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**Exhibit 10.27**Dated24 October 2005PLIVA d.d.andŽeljko Čović AGREEMENT WITH THEPRESIDENT OF THE MANAGEMENT BOARDAND 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 
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     **ThisAgreement**is made on 24 October 2005 **between**:**(1)** **PLIVA d.d**whose registered address is Ulica grada Vukovara 49,10000, Zagreb Croatia (“**PLIVAd.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 definingrights 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 fora Term;   “**Change of Control**” means (a) the acquisition of control of the composition of the board of directors ofPLIVA d.d. by a person (or group of persons acting together) not having such control asat the date of this agreement;  (b) the acquisition of control of the exercise of more than 50 per cent of thevoting rights attributable to the share capital of PLIVA d.d by a person (or group ofpersons 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 becomeunconditional in all respects;  (e) a person (or group of persons acting together) becoming a shadow director inrespect of at least one half in number of all the directors of PLIVA d.d. Board for thetime being;  (f) the sale of the assets of PLIVA d.d. or substantially all of the assets ofPLIVA 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.’soperating assets, to another Group Company, provided that all or substantially all ofthe 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 indirectlycontrolled by PLIVA d.d.
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  “**Group Company**” means a member of the Group and “**Group Companies**” will be interpretedaccordingly;   “**Listing Rules**” means the Listing Rules made by the UK Listing Authority relevant forlisting on the London Stock Exchange and Listing Rules of the Zagreb Stock Exchange, and anyother 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 theeffect of which constitutes a material change in the CEO’s job or a material reduction inhis 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 anyperson or committee nominated by the Supervisory Board as its representative for thepurposes of this agreement;   “**Term**” means the period from 9 December 2005 to 30 June 2010 for which the CEO is appointedPresident 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 forindefinite period of time. **2.2** This Agreement will be effective from 9 December 2005 on which date the agreementdated 7 September 2000 and its amendments as of 13 November 2001 and 13 November 2002 betweenPLIVA d.d. and the CEO (the “**Superseded Agreement**”) will terminate by mutual agreement andwill cease to have any further force or effect, save (i) where the contrary is stated in thisagreement; and (ii) that the termination of the Superseded Agreement will not affect anyrights 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 theTerm, 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 ExecutiveOfficer, with the roles and responsibilities as defined by the law, Articles of Association ofthe 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 GroupCompanies 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 performingposition of the President of the Management Board and CEO;
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 **3.3.2** properly perform his duties and exercise his powers;  **3.3.3** accept any offices or directorships as reasonably required by theSupervisory 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 theevent 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 ofevery Group Company.**3.4** The CEO accepts that with his consent (which he will not unreasonably withhold ordelay) that the Company may require him to perform CEO or other executive duties of equivalentstatus 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 thebusiness, finances or affairs of the Company or any other Group Company in a prompt and timelymanner. 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 theCompany, provided however that the CEO will not be entitled to additional remuneration for hoursworked 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 bedirectly or indirectly engaged or concerned in the conduct of any activity nor he will acceptany directorship in any company not being a Group Company, (except as a representative of theCompany or Group Companies) without first obtaining the written consent of the SupervisoryBoard, 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 oneper cent of the issued investments of any class of any one company whether or not thoseinvestments are listed or quoted on any recognised Stock Exchange or dealt in on theAlternative Investments Market, without first obtaining the written consent of the SupervisoryBoard, such consent not to be unreasonably withheld or delayed. **5.3** The CEO will (and will procure that his spouse and dependent children) comply withall rules of law, including Croatian Securities Act, Criminal Law and Listing rules and anyother rules or policies applicable to PLIVA d.d. from time to time in relation to the holdingor trading of securities.**6** **Location**   The CEO’s place of work will be in the seat of the Company. The CEO will be required totravel abroad when necessary and to the extent the reasonable business needs require so, theCEO shall also work in other PLIVA’s locations or places where PLIVA operates.
