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Exhibit 10.1
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of 8/1/99 (the
"Effective Date"), by and between McKesson HBOC, Inc. (the "Company"), a
Delaware corporation with its principal office at One Post Street, San
Francisco, California, and Alan Seelenfreund ("Executive").
RECITALS
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A. The Company, in its business, develops and uses certain Confidential
Information (as defined in Paragraph 7(c) below). 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 an exclusive 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 Agreement, the
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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
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hereunder, Executive agrees to serve the Company, and the Company shall
employ Executive, as Chairman of the Board of Directors of the Company.
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3. Term and Duties.
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(a) Term of Employment. The period of Executive's employment under this
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Agreement shall be deemed to have commenced on the date of this
Agreement and shall continue until June 30, 2001.
(b) Duties. During the period of his employment hereunder and except for
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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 (the "Board"); provided, however, that, with the approval of
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the Board, Executive may serve, or continue to serve, on the boards of
directors of, hold any other offices or positions in, 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, but are to be rendered primarily at the Company's
principal place of business at One Post Street in San Francisco,
California. Unless and until otherwise mutually agreed to between the
Company and Executive, 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.
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(a) Compensation. During the period of his employment hereunder,
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Executive shall be paid a salary, in monthly or semi-monthly
installments (in accordance with the Company's normal payroll
practices for senior executive officers), 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 (or any duly authorized
Commit-
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tee thereof) (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 awarded to him yearly by the Board (or any duly authorized
Committee thereof). For purposes of the MIP (as defined in
subparagraph (c) below), for each of the Company's fiscal years ending
during the term of this Agreement, Executive's Individual Target Award
shall be 100% of his base salary for the applicable Year (as defined
in the MIP). Executive shall also receive an automobile allowance from
the Company of One Thousand Dollars ($1,000.00) per month during the
term of this Agreement.
(b) Reimbursement of Expenses. The Company shall pay or reimburse
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Executive, in accordance with its normal policies and practices, for
all reasonable travel and other expenses incurred by Executive in
performing his obligations hereunder. 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 his employment hereunder,
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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 he 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 ("MIP"), 1988 Executive Survivor Benefits Plan
("ESBP"), Stock Purchase Plan and 1994 Restricted Stock and Stock
Option Plan (or any other similar plan or arrangement), and the
Company agrees that none of such benefits shall be altered in any
manner or in such a way as to reduce any then existing entitlement of
Executive thereunder.
5. Stock Options. Executive will be granted on or about August 16, 1999, a
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non-qualified stock option to purchase One Million (1,000,000) shares of
the Company's common stock, at a per share exercise price equal to the fair
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market value of a share of the Company's common stock on the date of grant
(the "Grant Date"), which option will vest at the rate of fifty percent
(50%) on the anniversary of the Grant Date and one hundred percent (100%)
on June 30, 2001. Such option will otherwise be subject to the terms and
conditions of the Company's Stock Option and Restricted Stock Plan (or any
other similar plan or arrangement).
6. Benefits Payable Upon Disability or Death.
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(a) Disability Benefits. If, during the term of this Agreement, Executive
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shall be prevented from properly performing services hereunder by
reason of his illness or other physical or mental incapacity, the
Company shall continue to pay Executive his then current salary
hereunder during the period of such disability; or, if less, for a
period of (12) calendar months, at which time the Company's
obligations hereunder shall cease and terminate.
(b) Death Benefits. In the event of the death of Executive during the
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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 Executive's death occurs. Thereafter, all of
the Company's obligations hereunder shall cease and terminate.
(c) Other Plans. The provisions of this Paragraph 6 shall not affect any
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rights of Executive's heirs, administrators, executors, legatees,
beneficiaries or assigns under the Company's Profit-Sharing Investment
Plan, ESBP, Restricted Stock and Stock Option Plan (or any other
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.
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(a) Noncompetition. Executive agrees that during the term of his
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employment hereunder, 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 of the Company, or
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any affiliated company, without the prior written consent of the
Board.
(b) Unauthorized Use of Confidential Information. Executive acknowledges
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and agrees that (i) during the course of his employment Executive will
have produced and/or have access to Confidential Information (as
defined in subparagraph (c) hereof), of the 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 the Company.
Executive promises and agrees not to engage in any unfair competition
with the Company either during or after the term of this Agreement.
