the Employment terminates pro-rated to reflect the number
of days worked in the year of termination, based on the Target Amount, and shall be
paid in full for any accrued but unpaid bonus, and payment of any such bonus shall be
made within 2 weeks after the termination date. For the avoidance of doubt, CEO shall
not be entitled to any bonus during any notice period after receipt of the notice on
termination;
	 
	 	8.3.2	 	in the event that the CEO resigns, the CEO will have no entitlement to any
bonus which hasn’t already been granted to him;
	 
	 	8.3.3	 	in the case of termination of the Agreement by the Company under the clause
17.7 no bonus shall be payable whether for the Bonus Year in which termination occurs
or in respect of any previous Bonus Year where such year’s bonus had not been paid;






	8.4	 	In the event of termination of the Agreement by the Company pursuant to clause 17.2
or 18 or the CEO pursuant to clause 18, the CEO’s entitlement to bonus, if any, will be
calculated pro-rata, based on Target Amount, to the date the Company gives notice in
accordance with clause 17.2 or 18 or the date on which the CEO serves a Material Change notice
on the Company in accordance with clause 18.
	 
	8.5	 	The “Bonus Year” means the financial year from 01 January to 31 December in respect
of which the annual bonus is being paid and, in the case of 2010 means the period 1 January
2010 to 30 June 2010. The amount of bonus calculated in accordance with the above provisions
represents the gross amount.
	 
	8.6	 	For the purpose of this Agreement, in case of no reappointment of CEO after the
Term, bonus for the period from 01 January to 30 June 2010 shall be determined in accordance
with the formula from clause 8.3, but based on plan for the first half 2010 in advance
approved by the Supervisory Board, so that EBIT Group and EBITDA Group shall be interpreted
accordingly.
	 
	8.7	 	The annual bonus shall in any case be paid within 15 days from the day of approval
of annual financial reports for the previous business year by the Supervisory Board, and for
the period from 1 January till 30 June 2010, in case of no reappointment for a new term, bonus
shall be paid within 15 days from the date of approval of the interim consolidated financial
results by the Supervisory Board.










	9	 	Stock Options
	 
	9.1	 	Grant of Stock Options






	 	9.1.1	 	On 1 April of each year (for the Bonus Years 2006, 2007, 2008 and 2009) and
on 1 October 2010 (for the Bonus Year 2010), the Company shall grant to the CEO Stock
Options (“Stock Option”) by granting ordinary shares of PLIVA d.d. (“Shares”) (traded
currently on the ZSE), as a participation of in the profit of the Company, for




6









Table of Contents






	 	 	 	the previous calendar year, whereby the number of granted Stock Options shall
depend on the realized annual bonus for the previous Bonus Year.






	 	 	The target number of Stock Options (“N”) is based on realisation of 100% of the Target Bonus
for the previous Bonus Year and is as follows:





	 	 	 	 	 
	Target Number of Granted Stock Options
	Over Year	 	Grant Year	 	Number of Stock Options (N)
	2006, 2007, 2008, 2009
	 	2007,2008,2009, 2010
	 	23,500
	2010
	 	2010
	 	16,657





Actual number of Stock Options (“P”) to be granted shall be calculated according to the
following formula:




	 	 	 
	Number of Stock Options (=P)
	 	 	Number of Stock Options
	Realised/Target Annual Bonus payment =Y	 	as a multiple of the target number (N)
	 y < 0,5
	 	P=0,75*N
	0,5 £ y £ 1,5
	 	P=N + {(Realized Bonus-Target
	 
	 	Bonus)/Target Bonus}*0,5N}







	 	9.1.2	 	Subject to clause 9.54, the Company will not grant a Stock Option if, on
the date on which the Stock Option would otherwise be granted, this Agreement has been
terminated or notice has been given terminating this Agreement; provided, however, that
this shall not apply in case the termination or notice has been given after end of the
calendar year for which options should be granted but before 1 April of the Grant Year.






