Employment Agreement
between
Xxxxxxx X. Xxxxxxx
&
Corning Clinical Laboratories, Incorporated
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into between CORNING
CLINICAL LABORATORIES, INC. (the "Company"), a Delaware corporation having its
principal place of business at Xxx Xxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000, and
XXXXXXX X. XXXXXXX (the "Executive").
WHEREAS, Executive has been employed by the Company as President and Chief
Executive Officer; and WHEREAS, the Company considers the services of the
Executive to be unique and essential to the success of the Company's business;
and
WHEREAS, it is anticipated that the Company will be subject to a tax-free
spin-off by Corning Incorporated ("Corning") (the "Spin-off") and the parties
desire that the Executive continue as President and Chief Executive Officer of
the Company following the Spin-off; and
WHEREAS, the Company and the Executive now wish to enter into an agreement
of employment that will constitute the sole and exclusive agreement relating to
the employment of Executive by the Company on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, terms and conditions set forth herein, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed between the Corporation and the Executive as follows:
1. Employment: The Company shall continue to employ the Executive in a
full-time capacity in the position set forth in this paragraph, and the
Executive shall continue to accept such employment upon the terms and
conditions set forth herein. Such employment shall be in the capacity
of President and Chief Executive Officer of the Company, and as a
Director and Chairman of the Board of Directors of the Company,
reporting directly to the Board. The Company shall nominate the
Executive as a Director of the Company and shall use its best efforts
to have the Executive elected and re-elected to the Board for the
duration of the "Employment Term" (as hereinafter defined).
2. Term: Unless earlier terminated pursuant to Section (9) hereof, the
term of employment under this agreement shall commence on the later of
January 1, 1997 or the date upon which the Spin-off is consummated (the
"Effective Date"), and shall continue through December 31, 1999 (the
"Employment Term"). On or before June 1, 1999, the Company and the
Executive agree to use their good faith efforts to negotiate a renewal
of this Agreement (the "Renewal Agreement"), on mutually satisfactory
terms and conditions. In the event that the Company and Executive are
unable to agree to a Renewal Agreement, and subject to continued
service by the Executive through December 31, 1999 (absent any
termination by the Company without Cause, or termination by the
Executive for Good Reason, or as a result of the death or disability
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of the Executive, in each case giving rise to payments pursuant to
Section 12 hereof) (each individually a "Section 12 Event"), then upon
the expiration of this Agreement on December 31, 1999, and in lieu of
any other amounts otherwise payable to the Executive pursuant to
Section 12 hereof, the Executive shall receive the "Non-Renewal
Payment" (as hereinafter defined). "Non-Renewal Payment" shall mean (i)
a lump-sum cash payment equal to two times the highest annual cash
compensation paid to the Executive during the Employment Term, and (ii)
reimbursed health benefits under COBRA for eighteen months for the
Executive and his family following the expiration of this Agreement.
Notwithstanding the foregoing, the Executive shall not be entitled to
receive the Non-Renewal Payment if upon the expiration of the
Employment Term (and absent any Section 12 Event) the Executive accepts
an executive position at Corning on terms and conditions satisfactory
to the Executive.
3. Duties: During the Employment Term, the Executive shall, subject to the
supervising powers of the Board, have those powers and duties
consistent with his position as Chief Executive Officer and Chairman,
which powers shall in all cases include, without limitation, the power
of supervision and control over, and responsibility for, the general
management and operations of the Company. Executive agrees to devote
substantially all his working time and attention to the business of the
Company. The Executive shall not, without the prior written consent of
the Company's Board of Directors, be directly or indirectly engaged in
any other trade, business or occupation for compensation requiring his
personal services during the Employment Term. Nothing in this agreement
shall preclude the Executive from: (i) engaging in charitable and
community activities or
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from managing his personal investments, or (ii) serving as a member of
the board of directors of an unaffiliated company not in competition
with the Company, subject however, in each such case of board
membership, to approval by the Company's Board of Directors (not to be
unreasonably withheld).
4. Place of Performance: The principal place of employment of the
Executive shall be at the Company's principal executive offices in
Teterboro, New Jersey, or such other location as may be agreed to by
the Board and Executive.
5. Cash Compensation: Executive shall be compensated for services rendered
during the Employment Term as follows:
(a) Base Salary: Executive shall be compensated at an annual base
salary of no less than $500,000 (the base salary, at the rate in effect
from time to time, is hereinafter referred to as the "Base Salary").