Therefore, during and subsequent to his employment by the Company and
its affiliated companies, 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 the
Company in writing or as required by law. All records, files,
drawings, documents, equipment, and the like, or copies thereof,
relating to the Company's business, or the business of any of its
affiliated companies, which Executive shall prepare, use, or come into
contact with, shall be and remain the sole property of the 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 the Company upon termination of
employment with the 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,
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"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
or any of its affiliated companies concerning the products, projects,
activities, business or affairs of the Company and its affiliated
companies, or the Company's or any of its affiliated company's
customers, including, without limitation, (i) all information
concerning trade secrets of the Company and its affiliated companies,
includ-
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ing computer programs, system documentation, special hardware, product
hardware, related software development, manuals, formulae, processes,
methods, machines, compositions, ideas, improvements or inventions of
the Company and its affiliated companies, (ii) all sales and financial
information concerning the Company and its affiliated companies, (iii)
all customer and supplier lists of the Company and its affiliated
companies, (iv) all information concerning products or projects under
development by the Company or any of its affiliated companies 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 or any of its
affiliated companies 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
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essential for the proper protection of the business of the Company and
its affiliated companies that Executive be restrained for a reasonable
period following the termination of Executive's employment with the
Company and its affiliated companies from: (i) soliciting or inducing
any employee of the Company or any of its affiliated companies to
leave the employ of the Company or any of its affiliated companies;
(ii) hiring or attempting to hire any employee of the Company or any
of its affiliated companies; or (iii) soliciting the trade of or
trading with the customers of the Company or any of its affiliated
companies for any competitive business purpose. Accordingly, Executive
agrees that during the term of his employment hereunder, and for the
Restricted Period thereafter following the termination of Executive's
employment with the Company and its affiliated companies for any
reason, Executive shall not, directly or indirectly, (x) hire,
solicit, aid in or encourage the hiring and/or solicitation of,
contract with, aid in or encourage the contracting with, or induce or
encourage to leave the employment of the Company or any of its
affiliated companies, any employee of the Company or any of its
affiliated
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companies; and (y) 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
and its affiliated companies, a customer or client of the Company or
any of its affiliated companies for the purpose of offering or selling
a product or service competitive with any of those offered by the
Company of any of its affiliated companies. For purposes of this
Paragraph 7(d), the "Restricted Period" shall be deemed to be the
longer of (i) two (2) years following termination of Executive's
employment for any reason or (ii) the period during which Executive is
receiving salary continuation payments hereunder. 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
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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 that 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.
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(a) For Cause. Notwithstanding anything herein to the contrary, the
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Company may, without liability, terminate Executive's employment
hereunder for Cause (as defined below) at any time upon written notice
from the Board (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
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not be delivered until after the Board (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
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(ii) a material breach by Executive of one or more terms of this
Agreement.
(b) Arbitration Required to Confirm Cause. In the event of a termination
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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 10(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.
(c) Other than for Cause; Performance, Reorganization. Notwithstanding
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anything herein to the contrary, the Company may also terminate
Executive's employment (without regard to any general or specific
policies of the Company relating to the employment or termination of
its employees) (i) should Executive fail to perform his duties
hereunder in a manner satisfactory to the Board, 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 Board, (ii) should
Executive's position be eliminated as a result of a reorganization or
restructuring of the Company or any of its affiliated companies or
(iii) for any other reason or reasons.
(d) Obligations of the Company on Termination of Employment.