	9.2	 	Lapse of Stock Option
	 
	 	 	A Stock Option shall lapse, to the extent that it has not been exercised, on the earliest of
the following dates:






	 	9.2.1	 	the 7th anniversary of the date on which the Stock Option vests;
	 
	 	9.2.2	 	except to the extent it vests under clause 9.4, the date on which this
Agreement is terminated; and
	 
	 	9.2.3	 	any date specified in clause 9.4.






	9.3	 	Vesting and exercise of Stock Option






	 	9.3.1	 	A Stock Option will only vest the first upcoming 1st of January
in the third year after the date of grant, unless it vests earlier under clause 9.4
	 
	 	9.3.2	 	The CEO can only exercise a Stock Option to the extent it has vested and
has not lapsed. He may exercise it wholly or in part. To exercise the Stock Option he
must give notice in writing to the Plan Administrator (Corporate Compliance department
in PLIVA d.d. or other relevant department as notified by PLIVA d.d. in writing)
specifying:






	 	(i)	 	the date of grant of the Stock Option being exercised; and




7









Table of Contents






	 	(ii)	 	the number of Shares in respect of which he wishes to exercise
it.






	 	9.3.3	 	Within 5 business days of that notice, the Company will procure the issue
or transfer to or to the order of the CEO of a number of Shares calculated in
accordance with the following formula:




a × (b − c)


 


b





	 	 	 	where:






	 	a 	= 	the number of Shares in respect of which the Stock Options is
validly exercised;
	 
	 	b 	= 	the closing price of a Share on the ZSE on the dealing day on
which the notice of exercise is received by the Plan Administrator; if there
was no trading with the Shares on the ZSE on that date, last closing price of
the Shares achieved on the ZSE prior to the date the notice is received shall
be taken;
	 
	 	c 	= 	the average closing prices of a Shares on the ZSE over the
period 1 January to 31 December (inclusive) immediately preceding the grant
date, and same principle for the last 6 months of the term.






	 	 	 	The number of Shares shall be rounded up to the nearest whole Share.
	 
	 	9.3.4	 	If the Company and CEO so agree, the Company may, instead of issuing or
transferring Shares as described in clause 9.3.23 issue or transfer GDRs of PLIVA d.d.,
whereas each GDR represents 1¤5 of each Ordinary share, unless ordinary share / GDR
ratio changes at any time during the existence of this Agreement;






	9.4	 	Effect of termination of this Agreement on Stock Option
	 
	 	 	If this Agreement is terminated:






	 	9.4.1	 	(i) by the Company, in accordance with clause 17.2, at the end of the Term
(ii) if the Company does not offer to renew this Agreement or (iii) this Agreement is
terminated in accordance with clause 18, all outstanding Stock Options will immediately
vest and will be exercisable for 12 months from the Termination Date after which they
will lapse;
	 
	 	9.4.2	 	by the CEO, in accordance with clause 17.2 or by the Company, in accordance
with clauses 17.5 or 17.7, all outstanding Stock Options will lapse, except to the
extent they have vested on or before the Termination Date. Stock Options which have
vested on the Termination Date will be exercisable for 12 months from the Termination
Date after which they will lapse.






	9.5	 	Delisting
	 
	 	 	If GDRs and/or ordinary shares in PLIVA d.d cease to be traded on any stock exchange
(including in connection with any Change of Control) the Company will procure that the CEO
is granted equivalent rights, on the broadly the same terms as those described in this
clause but over shares or other securities in the company which has control of PLIVA d.d or
pay cash equivalent;
	 
	9.6	 	Grant of Stock Options following a Change of Control




8









Table of Contents






	 	 	Where clause 18 applies, the Company will, on the Termination Date, grant to the CEO Stock
Option a number of Stock Options calculated in accordance with the following formula:





	 	 	 	 	 
	23,500  ́


	 	 	x	 
	 	 	 	 
	 	 	365	 







	 	 	where x = the number of days since the 1 January preceding the Termination Date to the
Termination Date.
	 