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**7** **Salary** **7.1** The Company will pay the CEO a gross base salary of EUR 430,000 per annum (“**BaseSalary**”). 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 accordingto the average exchange rate of Croatian National Bank on the date of calculation of thesalary for each particular month. **7.2** The salary referred to in clause 7.1 includes director’s fees from PLIVA d.d. andany other Group company in which the CEO is required to accept a directorship from time totime.**8** **Bonus** **8.1** Subject to the terms of this clause 8, the CEO shall be eligible for payment of anannual 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 theBonus Year. The amount of the annual bonus to be paid shall be determined in accordance withthe provisions below. The amount of the bonus may vary in a range from 0 to 150 per cent. ofthe Target Amount. The maximum annual bonus which may be paid to the CEO is 90 per cent. ofthe Base Salary for the relevant Bonus Year. **8.2** The CEO’s bonus entitlement for the whole Bonus Year 2005 will be calculated inaccordance with the provisions of the **Superseded Agreement**. **8.3** The annual bonus for Bonus Years commencing 1 January 2006 and thereafter shall bedetermined 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 earningsbefore interest, taxes, depreciation and amortisation and PLIVA Group earningsbefore interest and taxes, respectively, in the financial plan for the year insubject, as approved by the Supervisory Board solely for the purposes of thisagreement  **•** **Realised Group EBITDA**and **Realised Group EBIT**= Pliva Group EBITDA and EBITas determined in the Pliva Group Consolidated Financial Statements approved bythe Board and the Management Board for the year in subject;  **•** **Competencies coeff**. = coefficient of assessment of contribution to theperformance of the Company, in the range from 1.0 — 1.25. Competenciescoefficient shall be determined by the Supervisory Board.  The CEO shall not be entitled to a bonus if the kb value calculated by applying the aboveformula is less than 0.7. If the kb value calculated by applying the above formula is equalto or higher than 1.2, the kb value shall nonetheless remain at 1.2, meaning that, if the
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  CEO achieves the maximum competencies coefficient, he shall be entitled to the maximum bonusas 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 theCEO’s misconduct or in accordance with clause 17.7) the CEO shall be entitled to unpaidbonus for the year in which the Employment terminates pro-rated to reflect the numberof days worked in the year of termination, based on the Target Amount, and shall bepaid in full for any accrued but unpaid bonus, and payment of any such bonus shall bemade within 2 weeks after the termination date. For the avoidance of doubt, CEO shallnot be entitled to any bonus during any notice period after receipt of the notice ontermination;  **8.3.2** in the event that the CEO resigns, the CEO will have no entitlement to anybonus which hasn’t already been granted to him;  **8.3.3** in the case of termination of the Agreement by the Company under the clause17.7 no bonus shall be payable whether for the Bonus Year in which termination occursor 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 17.2or 18 or the CEO pursuant to clause 18, the CEO’s entitlement to bonus, if any, will becalculated pro-rata, based on Target Amount, to the date the Company gives notice inaccordance with clause 17.2 or 18 or the date on which the CEO serves a Material Change noticeon the Company in accordance with clause 18. **8.5** The “**Bonus Year**” means the financial year from 01 January to 31 December in respectof which the annual bonus is being paid and, in the case of 2010 means the period 1 January2010 to 30 June 2010. The amount of bonus calculated in accordance with the above provisionsrepresents the gross amount. **8.6** For the purpose of this Agreement, in case of no reappointment of CEO after theTerm, bonus for the period from 01 January to 30 June 2010 shall be determined in accordancewith the formula from clause 8.3, but based on plan for the first half 2010 in advanceapproved by the Supervisory Board, so that EBIT Group and EBITDA Group shall be interpretedaccordingly. **8.7** The annual bonus shall in any case be paid within 15 days from the day of approvalof annual financial reports for the previous business year by the Supervisory Board, and forthe period from 1 January till 30 June 2010, in case of no reappointment for a new term, bonusshall be paid within 15 days from the date of approval of the interim consolidated financialresults 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) andon 1 October 2010 (for the Bonus Year 2010), the Company shall grant to the CEO StockOptions (“Stock Option”) by granting ordinary shares of PLIVA d.d. (“Shares”) (tradedcurrently on the ZSE), as a participation of in the profit of the Company, for
