Exhibit 10.2

 

[g38411kk01image001.gif]

 

Employment Agreement for David R. Carlucci

 

As Amended and Restated at January 1, 2005

 

--------------------------------------------------------------------------------

 

IMS HEALTH INCORPORATED

 

Employment Agreement for David R. Carlucci

 

As Amended and Restated at January 1, 2005

 

1. Employment

 

 

 

2. Term

 

 

 

3. Offices and Duties

 

 

 

(a) Generally

 

(b) Place of Employment

 

 

 

4. Salary and Annual Incentive Compensation.

 

 

 

(a) Base Salary

 

(b) Annual Incentive Compensation

 

 

 

5. Long-Term Compensation, Including Restricted Stock, Stock Options, and
Benefits, Deferred Compensation, and Expense Reimbursement

 

 

 

(a) Executive Compensation Plans

 

(b) Employee and Executive Benefit Plans

 

(c) Acceleration of Awards Upon a Change in Control

 

(d) Deferral of Compensation

 

(e) Reimbursement of Expenses

 

(f) Company Registration Obligations

 

(g) Limitations Under Code Section 409A

 

 

 

6. Termination Due to Retirement, Death, or Disability

 

 

 

(a) Retirement

 

(b) Death

 

(c) Disability

 

(d) Other Terms of Payment Following Retirement, Death, or Disability

 

 

 

7. Termination of Employment For Reasons Other Than Retirement, Death, or
Disability

 

 

 

(a) Termination by the Company for Cause

 

(b) Termination by Executive Other Than For Good Reason

 

(c) Termination by the Company Without Cause Prior to a Change in Control

 

(d) Termination by Executive for Good Reason Prior to a Change in Control

 

 

i

--------------------------------------------------------------------------------

 

(e) Termination by the Company Without Cause After a Change in Control

 

(f) Termination by Executive for Good Reason After a Change in Control
[a05-3841_1ex10d2.htm#fterminationByExecutiveForGoodRea_050902]

 

(g) Other Terms Relating to Certain Terminations of Employment
[a05-3841_1ex10d2.htm#gotherTermsRelatingToCertainTermi_051045]

 

 

 

8. Definitions Relating to Termination Events
[a05-3841_1ex10d2.htm#a8_DefinitionsRelatingToTerminati_051158]

 

 

 

(a) “Cause” [a05-3841_1ex10d2.htm#acause__051223]

 

(b) “Change in Control” [a05-3841_1ex10d2.htm#bchangeInControl__051247]

 

(c) “Compensation Accrued at Termination”
[a05-3841_1ex10d2.htm#ccompensationAccruedAtTermination_051342]

 

(d) “Disability” [a05-3841_1ex10d2.htm#ddisability__051352]

 

(e) “Good Reason” [a05-3841_1ex10d2.htm#egoodReason_051356]

 

(f) “Potential Change in Control”
[a05-3841_1ex10d2.htm#fpotentialChangeInControl_051516]

 

 

 

9. Rabbi Trust Obligation Upon Potential Change in Control; Excise Tax-Related
Provisions [a05-3841_1ex10d2.htm#a9_RabbiTrustObligationUponPotent_051524]

 

 

 

(a) Rabbi Trust Funded Upon Potential Change in Control
[a05-3841_1ex10d2.htm#arabbiTrustFundedUponPotentialCha_051534]

 

(b) Gross-up If Excise Tax Would Apply
[a05-3841_1ex10d2.htm#bgrossupIfExciseTaxWouldApply__051543]

 

 

 

10. Non-Competition and Non-Disclosure; Executive Cooperation; Non-Disparagement
[a05-3841_1ex10d2.htm#a10_NoncompetitionAndNondisclosur_051709]

 

 

 

(a) Non-Competition [a05-3841_1ex10d2.htm#anoncompetition_051714]

 

(b) Non-Disclosure; Ownership of Work
[a05-3841_1ex10d2.htm#bnondisclosureOwnershipOfWork_051722]

 

(c) Cooperation With Regard to Litigation
[a05-3841_1ex10d2.htm#ccooperationWithRegardToLitigatio_051727]

 

(d) Non-Disparagement [a05-3841_1ex10d2.htm#dnondisparagement__051732]

 

(e) Release of Employment Claims
[a05-3841_1ex10d2.htm#ereleaseOfEmploymentClaims_051903]

 

(f) Forfeiture of Outstanding Options
[a05-3841_1ex10d2.htm#fforfeitureOfOutstandingOptions_051909]

 

(g) Survival [a05-3841_1ex10d2.htm#gsurvival_051927]

 

 

 

11. Governing Law; Disputes; Arbitration
[a05-3841_1ex10d2.htm#a11_GoverningLawDisputesArbitrati_051932]

 

 

 

(a) Governing Law [a05-3841_1ex10d2.htm#agoverningLaw__051939]

 

(b) Reimbursement of Expenses in Enforcing Rights
[a05-3841_1ex10d2.htm#breimbursementOfExpensesInEnforci_052025]

 

(c) Arbitration [a05-3841_1ex10d2.htm#carbitration_052030]

 

(d) Interest on Unpaid Amounts
[a05-3841_1ex10d2.htm#dinterestOnUnpaidAmounts_052038]

 

 

 

12. Miscellaneous [a05-3841_1ex10d2.htm#a12_miscellaneous__052043]

 

 

 

(a) Integration [a05-3841_1ex10d2.htm#aintegration__052053]

 

(b) Successors; Transferability
[a05-3841_1ex10d2.htm#bsuccessorsTransferability_052137]

 

(c) Beneficiaries [a05-3841_1ex10d2.htm#cbeneficiaries_052143]

 

(d) Notices [a05-3841_1ex10d2.htm#dnotices_052147]

 

(e) Reformation [a05-3841_1ex10d2.htm#ereformation__052552]

 

(f) Headings [a05-3841_1ex10d2.htm#fheadings__052556]

 

(g) No General Waivers [a05-3841_1ex10d2.htm#gnoGeneralWaivers_052559]

 

(h) No Obligation To Mitigate
[a05-3841_1ex10d2.htm#hnoObligationToMitigate_052604]

 

(i) Offsets; Withholding [a05-3841_1ex10d2.htm#ioffsetsWithholding__052609]

 

(j) Successors and Assigns [a05-3841_1ex10d2.htm#jsuccessorsAndAssigns__052635]

 

(k) Counterparts [a05-3841_1ex10d2.htm#kcounterparts_052641]

 

 

ii

--------------------------------------------------------------------------------

 

(l) Due Authority and Execution
[a05-3841_1ex10d2.htm#ldueAuthorityAndExecution_052645]

 

(m) Representations of Executive
[a05-3841_1ex10d2.htm#mrepresentationsOfExecutive_052649]

 

 

 

13. Indemnification [a05-3841_1ex10d2.htm#a13_indemnification__052654]

 

 

iii

--------------------------------------------------------------------------------

 

IMS HEALTH INCORPORATED

 

Employment Agreement for David R. Carlucci

 

As Amended and Restated at January 1, 2005

 

THIS EMPLOYMENT AGREEMENT by and between IMS HEALTH INCORPORATED, a Delaware
corporation (the “Company”), and David R. Carlucci (“Executive”) became
effective as of October 7, 2002 (the “Effective Date”).  The first amendment and
restatement of this Employment Agreement became effective as of December 3,
2002, and the second amendment and restatement of this Employment Agreement
shall become effective as of January 1, 2005.

