EXHIBIT (c)(7)
[LETTERHEAD OF MDL INFORMATION SYSTEMS, INC.]
Xx. Xxxxxx Xxxxxx February 28, 1996
Chairman and Chief Executive Officer
MDL Information Systems, Inc.
00000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dear Xxxxxx:
The purpose of this letter agreement is to document the terms of the
severance package to which you will be entitled should your employment with MDL
Information Systems, Inc. or any successor entity (jointly and severally, the
"Company") terminate in connection with certain changes in control of the
Company.
Part One specifies the terms and conditions upon which you may become
entitled to receive the severance benefits. Part Two sets forth certain
definitions to be in effect for purposes of determining your benefit
entitlement. Part Three concludes this agreement with a series of general terms
and conditions applicable to your severance benefits.
PART ONE -- INVOLUNTARY TERMINATION UPON
CHANGE IN CONTROL BENEFITS
Upon your Involuntary Termination (other than Termination for Cause)
within eighteen (18) months after a Change in Control, you will become entitled
to receive the special severance benefits provided in this Part One. At the end
of this eighteen (18) month period, the terms and conditions of any severance
benefits which you may be entitled to receive from the Company will be
determined in accordance with the MDL Information Systems, Inc. Executives and
Officers Separation Pay Plan.
1. SEVERANCE PAYMENTS. You will receive severance payments from the
Company following your Involuntary Termination in an amount equal to: (i) your
Salary paid for eighteen (18) months in semi-monthly installments in accordance
with the Company's normal payroll practices, and (ii) one and one-half (1.5)
times your Bonus paid in a lump-sum as soon as administratively practicable
following the date of your Involuntary Termination. All such severance payments
shall be subject to all applicable withholding taxes.
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February 28, 1996
2. HEALTH CARE COVERAGE. The Company will, at its expense, provide you and
your eligible dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (i) eighteen (18) months after the
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effective date of your Involuntary Termination, or (ii) the first date that you
are covered under another employer's health benefit program which provides
substantially the same level of benefits without exclusion for pre-existing
medical conditions. Such coverage will be in lieu of any other continued health
care coverage to which you or your dependents would otherwise be entitled in
accordance with the requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), by reason of your termination
of employment.
3. OPTION ACCELERATION. Each of your outstanding Options will (to the
extent not then otherwise exercisable for vested shares) automatically
accelerate so that each such Option will become immediately exercisable for the
total number of shares of Common Stock at the time subject to that Option.
Following your Involuntary Termination, each Option and all your then-vested
options may be exercised for any or all vested shares in accordance with the
exercise provisions of the option agreement evidencing the Option. However, in
no event may any outstanding option be exercised after the specified expiration
date of the option term.
4. RESTRICTIVE COVENANTS. For the eighteen (18) month period following
your Involuntary Termination:
(i) You will not directly or indirectly, whether for your own account or as
an employee, director, consultant or advisor, provide services to any
business enterprise which is at the time in competition with any of the
Company's then existing or formally planned product lines and which is
located geographically in an area where the Company maintains substantial
business activities, unless you obtain the prior written consent of the
Board.
(ii) You will not directly or indirectly encourage or solicit any individual
to leave the Company's employ for any reason or interfere in any other
manner with the employment relationships at the time existing between the
Company and its current or prospective employees.
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February 28, 1996
(iii) You will not induce or attempt to induce any customer, supplier,
distributor, licensee or other business relation of the Company to cease
doing business with the Company or in any way interfere with the
existing business relationship between any such customer, supplier,
distributor, licensee or other business relation and the Company.
You acknowledge that monetary damages may not be sufficient to compensate
the Company for any economic loss which may be incurred by reason of your breach
of the foregoing restrictive covenants. Accordingly, in the event of any such
breach, the Company shall, in addition to the cessation of the severance
benefits provided you under this letter agreement and any remedies available to
the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
5. BENEFIT REDUCTION. Should any of your severance benefits under this
letter agreement be deemed to be parachute payments under Code Section 280G,
then the following limitations will become applicable: (i) first, the dollar
amount of your severance payment under Paragraph 1, and (ii) then, the
accelerated vesting of your options under Paragraph 3 will be reduced to the
extent (and only to the extent) necessary to provide you with the maximum after-
tax benefit available, after taking into account any parachute excise tax which
might otherwise be payable by you under Code Section 4999 and any analogous
State income tax provision.