The Company's Board of Directors shall review and may, if appropriate,
at its discretion, increase this annual base salary effective the first
day of any future new year during the Employment Term; provided that
the Base Salary shall be increased annually to reflect ordinary salary
actions generally granted to other Company executives. The Base Salary
shall be payable in equal semi-monthly installments.
(b) Variable (bonus) Pay: In addition to the Base Salary provided for
in Section 5(a) above, the Company will provide annual bonus awards to
Executive under its Variable Compensation (VC) program in accordance
with the plan and financial performance targets as established by the
Company's shareholders and/or Board of Directors. During the Employment
Term, Executive's target incentive opportunity under the Company's VC
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program will be no less than 65% of Base Salary as in effect at the
time such target incentive opportunity is established.
6. Equity/Awards: Executive may be awarded additional compensation (such
as stock options or restricted stock) (collectively the "Annual
Incentive Awards") pursuant to the present or any future incentive
compensation or long-term compensation program established for
the senior officers of the Company (collectively the "Incentive
Compensation Programs"), which, in the sole judgment of the Company's
Board of Directors, is appropriate for the position occupied by
Executive and his performance therein; provided that no executive,
consultant or individual shall receive any annual award under the
Incentive Compensation Programs in excess of the annual award (if any)
made to the Executive, without Executive's express written consent.
Compensation granted under such plans will be subject to the actual
provisions and conditions applicable to such plans.
7. Initial Incentive Awards:
(a) The Executive is hereby granted (i) options on 180,000 shares of
common stock of the Company ("Common Stock") at an exercise price equal
to the lesser of $12.50 or the fair market value of the Common Stock as
of the effective date of the Spin-Off (the "Exercise Price"); and (ii)
90,000 shares of the Company's common stock (collectively the "Initial
Incentive Awards"). The Initial Incentive Awards shall be subject to
the general terms and conditions of the incentive plans under which
they were granted subject in each case to any provisions of this
Agreement providing for accelerated vesting.
5
(b) The Executive's rights with respect to certain previously granted
incentive awards in Corning shall be converted into (i) options on
185,600 shares of Common Stock (representing first and second year
CPP-6 stock options under Corning's long-term plan), and (ii) 55,085
shares of Common Stock (the "CCL Career Shares") (such CCL Career
Shares to be subject to the vesting provisions set forth in Annex A
hereto, absent accelerated vesting under the terms of this Agreement)
(collectively "Converted Incentive Awards").
(c) The final number of Initial Incentive Awards and Converted
Incentive Awards granted to the Executive shall be adjusted pro rata
upward or downward, as the case may be, depending on the appropriate
pricing formula finally adopted with the approval of the Executive, and
the extent to which the price of the Common Stock on the effective date
of the Spin-off is less than or greater than $12.50 per share.
8. Employee Benefits:
(a) General Provisions: Except as expressly provided in this Agreement,
Executive shall be eligible to participate in all employee benefit and
welfare plans offered by the Company (e.g. Life Insurance, Medical &
Dental Insurance, Travel, Accident, STD<D, Flexible Spending
Accounts, Regular and Supplemental AD&D, Optional/Supplemental Life
Insurance, Investment Plan - 401k, Employee Stock Purchase Plan and
other personal benefit plans of the Company) on a basis which is no
less favorable to the Executive than that made available to other
senior officers of the Company.
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(b) Transferred Executive Supplemental Retirement Plan: (i) Executive
will be eligible to participate in the "Transferred Executive
Supplemental Retirement Plan" (the "SRP") established by the Company
for certain executives of the Company, effective upon the Effective
Date. Under the terms of such plan, Executive will be entitled to
receive a nonqualified retirement benefit in accordance with the terms
and provisions of the plan, as administered by the Company's Board of
Directors, subject to the terms of this Agreement.