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i) If the Company terminates Executive's employment pursuant to
subparagraph 8(a) above and the Company's action is affirmed as
specified in subparagraph 8(b) above or Executive terminates his
employment with the Company other than for Good Reason (as
defined in subparagraph (d)(iii)), then all of the Company's
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 the Company whatsoever, and Executive's
rights, if any, under the Company's employee and executive
benefit plans shall be deter-
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mined solely in accordance with the express terms of the
respective plans;
ii) If the Company terminates Executive's employment pursuant to
subparagraph 8(c) above or Executive terminates his employment
with the Company for Good Reason prior to the expiration of this
Agreement, then in lieu of any benefits payable pursuant to the
Company's Executive Severance Policy (so long as the compensation
and benefits payable hereunder equal or exceed those payable
under said Policy) and in complete satisfaction and discharge of
all of its obligations to Executive hereunder, the Company shall,
provided Executive is not in breach of the provisions of
Paragraph 7 hereof, and except as provided in Paragraph 10(c)
below, (A) continue Executive's then base salary, without
increase, for the remainder of the term of this Agreement, (B)
continue Executive's incentive award compensation under the terms
of the Company's MIP for each fiscal year ending with or within
the term of this Agreement, such MIP awards to be equal, in each
case, to Executive's Individual Target Award existing at the time
of his termination of employment, (C) accelerate the vesting of
all stock options granted to Executive, (D) continue Executive's
automobile allowance until the expiration date of this Agreement
and (E) terminate Executive's participation in the 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) For purposes of this Agreement, "Good Reason" shall mean any of
the following actions, if taken without the express written
consent of Executive, (A) any material change by the Company in
Executive's functions, duties or responsibilities, which change
would cause Executive's position with the Company to become of
less dignity, responsibility, importance, or scope as compared to
the position and attributes that applied to Executive as of the
Effective Date; (B) any significant reduction in Executive's base
salary, other than a reduction effected as part of an across-the-
board reduction affecting all executive employees of the Company;
(C) any material
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failure by the Company to comply with any of the provisions of
the Agreement; (D) the Company's requiring Executive to be based
at any office or location more than 25 miles from the office at
which Executive is based as of the Effective Date, except for
travel reasonably required in the performance of Executive's
responsibilities; or (E) any failure by the Company to obtain the
express assumption of the Agreement by any successor or assign of
the Company.
9. Excise Tax Payment.
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(a) If, during the term of this Agreement, the benefits received by
Executive hereunder (the "Total Payments") are subject to the excise
tax provision set forth in Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") (the "Excise Tax"), the Company shall
pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of
any Excise Tax on the benefits received hereunder and any Federal,
state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all
of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion
of tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the accounting firm which was, immediately prior to
the Change in Control, the Company's independent auditor (the
"Auditor"), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits
or any deferred payment or benefit shall be deter-
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mined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be 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 (or if there is no date of termination, then the date on
which the Gross-Up Payment is calculated for purposes of this
Paragraph 9(b)), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined to be less than
the amount taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within fifteen (15)
business days following the time that the amount of such reduction in
the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive, to the extent that such repayment
results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes of
federal, state and local income and employment taxes, plus interest on
the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment
the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) within
fifteen (15) business days following the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Total Payments.
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10. General Provisions.
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(a) Executive's rights and obligations hereunder shall not be transferable
by assignment or otherwise. Nothing in this Agreement shall prevent
the consolidation of the Company with, or its merger into, any other
corporation, or the sale by the 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 between the
parties of even date herewith) 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 the Company. Nothing whatsoever in
this Agreement shall diminish, impair, or in any manner adversely
affect Executive's right to receive any benefits that Executive had
accrued or to which he was otherwise entitled as of the date
immediately prior to the Effective Date as a result of his previous
employment by, or retirement from, the Company.
(c) In the event Executive's employment with the Company shall terminate
under circumstances otherwise providing Executive with a right to
benefits under both Section 5 of the Termination Agreement and
Paragraph 8(d)(ii) of this Agreement, Executive shall be entitled to
receive the greater of the benefits provided therein or herein,
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calculated individually, without duplication.
(d) Any dispute, controversy or claim arising under or in connection with
this Agreement, or the breach hereof, other than any dispute,
controversy claim or breach arising under Paragraph 7 of this
Agreement, 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
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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) Executive expressly relinquishes any rights to renewed participation
in the Company's 1984 Executive Benefit Retirement Plan.
(f) The provisions of this Agreement shall be regarded as divisible, and
if any of said provisions or any part hereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and
the applicability hereof shall not be affected thereby.
(g) This Agreement may not be amended or modified except by a written
instrument executed by the Company and Executive.
(h) This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of
California without regard to its principles of conflict of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
McKESSON HBOC, INC.
A Delaware Corporation
By /s/ Ivan D. Meyerson
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Senior Vice President
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ATTEST:
/s/ Kristina Veaco /s/ Alan Seelenfreund
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Assistant Secretary Executive
By the Authority of the
Board of Directors
of McKesson HBOC, Inc.
on July 12, 1999.
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