EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, dated as of March 31, 1999, by and between McKesson HBOC, Inc.
(the "Company"), a Delaware corporation with its principal office at Xxx Xxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, and _______________ ("Executive").
R E C I T A L S
- - - - - - - -
A. The Company, in its business, develops and uses certain trade secrets,
pricing and marketing strategies, new products, customer lists, computer
software, and other confidential and proprietary information and data (as
hereinafter defined, "Confidential Information"). Such Confidential
Information will necessarily be communicated to or acquired by Executive by
virtue of his employment with the Company, and the Company has spent time,
effort and money to develop such Confidential Information and to promote
and increase its goodwill; and
B. The Company desires to retain the services of, and employ, Executive on its
own behalf and on behalf of its affiliated companies for the period
provided in this Agreement and, in so doing, to protect its Confidential
Information and goodwill, and Executive is willing to accept employment by
the Company on a full-time basis for such period, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions of this Employment
----------
Agreement, the Company agrees to employ Executive, and Executive agrees to
accept employment from, and remain in the employ of, the Company for the
period stated in Paragraph 3 hereof.
2. Position and Responsibilities. During the period of his employment
-----------------------------
hereunder, Executive agrees to serve the Company, and the Company shall
employ Executive, as Executive Vice President and President and Chief
Executive Officer of the Supply Management Business or in such other senior
corporate executive capacity or capacities as may be specified from time to
time by the Chief Executive Officer of the Company.
3. Term and Duties.
---------------
(a) Term of Employment. The period of Executive's employment under this
------------------
Agreement shall be deemed to have commenced on the date of this
Agreement and shall continue until March 31, 2003.
(b) Duties. During the period of his employment hereunder and except for
------
illness, reasonable vacation periods, and reasonable leaves of
absence, Executive shall devote his best efforts and all his business
time, attention, skill and efforts to the business and affairs of the
Company and its affiliated companies, as such business and affairs now
exist and as they may be hereafter changed or added to, under and
pursuant to the general direction of the Board of Directors of the
Company; provided, however, that, with the approval of the Chief
-------- -------
Executive Officer of the Company, Executive may serve, or continue to
serve, on the boards of directors of, hold any other offices or
positions in,
-1-
companies or organizations which, in such officer's judgment, will not
present any conflict of interest with the Company or any of its
subsidiaries or affiliates or divisions, or materially affect the
performance of Executive's duties pursuant to this Agreement. The
Company shall retain full direction and control of the means and
methods by which Executive performs the services for which he is
employed hereunder. The services which are to be employed by Executive
hereunder are to be rendered in the State of California, or in such
other place or places in the United States or elsewhere as may be
determined from time to time by the Board of Directors of the Company,
but are to be rendered primarily at the Company's principal place of
business at Xxx Xxxx Xxxxxx xx Xxx Xxxxxxxxx, Xxxxxxxxxx. Unless and
until otherwise mutually agreed between the Company and the Executive,
the Executive shall be at liberty to maintain his residence in the San
Francisco Bay Area, State of California.
4. Compensation and Reimbursement of Expenses; Other Benefits
----------------------------------------------------------
(a) Compensation. During the period of employment under this Agreement,
------------
Executive shall be paid a salary, in monthly or semi-monthly
installments, at the rate of Five Hundred Thousand Dollars
($500,000.00) per year, or such higher salary as may be from time to
time approved by the Board of Directors (or any duly authorized
Committee thereof) of the Company (any such higher salary so approved
to be thereafter the minimum salary payable to Executive during the
remainder of the term hereof), plus such additional incentive
compensation, if any, as may be voted to him yearly by the Board of
Directors (or any duly authorized Committee thereof). Executive shall
also receive an automobile allowance from Company of One Thousand
Dollars ($1000) per month during the term of this Agreement.
(b) Reimbursement of Expenses. The Company shall pay or reimburse
-------------------------
Executive, in accordance with its normal policies and practices, for
all reasonable travel and other expenses incurred by Executive in
performing his obligations under this Agreement. The Company further
agrees to furnish Executive with such assistance and accommodations as
shall be suitable to the character of Executive's position with the
Company and adequate for the performance of his duties hereunder.