(ii) Notwithstanding any terms of the SRP to the contrary,
Executive shall be entitled to receive a retirement pension benefit
under this Agreement (the "Company Non-Qualified Benefit") as provided
for below. The Company Non-Qualified Benefit shall be an annuity
commencing on the later of (i) his date of termination or (ii) the
Executive's 57th birthday (the "SRP Commencement Date"), and shall be
(1) fully equivalent in value to the pension benefits Executive would
have received under the Corning non-qualified and qualified pension
plans as in effect on the date of this Agreement (including all
across-the-board plan improvements or benefit decreases and/or
successor plans, in each case adopted after the date of this Agreement
and applicable to the class of executives of which the Executive was a
part while employed by Corning), (2) based on Executive's combined
years of service with the Company and Corning (but in any case not
less than 34 years of service), (3) computed on an unreduced basis as
if Executive were a retiree, rather than on a deferred vested basis,
and (4) based on all compensation earned by Executive from Corning and
Company through to the SRP Commencement Date (provided that for
purposes of such computation, Executive's
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benefit eligible compensation shall be his 1997 Base Salary and Bonus
and such amount increased at 5% per annum for subsequent years);
provided that if the Executive terminates his employment under this
Agreement without Good Reason or the Company terminates the Executive's
employment under this Agreement with Cause, then the pension benefits
payable to the Executive under the SRP shall be determined based only
on actual years of service and compensation through to the Termination
Date.
(iii) On or before the Effective Date, the Company shall deliver
to Executive a standby letter of credit in the amount of $5.4 million,
in form acceptable to Executive and his counsel and with an evergreen
term of no less than eighteen (18) months, to ensure that the
Company's obligation under the SRP and the Company Non-Qualified
Benefit are fully funded and secured on an after-tax basis to the
Executive (the "SRP LC"). As of the first day of any calendar year
thereafter (the "Adjustment Date") as of which the Company's pension
liability (on an after-tax basis) to Executive as computed hereunder,
as determined by an actuary acceptable to Executive on or before
November 1 of the preceding calendar year, has a present value that
exceeds by more than $250,000 the SRP LC (on an after-tax basis), the
Company shall, within 60 days of the Adjustment Date, increase the
amount of the SRP LC or secure and deliver to the Executive an
additional letter of credit in form acceptable to the Executive and
his counsel so that, in the aggregate, the letter(s) of credit then in
place are not less than the present value of such liability (on an
after-tax basis).
(iv) Immediately upon (x) the termination of Executive's
employment with the Company for any reason, including, without
limitation, failure to negotiate a Renewal
8
Agreement (and other than a termination of Executive's employment by
the Company for Cause or by the Executive without Good Reason), (y)
failure of the Company to renew the SRP LC or increase the amount of
the SRP LC or secure an additional letter of credit, as provided herein
(in each case, without the consent of the Executive not to do so), or
(z) upon the Executive's retirement, the Executive may draw on the SRP
LC; it being understood that the Executive may elect to draw on the SRP
LC (and any supplemental letter of credit) pursuant to subclause (y)
above and continue his employment hereunder.
(v) Amounts payable to the Executive in satisfaction of the
Company Non-Qualified Benefit shall be reduced by (i) any qualified
plan benefits actually received by Executive under Corning's qualified
plan ("Qualified Corning Benefits") and (ii) any non-qualified
benefits to the extent funded pursuant to Section III (c) of the
Transition Agreement, dated as of December 18, 1996 between Corning
and the Executive, and actually received by the Executive ("Section
III (c) Benefits"), and any amounts realized by the Executive upon
drawing upon the SRP LC (or any supplemental letter of credit) shall
be adjusted to take into account such Qualified Corning Benefits and
Section III (c) Benefits.
(c) Relocation: The Company shall reimburse the Executive up to $10,000
per month (grossed-up for tax purposes at a rate of 45%) until the
earlier of: (i) suitable housing in the New York Metropolitan area
being obtained by the Executive, or (ii) June 30, 1998. lf the
Executive has not utilized Corning's relocation benefits prior to the
Effective Date, the Company shall extend equal benefits (to the extent
the Company's
9
relocation policies are of lesser value to the Executive) for
relocating the Executive and his family from the Corning, New York area
to the New York City Metropolitan area. In addition, the Company will
provide for an interest-free housing loan to the Executive in the
amount of $400,000, all of which shall be forgiven in five (5) annual
installments at each annual anniversary of this Agreement's Effective
Date. Any compensation income to Executive resulting from the loan
forgiveness or interest-free features of this loan will be grossed-up
for tax purposes at the Executive's effective tax rate.
(d) Vacation and Sick Leave: Executive shall be entitled to vacation
and sick leave in accordance with the vacation and sick leave policies
adopted by the Company from time to time, provided that the Executive
shall be entitled to no less than five (5) weeks of paid vacation each
calendar year. Any vacation shall be at such times and for such periods
as shall be mutually agreed upon between the Executive and the Company.