	 	 	The Stock Options granted under this clause 9.6 will vest in full on the date of grant and
will lapse 12 months after the date of grant.
	 
	 	 	In addition, the Company will grant to the CEO 15,000 Shares on the date on which Stock
Options pursuant to the clause 9.6 are granted.
	 
	9.7	 	Tax
	 
	 	 	The CEO will promptly pay all taxes, eventual social security contributions, duties or other
levies which arise or may arise in connection with the grant, vesting or exercise of the
Stock Options or any cash payment made under this clause 9 or will, on demand, repay any
such amounts paid by the Company or any of its subsidiaries. The CEO consents to the
deduction of any such amounts and authorises the Company to sell, on his behalf, sufficient
Shares or other securities to meet any such liability.
	 
	9.8	 	Delay of grant or exercise
	 
	 	 	Where this clause 9 requires the grant of any Stock Option or issue or transfer of any Share
or GDR at a particular time and the Company is prevented from granting, issuing or
transferring by any restrictions imposed by statute, order, regulation or Government
directive or the rules of any stock exchange, the time may be delayed until the lifting of
any such restriction.










	10	 	Company Car
	 
	 	 	The CEO is entitled to use the Company car of AUDI A8 or similar class.










	11	 	Pension
	 
	11.1	 	The Company shall pay to the CEO annually gross amount equal to 15% of the Base
salary to voluntarily pension fond as elected and notified to the Company by the CEO, and
which shall be paid in 12 equal monthly installments as long as this Agreement is in force.
	 
	11.2	 	CEO undertakes that, except to the extent determined by this Agreement, he will
not be entitled to any other benefits related to the contribution to the pension scheme.










	12	 	Insurance
	 
	12.1	 	The Company shall arrange and pay the cost for the CEO insurance policy, including
but not limited to life insurance, insurance for long term disease or disability, according to
the Company policy in effect.






9









Table of Contents






	12.2	 	The Company shall arrange and pay the cost for the CEO a private health insurance
policy, in accordance with the Company’s policies.
	 
	12.3	 	The CEO understands and agrees that if the Company provides long term
illness/disability insurance and the Insurer appointed by the Company from time to time fails
or refuses to provide the CEO with any benefit under the insurance arrangement, the CEO will
have no right of action against the Company in respect of such failure or refusal.
	 
	12.4	 	The Company shall arrange and meet the cost of business travel insurance in
respect of the CEO’s performance of his duties under this Agreement. The CEO’s rights and
entitlements under such travel insurance will be subject to the terms of Company’s insurance
cover from time to time.










	 	 	 
	13	 	Expenses
	 
	13.1	 	The Company will reimburse the CEO for all reasonable expenses properly incurred
by him in performing his duties under this Agreement, provided that these are incurred in
accordance with Company policy from time to time.
	 
	13.2	 	If the CEO is provided with a credit or charge card by the Company this must only
be used for expenses which he incurs in performing the duties of this Agreement.










	 	 	 
	14	 	Holidays
	 
	 	 	The CEO is entitled to 30 days’ paid holiday each year (in addition to other public holidays
in Croatia) which shall be used at the latest by 30 June of the following year, after which
date all unused holiday days shall lapse. The CEO will pay due consideration to the
operational requirements of the Company when arranging any holidays. For part years, the CEO’s
holiday entitlement for the year will be pro-rated to the length of his service in that year.
Only 5 working days shall be calculated for the purpose of determination of duration of
holiday.










	 	 	 
	15	 	Confidentiality
	 
	15.1	 	Without prejudice to the legal duties which he owes to the Company the CEO agrees
that he will not, except in the proper performance of his duties, copy, use or disclose to any
person any of the Company’s trade secrets or confidential information. This restriction will
continue to apply after the termination of the Agreement without limit in time but will not
apply to trade secrets or confidential information which become public other than through
unauthorised disclosure by the CEO. The CEO will use all reasonable endeavours to prevent the
unauthorised copying use or disclosure of such information.
	 
