Exhibit 10.22
EMPLOYMENT AGREEMENT
BETWEEN
XXXXXXX X. XXXXXXX
&
QUEST DIAGNOSTICS INCORPORATED
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
date of execution (the "Effective Date"), between QUEST DIAGNOSTICS INCORPORATED
(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 Chairman of
the Board 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 the Company and the Executive had previously entered into an
employment agreement dated December 18, 1996, the term of which originally is to
expire as of December 31, 1999, and the parties desire that the Executive
continue as President and Chief Executive Officer of the Company; and
WHEREAS, the Company and the Executive now wish to enter into an
omnibus amendment of the current agreement of employment on the terms and
conditions set forth herein, and which shall constitute the sole and exclusive
agreement relating to the employment of Executive by the Company.
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
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of which are hereby acknowledged, it is hereby agreed between the Company and
the Executive that his existing agreement shall be amended and modified in its
entirety 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 Chief Executive Officer of the Company, and as a Director and
Chairman of the Board of Directors of the Company (the "Board")
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. EMPLOYMENT TERM. Unless earlier terminated pursuant to Section (10)
hereof, the term of Executive's employment under this Agreement shall
commence as of the Effective Date of this Agreement and continue until
December 31, 2002 (the "Employment Term"). On or before June 1, 2002,
the Company and Executive agree to use their good faith efforts to
negotiate a renewal of this Agreement (the "Renewal Agreement"), on
mutually satisfactory terms and conditions. Subject to continued
service by the Executive through December 31, 2002 (absent any
termination by the Company without Cause, or termination by the
Executive for Good Reason, or as a result of the death or permanent
disability of the Executive, in each case giving rise to payments
pursuant to Section 11 hereof) (each individually a "Section 11
Event"), then upon the expiration of this Agreement on December 31,
2002 (a "Non-Renewal Event"), the Executive shall be entitled to the
severance benefit provided in Section 11.
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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 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 either currently under
consideration by the Company/Executive or proposed by the Executive for
the new corporate headquarters 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 $750,000 (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
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may, if appropriate, at its discretion, increase this annual
Base Salary during the Employment Term. Base Salary shall be
reviewed annually and be adjusted to reflect (among other
factors) increases generally granted to other senior
executives of the Company and CEO performance consistent with
Company pay practices. The Base Salary shall be payable in
equal bi-weekly installments.
(b) ANNUAL BONUS. In addition to the Base Salary provided for in
Section 5 (a) above, the Company will provide annual bonus
awards to Executive under its Management Incentive Plan (MIP)
in accordance with the plan and any financial performance
targets thereunder. During the Employment Term, Executive's
target incentive opportunity under the Company's MIP will be
no less than 140% of Base Salary as in effect at the time such
target incentive opportunity is established.
(i) 60% of the annual bonus award shall be delivered in
cash (at the same time other MIP awards are paid).
(ii) 40% of the annual bonus award shall be delivered in
shares of common stock of the Company at the same
time other MIP awards are paid that will be 100%
vested but will be restricted ("Restricted Shares")
in that they may not be sold, assigned, pledged,
transferred, hypothecated or otherwise be disposed of
or encumbered, voluntarily or involuntarily, by
operation of law or otherwise, except as may be
permitted, in writing, by the Board. The Board may,
in its sole discretion, permit Restricted Shares to
be exchanged in such transaction for property subject
to restrictions and conditions substantially similar
to those applicable to the Restricted Shares
exchanged. In the event of any purported sale,
transfer or other disposition to the
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Restricted Shares in contravention of the foregoing
provisions, such purported sale, transfer or other
disposition shall, to the fullest extent permitted by
law, be null, void and of no effect. The foregoing
restrictions shall be lifted as to one-third of the
Restricted Shares on each of the first, second and
third anniversaries of the cash award payment date,
subject to accelerated lifting of restrictions as
provided for in Section 11.
(c) DEFERRAL. The Executive may elect to defer from
payments of Base Salary and Annual Bonus and any
other eligible compensation as defined by the terms
of the plan such amounts as provided for under the
terms of the Company's Supplemental Deferred
Compensation Plan ("SDCP").