The Executive shall be entitled to all public holidays observed by the
Company.
9. Applicable Taxes: There shall be deducted from any compensation
payments made under this Agreement any federal, state and local taxes
or other amounts required to be withheld by any entity having
jurisdiction over the matter.
10. Miscellaneous Benefits: During the Employment Term, the Company shall
provide the Executive with the following additional benefits:
(a) Business Travel and Expenses: Executive shall be reimbursed by the
Company for reasonable travel and other business expenses, as approved
by the Company, which are
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incurred and accounted for in accordance with the Company's normal
practices and procedures for reimbursement of expenses.
(b) Legal Fees: The Company shall reimburse Executive for reasonable
legal fees and disbursements incurred in connection with the
negotiation, preparation and implementation of this Agreement (grossed
up for tax purposes at a rate of 45%).
(c) Clubs and Memberships: The Company will reimburse Executive for
annual and one-time costs associated with memberships for the Executive
and his family in a country club and city club (grossed-up for tax
purposes at a rate of 45%).
(d) Executive Driver: In order to ensure the accessibility and safety
of the Executive during the Employment Term, the Company will reimburse
Executive for the costs of an executive driver comparable to the costs
presently incurred on behalf of the Executive, subject to annual COLA
adjustments (grossed up for tax purposes at a rate of 45%).
(e) Use of Aircraft: In order to ensure the accessibility and safety of
the Executive during the Employment Term, the Company shall reimburse
Executive for all costs associated with the Executive's use of aircraft
in accordance with the Company's policies, whether for business
purposes or for personal reasons, whether the aircraft is being
chartered or is Company-owned. Any payments under this provision which
are to be treated as taxable compensation to the Executive (in
accordance with IRS rules and regulations) will be grossed-up for tax
purposes at a rate of 45%.
(f) Automobile Expenses: The Company will provide Executive with a
gross automobile allowance of $1,070 per month (or other greater
monthly amount as is
11
provided to other senior executives of the Company) in accordance with
the provisions of the Company's auto allowance program.
(g) Financial Counseling and Legal Services: The Company shall
reimburse the Executive for financial counseling, tax preparation and
legal services (grossed-up for tax purposes at a rate of 45%) in an
annual amount comparable to that paid on behalf of similarly situated
senior executives, but in no event less than $25,000/year.
(h) Non-Exclusivity: Nothing in this Agreement shall prevent the
Executive from being entitled to receive any additional compensation or
benefits as approved by the Company's Board of Directors.
11. Termination of Employment: Notwithstanding any other provisions of this
Agreement to the contrary, the employment of the Executive pursuant to
this Agreement may be terminated as follows:
(a) Termination by the Company For Cause: Executive may be terminated
for "Cause" by the Company as provided below. As used herein, the term
"Cause" shall mean (i) conviction of the Executive of a felony; (ii) if
Executive is not disabled (as defined below), a willful failure or
refusal to substantially perform the duties and services specified
herein for a period of not less than thirty (30) days, and after having
been afforded (x) written notice of any alleged failure to
substantially perform such duties and services and (y) a reasonable
opportunity to cure any alleged failure; (iii) the commission by the
Executive of fraud or theft against, or embezzlement from, the Company;
or (iv) gross misconduct intentionally undertaken by the Executive that
is demonstrably and materially injurious to the operations of the
Company. For purposes of this section, no
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act or failure to act on Executive's part shall be considered to be
reason for termination for Cause if done, or omitted to be done, by
Executive in good faith and with the reasonable belief that the action
or omission was in the best interests of the Company. Cause shall not
exist unless and until there shall have been delivered to the Executive
a copy of a resolution, duly adopted by the affirmative vote of not
less than two thirds of the entire membership of the Board at a meeting
of the Board held for the purpose (after ten (10) days' prior written
notice to the Executive of such meeting and the purpose thereof and an
opportunity for him, together with his counsel, to be heard before the
Board at such meeting), of finding that in the good faith opinion of
the Board, the Executive was guilty of the conduct set forth above in
this Section 11(a) and specifying the particulars thereof in detail. As
set forth more fully in Section 11(f) hereof, the "Date of Termination"
shall be the date specified in the "Notice of Termination;" provided,
however, that in the case of a termination for Cause under clause (ii)
above, the Date of Termination shall not be earlier than 30 days after
delivery of the Notice of Termination. Anything herein to the contrary
notwithstanding, if, following a termination of the Executive's
employment by the Company for Cause based upon the conviction of the
Executive for a felony, such conviction is overturned in a final
determination on appeal, the Executive shall be entitled to the
payments and the economic equivalent of the benefits the Executive
would have received if his employment had been terminated by the
Company without Cause.