	15.2	 	In the course of the Agreement the CEO is likely to obtain trade secrets and
confidential information belonging or relating to other Group Companies and other persons. He
will treat such information as if it falls within the terms of clause 15.1 and clause 15.1
will apply with any necessary amendments to such information. If requested to do so by the
Company the CEO will enter into an agreement with other Group Companies and any other persons
in the same terms as clause 18.1 with any amendments necessary to give effect to this
provision.




10









Table of Contents






	15.3	 	Without prejudice to this clause, details of what the Company and the Group
Companies regard as confidential information are set out in relevant policies of the Company
and/or the Group Companies from time to time.










	 	 	 
	16	 	Intellectual Property Rights
	 
	16.1	 	In relation to each and every invention, improvement or discover (together called
“the Group Company Invention”) which relates either directly or indirectly to the business of
the Company or Group Company which the CEO (jointly or alone) makes at any time during his
employment, the CEO will, subject to the Company or Group Companies complying with all
statutory obligations, promptly disclose to the Company full details of all Group Company
Inventions and then, as requested by the Company or Group Company and at its expense, do all
things necessary or desirable to enable the Group Company (or its nominee) to exploit such
Group Company Inventions for commercial purposes and to secure patent or other appropriate
forms of protection for the same anywhere in the world. Decisions as to the patenting and
exploitation of any such Group Company Inventions are at the sole discretion of the Group
Company.
	 
	16.2	 	In relation to each and every copyright work, database or design which relates
either directly or indirectly to the business of the Group Company (a “Company Work”) which
the CEO (jointly or alone) originates, conceives, writes or makes at any time during the
period of this employment, the CEO acknowledges that all intellectual property rights in and
to such Company Work are the property of the Group Company. At the Company’s request the CEO
will assign to the Company all copyright (and all and any other proprietary or similar rights)
throughout the world in Company Works.
	 
	16.3	 	The CEO agrees that (at the request and expense of the Company) he will do all
things necessary or desirable to substantiate the rights of the Group Company to each and
every Group Company Invention or Company Work and that he will permit he Group Company (whom
he irrevocably appoints as the Company’s attorney for this purpose) to execute documents, to
use the CEO’s name and to do all things which may be necessary or desirable for the Company to
obtain for itself or its nominee the full benefit of each and every Group Company Invention or
Company Work.










	 	 	 
	17	 	Termination and Suspension
	 
	17.1	 	The Agreement will be in force until the end of the Term unless terminated earlier
by either party giving written notice in accordance with clauses 17.2, 17.5 or 18.
	 
	17.2	 	Either party may terminate the Employment by giving not less than 6 months’
written notice to the other.
	 
	17.3	 	In case the Company terminates this Agreement, in addition to the CEO’s right to
receive notice in accordance with clause 17.2, the CEO shall be entitled to a severance
payment equal to 18 months’ Base Salary (“18-months’ severance payment”) which will be paid to
the CEO within 4 weeks of the date termination of the employment. This 18 months’ severance
payment will only be payable if the Agreement is terminated by the Company on 6 months’ notice
and will not be payable where such termination is by reason of the CEO’s misconduct or in
accordance with clause 17.7.




11









Table of Contents






	17.4	 	However, the Supervisory Board may accept shorter notice period in case the CEO
resign according to clause 17.2.
	 
	17.5	 	In case the CEO becomes disable to perform the duties from this Agreement (i) for
a period of 60 consecutive days or 90 non-consecutive days in any period of 365 days and is
likely that such disability will continue, or (ii) immediately upon occurrence of such
disability becomes likely that the CEO will not be able to perform his duties even after
expiration of the 60 or 90 days, the Company may terminate this Agreement with the 6-months
notice. In addition, the Company will pay the CEO 18 months’ severance payment within 30 days
after termination of the employment.
	 