 

W I T N E S S E T H

 

WHEREAS, the Company desires to employ Executive as Chief Executive Officer and
President of the Company, and Executive desires to accept such employment on the
terms and conditions herein set forth.

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration the receipt and
adequacy of which the Company and Executive each hereby acknowledge, the Company
and Executive hereby agree as follows:

 

1.             Employment.

 

The Company hereby agrees to employ Executive as its Chief Executive Officer and
President, and Executive hereby agrees to accept such employment during the Term
as defined in Section 2 (subject to Section 7(c) and 7(e)) and to serve in such
capacities from and after January 1, 2005, upon the terms and conditions set
forth in this Employment Agreement (the “Agreement”).  Prior to January 1, 2005,
Executive served as Chief Operating Officer of the Company, which office and
title he relinquished with his consent

 

2.             Term.

 

The term of employment of Executive under this Agreement (the “Term”) shall be
the period commencing on January 1, 2005 and ending on December 31, 2007 and any
period of extension thereof in accordance with this Section 2, except that the
Term will end at a date, prior to the end of such period or extension thereof,
specified in Section 6 or 7 in the event of termination of Executive’s
employment. The Term, if not previously ended, shall be extended automatically
without further action by either party by one additional year (added to the end
of the Term) first on December 31, 2007 (extending the Term to December 31,
2008) and on each succeeding December 31 thereafter, unless either party shall
have served written notice in accordance with Section 12(d) upon the other party
on or within 90 days before the December 31 extension

 

--------------------------------------------------------------------------------

 

date, electing not to extend the Term further as of that December 31 extension
date, in which case employment shall terminate on that December 31 and the Term
shall end at that date, subject to earlier termination of employment and earlier
termination of the Term in accordance with Section 6 or 7. The foregoing
notwithstanding, in the event there occurs a Potential Change in Control during
the period of 180 days prior to the December 31 on which the Term will terminate
as a result of notice given by Executive hereunder, the Term shall be extended
automatically at that December 31 by an additional period such that the Term
will extend until the 180th day following such Potential Change in Control.

 

3.             Offices and Duties.

 

The provisions of this Section 3 will apply during the Term, except as otherwise
provided in Section 7(c) and 7(e):

 

(a)  Generally.    Executive shall serve as the Chief Executive Officer and
President of the Company and shall be nominated and, if elected, shall serve as
a member of the Board of Directors of the Company (the “Board”) and, for so long
as he is serving on the Board, Executive agrees to serve as a member of any
Board committee if the Board shall elect Executive to such committee.  In any
and all such capacities, Executive shall report only to the Board of Directors
and the Executive Chairman of the Board of the Company.  Executive shall have
and perform such duties, responsibilities, and authorities as are customary for
the chief executive officer and president of a publicly held corporation of the
size, type, and nature of the Company as they may exist from time to time and
consistent with such position and status. Executive shall devote his full
business time and attention, and his best efforts, abilities, experience, and
talent, to the positions of Chief Executive Officer and President and for the
businesses of the Company without commitment to other business endeavors, except
that Executive (i) may make personal investments which are not in conflict with
his duties to the Company and manage personal and family financial and legal
affairs, (ii) may serve as a member of the board of directors of such companies
as he is serving on as of January 1, 2005, (iii) undertake public speaking
engagements, and (iv) serve as a director of (or similar position with) any
other business or an educational, charitable, community, civic, religious, or
similar type of organization, with the approval of the Board, so long as such
activities (i.e., those listed in clauses (i) through (iv)) do not preclude or
render unlawful Executive’s employment or service to the Company or otherwise
materially inhibit the performance of Executive’s duties under this Agreement or
impair the business of the Company or its subsidiaries.

 

(b)  Place of Employment.    Executive’s principal place of employment shall be
at the Company’s principal executive offices in Fairfield, Connecticut.

 

4.             Salary and Annual Incentive Compensation.

 

As partial compensation for the services to be rendered hereunder by Executive,
the Company agrees to pay to Executive during the Term the compensation set
forth in this Section 4.

 

(a)  Base Salary.    The Company will pay to Executive during the Term a base
salary at the annual rate of $730,000, payable commencing at the beginning of
the Term in accordance with the Company’s usual payroll practices with respect
to senior executives (except to the extent deferred under Section 5(d)). 
Executive’s annual base salary shall be reviewed by the Compensation and
Benefits Committee of the Board (the “Committee”) as of January 1 of each

 

2

--------------------------------------------------------------------------------

 

year of the Term, beginning in 2006, and may be increased above, but may not be
reduced below, the then-current rate of such base salary. For purposes of this
Agreement, “Base Salary” means Executive’s then-current base salary.

 

(b)  Annual Incentive Compensation.    The Company will pay to Executive during
the Term annual incentive compensation which shall offer to Executive an
opportunity to earn additional compensation based upon performance in amounts
determined by the Committee in accordance with the applicable plan and
consistent with past practices of the Company; provided, however, that the
annual target incentive opportunity shall be not less than 100% of Base Salary
for achievement of target level performance, with the nature of the performance
and the levels of performance triggering payments of such annual target
incentive compensation for each year to be established after consultation with
Executive and communicated to Executive during the first quarter of such year by
the Committee.  In addition, the Committee (or the Board) may determine, in its
discretion, to increase Executive’s annual target incentive opportunity or
provide an additional annual incentive opportunity, in excess of the annual
target incentive opportunity, payable for performance in excess of or in
addition to the performance required for payment of the annual target incentive
amount. Any annual incentive compensation payable to Executive shall be paid in
accordance with the Company’s usual practices with respect to payment of
incentive compensation to senior executives (except to the extent deferred under
Section 5(d)).

 

5.             Long-Term Compensation, Including Restricted Stock, Stock
Options, Benefits, Deferred Compensation, and Expense Reimbursement.