(b) Termination By the Company For Disability: At the sole discretion
of the Company's Board of Directors, Executive may be terminated if the
Executive is disabled (as defined below) and shall have been absent
from his duties with the Company on a full-time basis for
13
one hundred and twenty (120) consecutive days, and if within thirty
(30) days after written Notice of Termination is given by the Company
to the Executive, the Executive shall not have resumed the performance
of his duties hereunder on a full-time basis. In this event, the date
of termination shall be thirty (30) days after Notice of Termination is
given by the Company (provided that the Executive shall not have
returned to the full-time performance of his duties). As used herein,
the term "disabled" shall mean that the Executive is unable, as a
result of a medically determinable physical or mental impairment, to
perform the duties and services of his position.
(c) Death: The Executive's employment shall terminate upon his death,
and the date of his death shall be the Date of Termination for purposes
of this Agreement.
(d) Termination by the Executive for Good Reason: The Executive may
terminate his employment hereunder for "Good Reason," provided that the
Executive shall have delivered a Notice of Termination within ninety
(90) days after the occurrence of the event of Good Reason giving rise
to such termination. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of one or more of the following
circumstances, without the Executive's express written consent, which
are not remedied by the Company with thirty (30) days of receipt of the
Executive's Notice of Termination:
(i) an assignment to the Executive of any duties
materially inconsistent with his positions, duties,
responsibilities and status with the Company, or any material
limitation of the powers of the Executive not consistent with
the powers of the Executive contemplated by Section (3)
hereof;
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(ii) any removal of the Executive from, or any failure to
re-elect the Executive to, the positions specified in Section
(1) of this Agreement;
(iii) the change of the Executive's title as specified by
Section (1) of this Agreement;
(iv) the Company's requiring the Executive without his
written consent to be based at any office or location more
than 75 miles commuting distance from the location as
described in Section (4) of this Agreement;
(v) a reduction in the Executive's Base Salary or
Variable Compensation bonus opportunity as in effect from
time to time, without his written consent;
(vi) the failure of the Company to continue in effect any
Benefit Plan that was in effect on the date hereof or provide
the Executive with equivalent benefits, without his written
consent;
(vii) the failure of the Company, within not more than
thirty (30) days after the Effective Date, to have the
Executive duly elected as a member of its Board of Directors
and to maintain the Executive in such position at all times
thereafter, for so long as he shall serve as Chief Executive
Officer of the Company;
(viii) any other material breach by the Company of this
Agreement;
(ix) a Change in Control;
(x) a failure of the Company to secure a written
assumption by any successor company as provided for in
Section 15(g) hereof; or
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(xi) the failure of the Company to secure, maintain,
renew or supplement the SRP LC (and any supplemental letter
of credit) as provided for in Section 8(b)(iii) hereof. In
the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of
Termination, and shall be more than thirty (30) days after
the Notice of Termination.
In the event of a termination for Good Reason pursuant to Section
11(d)(xi) hereof, the Executive shall retain the right to draw on the
SRP LC (and any supplemental letter of credit) as provided for in
Section 8(b) hereof.
(e) Other Terminations: Notwithstanding the foregoing, the Executive
may terminate his employment at any time, subject to the provisions of
Section (11)(f) hereof. If the Executive's employment is terminated
hereunder for any reason other than as set forth in Sections
(11)(a)-(11)(d) hereof, the date on which a Notice of Termination is
given or any later date (within 30 days) set forth in such Notice of
Termination shall be the Date of Termination.
(f) Notice of Termination: Any termination of the Executive's
employment hereunder by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provisions so indicated.
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12. Compensation upon Termination or during Disability:
(a) Disability Period. During any period during the Employment Term
that the Executive fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness ("Disability Period"), the
Executive shall continue to (i) receive his full Base Salary and bonus
otherwise payable for that period of the Employment Term including the
Disability Period and (ii) participate in the Benefit Plans. Such
payments made to the Executive during the Disability Period shall be
reduced by the sum of the amounts, if any, payable to the Executive at
or prior to the time of any such payment under disability benefit plans
of the Company or under the Social Security disability insurance
program, where such amounts were not previously applied to reduce any
such payment.