(c) Other Benefits. During the period of employment under this Agreement,
--------------
Executive shall be entitled to receive all other benefits of
employment generally available to other members of the Company's
management and those benefits for which key executives are or shall
become eligible, when and as the becomes eligible therefor, including
without limitation, group health and life insurance benefits, short
and long-term disability plans, deferred compensation plans, and
participation in the Company's Profit-Sharing Investment Plan,
Employee Stock Purchase Plan, Executive Medical Plan, 1989 Management
Incentive Plan, Long Term Incentive Plan, 1984 Executive Benefit
Retirement Plan ("EBRP"), 1988 Executive Survivor Benefits Plan
("ESBP"), Stock Purchase Plan and 1994 Restricted Stock and Stock
Option Plan (or any similar plan or arrangement), and the Company
agrees that none of such benefits shall be altered in any manner in
such a way as to reduce any then existing entitlement of Executive
thereunder.
5. Initial Incentive Grants. Executive shall receive the following initial
------------------------
incentive awards specified in subparagraphs (a) through (c) below:
(a) Retention Bonus. Company shall pay Executive a special, one-time bonus
---------------
of One Million Five Hundred Thousand Dollars ($1,500,000.00) as soon
as practicable following execution of this Agreement. This bonus is
not to be construed as a salary type payment but rather a retention
payment, to be retained by Executive if and only if he
-2-
remains employed by Company one year following execution of this
Agreement. Executive acknowledges and agrees that, in the event he
voluntarily leaves the Company's employment within one (1) year of the
date hereof, he shall promptly (and in no event later than thirty (30)
days following cessation of employment) return one-half of said bonus
(i.e., $750,000.00) to Company.
(b) Stock Options. Executive has received a grant of One Million
-------------
(1,000,000) non-qualified stock options, which options will vest at
the rate of fifty percent (50%) at the end of two years from the date
hereof, seventy-five percent (75%) at the end of three years and one
hundred percent (100%) at the end of the fourth year from the date
hereof. Such options are otherwise subject to the terms and conditions
of the plan or arrangement pursuant to which they were issued.
(c) LTIP Cash Award. Company shall grant Executive a Long-Term Incentive
---------------
Plan award of Ten Million dollars ($10,000,000.00), payable, if
earned, fifty percent (50%) at the end of three years, and fifty
percent (50%) at the end of five years, in each case, from the date
hereof. Executive acknowledges that payments of the award are
contingent and based upon Company's total shareholder return ("TSR").
Full awards will be paid if, at the end of each measurement period,
the TSR is at or above the 75th percentile of the S&P 500 (excluding
therefrom financial institutions). Partial awards will be paid as
follows: 75% if TSR is between the 60th and 75th percentile; 50% if
TSR is between the 50th and 60th percentile; and 25% if TSR is below
the 50th percentile.
6. Benefits Payable Upon Disability or Death.
-----------------------------------------
(a) Disability Benefits. If Executive shall be prevented during the term
-------------------
of this Agreement from properly performing services hereunder by
reason of illness or other physical or mental incapacity, the Company
shall continue to pay Executive his then current salary hereunder
during the period of his disability; provided, however, that if
Executive is disabled for a continuous period exceeding twelve (12)
calendar months, then the Company's obligations hereunder shall cease
and terminate.
(b) Death Benefits. In the event of the death of Executive during the term
--------------
of this Agreement, Executive's salary payable hereunder shall continue
to be paid to Executive's surviving spouse, or if there is no spouse
surviving, then to Executive's designee or representative (as the case
may be) through the six-month period following the end of the calendar
month in which death occurs. Thereafter, all of Company's obligations
hereunder shall cease and terminate.
(c) Other Plans. The provisions of this Paragraph 6 shall not affect any
-----------
rights of Executive's heirs, administrators, executors, legatees,
beneficiaries or assigns under the Company's Profit-Sharing Investment
Plan, EBRP, Long Term Incentive Plan, ESBP, Restricted Stock and Stock
Option Plan (or any similar plan or arrangement), any stock purchase
plan or any other employee benefit plan of the Company, and any such
rights shall be governed by the terms of the respective plans.