	17.6	 	The CEO’s entitlements to bonus and Stock Options, if any, on termination, are set
out in clauses 8 and 9.
	 
	17.7	 	The Company may terminate the Agreement with immediate effect by giving written
notice if the CEO:






	 	17.7.1	 	commits any serious or persistent breach of his material obligations under
this Agreement; or
	 
	 	17.7.2	 	is guilty of any gross misconduct or conducts himself (whether in
connection with the Agreement or not) in a way which in the reasonable opinion of the
Supervisory Board is harmful to PLIVA d.d. or any Group Company; or
	 
	 	17.7.3	 	is guilty of dishonesty or is convicted of an offence (other than an
offence under the road traffic legislation) whether in connection with the Agreement or
not, in a way which in the reasonable opinion of the Supervisory Board is harmful to
PLIVA d.d. or any Group Company; or
	 
	 	17.7.4	 	commits (or is reasonably believed by the Supervisory Board to have
committed) a breach of any legislation in force or Group policies which may affect or
relate to the business or reputation of any Group Company; or
	 
	 	17.7.5	 	becomes of unsound mind, is bankrupted or has a receiving order made
against him;
	 
	 	17.7.6	 	becomes disqualified from being a director of a company by decision of
relevant authority; or
	 
	 	17.7.7	 	fails to follow lawful direction by Supervisory Board and the Management
Board;






	17.8	 	The CEO will have no claim for damages or any other remedy against the Company and
Group Companies if the Agreement is terminated for any of the reasons set out in clause 17.5
or 17.7.
	 
	17.9	 	The Company may suspend the CEO for a reasonable period from the employment on
full salary and contractual benefits at any time to investigate any matter in which the CEO is
implicated or involved (whether directly or indirectly) and to conduct any related
disciplinary proceedings. During suspension, the CEO shall not work and shall not be entitled
to any salary nor to any other contractual benefits, but is obliged to comply with the clause
15 , 16 and 21 of the Agreement, and shall not undertake any action which may cause the damage
to the Company or any Group Company.




12









Table of Contents
















	18	 	Change of Control
	 
	18.1	 	In the event of a termination of the Agreement either by the Company following
Change of Control (unless the Company terminates pursuant to clause 17.7) or by the CEO when
there is a Material Change before the end of the Term the period of notice will be 6 months.
In addition, the Company shall pay the CEO severance payment of the amount that is equal to
either (i) 30 months base salary or (ii) amount equal to base salary the CEO would be entitled
for the remaining period of the Term (less 6-months notice period), whichever is longer.
Severance will be paid to the CEO within 4 weeks of the date on which the Agreement
terminates.










	 	 	 
	19	 	Full and Final Settlement
	 
	 	 	In the event that the CEO becomes entitled to a severance payment under clauses 17.3,
17.5 or 18 of this Agreement, such payment is subject to and conditional upon the CEO
entering into a Settlement and Compromise Agreement with the Company and Pliva d.d. (of
terms which are satisfactory to Pliva d.d.) the terms of that agreement will provide that
the severance payments are made in full and final settlement of all and any claims the CEO
has or may have against the Company in respect of his employment by it or the termination of
that employment (in addition to what he is entitled to according to this Agreement).










	 	 	 
	20	 	Garden Leave
	 
	20.1	 	The CEO agrees that:






	 	20.1.1	 	at any time after notice to terminate the Agreement is given by either party; or
	 
	 	20.1.2	 	if the CEO purports to terminate the Agreement by resigning without giving
due notice and the Company does not accept his resignation; or
	 
	 	20.1.3	 	during the last six months of the Term;
	 
	 	 	 	the Company may require the CEO to comply with any or all of the provisions in clauses 21.2
and 21.3 below for a maximum period of six months (the “Garden Leave Period”).