(b) Death. If the Executive's employment hereunder is terminated as a
result of his death, then: (i) the Company shall pay the Executive's
estate or designated beneficiary, as soon as practicable after the Date
of Termination, a lump sum payment equal to (1) any Base Salary
installments due in the month of death and any reimbursable expenses
accrued or owing the Executive hereunder as of the Date of Termination,
(2) a pro rata portion of any bonus owed to the Executive for that
portion of the Employment Term through to the Date of Termination, and
(3) the greater of (x) Base Salary payments otherwise payable for the
remainder of the Employment Term or (y) two (2) times the average
annual Base Salary paid to the Executive prior to his death (the
payments provided for in subclauses (x) and (y) are the "Reduced
Severance Benefits"), and (ii) the Initial Incentive Awards, Converted
Incentive Awards, and all other Annual Incentive Awards granted to the
Executive shall
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immediately become fully vested as of the Date of Termination, subject
to such exercise periods as shall be provided for under the terms of
the initial grant.
(c) Disability. If the Executive's employment hereunder is terminated
as a result of Disability, then (i) the Company shall pay the
Executive, as soon as practicable after the Date of Termination (1) any
Base Salary and any reimbursable expenses accrued or owing the
Executive hereunder as of the Date of Termination, (2) a pro rata
portion of any bonus owed to the Executive for that portion of the
Employment Term through to the Date of Termination, and (3) the
"Reduced Severance Benefits;" and (ii) the Initial Incentive Awards,
Converted Incentive Awards, and all other Annual Incentive Awards
granted to the Executive shall immediately become fully vested as of
the Date of Termination, subject to such exercise periods as shall be
provided for under the terms of the initial grant.
(d) Termination for Cause or by the Executive other than for Good
Reason. If the Executive's employment hereunder is terminated by the
Company for Cause or by the Executive (other than for Good Reason),
then (i) the Company shall pay the Executive, as soon as practicable
after the Date of Termination, any Base Salary and any reimbursable
expenses accrued or owing the Executive hereunder for services as of
the Date of Termination; and (ii) the Executive shall immediately
forfeit any unvested CCL Career Shares. In the event of termination by
the Company for Cause, the Executive shall have the right to exercise
the vested unexercised portion of any Initial Incentive Awards,
Converted Incentive Awards or any other Annual Incentive Awards prior
to the Date of Termination, and the unexercised portion of any such
awards shall be forfeited thereafter. In the event of termination by
the Executive other than for Good Reason, the Executive shall have the
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right to exercise the vested unexercised portion of any Initial
Incentive Awards, Converted Incentive Awards or any other Annual
Incentive Awards then held by the Executive for such period following
the Date of Termination as shall be provided for under the terms of the
initial grant, and the unexercised portion of any such awards shall be
forfeited thereafter.
(e) Termination by Company Without Cause or by Executive with Good
Reason:
Executive's employment may be terminated without Cause by the
Company's Board of Directors (other than as a result of Disability) or
by the Executive for Good Reason, provided that in such event:
(i) Executive shall be entitled to receive three (3)
years base salary (at the Executive's effective annual rate
on the date of termination) to be paid in a lump-sum (net of
appropriate withholdings) within sixty (60) days of the Date
of Termination;
(ii) Executive shall be entitled to receive three (3)
years of his annual bonus award (defined to be three (3)
times his most recent target incentive opportunity under the
Variable Compensation plan times his annual base salary on
the date of termination) to be paid in a lump sum (net of
appropriate withholdings) within sixty (60) days of the Date
of Termination;
(iii) Executive shall be entitled to continue
participation in the Company's health and benefit plans (to
the extent allowable in accordance with the administrative
provisions of those plans and applicable federal and state
law) for a period of up to three (3) years or until Executive
is covered by a successor employer's benefit plans, whichever
is sooner;
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(iv) The Initial Incentive Awards, Converted Incentive
Awards and any other Annual Incentive Awards granted to the
Executive shall become vested and fully exercisable as of the
Date of Termination; and
(v) In the event that the Executive receives any payment
or benefit (including but not limited to the payments or
benefits pursuant to Section 12 of this Agreement (a
"Payment") that is subject to the excise tax (the "Excise
Tax") under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay to the
Executive, as soon thereafter as practicable, an additional
amount (a "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax
imposed upon the Payment and any federal, state and local
income tax and Excise Tax imposed upon the Gross-Up Payment,
shall be equal to the Payment. The determination of whether
an Excise Tax is due in respect to any payment or benefit,
the amount of the Excise Tax and the amount of the Gross-Up
Payment shall be made by an independent auditor (the
"Auditor") jointly selected by the Company and the Executive
and paid by the Company. If the Executive and the Company
cannot agree on the firm to serve as the Auditor, then the
Executive and the Company shall each select one nationally
recognized accounting firm and those two firms shall jointly
select the nationally recognized accounting firm to serve as
the Auditor. Notwithstanding the Payment, (i) any other
payments or benefits received or to be received by the
Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement
20
with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person) shall
be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of the tax counsel selected by the
Auditor, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or are otherwise not subject to the
Excise Tax, and (ii) the Executive shall be deemed to pay federal
income tax at the highest marginal rate applicable in the calendar year
in which the Gross-up Payment is made, and state and local income taxes
at the highest marginal rate of taxation in the state and locality of
the Executive's residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event the actual Excise
Tax or such income tax is more or less than the amount used to
calculate the Gross-Up Payment, the Executive or the Company, as the
case may be, shall pay to the other an amount reflecting the actual
Excise Tax or such income tax.