7. Obligations of Executive During and After Employment.
----------------------------------------------------
(a) No Competition. Executive agrees that during the term of his
--------------
employment under this Agreement, he will engage in no other business
activities, directly or indirectly, which are or may be competitive
with or which might place him in a competing position to that
-3-
of the Company, or any affiliated company, without the prior written
consent of the Chief Executive Officer of the Company.
(a) Unauthorized Use of Confidential Information. Executive acknowledges
--------------------------------------------
and agrees that (i) during the course of his employment Executive will
have produced and/or have access to Confidential Information, of
Company and its affiliated companies, and (ii) the unauthorized use or
sale of any of such confidential or proprietary information at any
time would harm the Company and would constitute unfair competition
with Company. Executive promises and agrees not to engage in any
unfair Competition with Company either during or after the term of
this Agreement. Therefore, during and subsequent to his employment by
Company or an affiliated Company, Executive agrees to hold in
confidence and not, directly or indirectly, disclose, use, copy or
make lists of any such information, except to the extent expressly
authorized by Company in writing. All records, files, drawings,
documents, equipment, and the like, or copies thereof, relating to
Company's business, or the business of an affiliated company, which
Executive shall prepare, or use, or come into contact with, shall be
and remain the sole property of Company, or of an affiliated company,
and shall not be removed (except to allow Executive to perform his
responsibilities hereunder while traveling for business purposes or
otherwise working away from his office) from the Company's or the
affiliated company's premises without its prior written consent, and
shall be promptly returned to Company upon termination of employment
with Company and its affiliated companies. This paragraph 7(b) shall
survive the termination or expiration of this Agreement.
(c) Confidential Information Defined. For purposes of this Agreement,
--------------------------------
"Confidential Information" means all information (whether reduced to
written, electronic, magnetic or other tangible form) acquired in any
way by Executive during the course of his employment with the Company
concerning the products, projects, activities, business or affairs of
the Company or the Company's customers, including, without limitation,
(i) all information concerning trade secrets of the Company, including
computer programs, system documentation, special hardware, product
hardware, related software development, manuals, formulae, processes,
methods, machines, compositions, ideas, improvements or inventions of
Company and its affiliated companies, (ii) all sales and financial
information concerning the Company, (iii) all customer and supplier
lists, (iv) all information concerning products or projects under
development or marketing plans for any of those products or projects,
and (v) all information in any way concerning the products, projects,
activities, business or affairs of customers of the Company which was
furnished to him by the Company or any of its agents or customers;
provided, however, that Confidential Information does not include
information which (A) becomes available to the public other than as a
result of a disclosure by Executive, (B) was available to him on a
non-confidential basis outside of his employment with the Company, or
(C) becomes available to him on a non-confidential basis from a source
other than the Company or any of its agents, creditors, suppliers,
lessors, lessees or customers.
(d) Nonsolicitation. Executive recognizes and acknowledges that it is
---------------
essential for the proper protection of the business of the Company
that Executive be restrained for a reasonable period following the
termination of Executive's employment with the Company from: (1)
soliciting or inducing any employee of the Company to leave the employ
of the Company; (2) hiring or attempting to hire any employee of the
Company; or (3) soliciting the trade of or trading with the customers
of the Company for any competitive business purpose. Accordingly,
Executive agrees that during the term of his employment under this
Agreement, and for the Restricted Period thereafter following the
termination of Executive's employment with the Company for any reason,
Executive shall not, directly or indirectly, (i) hire, solicit, aid in
or encourage the hiring and/or
-4-
solicitation of, contract with, aid in or encourage the contracting
with, or induce or encourage to leave the employment of the Company,
any employee of the Company; and (ii) solicit, aid in or encourage the
solicitation of, contract with, aid in or encourage the contracting
with, service, or contact any person or entity which is, or was,
within three years prior to the termination of Executive's employment
with the Company, a customer or client of the Company for the purpose
of offering or selling a product or service competitive with any of
those offered by the Company. For purposes of this Paragraph 7(d), the
"Restricted Period" shall be deemed to be two (2) years. This
Paragraph 7(d) shall survive the termination or expiration of this
Agreement.