	20.2	 	The CEO will not, without prior written consent of the Supervisory Board as long
as he assumes position of President of the Management Board and CEO, be employed or otherwise
engaged in the conduct of any activity, whether or not of a business nature during the Garden
Leave Period. Further, the CEO will not, unless requested by the Company:






	 	20.2.1	 	enter or attend the premises of the Company or any other Group Company; or
	 
	 	20.2.2	 	contact or have any communication with any customer or client of the
Company or any other Group Company in relation to the business of the Company or any
other Group Company; or
	 
	 	20.2.3	 	contact or have any communication with any CEO, officer, director, agent
or consultant of the Company or any other Group Company in relation to the business of
the Company or any other Group Company; or
	 
	 	20.2.4	 	remain or become involved in any aspect of the business of the Company or
any other Group Company except as required by such companies.




13









Table of Contents












	20.3	 	The Company may require the CEO:






	 	20.3.1	 	to comply with the provisions of clause 21; and
	 
	 	20.3.2	 	to immediately resign from any directorship which he holds in the Company,
any other Group Company or any other company where such directorship is held as a
consequence or requirement of the Agreement, unless he is required to perform duties to
which any such directorship relates, in which case he may retain such directorships
while those duties are ongoing.






	20.4	 	During the Garden Leave Period, the CEO will be entitled to receive his salary and
all contractual benefits except bonus and Stock Options, in accordance with the terms of this
Agreement. Any unused holiday accrued at the commencement of the Garden Leave Period and any
holiday accrued during any such period will be deemed to be taken by the CEO during the Garden
Leave Period.
	 
	20.5	 	All duties of the Agreement (whether express or implied), shall continue
throughout the Garden Leave Period save as expressly varied by this clause.










	 	 	 
	21	 	Restrictions after Termination of Employment
	 
	21.1	 	In this clause:
	 
	 	 	“Relevant Date” means the Termination Date or, if earlier, the date on which the CEO
commences any Garden Leave Period; and
	 
	 	 	“Restricted Period” means the period of 9 months (less any period of Garden Leave)
commencing on the Termination Date;
	 
	21.2	 	The CEO is likely to obtain trade secrets and confidential information and
personal knowledge of and influence over customers and clients of the Group during the course
of the Employment. To protect these interests of the Company, the CEO agrees with the Company
that he will be bound by the following covenants:






	 	21.2.1	 	during the Restricted Period he will not be employed in, or carry on for
his own account or for any other person, whether directly or indirectly, (or be a
director of any company engaged in) any business which, by virtue of its location or
otherwise, is or is about to be in competition with any business of the Company or any
other Group Company being carried on by such company at the Relevant Date provided he
was concerned or involved with that business at any time during his service with the
Company;
	 
	 	21.2.2	 	during the Restricted Period he will not (either on his own behalf or for
or with any other person), whether directly or indirectly, canvass or solicit in
competition with the Company or any other Group Company the custom of any person who at
any time during the 12 months prior to the Relevant Date was a customer or client of,
or in the habit of dealing with, the Company or (as the case may be) any other Group
Company and in respect of whom the CEO had access to confidential information or with
whose custom or business the CEO was personally concerned;
	 
	 	21.2.3	 	during the Restricted Period he will not (either on his own behalf or for
or with any other person, whether directly or indirectly) deal with or otherwise accept
in competition with the Company or any Group Company the custom of any person who was
at any time during the 12 months prior to the Relevant Date a customer or




14









Table of Contents






	 	 	 	client of, or in the habit of dealing with, the Company or (as the case may be) any
Group Company and in respect of whom the CEO had access to confidential information
or with whose custom or business the CEO was personally concerned;






	21.3	 	Each of the paragraphs contained in clause 21.2 constitutes an entirely separate
and independent covenant. If any covenant is found to be invalid this will not affect the
validity or enforceability of any of the other covenants.
	 
	21.4	 	Following the Termination Date, the CEO will not represent himself as being in any
way connected with the businesses of the Company or of any other Group Company (except to the
extent agreed by such a company).
	 