 

(a)  Executive Compensation Plans.    Executive shall be entitled during the
Term to participate, without discrimination or duplication, in all executive
compensation plans and programs intended for general participation by senior
executives of the Company, as presently in effect or as they may be modified or
added to by the Company from time to time, subject to the eligibility and other
requirements of such plans and programs and subject to the limitation specified
in Section 5(a)(v) below; provided that for purposes of eligibility and benefit
participation levels under any such programs hereafter adopted that are not
tax-qualified or otherwise subject to nondiscrimination requirements under the
Internal Revenue Code of 1986, as amended, Executive shall be given full service
credit for service with IBM Corporation (“Past Service Credit”) and, with
respect to existing programs, Executive will be entitled to Past Service Credit
as provided in Section 5(b).

 

In furtherance of the foregoing:

 

(i)            Executive will continue to be eligible for awards of Restricted
Stock Units (“PERS”) under the Performance-Based Restricted Stock Program (the
“PBRSP”) which match the amount of annual incentive compensation earned under
Section 4(b); provided, however, that the Company may replace the PBRSP with a
different long-term incentive program providing an incentive opportunity
determined by the Committee to be reasonably comparable to that under the PBRSP.

 

(ii)           The Company shall grant Executive, as of January 1, 2005, 38,000
Restricted Stock Units (“RSUs”) pursuant to and subject to the terms of the
Company’s Amended and Restated 1998 Stock Incentive Plan (“1998 Plan”) (the
“Promotion

 

3

--------------------------------------------------------------------------------

 

RSU Grant”). The Promotion RSU Grant shall vest as to one-third of the RSUs on
each of the first three anniversaries of the date of grant (subject to
accelerated vesting in accordance with other provisions of this Agreement). 
Other terms of the RSUs shall be governed by the 1998 Plan and the agreement
under the 1998 Plan setting forth the terms of the RSUs.

 

(iii)          The Company shall grant to Executive as of January 1, 2005 stock
options (the “Promotion Options”) to acquire 115,000 common shares of the
Company, par value $.01 per share (the “Company Common Stock”). The Promotion
Options shall be granted under the 1998 Plan, shall have an exercise price per
share equal to the Fair Market Value (as defined in the 1998 Plan) of the
Company Common Stock on the date of grant, shall vest and become fully
exercisable as to one-third of the underlying shares on each of the first three
anniversaries of the date of grant (subject to accelerated vesting in accordance
with other provisions of this Agreement) and shall provide for an exercise
period equal to (x) the remaining option term of ten years from date of grant
for so long as Executive remains employed, (y) upon Executive’s termination of
employment by the Company without Cause or by Executive for Good Reason, the
shorter of the remaining option term or three years from date of termination,
and (z), upon other terminations of Executive’s employment, in accordance with
the terms of this Agreement and otherwise in accordance with the customary terms
of options under the 1998 Plan.

 

(iv)          All unvested PERS granted under the PBRSP prior to January 1, 2005
and all unvested stock options granted by the Company prior to January 1, 2005
will continue to vest during the Term and shall be governed by the terms
applicable to the original award (including terms applicable under Executive’s
employment agreement as in effect prior to January 1, 2005).

 

(v)           Other provisions of this Section 5 notwithstanding, Executive
agrees that no stock options (or any long-term equity award that replaces
options) will be granted to Executive for the 2005 award cycle.

 

(b)  Employee and Executive Benefit Plans.    Executive shall be entitled during
the Term to participate, without discrimination or duplication, in all employee
and executive benefit plans and programs of the Company, as presently in effect
or as they may be modified or added to by the Company from time to time, to the
extent such plans are available to other senior executives or employees of the
Company, subject to the eligibility and other requirements of such plans and
programs, including without limitation plans providing pensions, supplemental
pensions, supplemental and other retirement benefits, medical insurance, life
insurance, disability insurance, and accidental death or dismemberment
insurance, as well as savings, profit-sharing, and stock ownership plans,
provided that such benefit plans and programs, in the aggregate, shall provide
Executive with benefits and compensation substantially no less favorable than
those provided by the Company to Executive under such plans and programs as in
effect on the Effective Date. Additionally, Executive shall be eligible to
participate in and receive benefits under the Company’s Employee Protection
Plan, and Executive shall be eligible to receive or participate in perquisites
under policies implemented by the Board and the Committee.

 

4

--------------------------------------------------------------------------------

 

In furtherance of and not in limitation of the foregoing, during the Term:

 

(i)            Executive will participate as Chief Executive Officer and
President in all executive and employee vacation and time-off programs; provided
that Executive shall be entitled to a minimum of 25 vacation days annually; and

 

(ii)           Executive will be entitled to retirement benefits substantially
in accordance with the IMS Health Incorporated Supplemental Executive Retirement
Plan (the “SERP”), as in effect on the Effective Date; provided, however, that,
the provisions of the SERP notwithstanding, (A) for vesting purposes under the
SERP, Executive shall be credited with 26 years of “Service,” based on his prior
employment with IBM Corporation; (B) in place of the annual benefit formula in
Section 3.1(b)(i) and 3.2(b)(i) of the SERP, Executive’s Retirement Benefit or
Deferred Vested Benefit shall be calculated as “8% of his Average Final
Compensation multiplied by the number of his years of Service not in excess of
five years, plus 1.6% of such Average Final Compensation multiplied by the
number of his years of Service over five but not in excess of 17, with an
additional 0.8% for a partial year of Service completed at his 65th birthday”;
and (C), in addition to the offsets specified in subsections (ii), (iii) and
(iv) of Section 3.1(b) and 3.2(b) of the SERP, the Retirement Benefit or
Deferred Vested Benefit payable under the SERP shall be reduced by the amount of
Executive’s vested retirement benefits paid or payable to Executive under any
qualified or non-qualified defined benefit pension plan maintained by IBM
Corporation as though such benefits were a “Basic Plan Benefit” for purposes of
the SERP (and calculated in the form of an annual life annuity as provided for
in Section (3) of the SERP).

 

Any provision to the contrary contained in this Agreement notwithstanding,
unless Executive is terminated by the Company for “Cause” (as defined in
Section 8(a)) or Executive terminates voluntarily and not for “Good Reason” (as
defined in Section 8(e)), Executive may elect continued participation after
termination of employment in the Company’s health and medical coverage for
himself and his spouse and dependent children after such coverage would
otherwise end for his lifetime (under rules in effect at the Effective Date
hereof); provided, however, that in the event of such election, Executive shall
pay the Company each year an amount equal to (i), during the first 18 months
after termination (or other applicable period under COBRA), the then-current
annual COBRA premium being paid (or payable) by any other former employee of the
Company, and (ii), thereafter, the annual amount payable in accordance with
standard payment rates applicable to employees as of the Effective date of this
agreement except in each case as may be otherwise provided under Section 6 or 7.
If Executive’s age and years of service do not qualify him for full benefits
under the Company’s retiree health benefits plan, Executive and his spouse and
qualifying dependents shall be entitled to the same benefits as would have been
provided if Executive’s age and years of service had qualified for full benefits
under such plan.