(e) Remedy for Breach. Executive agrees that in the event of a breach or
-----------------
threatened breach of any of the covenants contained in this Paragraph
7, the Company shall have the right and remedy to have such covenants
specifically enforced by any court having jurisdiction, it being
acknowledged and agreed than any material breach of any of the
covenants will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
8. Termination.
-----------
(a) For Cause. Notwithstanding anything herein to the contrary, the
---------
Company may, without liability, terminate Executive's employment
hereunder for cause at any time upon written notice from the Board of
Directors (or any duly authorized Committee thereof) specifying such
cause, and thereafter the Company's obligations hereunder shall cease
and terminate; provided, however, that such written notice shall not
-------- -------
be delivered until after the Board of Directors (or any duly
authorized Committee thereof) shall have given Executive written
notice specifying the conduct alleged to have constituted such cause
and Executive has failed to cure such conduct, if curable, within
fifteen (15) days following receipt of such notice. As used herein,
the term "cause" shall mean (i) Executive's willful misconduct,
habitual neglect, dishonesty or other intentional actions (or failures
to act) which are materially and demonstrably injurious to the
Company, or (ii) a material breach by Executive of one or more terms
of this Agreement.
(a) Arbitration Required to Confirm Cause. In the event of a termination
-------------------------------------
for cause pursuant to subparagraph (a) above, the Company shall
continue to pay Executive's then current compensation as specified in
this Agreement until the issuance of an arbitration award affirming
the Company's action. Such arbitration shall be held in accordance
with the provisions of Paragraph 9(d) below. In the event the award
upholds the action of the Company, Executive shall promptly repay to
the Company any sums received pursuant to this subparagraph 8(b),
following termination of employment.
(b) Other than for Cause; Performance, Reorganization. Notwithstanding
-------------------------------------------------
anything herein to the contrary, Company may also terminate
Executive's employment (without regard to any general or specific
policies of Company relating to the employment or termination of its
employees) should (i) Executive fail to perform his duties hereunder
in a manner satisfactory to the Chief Executive Officer of Company,
provided that Executive shall first be given written notice of such
unsatisfactory performance and a period of ninety (90) days to improve
such performance to a level deemed acceptable to the Chief Executive
Officer or, (ii) Executive's position be eliminated as a result of a
reorganization or restructuring of Company or its affiliated
companies.
(c) Obligations of Company on Termination of Employment.
---------------------------------------------------
i) If Company terminates Executive's employment pursuant to
subparagraph 8(a) above, and the Company's action is affirmed as
specified in subparagraph 8(b)
-5-
above, then all of Company obligations hereunder shall immediately
cease and terminate. Executive shall thereupon have no further right
or entitlement to additional salary, incentive compensation payments
or awards, or any perquisites from Company whatsoever, and
Executive's rights, if any, under Company's employee and executive
benefit plans shall be determined solely in accordance with the
express terms of the respective plans;
ii) If Company terminates Executive's employment pursuant to
subparagraph 8(c) above, then in lieu of any benefits payable
pursuant to Company's Executive Severance Policy (so long as the
compensation and benefits payable hereunder equal or exceed those
payable under said Policy) and complete satisfaction and discharge
of all of its obligations to Executive hereunder, Company shall,
provided Executive is not in breach of the provisions of Paragraph 7
hereof, and except as provided in Section 9(c) below, (a) continue
Executive's then base salary, without increase, for the remainder of
the term of this Agreement, provided, however that Company's
-------- -------
obligation to make such salary payments shall be reduced by any
compensation received by Executive from a subsequent employer during
such term, (b) consider Executive for a bonus under the terms of
Company's Management Incentive Plan for the fiscal year in which
termination occurs (but not for any subsequent year) provided that
any such bonus, if earned, shall be prorated to reflect the portion
of the year for which Executive was actively employed, (c) continue
Executive's automobile allowance and Executive Medical Plan benefits
until the earlier of the expiration date of this Agreement or the
effective date of Executive's medical coverage under a subsequent
employer's plan or policy, (d) subject to both (x) the express
special forfeiture and repayment provisions of the respective plans
(or the terms and conditions applicable thereto) and (y) the
provisions of subparagraph (d)(iv) below, continue the accrual and
vesting of Executive's rights, benefits and existing awards for the
remainder of the term of this Agreement for purposes of the EBRP,
ESBP, and the Stock Option and Restricted Stock Plan (or any similar
plan or arrangement), provided, however, that (unless the Board of
-------- -------
Directors, or any duly authorized Committee, in its sole discretion,
determines otherwise) Executive shall in no event receive or be
entitled either to additional grants or awards subsequent to the
date of termination, or "Approved Retirement" status, under the
foregoing plans, (e) continue Executive's participation in the
Company's Long Term Incentive Plan for the remainder of the term of
this Agreement (prorating performance periods as of the expiration
date of the date Executive ceased rendering services to Company),
provided, that Executive shall not participate in any way whatsoever
-------- ----
in any performance period commencing subsequent to the date of
termination, and (f) terminate Executive's participation in
Company's tax-qualified profit-sharing plans and stock purchase
plans, pursuant to the terms of the respective plans, as of the date
of Executive's termination of employment.