(d) INCENTIVE AWARD MODIFICATIONS. Any equity and option
awards made to the Executive as of the date of this
Agreement and any equity and option awards which
shall be made to the Executive during the Employment
Term shall be subject to, and shall benefit from, any
favorable amendments or revisions to the terms and
conditions of any of the Company's Incentive
Compensation Programs (including, without limitation,
any action resulting in extended exercise periods)
that may be implemented on or after the date hereof.
6. EQUITY AWARD. Executive may be awarded additional compensation (such as
stock options, shares of incentive stock, or shares of restricted
stock) 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"), in an
appropriate manner for the position occupied by Executive and his
performance therein relative to other Company senior executives and
consistent with Company pay practices.
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Compensation granted under such plans will be subject to the actual
provisions and conditions applicable to such plans.
7. 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 & LTD, Flexible Spending Accounts, Regular and
Supplemental AD&D, Optional/Supplemental Life Insurance,
Profit Sharing [the 401(k) Plan], Employee Stock Purchase Plan
and other personal benefit plans of the Company, collectively
referred to as the "Benefit Plans") on a basis which is no
less favorable to the Executive than that made available to
other senior officers of the Company; provided that Executive
shall be reimbursed for the costs of his annual participation
in a comprehensive executive health assessment at a leading
medical institution of his choice (grossed up for tax purposes
at the present rate of 48%).
(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.
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(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 nonqualified
and qualified pension plans as in effect on December
18, 1996 (including all across-the-board plan
improvements or benefit decreases and/or successor
plans, in each case adopted after 12/18/96) 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 benefit eligible compensation shall be
his 1999 Base Salary and Bonus including any deferred
Base Salary and bonus in the Company's Supplemental
Deferred Compensation Plan 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
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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) Upon execution of this Agreement, 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 I 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
the non-renewal of this Agreement), 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
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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.
(v) Amounts payable to the Executive in satisfaction of
the Company NonQualified 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) Executive shall be eligible to participate in the Supplemental
Deferred Compensation Plan on a basis which is no less
favorable than other senior officers participating in the
Transferred Executive Supplemental Retirement Plan.
(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 time and for such periods as shall
be mutually agreed upon between the Executive and the
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Company. The Executive shall be entitled to all public
holidays observed by the Company.
(e) RELOCATION. The Company acknowledges that it has provided to
the Executive an interest-free housing loan in the amount of
$400,000, which it has also agreed shall be forgiven in five
(5) annual installments at each annual anniversary of the
effective date of the original employment agreement executed
between the Company and the Executive, dated December 18,
1996. The Company acknowledges and agrees that it shall
continue to forgive the remaining annual installments of such
loan and that any compensation income to Executive resulting
from the loan forgiveness or interest-free features of the
loan will be grossed up for tax purposes at the present rate
of 48%.
8. 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.
9. MISCELLANEOUS BENEFITS. During the Employment Tenn, 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 and other business expenses, as
approved by the Company, which are 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,
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implementation and execution of this Agreement (grossed up for
tax purposes at present rate of 48%).
(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 the present rate of 48%).
(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 the present rate of 48%).
(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) shall be grossed-up
for tax purposes at the present rate of 48%.
(f) FINANCIAL COUNSELING AND LEGAL SERVICES. The Company shall
reimburse the Executive annually for all reasonable financial
counseling (not including asset management fees), tax
preparation and legal services associated with tax, financial
and estate planning (grossed-up for tax purposes at the
present rate of 48%). The Company shall continue to pay the
fees paid to Xxxx Xxxxxx and Associates ("Xxxxxx") consistent
with Xxxxxx'x services under the prior contract.
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(g) 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.