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   the previous calendar year, whereby the number of granted Stock Options shalldepend 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 Bonusfor the previous Bonus Year and is as follows:     Target Number of Granted Stock OptionsOver Year Grant Year Number of Stock Options (N)2006, 2007, 2008, 2009 2007,2008,2009, 2010 23,5002010 2010 16,657Actual number of Stock Options (“**P**”) to be granted shall be calculated according to thefollowing formula:   **Number of Stock Options (=P)**  Number of Stock OptionsRealised/Target Annual Bonus payment =Y as a multiple of the target number (N) y < 0,5 P=0,75*N0,5 £ 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, onthe date on which the Stock Option would otherwise be granted, this Agreement has beenterminated or notice has been given terminating this Agreement; provided, however, thatthis shall not apply in case the termination or notice has been given after end of thecalendar 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 ofthe 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 thisAgreement 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 Januaryin 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 andhas not lapsed. He may exercise it wholly or in part. To exercise the Stock Option hemust give notice in writing to the Plan Administrator (Corporate Compliance departmentin 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
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 (ii) the number of Shares in respect of which he wishes to exerciseit. **9.3.3** Within 5 business days of that notice, the Company will procure the issueor transfer to or to the order of the CEO of a number of Shares calculated inaccordance with the following formula:*a × (b − c)* *b*   where: a = the number of Shares in respect of which the Stock Options isvalidly exercised;  b = the closing price of a Share on the ZSE on the dealing day onwhich the notice of exercise is received by the Plan Administrator; if therewas no trading with the Shares on the ZSE on that date, last closing price ofthe Shares achieved on the ZSE prior to the date the notice is received shallbe taken;  c = the average closing prices of a Shares on the ZSE over theperiod 1 January to 31 December (inclusive) immediately preceding the grantdate, 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 ortransferring 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 / GDRratio 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 isterminated in accordance with clause 18, all outstanding Stock Options will immediatelyvest and will be exercisable for 12 months from the Termination Date after which theywill lapse;  **9.4.2** by the CEO, in accordance with clause 17.2 or by the Company, in accordancewith clauses 17.5 or 17.7, all outstanding Stock Options will lapse, except to theextent they have vested on or before the Termination Date. Stock Options which havevested on the Termination Date will be exercisable for 12 months from the TerminationDate 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 CEOis granted equivalent rights, on the broadly the same terms as those described in thisclause but over shares or other securities in the company which has control of PLIVA d.d orpay cash equivalent; **9.6** Grant of Stock Options following a Change of Control
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  Where clause 18 applies, the Company will, on the Termination Date, grant to the CEO StockOption 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 theTermination Date.   The Stock Options granted under this clause 9.6 will vest in full on the date of grant andwill 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 StockOptions pursuant to the clause 9.6 are granted. **9.7** Tax   The CEO will promptly pay all taxes, eventual social security contributions, duties or otherlevies which arise or may arise in connection with the grant, vesting or exercise of theStock Options or any cash payment made under this clause 9 or will, on demand, repay anysuch amounts paid by the Company or any of its subsidiaries. The CEO consents to thededuction of any such amounts and authorises the Company to sell, on his behalf, sufficientShares 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 Shareor GDR at a particular time and the Company is prevented from granting, issuing ortransferring by any restrictions imposed by statute, order, regulation or Governmentdirective or the rules of any stock exchange, the time may be delayed until the lifting ofany 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 Basesalary to voluntarily pension fond as elected and notified to the Company by the CEO, andwhich 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 willnot 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, includingbut not limited to life insurance, insurance for long term disease or disability, according tothe Company policy in effect.