(f) Change in Control. For purposes of this Agreement, a
"Change-in-Control" is defined to be:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becoming the
beneficial owner, directly or indirectly, of Company
securities representing 20% or more of the combined voting
power of the Company's then outstanding securities; or
21
(ii) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the
Board as of the date of the Spin-off and any other Director
elected to the Board with the consent of the Executive,
provided that any person becoming a director subsequent to
such date whose election or nomination for election was
supported by two-thirds of the directors who then comprised
the Incumbent Directors shall be considered to be an Incumbent
Director; or
(iii) the Company's shareholders approve a merger (pursuant to
which the Company is not the surviving entity), consolidation,
sale or disposition of all or substantially all of the
Company's assets or a plan of partial or complete liquidation;
provided that notwithstanding anything to the contrary in this
subclause (iii), no such merger, consolidation or sale shall
be deemed to constitute a "Change in Control" if such
transaction or series of transactions required the Executive
to be identified in any United States securities law filing as
a person or a member of any group acquiring, holding or
disposing of beneficial ownership of the Company's securities
and/or assets and effecting a "Change in Control" as defined
in this subclause (iii).
13. Arbitration: In the event of any difference of opinion or dispute
between the Executive and the Company with respect to the construction
or interpretation of this Agreement or the alleged breach thereof,
which cannot be settled amicably by agreement of the parties, then such
dispute shall be submitted to and determined by arbitration by a single
arbiter in the city of New York, New York in accordance with the rules
then in effect of the Commercial
22
Arbitration Panel of the AMERICAN ARBITRATION ASSOCIATION, and judgment
upon the award rendered shall be final, binding and conclusive upon the
parties and may be entered in the highest court, state or federal,
having jurisdiction. The costs of the arbitration shall be borne as
determined by the arbitrator; provided, however, that if the Company's
position is not substantially upheld, as determined by the arbitrator,
the expenses of the Executive (including, without limitation, fees and
expenses payable to the AAA and the arbitrator, fees and expenses
payable to witnesses, including expert witnesses, fees and expenses
payable to attorneys and other professionals, expenses of the Executive
in attending the hearings, costs in connection with obtaining and
presenting evidence and costs of the transcription of the proceedings),
as determined by the arbitrator, shall be reimbursed to him by the
Company.
14. Confidentiality: During the Employment Term, and except as otherwise
required by law, the Executive shall not disclose or make accessible to
any business, person or entity, or make use of (other than in the
course of the business of the Company) any trade secrets, proprietary
knowledge or confidential information, which he shall have obtained
during his employment by the Company and which shall not be generally
known to or recognized by the general public. All information regarding
or relating to any aspect of either the Company's business, including
but not limited to that relating to existing or contemplated business
plans, activities or procedures, current or prospective clients,
current or prospective contracts or other business arrangements, or any
other information acquired because of the Executive's employment by the
Company, shall be conclusively presumed to be confidential; provided
however, that Confidential Information shall not include any
23
information known generally to the public (other than as a
result of unauthorized disclosure by the Executive) or any specific
information or type of information generally not considered information
disclosed by the Company or any officer thereof to a third party
without restrictions on the disclosure of such information. The
Executive's obligations under this Section 14 shall be in addition to
any other confidentiality or nondisclosure obligations of the Executive
to the Company at law or under any other agreements.