	21.5	 	Any benefit given or deemed to be given by the CEO to any Group Company is
received and held on trust by the Company for the relevant Group Company. The CEO will enter
into appropriate restrictive covenants directly with other Group Companies if asked to do so
by the Company.










	 	 	 
	22	 	Contractual Penalty
	 
	 	 	In case of the breach of any provision from the clause 20 or 21 of this Agreement, the
CEO shall be liable to pay the Company contractual penalty equal to 24 months gross salary
paid to him in the last three months before termination of the Agreement within 30 days from
the notice of the Company that breach is made. If the CEO was compensated with anything in
addition to base salary after the termination date and commits breach of the clause 20 or 21
of this Agreement, he shall be liable to pay back the Company any such payment.










	 	 	 
	23	 	Return of Company Property
	 
	23.1	 	At any time during the Agreement (at the request of the Company) and in any event
when the Agreement terminates, the CEO will immediately return to the Company:






	 	23.1.1	 	all documents and other materials (whether originals or copies) made or
compiled by or delivered to the CEO during the Employment and concerning all the Group
Companies. The CEO will not retain any copies of any materials or other information;
and
	 
	 	23.1.2	 	all other property belonging or relating to any of the Group Companies.






	23.2	 	When the Agreement terminates, the CEO will upon expiration of the notice period
or Garden leave, whichever is longer, return to the Company any car provided to the CEO which
is in the possession or under the control of the CEO.










	 	 	 
	24	 	Directorships
	 
	24.1	 	The CEO’s office as a director of the Company or any other Group Company is
subject to the Articles of Association of the relevant company (as amended from time to time)
or any other document which governs appointment of Directors to any Group Company. If the
provisions of this agreement conflict with the provisions of the Articles of Association or
any other governing document, the Articles of Association and the governing document will
prevail.




15









Table of Contents






	24.2	 	The CEO must resign from any office held in any Group Company if he is asked to do
so by the Company.
	 
	24.3	 	The termination of any directorship or other office held by the CEO will not
terminate the CEO’s employment or amount to a breach of terms of this Agreement by the
Company.
	 
	24.4	 	During the Employment the CEO will not do anything which could cause him to be
disqualified from continuing to act as a director of any Group Company.












	 	 	 
	25	 	Notices
	 
	 	 	Any notices given under this Agreement must be given in writing. Notice to the Company
must be addressed to its registered office at the time the notice is given. Notice to the CEO must
be given to him personally or sent to his last known address.
	 	 	 







	 
	26	 	Miscellaneous
	 
	26.1	 	This Agreement may only be modified by the written agreement of the parties.
	 
	26.2	 	The CEO cannot assign this Agreement to anyone else.
	 
	26.3	 	This Agreement supersedes any previous written or oral agreement between the
parties in relation to the matters dealt with in it.
	 
	26.4	 	Reference to any provision of the law shall include any of its later amendments.
	 
	26.5	 	Headings will be ignored in construing this agreement.
	 
	26.6	 	If either party agrees to waives his rights under a provision of this Agreement,
that waiver will only be effective if it is in writing and it is signed by him. A party’s
agreement to waive any breach of any term or condition of this Agreement will not be regarded
as a waiver of any subsequent breach of the same term or condition or a different term or
condition.
	 
	26.7	 	This Agreement is governed by and will be interpreted in accordance with the laws
of Croatia. Each of the parties submits to the exclusive jurisdiction of the relevant Court in
Zagreb as regards any claim or matter arising under this Agreement.
	 
	26.8	 	The Agreement is signed in four original copies in Croatian and two original
copies in English, whereby the CERO keep one copy of the each, and the Company keeps three
copies in Croatian and one copy on English. The Croatian version shall be prevailing for the
interpretation purpose.





For and on behalf of

PLIVA d.d.




	 	 	 
	Signed

	 	Signed
	/s/ Massimo Armanini

	 	/s/ Željko Čović
	President of the Supervisory Board of PLIVA d.d.
	 	 
	 
	 	 
	Date

	 	Date







16