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**12.2** The Company shall arrange and pay the cost for the CEO a private health insurancepolicy, in accordance with the Company’s policies. **12.3** The CEO understands and agrees that if the Company provides long termillness/disability insurance and the Insurer appointed by the Company from time to time failsor refuses to provide the CEO with any benefit under the insurance arrangement, the CEO willhave 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 inrespect of the CEO’s performance of his duties under this Agreement. The CEO’s rights andentitlements under such travel insurance will be subject to the terms of Company’s insurancecover from time to time.   **13** **Expenses** **13.1** The Company will reimburse the CEO for all reasonable expenses properly incurredby him in performing his duties under this Agreement, provided that these are incurred inaccordance 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 onlybe 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 holidaysin Croatia) which shall be used at the latest by 30 June of the following year, after whichdate all unused holiday days shall lapse. The CEO will pay due consideration to theoperational requirements of the Company when arranging any holidays. For part years, the CEO’sholiday 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 ofholiday.   **15** **Confidentiality** **15.1** Without prejudice to the legal duties which he owes to the Company the CEO agreesthat he will not, except in the proper performance of his duties, copy, use or disclose to anyperson any of the Company’s trade secrets or confidential information. This restriction willcontinue to apply after the termination of the Agreement without limit in time but will notapply to trade secrets or confidential information which become public other than throughunauthorised disclosure by the CEO. The CEO will use all reasonable endeavours to prevent theunauthorised copying use or disclosure of such information. **15.2** In the course of the Agreement the CEO is likely to obtain trade secrets andconfidential information belonging or relating to other Group Companies and other persons. Hewill treat such information as if it falls within the terms of clause 15.1 and clause 15.1will apply with any necessary amendments to such information. If requested to do so by theCompany the CEO will enter into an agreement with other Group Companies and any other personsin the same terms as clause 18.1 with any amendments necessary to give effect to thisprovision.
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**15.3** Without prejudice to this clause, details of what the Company and the GroupCompanies regard as confidential information are set out in relevant policies of the Companyand/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 ofthe Company or Group Company which the CEO (jointly or alone) makes at any time during hisemployment, the CEO will, subject to the Company or Group Companies complying with allstatutory obligations, promptly disclose to the Company full details of all Group CompanyInventions and then, as requested by the Company or Group Company and at its expense, do allthings necessary or desirable to enable the Group Company (or its nominee) to exploit suchGroup Company Inventions for commercial purposes and to secure patent or other appropriateforms of protection for the same anywhere in the world. Decisions as to the patenting andexploitation of any such Group Company Inventions are at the sole discretion of the GroupCompany. **16.2** In relation to each and every copyright work, database or design which relateseither directly or indirectly to the business of the Group Company (a “**Company Work**”) whichthe CEO (jointly or alone) originates, conceives, writes or makes at any time during theperiod of this employment, the CEO acknowledges that all intellectual property rights in andto such Company Work are the property of the Group Company. At the Company’s request the CEOwill 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 allthings necessary or desirable to substantiate the rights of the Group Company to each andevery Group Company Invention or Company Work and that he will permit he Group Company (whomhe irrevocably appoints as the Company’s attorney for this purpose) to execute documents, touse the CEO’s name and to do all things which may be necessary or desirable for the Company toobtain for itself or its nominee the full benefit of each and every Group Company Invention orCompany Work.   **17** **Termination and Suspension** **17.1** The Agreement will be in force until the end of the Term unless terminated earlierby 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 toreceive notice in accordance with clause 17.2, the CEO shall be entitled to a severancepayment equal to 18 months’ Base Salary (“**18-months’ severance payment**”) which will be paid tothe CEO within 4 weeks of the date termination of the employment. This 18 months’ severancepayment will only be payable if the Agreement is terminated by the Company on 6 months’ noticeand will not be payable where such termination is by reason of the CEO’s misconduct or inaccordance with clause 17.7.