PART TWO -- DEFINITIONS
DEFINITIONS. For purposes of this letter agreement, including in
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particular the application of the special benefit limitations of Part One, the
following definitions will be in effect:
Board shall mean the Company's Board of Directors.
Bonus shall mean the bonus paid to you by the Company for the fiscal year
immediately preceding the fiscal year in which your Involuntary Termination is
effected. Any bonuses paid for a partial year of employment will be annualized.
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February 28, 1996
Change in Control shall mean any of the following events:
(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or substantially all of
the assets of the Company other than in the ordinary course of business;
(iii) any reverse merger in which the Company ceases to exist as an independent
corporation and becomes the subsidiary of another corporation;
(iv) the acquisition by any person (or related group of persons), whether by
tender or exchange offer made directly to the Company's stockholders,
private purchases from one or more of the Company's stockholders, open
market purchases or any other transaction, of beneficial ownership of
securities possessing more than twenty-five percent (25%) of the total
combined voting power of the Company's outstanding securities;
(v) the acquisition by any person (or related group of persons), whether by
tender or exchange offer made directly to the Company's stockholders,
private purchases from one or more of the Company's stockholders, open
market purchases or any other transaction, of additional securities of
the Company which increase the total holdings of such person (or group)
to a level of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities; or
(vi) the acquisition by any person (or related group of persons), whether by
tender or exchange offer made directly to the Company's stockholders,
private purchases from one or more of the Company's stockholders, open
market purchases or any other transaction, of securities of the Company
possessing sufficient voting power in the aggregate to elect an absolute
Xx. Xxxxxx Xxxxxx Page 5.
February 28, 1996
majority of the members of the Board (rounded up to the nearest whole
number).
Code shall mean the Internal Revenue Code of 1986, as amended.
Common Stock shall mean the Company's common stock.
HEALTH CARE COVERAGE shall mean the continued health care coverage to
which you and your eligible dependents may become entitled under this letter
agreement and pursuant to the terms of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") upon the termination of your
employment other than Termination for Cause.
INVOLUNTARY TERMINATION shall mean the termination of your employment with
the Company which occurs:
(i) involuntarily upon your discharge or dismissal in connection with a Change
in Control for reasons other than for Termination For Cause; or
(ii) voluntarily upon your resignation in connection with any of the following
changes to the terms and conditions of your employment following a Change
in Control: (a) a change in your position with the Company which
materially reduces your level of responsibility or the nature of your
functions, (b) a greater than ten percent (10%) reduction in your level
of compensation (including base salary, fringe benefits and participation
in non-discretionary bonus programs under which awards are payable
pursuant to objective financial or performance standards), or (c) a
relocation of your principal place of employment by more than thirty-five
(35) miles, provided such change, reduction or relocation is effected
without your written consent.
Option shall mean any option granted to you under the MDL Information
Systems, Inc. 1993 Stock Option and Restricted Stock Plan or any other equity
incentive plan or plans subsequently adopted by the Company, but only to the
extent the option is outstanding at the time of your Involuntary Termination.
Xx. Xxxxxx Xxxxxx Page 6.
February 28, 1996
Salary shall mean the following measured as of your date of Involuntary
Termination:
(i) your predetermined base salary excluding bonuses, other incentive-type
payments, reimbursements or compensation associated with stock options
from the Company; and
(ii) your car allowance from the Company.
TERMINATION FOR CAUSE shall mean an Involuntary Termination of your
employment initiated by the Company by reason of your conviction of any felony
or other criminal act, your commission of any act of fraud or embezzlement, your
unauthorized use or disclosure of confidential information or trade secrets of
the Company or its subsidiaries, or any other intentional misconduct on your
part which adversely affects the business or affairs of the Company in a
material manner.
PART THREE - MISCELLANEOUS PROVISIONS
1. TERMINATION fOR CAUSE. Should your Involuntary Termination constitute a
Termination for Cause, then the Company shall only be required to pay you (i)
any unpaid compensation earned for services previously rendered through the date
of such termination and (ii) any accrued but unpaid vacation benefits or sick
days, and no benefits will be payable to you under this letter agreement.
2. TERM OF AGREEMENT. The provisions of this letter agreement will
continue in effect until terminated by written agreement entered into between
you and the Company.
3. GENERAL CREDITOR STATUS. The benefits to which you may become entitled
under this letter agreement (except those attributable to your Options) will be
paid, when due, from the general assets of the Company. Your right (or the right
of the executors or administrators of your estate) to receive any such payments
will at all times be that of a general creditor of the Company and will have no
priority over the claims of other general creditors of the Company.