10. 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 for a felony; or (ii) the commission by the
Executive of fraud or theft against, or embezzlement from, the
Company. For purposes of this section, no 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 10(a) and specifying the particulars thereof in
detail. As set forth more fully in Section 10(f) hereof, the
"Date of Termination" (which shall be no earlier than 30 days
after delivery of the written notice to the Executive) shall
be the
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date specified in the "Notice of Termination;" provided,
however, that in the case of a termination for Cause under
clauses 10(a)(i) and 10(a)(ii) above, the Date of Termination
shall be the date of 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 EXCESSIVE ABSENTEEISM. At the
sole discretion of the Company's Board of Directors, Executive
may be terminated if the Executive shall have been absent from
his duties with the Company on a full-time basis for 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).
(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
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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 within thirty (30) days of receipt of
the Executive's Notice of Termination except in the event of a
Change in Control:
(i) an assignment to the Executive of any duties
materially inconsistent with his position, 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;
(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
locations referred to in Section (4) of this
Agreement;
(v) a reduction in the Executive's Base Salary or Annual
Bonus target incentive 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;
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(vii) the failure of the Company to maintain the Executive
as a member of its Board of Directors 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) "Change in Control" as defined in Section 11(f)
of this Agreement.
(x) a failure of the Company to secure a written
assumption by any successor company as provided
for in Section 15(g) hereof, or
(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
7(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 10(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 7(b)
hereof.
(e) OTHER TERMINATIONS. Notwithstanding the foregoing, the
Executive may terminate his employment at any time, subject to
the provisions of Section 10(f) hereof. If the Executive's
employment is terminated hereunder for any reason other than
as set forth in Sections 10(a) through 10(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.
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(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
and a date of termination.
11. 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
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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 any earned and unpaid bonus
relating to services performed by the Executive in the year
preceding his death, and (3) the severance benefits set forth
in Section 11(e), and (ii) all outstanding stock options,
earned shares of incentive stock, and other awards granted to
the Executive under the Incentive Compensation Programs shall
immediately become fully vested as of the Date of Termination
and all transfer restrictions shall lapse but continue to be
subject to such exercise periods as shall be provided for
under the terms of each grant.
(c) ABSENCE FROM WORK. If the Executive's employment hereunder is
terminated for excessive absenteeism as defined in Section
10(b), 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 any earned and unpaid bonus relating to
service performed by the Executive in the year preceding his
Date of Termination for excessive absenteeism, and (3) the
severance benefits set forth in Section 11(e); and (ii) all
outstanding stock option and Incentive Stock awards granted to
the Executive shall immediately become fully vested as of the
Date of Termination and all transfer restrictions shall lapse
but continue to be subject to such exercise periods as shall
be provided for under the terms of each grant.
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(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 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 career
shares and earned but unvested incentive stock shares. In the
event of termination by the Company for Cause, the Executive
shall have the right to exercise the vested unexercised
portion of all outstanding stock option and stock awards prior
to the Date of Termination, and the unexercised portion of any
such award shall be forfeited thereafter and any restricted
stock shall remain subject to the terms of each grant. In the
event of termination by the Executive other than for Good
Reason but subject to the provisions of Section 12, the
Executive shall have the right to exercise the vested
unexercised portion of all outstanding stock options and stock
awards then held by the Executive for such period following
the Date of Termination as shall be provided for under the
terms of each grant, and the unexercised portion of any such
awards shall be forfeited thereafter and any restricted stock
shall remain subject to the terms of each grant.