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**17.4** However, the Supervisory Board may accept shorter notice period in case the CEOresign according to clause 17.2. **17.5** In case the CEO becomes disable to perform the duties from this Agreement (i) fora period of 60 consecutive days or 90 non-consecutive days in any period of 365 days and islikely that such disability will continue, or (ii) immediately upon occurrence of suchdisability becomes likely that the CEO will not be able to perform his duties even afterexpiration of the 60 or 90 days, the Company may terminate this Agreement with the 6-monthsnotice. In addition, the Company will pay the CEO 18 months’ severance payment within 30 daysafter termination of the employment. **17.6** The CEO’s entitlements to bonus and Stock Options, if any, on termination, are setout in clauses 8 and 9. **17.7** The Company may terminate the Agreement with immediate effect by giving writtennotice if the CEO: **17.7.1** commits any serious or persistent breach of his material obligations underthis Agreement; or  **17.7.2** is guilty of any gross misconduct or conducts himself (whether inconnection with the Agreement or not) in a way which in the reasonable opinion of theSupervisory 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 anoffence under the road traffic legislation) whether in connection with the Agreement ornot, in a way which in the reasonable opinion of the Supervisory Board is harmful toPLIVA d.d. or any Group Company; or  **17.7.4** commits (or is reasonably believed by the Supervisory Board to havecommitted) a breach of any legislation in force or Group policies which may affect orrelate to the business or reputation of any Group Company; or  **17.7.5** becomes of unsound mind, is bankrupted or has a receiving order madeagainst him;  **17.7.6** becomes disqualified from being a director of a company by decision ofrelevant authority; or  **17.7.7** fails to follow lawful direction by Supervisory Board and the ManagementBoard;**17.8** The CEO will have no claim for damages or any other remedy against the Company andGroup Companies if the Agreement is terminated for any of the reasons set out in clause 17.5or 17.7. **17.9** The Company may suspend the CEO for a reasonable period from the employment onfull salary and contractual benefits at any time to investigate any matter in which the CEO isimplicated or involved (whether directly or indirectly) and to conduct any relateddisciplinary proceedings. During suspension, the CEO shall not work and shall not be entitledto any salary nor to any other contractual benefits, but is obliged to comply with the clause15 , 16 and 21 of the Agreement, and shall not undertake any action which may cause the damageto the Company or any Group Company.
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**18** **Change of Control** **18.1** In the event of a termination of the Agreement either by the Company followingChange of Control (unless the Company terminates pursuant to clause 17.7) or by the CEO whenthere 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 toeither (i) 30 months base salary or (ii) amount equal to base salary the CEO would be entitledfor 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 Agreementterminates.   **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 CEOentering into a Settlement and Compromise Agreement with the Company and Pliva d.d. (ofterms which are satisfactory to Pliva d.d.) the terms of that agreement will provide thatthe severance payments are made in full and final settlement of all and any claims the CEOhas or may have against the Company in respect of his employment by it or the termination ofthat 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 givingdue 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 21.2and 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 longas he assumes position of President of the Management Board and CEO, be employed or otherwiseengaged in the conduct of any activity, whether or not of a business nature during the GardenLeave 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 theCompany or any other Group Company in relation to the business of the Company or anyother Group Company; or  **20.2.3** contact or have any communication with any CEO, officer, director, agentor consultant of the Company or any other Group Company in relation to the business ofthe Company or any other Group Company; or  **20.2.4** remain or become involved in any aspect of the business of the Company orany other Group Company except as required by such companies.