 

(c)  Acceleration of Awards Upon a Change in Control.    In the event of a
Change in Control (as defined in Section 8(b)), or as otherwise provided for
hereunder, all outstanding stock options, restricted stock, RSUs and other
equity-based awards granted to and held by Executive shall become vested and
exercisable.

 

5

--------------------------------------------------------------------------------

 

(d)  Deferral of Compensation.    If the Company has in effect or adopts any
deferral program or arrangement permitting executives to elect to defer any
compensation, Executive will be eligible to participate in such program on terms
no less favorable than the terms of participation of any other senior executive
officer of the Company. Any plan or program of the Company which provides
benefits based on the level of salary, annual incentive, or other compensation
of Executive shall, in determining Executive’s benefits, take into account the
amount of salary, annual incentive, or other compensation prior to any reduction
for voluntary contributions made by Executive under any deferral or similar
contributory plan or program of the Company, but shall not treat any payout or
settlement under such a deferral or similar contributory plan or program to be
additional salary, annual incentive, or other compensation for purposes of
determining such benefits, unless otherwise expressly provided under such plan
or program.

 

(e)  Reimbursement of Expenses.    The Company will promptly reimburse Executive
for all reasonable business expenses and disbursements incurred by Executive in
the performance of Executive’s duties during the Term in accordance with the
Company’s reimbursement policies as in effect from time to time.

 

(f)  Company Registration Obligations.    The Company will use its best efforts
to file with the Securities and Exchange Commission and thereafter maintain the
effectiveness of one or more registration statements registering under the
Securities Act of 1933, as amended (the “1933 Act”), the offer and sale of
shares by the Company to Executive pursuant to stock options or other
equity-based awards granted to Executive under Company plans or otherwise or, if
shares are acquired by Executive in a transaction not involving an offer or sale
to Executive but resulting in the acquired shares being “restricted securities”
for purposes of the 1933 Act, registering the reoffer and resale of such shares
by Executive.

 

(G)  LIMITATIONS UNDER CODE SECTION 409A.  IN THE EVENT THAT IT IS REASONABLY
DETERMINED BY THE COMPANY THAT, AS A RESULT OF SECTION 409A OF THE CODE (AND ANY
RELATED REGULATIONS OR OTHER PRONOUNCEMENTS THEREUNDER), ANY OF THE PAYMENTS
THAT EXECUTIVE IS ENTITLED TO UNDER THE TERMS OF THIS AGREEMENT, THE SERP, OR
ANY OTHER PLAN INVOLVING DEFERRED COMPENSATION (AS DEFINED UNDER CODE
SECTION 409A) MAY NOT BE MADE AT THE TIME CONTEMPLATED BY THE TERMS THEREOF
WITHOUT CAUSING THE EXECUTIVE TO BE SUBJECT TO AN INCOME TAX PENALTY AND
INTEREST, THE COMPANY WILL MAKE SUCH PAYMENT ON THE FIRST DAY PERMISSIBLE UNDER
CODE SECTION 409A WITHOUT THE EXECUTIVE INCURRING A PENALTY.  IN PARTICULAR,
WITH RESPECT TO THE LUMP SUM SERP PAYMENTS PROVIDED FOR HEREUNDER (AS DESCRIBED
ABOVE), IN THE EVENT OF ANY DELAY IN THE PAYMENT DATE AS A RESULT OF CODE
SECTION 409A(A)(2)(A)(I) AND (B)(I), THE COMPANY WILL ADJUST THE PAYMENTS TO
REFLECT THE DEFERRED PAYMENT DATE USING THE INTEREST RATE PRESCRIBED UNDER THE
SERP.  IN ADDITION, OTHER PROVISIONS OF THIS AGREEMENT, THE SERP, OR ANY OTHER
SUCH PLAN NOTWITHSTANDING, THE COMPANY SHALL HAVE NO RIGHT TO ACCELERATE ANY
SUCH PAYMENT OR TO MAKE ANY SUCH PAYMENT AS THE RESULT OF AN EVENT EXCEPT TO THE
EXTENT PERMITTED UNDER SECTION 409A. 

 

6.             Termination Due to Retirement, Death, or Disability.

 

(a)  Retirement.    Executive may elect to terminate employment hereunder by
retirement at or after age 60 or at such earlier age as may be approved by the
Board (in either case, “Retirement”). At the time Executive’s employment
terminates due to Retirement, the Term will

 

6

--------------------------------------------------------------------------------

 

terminate, all obligations of the Company and Executive under Sections 1 through
5 of this Agreement will immediately cease except for obligations which
expressly continue after termination of employment due to Retirement, and the
Company will pay Executive, and Executive will be entitled to receive, the
following:

 

(i)            Executive’s Compensation Accrued at Termination (as defined in
Section 8(c));

 

(ii)           In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s employment terminated, an amount equal to
annual incentive compensation that would have become payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for that year if his employment had not terminated, based on performance
actually achieved in that year (determined by the Committee following completion
of the performance year), multiplied by a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination;

 

(iii)          The vesting and exercisability of stock options held by Executive
at termination and all other terms of such options shall be governed by the
plans and programs and the agreements and other documents pursuant to which such
options were granted (subject to Section 10(f) hereof); and

 

(iv)          All restricted stock and deferred stock awards, including
outstanding PERS awards, all other long-term incentive awards, and all deferral
arrangements under Section 5(d), shall be governed by the plans and programs
under which the awards were granted or governing the deferral, and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement.

 

(b)  Death.    In the event of Executive’s death which results in the
termination of Executive’s employment, the Term will terminate, all obligations
of the Company and Executive under Sections 1 through 5 of this Agreement will
immediately cease except for obligations which expressly continue after death,
and the Company will pay Executive’s beneficiary or estate, and Executive’s
beneficiary or estate will be entitled to receive, the following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s death occurred, an amount equal to the annual
incentive compensation that would have become payable in cash to Executive
(i.e., excluding the portion payable in PERS or in other non-cash awards) for
that year if his employment had not terminated, based on performance actually
achieved in that year (determined by the Committee following completion of the
performance year), multiplied by a fraction the numerator of which is the number
of days Executive was employed in the year of his death and the denominator of
which is the total number of days in the year of death;

 

(iii)          The vesting and exercisability of stock options held by Executive
at death and all other terms of such options shall be governed by the plans and
programs and the

 

7

--------------------------------------------------------------------------------

 

agreements and other documents pursuant to which such options were granted; and

 

(iv)          All restricted stock and deferred stock awards, including
outstanding PERS awards, all other long-term incentive awards, and all deferral
arrangements under Section 5(d), shall be governed by the plans and programs
under which the awards were granted or governing the deferral, and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement.