4. DEATH. Should you die before receipt of all benefits to which you
become entitled under this letter agreement, then the payment of such benefits
will be made, on the due date or dates hereunder had you survived, to the
executors or administrators of your estate. Should you die before you exercise
your outstanding vested
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February 28, 1996
options, then each such option may be exercised, during the applicable exercise
period in effect hereunder for those options at the time of your death, by the
executors or administrators of your estate or by person to whom the option is
transferred pursuant to your will or in accordance with the laws of inheritance.
5. MISCELLANEOUS. The provisions of this letter agreement will be
construed and interpreted under the laws of the State of California. This
agreement incorporates the entire agreement between you and the Company relating
to the subject of severance benefits and supersedes any and all prior agreements
and understandings with respect to such subject matter, This agreement may only
be amended by written instrument signed by you and a member of the Board of
Directors of the Company. If any provision of this letter agreement as applied
to any party or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision shall in no way affect (to the maximum extent permissible by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this letter
agreement, or the enforceability or invalidity of this letter agreement as a
whole. Should any provision of this letter agreement become or be deemed
invalid, illegal or unenforceable in any jurisdiction by reason of the scope,
extent or duration of its coverage, then such provision shall be deemed amended
to the extent necessary to conform to applicable law so as to be valid and
enforceable or, if such provision cannot be so amended without materially
altering the intention of the parties, then such provision shall be stricken and
the remainder of this letter agreement shall continue in full force and effect.
6. REMEDIES. All rights and remedies provided pursuant to this letter
agreement or by law will be cumulative, and no such right or remedy will be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this letter agreement.
7. ARBITRATION. Any controversy which may arise between you and the
Company with respect to the construction, interpretation or application of any
of the terms, provisions or conditions of this agreement or any monetary claim
arising from or relating to this agreement will be submitted to final and
binding arbitration in Alameda County, California in accordance with the rules
of the American Arbitration Association then in effect.
8. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this agreement shall
confer upon you any right to continue in the employment of the Company for any
period
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February 28, 1996
of specific duration or interfere with or otherwise restrict in any way the
rights of the Company or you, which rights are hereby expressly reserved by
each, to terminate your employment at any time for any reason whatsoever, with
or without cause.
9. PROPRIETARY INFORMATION. You hereby acknowledge that the company may,
from time to time during your employment with the Company, disclose to you
confidential information pertaining to the Company's business and affairs. All
information and data, whether or not in writing, of a private or confidential
nature concerning the business or financial affairs of the Company
(collectively, "Proprietary Information") is and will remain the sole and
exclusive property of the Company. In connection with such Proprietary
Information, you agree as follows:
(i) You will not, during your employment with the Company or at any time
thereafter, disclose to any third party or directly or indirectly make
use of any such Proprietary Information other than in connection with,
and in furtherance of, the Company's business and affairs.
(ii) You agree that you will use all files, letters, memoranda, reports,
records, data or other written, reproduced or other tangible
manifestations of the Proprietary Information, whether created by you or
others, to which you have access during your employment with the Company,
only in the performance of your duties with the Company. You will return
all such materials (whether written, printed or otherwise reproduced or
recorded) to the Company immediately upon the termination of your
employment with the Company or upon any earlier request by the Company,
without retaining any copies, notes or excerpts thereof.
(iii) Your obligations under this Paragraph 9 will continue in effect after
the termination of your employment with the Company, whatever the reason
or reasons for such termination, and the Company will have the right to
communicate with any future or prospective employer concerning your
continuing obligations under this Paragraph 9.
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February 28, 1996
10. ATTORNEY FEES. Should any legal action or arbitration proceedings be
instituted by a party to this Agreement to enforce any of the terms and
provisions contained herein or to obtain relief for any breach hereof, the
prevailing party in such action or proceeding shall be entitled to reasonable
attorney fees, costs and expenses incurred in such action or proceeding, in
addition to any other relief to which such party may be entitled.
Please indicate your acceptance of the foregoing provisions of this
severance agreement by signing the enclosed copy of this letter agreement and
returning it to the Company.
Very truly yours,
MDL INFORMATION SYSTEMS, INC.
By: /s/ Xxx Xxxxxxx
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Title: Vice President of Human Resources
ACCEPTED BY AND AGREED TO
Signature: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
Dated: February 28, 1996