(e) ALL OTHER TERMINATIONS. Executive's employment may be
terminated without Cause by the Company's Board of Director's
or by the Executive for Good Reason or upon a Non-Renewal
Event, 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
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lump-sum (net of appropriate withholdings) within
sixty (60) days of the Date of Termination;
(ii) Executive shall be entitled to receive three (3)
times his average Annual Bonus Award (including the
stock and cash components) earned during the
employment term of this Contract and any earned and
unpaid bonus relating to (A) services performed by
the Executive in the year preceding his termination
by the Company without Cause or his termination for
Good Reason, and (B) services performed by the
Executive for calendar year 2002 in the event of a
Non-Renewal Event to be paid in a lump sum (net of
appropriate withholding) within sixty (60) days of
the Date of Termination provided that the bonus
payment pursuant to Section 11(e)(ii) shall not
duplicate any bonus payments previously paid to the
Executive;
(iii) Executive and his eligible dependents shall be
entitled to continue participation in the Company's
Benefit Plans at the same cost as other Company
senior executives (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
and his eligible dependents are eligible to be
covered by a successor employer's comparable benefit
plans, whichever is sooner;
(iv) Any stock or stock option granted to the Executive
subject to vesting restrictions shall become vested
and fully exercisable as of the Date of Termination
but subject to the provisions of Section 12. In
addition, any
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restrictions on sale, transfer or disposition of
restricted stock will be lifted; 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 11 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 one
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 with the Company,
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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 tax 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, "Change in
Control" shall mean:
(i) The Company's shareholders approve a merger (pursuant
to which the Company is not the surviving entity),
consolidation (pursuant to which the voting
shareholders of the Company cease to hold in excess
of fifty (50%) percent of the voting stock of the
consolidated entity), sale or disposition of all or
substantially all of the Company's assets or a plan
of partial or
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complete liquidation and such transaction is
completed substantially in accordance with the terms
approved by the shareholders; PROVIDED THAT
notwithstanding anything to the contrary, in this
subsection (f)(i), 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 (f)(i);
(ii) The majority of the Board consists of individuals
other than Incumbent Directors (a "Hostile Board"),
which term "Incumbent Directors" means the members of
the Board as of the Effective Date of this Agreement
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; PROVIDED FURTHER that the
occurrence of a Share Acquisition (as defined below)
without the prior approval of the two-thirds of the
Incumbent Directors shall be deemed to result in a
Hostile Board for all purposes hereunder; or
(iii) the acquisition by any third-party of stock
constituting at least 51% of all outstanding shares
of stock of the Company (a "Share Acquisition") and
subsequent to such acquisition either (i) the Company
no longer is a public
-22-
company for U.S. securities law purposes, or (ii)
there is a material diminution of the Executive's
position or any other breach of this Agreement by the
Company or event giving rise to a Good Reason
termination by the Executive.
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12. NONSOLICITATION AND NONCOMPETITION
(a) During his employment with the Company and for a period of (1)
one year from the date of the Executive's termination of
employment for any reason, the Executive will not provide
services, in any capacity, whether as an employee, consultant,
independent contractor, or otherwise, to any person or entity
that provides products or services that compete with the
Business of the Company, including but not limited to:
Laboratory Corporation of America Holdings, Inc.; Mayo
Laboratory; ARUP Laboratory; LabOne; Dianon; Specialty Labs
Inc.; DynaCare; Unilab Corporation; American Medical
Laboratory; Microbiology Reference Laboratory; Physicians
Clinical Laboratory Inc.; Endocare Services Inc.; Nu-Tech
Bio-Med, Inc.; Chi Systems, Inc.; Enzon, Inc.; IMPATH Inc.;
TRIPATH, Inc. (NEOPATH); or their successors or assigns,
except that after the termination of Executive's employment
this restriction shall only apply to North America. If so
requested in writing by Executive, the Company shall advise
the Executive promptly in writing in advance (but in no case
later than 30 calendar days) as to whether, in the exercise of
its reasonable judgment, the Company views any proposed
activity contemplated by the Executive as constituting a
competing "Business," PROVIDED THAT nothing herein shall
prevent the Executive from, after the termination of his
employment, being a passive owner of not more than 5% of the
outstanding stock of any class of a corporation that is
publicly traded and that may acquire any corporation or
business that competes with the Company.
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(b) For a period of one (1) year following the termination of the
Executive's employment for any reason, the Executive will not
directly or indirectly solicit the Business of any customer of
the Company during the one (1) year period prior to the
termination of the employment relationship with the Company
for any purpose other than to obtain, maintain and/or service
the customer's Business for the Company.
(c) For a period of one (1) year following the termination of the
Executive's employment for any reason, the Executive agrees
not to, directly or indirectly, recruit or solicit any
employees of the Company to work for the Executive or any
other person or entity.