 

(c)  Disability.    The Company may terminate the employment of Executive
hereunder due to the Disability (as defined in Section 8(d)) of Executive. Such
employment shall terminate at the expiration of the 30-day period referred to in
the definition of Disability set forth in Section 8(d), unless Executive has
returned to service and presented to the Company a certificate of good health
prior to such termination as specified in Section 8(d). Upon termination of
employment, the Term will terminate, all obligations of the Company and
Executive under Sections 1 through 5 of this Agreement will immediately cease
except for obligations which expressly continue after termination of employment
due to Disability, and the Company will pay Executive, and Executive will be
entitled to receive, the following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s employment terminated, an amount equal to the
annual incentive compensation that would have become payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for that year if his employment had not terminated, based on performance
actually achieved in that year (determined by the Committee following completion
of the performance year), multiplied by a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination;

 

(iii)          The vesting and exercisability of stock options held by Executive
at termination and all other terms of such options shall be governed by the
plans and programs and the agreements and other documents pursuant to which such
options were granted, as modified by this Agreement;

 

(iv)          Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards and other long-term
incentive awards is conditioned shall be deemed to have been met at target level
at the date of termination, and restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards) shall
become fully vested and non-forfeitable at the date of such termination, and, in
other respects, such awards shall be governed by the plans and programs and the
agreements and other documents pursuant to which such awards were granted;

 

8

--------------------------------------------------------------------------------

 

(v)           Disability benefits shall be payable in accordance with the
Company’s plans, programs and policies (including the SERP) as modified by this
Agreement, and all deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral, provided that, if
the Company’s payment obligation (determined on a monthly basis) pursuant to
Section 7(c)(ii) hereof (the “Section 7(c)(ii) Payments”) would have been
greater than the monthly payments if Executive’s termination of employment had
been treated as a termination by the Company without Cause, Executive shall be
entitled to an additional monthly payment equal to the difference between the
Section 7(c)(ii) Payments and the monthly payments due Executive pursuant to
this Section 6(c)(v), to the extent of such excess; and

 

(vi)          For the period extending from the date of termination due to
Disability until the date Executive reaches age 65, Executive shall continue to
participate in those employee and executive benefit plans and programs under
Section 5(b) to the extent such plans and programs provide medical insurance,
disability insurance and life insurance benefits (but not other benefits, such
as pension and retirement benefits, provided under Section 5(b)) in which
Executive was participating immediately prior to termination, the terms of which
allow Executive’s continued participation, as if Executive had continued in
employment with the Company during such period or, if the terms of such plans or
programs do not allow Executive’s continued participation, Executive shall be
paid a cash payment equivalent on an after-tax basis to the value of the
additional benefits (of the type described in this Section 6(c)(vi)) Executive
would have received under such plans or programs had Executive continued to be
employed during such period following Executive’s termination until age 65, with
such benefits provided by the Company at the same times and in the same manner
as such benefits would have been provided to Executive under such plans and
programs (it being understood that the value of any insurance-provided benefits
will be based on the premium cost to Executive, which shall not exceed the
highest risk premium charged by a carrier having an investment grade or better
credit rating); provided, however, that Executive must continue to satisfy the
conditions set forth in Section 10 in order to continue receiving the benefits
provided under this Section 6(c)(vi).

 

(d)  Other Terms of Payment Following Retirement, Death, or
Disability.    Nothing in this Section 6 shall limit the benefits payable or
provided in the event Executive’s employment terminates due to Retirement,
death, or Disability under the terms of plans or programs of the Company more
favorable to Executive (or his beneficiaries) than the benefits payable or
provided under this Section 6 (except in the case of annual incentives in lieu
of which amounts are paid hereunder), including plans and programs adopted after
the date of this Agreement. Amounts payable under this Section 6 following
Executive’s termination of employment, other than those expressly payable
following determination of performance for the year of termination for purposes
of annual incentive compensation or otherwise expressly payable on a deferred
basis, will be paid as promptly as practicable after such termination of
employment.

 

9

--------------------------------------------------------------------------------

 

7.             Termination of Employment For Reasons Other Than Retirement,
Death, or Disability.

 

(a)  Termination by the Company for Cause.    The Company may terminate the
employment of Executive hereunder for Cause (as defined in Section 8(a)) at any
time. At the time Executive’s employment is terminated for Cause, the Term will
terminate, all obligations of the Company and Executive under Sections 1 through
5 of this Agreement will immediately cease, and the Company will pay Executive,
and Executive will be entitled to receive, the following:

 

(i)            Executive’s Compensation Accrued at Termination (as defined in
Section 8(c));

 

(ii)           All stock options, restricted stock and deferred stock awards,
including outstanding PERS awards, and all other long-term incentive awards will
be governed by the terms of the plans and programs under which the awards were
granted, as modified by this Agreement; and

 

(iii)          All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral, and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement.

 

(b)  Termination by Executive Other Than For Good Reason.    Executive may
terminate his employment hereunder voluntarily for reasons other than Good
Reason (as defined in Section 8(e)) at any time. An election by Executive not to
extend the Term pursuant to Section 2 hereof shall be deemed to be a termination
of employment by Executive for reasons other than Good Reason at the date of
expiration of the Term, unless a Change in Control (as defined in Section 8(b))
occurs prior to, and there exists Good Reason at, such date of expiration. At
the time Executive’s employment is terminated by Executive other than for Good
Reason the Term will terminate, all obligations of the Company and Executive
under Sections 1 through 5 of this Agreement will immediately cease, and the
Company will pay Executive, and Executive will be entitled to receive, the
following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           All stock options, restricted stock and deferred stock awards,
including outstanding PERS awards, and all other long-term incentive awards will
be governed by the terms of the plans and programs under which the awards were
granted; and

 

(iii)          All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral, and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement.

 

(c)  Termination by the Company Without Cause Prior to a Change in
Control.    The Company may terminate the employment of Executive hereunder
without Cause, if at the date of termination no Change in Control or a Potential
Change in Control has occurred, upon at least 90 days’ written notice to
Executive. The foregoing notwithstanding, the Company may

 