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**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 aconsequence or requirement of the Agreement, unless he is required to perform duties towhich any such directorship relates, in which case he may retain such directorshipswhile those duties are ongoing.**20.4** During the Garden Leave Period, the CEO will be entitled to receive his salary andall contractual benefits except bonus and Stock Options, in accordance with the terms of thisAgreement. Any unused holiday accrued at the commencement of the Garden Leave Period and anyholiday accrued during any such period will be deemed to be taken by the CEO during the GardenLeave Period. **20.5** All duties of the Agreement (whether express or implied), shall continuethroughout 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 CEOcommences 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 andpersonal knowledge of and influence over customers and clients of the Group during the courseof the Employment. To protect these interests of the Company, the CEO agrees with the Companythat he will be bound by the following covenants: **21.2.1** during the Restricted Period he will not be employed in, or carry on forhis own account or for any other person, whether directly or indirectly, (or be adirector of any company engaged in) any business which, by virtue of its location orotherwise, is or is about to be in competition with any business of the Company or anyother Group Company being carried on by such company at the Relevant Date provided hewas concerned or involved with that business at any time during his service with theCompany;  **21.2.2** during the Restricted Period he will not (either on his own behalf or foror with any other person), whether directly or indirectly, canvass or solicit incompetition with the Company or any other Group Company the custom of any person who atany 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 GroupCompany and in respect of whom the CEO had access to confidential information or withwhose custom or business the CEO was personally concerned;  **21.2.3** during the Restricted Period he will not (either on his own behalf or foror with any other person, whether directly or indirectly) deal with or otherwise acceptin competition with the Company or any Group Company the custom of any person who wasat any time during the 12 months prior to the Relevant Date a customer or
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   client of, or in the habit of dealing with, the Company or (as the case may be) anyGroup Company and in respect of whom the CEO had access to confidential informationor with whose custom or business the CEO was personally concerned;**21.3** Each of the paragraphs contained in clause 21.2 constitutes an entirely separateand independent covenant. If any covenant is found to be invalid this will not affect thevalidity or enforceability of any of the other covenants. **21.4** Following the Termination Date, the CEO will not represent himself as being in anyway connected with the businesses of the Company or of any other Group Company (except to theextent agreed by such a company). **21.5** Any benefit given or deemed to be given by the CEO to any Group Company isreceived and held on trust by the Company for the relevant Group Company. The CEO will enterinto appropriate restrictive covenants directly with other Group Companies if asked to do soby the Company.   **22** **Contractual Penalty**   In case of the breach of any provision from the clause 20 or 21 of this Agreement, theCEO shall be liable to pay the Company contractual penalty equal to 24 months gross salarypaid to him in the last three months before termination of the Agreement within 30 days fromthe notice of the Company that breach is made. If the CEO was compensated with anything inaddition to base salary after the termination date and commits breach of the clause 20 or 21of 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 eventwhen the Agreement terminates, the CEO will immediately return to the Company: **23.1.1** all documents and other materials (whether originals or copies) made orcompiled by or delivered to the CEO during the Employment and concerning all the GroupCompanies. 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 periodor Garden leave, whichever is longer, return to the Company any car provided to the CEO whichis 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 issubject 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 theprovisions of this agreement conflict with the provisions of the Articles of Association orany other governing document, the Articles of Association and the governing document willprevail.
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**24.2** The CEO must resign from any office held in any Group Company if he is asked to doso by the Company. **24.3** The termination of any directorship or other office held by the CEO will notterminate the CEO’s employment or amount to a breach of terms of this Agreement by theCompany. **24.4** During the Employment the CEO will not do anything which could cause him to bedisqualified 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 Companymust be addressed to its registered office at the time the notice is given. Notice to the CEO mustbe 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 theparties 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’sagreement to waive any breach of any term or condition of this Agreement will not be regardedas a waiver of any subsequent breach of the same term or condition or a different term orcondition. **26.7** This Agreement is governed by and will be interpreted in accordance with the lawsof Croatia. Each of the parties submits to the exclusive jurisdiction of the relevant Court inZagreb as regards any claim or matter arising under this Agreement. **26.8** The Agreement is signed in four original copies in Croatian and two originalcopies in English, whereby the CERO keep one copy of the each, and the Company keeps threecopies in Croatian and one copy on English. The Croatian version shall be prevailing for theinterpretation purpose.For and on behalf of