(d) As used in this Section, the following terms shall have their
respective definitions:
(i) "Business" shall include (A) clinical laboratory,
pathology, toxicology, pharmaceutical testing,
clinical trials, (B) Clinical Laboratory Medical
Information Services, (C) clinical laboratory testing
kits; and (D) any other product or service which the
Company planned, provided or discussed during the (1)
one year period prior to the termination of
Executive's employment.
(ii) "Clinical Laboratory Medical Information Services"
shall mean medical information services which contain
a substantial clinical laboratory data component.
(iii) "Indirectly solicit" shall include, but are not to be
limited to, providing Company's proprietary
information to another individual, or entity,
allowing the use of Executive's name by any company
(or any employees of any other company) other than
the Company, in the solicitation of the Business of
Company's customers.
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(e) In the event there is a dispute under this Section, the
parties agree to hold an expedited hearing before an
arbitrator under American Arbitration Association Rules.
(f) EXCLUSIVE PROPERTY. Executive confirms that all confidential
information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or
made by Executive relating to the business of the Company, its
affiliates and subsidiaries (other than his personal records)
shall be and remain the property of the Company. Upon the
termination of his employment with the Company or upon the
request of the Company at any time, Executive shall promptly
deliver to the Company, and shall not without the consent of
the Board retain copies of, any written materials not
previously made available to the public, or records and
documents made by Executive in his possession concerning the
business or affairs of the Company or any of its affiliates or
subsidiaries (other than his personal records); provided,
however, that subsequent to any such termination, the Company
shall provide Executive with copies (the cost of which shall
be borne by Executive) of any documents which are requested by
Executive and which Executive has determined in good faith are
(i) required to establish a defense to a claim that Executive
has not complied with his duties hereunder or (ii) necessary
to Executive in order to comply with applicable law.
(g) REMEDIES.
(i) INJUNCTIVE RELIEF. Without intending to limit the
remedies available to the Company, Executive
acknowledges that a breach of any of the covenants
contained in this Section 12 may result in material
irreparable injury to the Company or its affiliates
or subsidiaries for which there is no adequate
-26-
remedy at law, that it will not be possible to
measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the
Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent
injunction restraining Executive from engaging in
activities prohibited by this Section 12 or such
other relief as may be required to specifically
enforce any of the covenants in this Section 12.
Without intending to limit the remedies available to
Executive, Executive shall be entitled to seek
specific performance of the Company's obligations
under this Agreement.
(ii) ADDITIONAL REMEDY. In the event of an arbitrator's
determination that Executive has breached any of the
covenants contained in this Section 12 during his
employment or within one year after termination
thereof for any reason, then (1) all of Executive's
outstanding stock options shall immediately terminate
as of the date of the breach and (2) any gains
realized by Executive from exercising all or a
portion of any stock options within three months
prior to his termination of employment or anytime
after his termination of employment, shall be paid by
Executive to the Company. The amount of the realized
gains shall be the difference between the exercise
price and the fair market value of the stock on the
day each option is exercised and the Executive agrees
to pay immediately said amounts to the Company. The
Company shall cooperate with the Executive in filing
amended tax returns required as a result of the
exercise by the Company of its rights pursuant to
this subclause (ii). Executive agrees to pay
immediately
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the unpaid balance to the Company. Executive may be
released from his obligations hereunder only if the
Board (or its duly appointed agent) determines in its
sole discretion that such action is in the best
interests of the Company.
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 Arbitration Panel of the American
Arbitration Association (the "AAA"), 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 hearing, 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
-28-
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,
current or prospective products, facilities and methods, manuals,
intellectual property, price lists, financial information (including
the revenues, costs, or profits associated with any of the Company's
products or services), 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 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
of 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 other than with
respect to the letter from the Company dated December 30,
1999. As used in this Agreement, terms such as "herein,"
"hereof," "hereto" and similar language shall be construed to
refer to this entire
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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, 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
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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 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 (11) hereof by seeking
other employment or otherwise.
16. 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
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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 operations of this
Section (16).
17. 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.
QUEST DIAGNOSTICS INCORPORATED
BY:_________________________________
ATTEST:
Secretary
EXECUTIVE:
---------------------------------
Xxxxxxx X. Xxxxxxx
Dated:______________________________
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