10

--------------------------------------------------------------------------------

 

elect, by written notice to Executive, to terminate Executive’s positions
specified in Sections 1 and 3 and all other obligations of Executive and the
Company under Section 3 at a date earlier than the expiration of such 90-day
period, if so specified by the Company in the written notice, provided that
Executive shall be treated as an employee of the Company (without any assigned
duties) for all other purposes of this Agreement, including for purposes of
Sections 4 and 5, from such specified date until the expiration of such 90-day
period. An election by the Company not to extend the Term pursuant to Section 2
hereof shall be deemed to be a termination of Executive’s employment by the
Company without Cause at the date of expiration of the Term and shall be subject
to this Section 7(c) if at the date of such termination no Change in Control or
a Potential Change in Control has occurred; provided, however, that, if
Executive has attained age 65 at such date of termination, such termination
shall be deemed a Retirement of Executive. At the time Executive’s employment is
terminated by the Company (i.e., at the expiration of such notice period), the
Term will terminate, all remaining obligations of the Company and Executive
under Sections 1 through 5 of this Agreement will immediately cease (except as
expressly provided below), and the Company will pay Executive, and Executive
will be entitled to receive, the following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           Cash in an aggregate amount equal to two times the sum of (A)
Executive’s Base Salary under Section 4(a) immediately prior to termination plus
(B) an amount equal to the greater of (x) the Executive’s annual target
incentive compensation potentially payable in cash to Executive (i.e., excluding
the portion payable in PERS or in other non-cash awards) for the year of
termination or (y) the Executive’s annual incentive compensation that became
payable in cash to Executive (i.e., excluding the portion payable in PERS or in
other non-cash awards) for the latest year preceding the year of termination
based on performance actually achieved in that latest year (the sum of (A) and
(B) being herein referred to as the “Cash Compensation”) . The amount determined
to be payable under this Section 7(c)(ii) shall be payable in monthly
installments over the 24 months following termination, without interest, except
that (subject to Section 5(g)) the Company may elect to accelerate payment of
the remaining balance of such amount and to pay it as a lump sum, without
discount;

 

(iii)          In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s employment terminated, an amount equal to the
annual target incentive compensation potentially payable in cash to Executive
(i.e., excluding the portion payable in PERS or in other non-cash awards) for
the year of termination, multiplied by a fraction the numerator of which is the
number of days Executive was employed in the year of termination and the
denominator of which is the total number of days in the year of termination;

 

(iv)          Stock options held by Executive at termination, if not then vested
and exercisable, will become fully vested and exercisable at the date of such
termination, and, in other respects (including the period following termination
during which such options may be exercised), such options shall be governed by
the plans and programs and the agreements and other documents pursuant to which
such options were granted;

 

11

--------------------------------------------------------------------------------

 

(v)           Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards and other long-term
incentive awards is conditioned shall be deemed to have been met at target level
at the date of termination, and restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards) shall
become fully vested and non-forfeitable at the date of such termination, and, in
other respects, such awards shall be governed by the plans and programs and the
agreements and other documents pursuant to which such awards were granted;

 

(vi)          All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement; and

 

(vii)         For a period of two years after such termination (but not after
Executive attains age 65), Executive shall continue to participate in those
employee and executive benefit plans and programs under Section 5(b) to the
extent such plans and programs provide medical insurance, disability insurance
and life insurance benefits (but not other benefits, such as pension and
retirement benefits, provided under Section 5(b)) in which Executive was
participating immediately prior to termination, the terms of which allow
Executive’s continued participation, as if Executive had continued in employment
with the Company during such period; provided, however, that such participation
shall terminate, or the benefits under such plans and programs shall be reduced,
if and to the extent Executive becomes covered (or is eligible to become
covered) by plans of a subsequent employer or other entity to which Executive
provides services during such period providing comparable benefits. If the terms
of the Company plans and programs referred to in this Section 7(c)(vii) do not
allow Executive’s continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the additional benefits
described in this Section 7(c)(vii) Executive would have received under such
plans or programs had Executive continued to be employed during such period,
with such benefits provided by the Company at the same times and in the same
manner as such benefits would have been provided to Executive under such plans
and programs (it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an investment grade or
better credit rating); provided, however, that Executive must continue to
satisfy the conditions set forth in Section 10 in order to continue receiving
the benefits provided under this Section 7(c)(vii). Executive agrees to promptly
notify the Company of any employment or other arrangement by which Executive
provides services during the benefits-continuation period and of the nature and
extent of benefits for which Executive becomes eligible during such period which
would reduce or terminate benefits under this Section 7(c)(vii); and the Company
be entitled to recover from Executive any payments and the fair market value of
benefits previously made or provided to Executive hereunder which would not have
been paid under this

 

12

--------------------------------------------------------------------------------

 

Section 7(c)(vii) if the Company had received adequate prior notice as required
by this sentence.

 

(d)    Termination by Executive for Good Reason Prior to a Change in
Control.    Executive may terminate his employment hereunder for Good Reason,
prior to a Change in Control, upon 90 days’ written notice to the Company;
provided, however, that, if the Company has corrected the basis for such Good
Reason within 30 days after receipt of such notice, Executive may not terminate
his employment for Good Reason with respect to the matters addressed in the
written notice, and therefore Executive’s notice of termination will
automatically become null and void. At the time Executive’s employment is
terminated by Executive for Good Reason (i.e., at the expiration of such notice
period), the Term will terminate, all obligations of the Company and Executive
under Sections 1 through 5 of this Agreement will immediately cease (except as
expressly provided below), and the Company will pay Executive, and Executive
will be entitled to receive, the following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           Cash in an aggregate amount equal to two times the sum of (A)
Executive’s Base Salary under Section 4(a) immediately prior to termination plus
(B) an amount equal to the greater of (x) Executive’s annual target incentive
compensation potentially payable in cash to Executive (i.e., excluding the
portion payable in PERS or in other non-cash awards) for the year of termination
or (y) Executive’s annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for the latest year preceding the year of termination based on
performance actually achieved in that latest year (the sum of (A) and (B) being
herein referred to as the “Cash Compensation”). The amount determined to be
payable under this Section 7(d)(ii) shall be payable in monthly installments
over the 24 months following termination, without interest, except that (subject
to Section 5(g)) the Company may elect to accelerate payment of the remaining
balance of such amount and to pay it as a lump sum, without discount;

 

(iii)          In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s employment terminated, an amount equal to
Executive’s annual target incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for the year of termination, multiplied by a fraction the numerator of
which is the number of days Executive was employed in the year of termination
and the denominator of which is the total number of days in the year of
termination;

 

(iv)          Stock options held by Executive at termination, if not then vested
and exercisable, will become fully vested and exercisable at the date of such
termination, and, in other respects (including the period following termination
during which such options may be exercised), such options shall be governed by
the plans and programs and the agreements and other documents pursuant to which
such options were granted;

 

(v)           Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards and other long-term
incentive awards

 

13

--------------------------------------------------------------------------------

 

is conditioned shall be deemed to have been met at target level at the date of
termination, and restricted stock and deferred stock awards, including
outstanding PERS awards, and other long-term incentive awards (to the extent
then or previously earned, in the case of performance-based awards) shall become
fully vested and non-forfeitable at the date of such termination, and, in other
respects, such awards shall be governed by the plans and programs and the
agreements and other documents pursuant to which such awards were granted;

 

(vi)          All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement; and

 