iii) Company and Executive agree that if Executive resigns or otherwise
voluntarily leaves his employment with Company prior to the
expiration of this Agreement (other than for Good Reason as defined
in the Termination Agreement between the parties dated January 31,
1996 (the "Termination Agreement")), Company shall be under no
further obligation to make any additional payments or provide any
benefits hereunder.
iv) For purposes of subparagraph (d)(ii) above, (a) any stock options
granted to Executive prior to January 1, 1999 shall continue to vest
according to their original vesting schedule during the term of this
Agreement, and (b) any stock
-6-
options granted to Executive subsequent to January 1, 1999 which are
not vested as of the date Executive ceases to render services to
Company shall be canceled and of no further force or effect.
9. General Provisions.
------------------
(a) Executive's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise. Nothing in this Agreement
shall prevent the consolidation of Company with, or its merger into,
any other corporation, or the sale by Company of all or substantially
all of its properties or assets; and this Agreement shall inure to the
benefit of, be binding upon and be enforceable by, any successor
surviving or resulting corporation, or other entity to which such
assets shall be transferred. This Agreement shall not be terminated by
the voluntary or involuntary dissolution of the Company.
(b) This Agreement (together with the Termination Agreement) and the
rights of Executive with respect to the benefits of employment
referred to in Paragraph 4(c) constitute the entire agreement between
the parties hereto in respect of the employment of Executive by
Company. This Agreement supersedes and replaces all prior oral and
written agreements, understandings, commitments, and practices between
the parties.
(c) In the event Executive's employment with Company shall terminate under
circumstances otherwise providing Executive with a right to benefits
under both Section 5 of the Termination Agreement and Section 8(d)(ii)
of this Agreement, Executive shall be entitled to receive the
<+#>greater<-#> of the benefits provided therein, calculated
individually, without duplication.
(d) Any dispute, controversy or claim arising under or in connection with
this Agreement, or the breach hereof, shall be settled exclusively by
arbitration in accordance with the Rules of the American Arbitration
Association then in effect. Judgment upon the award rendered by the
arbitrator may be entered in any court of competent jurisdiction. Any
arbitration held pursuant to this paragraph in connection with any
termination of Executive's employment shall take place in San
Francisco, California at the earliest possible date. If any proceeding
is necessary to enforce or interpret the terms of this Agreement, or
to recover damages for breach thereof, the prevailing party shall be
entitled to reasonable attorneys fees and necessary costs and
disbursements, not to exceed in the aggregate one percent (1%) of the
net worth of the other party, in addition to any other relief to which
he or it may be entitled.
(e) The provisions of this Agreement shall be regarded as divisible, and
if any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts thereof
and the applicability thereof shall not be affected thereby.
(f) This Agreement may not be amended of modified except by a written
instrument executed by Company and Executive.
(g) This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of
California.
-7-
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the date first above written.
McKESSON HBOC, INC.
A Delaware Corporation
By ____________________________
Senior Vice President
ATTEST:
______________________________________ _______________________________
Senior Vice President and Secretary Executive
By the Authority of the
Compensation Committee
of the Board of Directors
of McKesson HBOC, Inc.
on January 27, 1999.
-8-