15. Other Matters:
(a) Entire Agreement: This Agreement constitutes the entire agreement
between the Company and the Executive relating to the subject matter
hereof, and supersedes any previous agreements, commitments and
understandings, written or oral, with respect to the matters provided
herein. As used in this Agreement, terms such as "herein," "hereof,"
"hereto" and similar language shall be construed to refer to this
entire instrument and not merely the paragraph or sentence in which
they appear, unless so limited by express language.
(b) Assignment: Except as set forth below, this Agreement and the
rights and obligations contained herein shall not be assignable or
otherwise transferable by either party to this Agreement without the
prior written consent of the other party to this Agreement.
Notwithstanding the foregoing, any amounts owing to the Executive upon
his death shall inure to the benefit of his heirs, legatees, personal
representatives, executor or administrator.
(c) Notices: Any and all notices provided for under this Agreement
shall be in writing and hand delivered or sent by first class
registered or certified mail, postage prepaid,
24
return receipt requested, addressed to the Executive at his residence
or to the Company at its usual place of business, and all such notices
shall be deemed effective at the time of delivery or at the time
delivery is refused by the addressee upon presentation.
(d) Amendment/Waiver: No provision of this Agreement may be amended,
waived, modified, extended or discharged unless such amendment, waiver,
extension or discharge is agreed to in writing signed by both the
Company and the Executive.
(e) Applicable Law: This Agreement and the rights and obligations of
the parties hereunder shall be construed, interpreted, and enforced in
accordance with the laws of the State of New York (applicable to
contracts to be performed wholly within such State).
(f) Severability: The Executive hereby expressly agrees that all of the
covenants in this Agreement are reasonable and necessary in order to
protect the Company and its business. If any provision or any part of
any provision of this Agreement shall be invalid or unenforceable under
applicable law, such part shall be ineffective only to the extent of
such invalidity or unenforceability and shall not affect in any way the
validity or enforceability of the remaining provisions of this
Agreement, or the remaining parts of such provision.
(g) Successor of Interests: In the event the Company merges or
consolidates with or into any other corporation or corporations, or
sells or otherwise transfers substantially all of its assets to another
corporation, the provisions of this Agreement shall be binding upon and
inure to the benefit of the corporation surviving or resulting from the
merger or consolidation or to which the assets are sold or transferred
and, prior to the
25
consummation of any such event, the Company shall obtain the express
written assumption of this Agreement by the other corporation (other
than in the case of a merger after which the Company is the surviving
entity). All references herein to the Company refer with equal force
and effect to any corporate or other successor of the corporation that
acquires directly or indirectly by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Company.
(h) No Mitigation: The Executive shall not be required to mitigate
amounts payable pursuant to Section (12) hereof by seeking other
employment or otherwise.
16. Condition Subsequent: This Agreement shall be null and void and of no
effect if the Spin-off is not consummated on or before March 1, 1997.
17. Indemnification: The Company shall indemnify the Executive to the full
extent permitted by law and the By-laws of the Company for all
expenses, costs, liabilities and legal fees which the Executive may
incur in the discharge of all his duties hereunder, including, without
limitation, the right to be paid in advance by the Company for his
expenses in defending a civil or criminal action, proceeding or
investigation prior to the final disposition thereof. The Executive
shall be insured under the Company's Directors' and Officers' Liability
Insurance Policy as in effect from time to time. Notwithstanding any
other provision of this Agreement to the contrary, any termination of
the Executive's employment or of this Agreement shall have no effect on
the continuing operation of this Section (17).
26
18. Authority: The execution, delivery and performance of this Agreement
has been duly authorized by the Company and this Agreement represents
the valid, legal and binding obligation of the Company, enforceable
against the Company according to its terms.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
own behalf and has caused its corporate seal to be affixed, and the Executive
has executed this Agreement on his own behalf intending to be legally bound, as
of the date first written above.
CORNING CLINICAL LABORATORIES
By: /s/ Van X. Xxxxxxxx
__________________________________
Van X. Xxxxxxxx
Chairman CLSI
ATTEST:
/s/
-------------------------------
Secretary
EXECUTIVE:
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
27
ANNEX A
CCL Career Shares
Vesting Schedule
1997 11,997
1998 22,766
1999 33,538
2000 44,310
2001 55,085