(vii)         For a period of two years after such termination (but not after
Executive attains age 65), Executive shall continue to participate in those
employee and executive benefit plans and programs under Section 5(b) to the
extent such plans and programs provide medical insurance, disability insurance
and life insurance benefits (but not other benefits, such as pension and
retirement benefits, provided under Section 5(b)) in which Executive was
participating immediately prior to termination, the terms of which allow
Executive’s continued participation, as if Executive had continued in employment
with the Company during such period; provided, however, that such participation
shall terminate, or the benefits under such plans and programs shall be reduced,
if and to the extent Executive becomes covered (or is eligible to become
covered) by plans of a subsequent employer or other entity to which Executive
provides services during such period providing comparable benefits. If the terms
of the Company plans and programs referred to in this Section 7(d)(vii) do not
allow Executive’s continued participation, Executive shall be paid a cash
payment equivalent on an after-tax basis to the value of the additional benefits
described in this Section 7(d)(vii) Executive would have received under such
plans or programs had Executive continued to be employed during such period,
with such benefits provided by the Company at the same times and in the same
manner as such benefits would have been provided to Executive under such plans
and programs (it being understood that the value of any insurance-provided
benefits will be based on the premium cost to Executive, which shall not exceed
the highest risk premium charged by a carrier having an investment grade or
better credit rating); provided, however, that Executive must continue to
satisfy the conditions set forth in Section 10 in order to continue receiving
the benefits provided under this Section 7(d)(vii). Executive agrees to promptly
notify the Company of any employment or other arrangement by which Executive
provides services during the benefits-continuation period and of the nature and
extent of benefits for which Executive becomes eligible during such period which
would reduce or terminate benefits under this Section 7(d)(vii); and the Company
shall be entitled to recover from Executive any payments and the fair market
value of benefits previously made or provided to Executive hereunder which would
not have been paid under this Section 7(d)(vii) if the Company had received
adequate prior notice as required by this sentence.

 

14

--------------------------------------------------------------------------------

 

If any payment or benefit under this Section 7(d) is based on Base Salary or
other level of compensation or benefits at the time of Executive’s termination
and if a reduction in such Base Salary or other level of compensation or benefit
was the basis for Executive’s termination for Good Reason, then the Base Salary
or other level of compensation in effect before such reduction shall be used to
calculate payments or benefits under this Section 7(d).

 

(e)    Termination by the Company Without Cause After a Change in
Control.    The Company may terminate the employment of Executive hereunder
without Cause, simultaneously with or within 24 months following a Change in
Control, upon at least 90 days’ written notice to Executive. The foregoing
notwithstanding, the Company may elect, by written notice to Executive, to
terminate Executive’s positions specified in Sections 1 and 3 and all other
obligations of Executive and the Company under Section 3 at a date earlier than
the expiration of such 90-day notice period, if so specified by the Company in
the written notice, provided that Executive shall be treated as an employee of
the Company (without any assigned duties) for all other purposes of this
Agreement, including for purposes of Sections 4 and 5, from such specified date
until the expiration of such 90-day period. An election by the Company not to
extend the Term pursuant to Section 2 hereof shall be deemed to be a termination
of Executive’s employment by the Company without Cause at the date of expiration
of the Term and shall be subject to this Section 7(e) if the date of such
termination coincides with or is after a Change in Control or Potential Change
in Control; provided, however, that, if Executive has attained age 65 at such
date of termination, such termination shall be deemed a Retirement of Executive.
At the time Executive’s employment is terminated by the Company (i.e., at the
expiration of such notice period), the Term will terminate, all remaining
obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except as expressly provided below), and the
Company will pay Executive, and Executive will be entitled to receive, the
following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           Cash in an aggregate amount equal to three times the sum of (A)
Executive’s Base Salary under Section 4(a) immediately prior to termination plus
(B) an amount equal to the greater of (x) Executive’s annual target incentive
compensation potentially payable in cash to Executive (i.e., excluding the
portion payable in PERS or in other non-cash awards) for the year of termination
or (y) Executive’s annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for the latest year preceding the year of termination based on
performance actually achieved in that latest year. The amount determined to be
payable under this Section 7(e)(ii) shall be paid by the Company not later than
15 days after Executive’s termination;

 

(iii)          In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s employment terminated, an amount equal to
Executive’s annual target incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for the year of termination, multiplied by a fraction the numerator of
which is the number of days Executive was employed in the year of termination
and the denominator of which is the total number of days in the year of
termination;

 

15

--------------------------------------------------------------------------------

 

(iv)          Stock options held by Executive at termination, if not then vested
and exercisable, will become fully vested and exercisable at the date of such
termination, and any such options granted on or after the date hereof shall
remain outstanding and exercisable until the stated expiration date of the
Option as though Executive’s employment did not terminate, and, in other
respects, such options shall be governed by the plans and programs and the
agreements and other documents pursuant to which such options were granted;

 

(v)           Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards and other long-term
incentive awards is conditioned shall be deemed to have been met at target level
at the date of termination, and restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards) shall
become fully vested and non-forfeitable at the date of such termination, and, in
other respects, such awards shall be governed by the plans and programs and the
agreements and other documents pursuant to which such awards were granted;

 

(vi)          All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement; and

 

(vii)         For a period of three years after such termination (but not after
Executive attains age 65), Executive shall continue to participate in those
employee and executive benefit plans and programs under Section 5(b) to the
extent such plans and programs provide medical insurance, disability insurance
and life insurance benefits (but not other benefits, such as pension and
retirement benefits, provided under Section 5(b)) in which Executive was
participating immediately prior to termination, the terms of which allow
Executive’s continued participation, as if Executive had continued in employment
with the Company during such period, and on terms no less favorable than the
terms applicable to Executive before the Change in Control; provided, however,
that such participation shall terminate, or the benefits under such plans and
programs shall be reduced, if and to the extent Executive becomes covered (or is
eligible to become covered) by plans of a subsequent employer or other entity to
which Executive provides services during such period providing comparable
benefits. If the terms of the Company plans and programs referred to in this
Section 7(e)(viii) do not allow Executive’s continued participation, Executive
shall be paid a cash payment equivalent on an after-tax basis to the value of
the additional benefits described in this Section 7(e)(viii) Executive would
have received under such plans or programs had Executive continued to be
employed during such period, with such benefits provided by the Company at the
same times and in the same manner as such benefits would have been provided to
Executive under such plans and programs (it being understood that the value of
any insurance-provided benefits will be based on the premium cost to Executive,
which shall not exceed the highest risk premium charged by a carrier having an
investment grade or better credit rating); provided, however, that Executive
must continue to satisfy the

 

16

--------------------------------------------------------------------------------

 

conditions set forth in Section 10 in order to continue receiving the benefits
provided under this Section 7(e)(viii). Executive agrees to promptly notify the
Company of any employment or other arrangement by which Executive provides
services during the benefits-continuation period and of the nature and extent of
benefits for which Executive becomes eligible during such period which would
reduce or terminate benefits under this Section 7(e)(viii); and the Company
shall be entitled to recover from Executive any payments and the fair market
value of benefits previously made or provided to Executive hereunder which would
not have been paid under this Section 7(e)(viii) if the Company had received
adequate prior notice as required by this sentence.

 

If any payment or benefit under this Section 7(e) is based on Base Salary or
other level of compensation or benefits at the time of Executive’s termination
and if the Company has purported to reduce Base Salary or other level of
compensation or benefits prior to such termination in a manner that would
constitute Good Reason, then the Base Salary or other level of compensation in
effect before such reduction shall be used to calculate payments or benefits
under this Section 7(e).

 

(f)    Termination by Executive for Good Reason After a Change in
Control.    Executive may terminate his employment hereunder for Good Reason,
simultaneously with or within 24 months following a Change in Control, upon 90
days’ written notice to the Company; provided, however, that, if the Company has
corrected the basis for such Good Reason within 30 days after receipt of such
notice, Executive may not terminate his employment for Good Reason, and
therefore Executive’s notice of termination will automatically become null and
void. At the time Executive’s employment is terminated by Executive for Good
Reason (i.e., at the expiration of such notice period), the Term will terminate,
all obligations of the Company and Executive under Sections 1 through 5 of this
Agreement will immediately cease (except as expressly provided below), and the
Company will pay Executive, and Executive will be entitled to receive, the
following:

 

(i)            Executive’s Compensation Accrued at Termination;

 

(ii)           Cash in an aggregate amount equal to three times the sum of (A)
Executive’s Base Salary under Section 4(a) immediately prior to termination plus
(B) an amount equal to the greater of (x) Executive’s annual target incentive
compensation potentially payable in cash to Executive (i.e., excluding the
portion payable in PERS or in other non-cash awards) for the year of termination
or (y) Executive’s annual incentive compensation that became payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for the latest year preceding the year of termination based on
performance actually achieved in that latest year. The amount determined to be
payable under this Section 7(f)(ii) shall be paid by the Company not later than
15 days after Executive’s termination;

 

(iii)          In lieu of any annual incentive compensation under Section 4(b)
for the year in which Executive’s employment terminated, an amount equal to
Executive’s annual target incentive compensation potentially payable in cash to
Executive (i.e., excluding the portion payable in PERS or in other non-cash
awards) for the year of termination, multiplied by a fraction the numerator of
which is the number

 

17

--------------------------------------------------------------------------------

 

of days Executive was employed in the year of termination and the denominator of
which is the total number of days in the year of termination;

 

(iv)          Stock options held by Executive at termination, if not then vested
and exercisable, will become fully vested and exercisable at the date of such
termination, and any such options granted on or after the date hereof shall
remain outstanding and exercisable until the stated expiration date of the
Option as though Executive’s employment did not terminate, and, in other
respects, such options shall be governed by the plans and programs and the
agreements and other documents pursuant to which such options were granted;

 

(v)           Any performance objectives upon which the earning of
performance-based restricted stock and deferred stock awards and other long-term
incentive awards is conditioned shall be deemed to have been met at target level
at the date of termination, and restricted stock and deferred stock awards,
including outstanding PERS awards, and other long-term incentive awards (to the
extent then or previously earned, in the case of performance-based awards) shall
become fully vested and non-forfeitable at the date of such termination, and, in
other respects, such awards shall be governed by the plans and programs and the
agreements and other documents pursuant to which such awards were granted;

 

(vi)          All deferral arrangements under Section 5(d) will be settled in
accordance with the plans and programs governing the deferral and all rights
under the SERP and any other benefit plan shall be governed by such plan, as
modified by this Agreement; and

 

(vii)         For a period of three years after such termination (but not after
Executive attains age 65), Executive shall continue to participate in those
employee and executive benefit plans and programs under Section 5(b) to the
extent such plans and programs provide medical insurance, disability insurance
and life insurance benefits (but not other benefits, such as pension and
retirement benefits, provided under Section 5(b)) in which Executive was
participating immediately prior to termination, the terms of which allow
Executive’s continued participation, as if Executive had continued in employment
with the Company during such period, and on terms no less favorable than the
terms applicable to Executive before the Change in Control; provided, however,
that such participation shall terminate, or the benefits under such plans and
programs shall be reduced, if and to the extent Executive becomes covered (or is
eligible to become covered) by plans of a subsequent employer or other entity to
which Executive provides services during such period providing comparable
benefits. If the terms of the Company plans and programs referred to in this
Section 7(f)(viii) do not allow Executive’s continued participation, Executive
shall be paid a cash payment equivalent on an after-tax basis to the value of
the additional benefits described in this Section 7(f)(viii) Executive would
have received under such plans or programs had Executive continued to be
employed during such period, with such benefits provided by the Company at the
same times and in the same manner as such benefits would have been provided to
Executive under such plans and programs (it being understood that the value of
any insurance-provided benefits

 

18

--------------------------------------------------------------------------------

 

will be based on the premium cost to Executive, which shall not exceed the
highest risk premium charged by a carrier having an investment grade or better
credit rating); provided, however, that Executive must continue to satisfy the
conditions set forth in Section 10 in order to continue receiving the benefits
provided under this Section 7(f)(viii). Executive agrees to promptly notify the
Company of any employment or other arrangement by which Executive provides
services during the benefits-continuation period and of the nature and extent of
benefits for which Executive becomes eligible during such period which would
reduce or terminate benefits under this Section 7(f)(viii); and the Company
shall be entitled to recover from Executive any payments and the fair market
value of benefits previously made or provided to Executive hereunder which would
not have been paid under this Section 7(f)(viii) if the Company had received
adequate prior notice as required by this sentence.

 

If any payment or benefit under this Section 7(f) is based on Base Salary or
other level of compensation or benefits at the time of Executive’s termination
and if a reduction in such Base Salary or other level of compensation or
benefits was the basis for Executive’s termination for Good Reason or would
otherwise constitute Good Reason, then the Base Salary or other level of
compensation in effect before such reduction shall be used to calculate payments
or benefits under this Section 7(f).

 

(g)    Other Terms Relating to Certain Terminations of Employment.    Whether a
termination is deemed to be at or following a Change in Control or Potential
Change in Control for purposes of Sections 7(c), (d), (e), or (f) is determined
at the date of termination, regardless of whether the Change in Control had
occurred at the time a notice of termination was given. In the event Executive’s
employment terminates for any reason set forth in Section 7(b) through (f),
Executive will be entitled to the benefit of any terms of plans or agreements
applicable to Executive which are more favorable than those specified in this
Section 7 (except in the case of annual incentives in lieu of which amounts are
paid hereunder). Amounts payable under this Section 7 following Executive’s
termination of employment, other than those expressly payable on a deferred
basis, will be paid as promptly as practicable after such a termination of
employment, and such amounts payable under Section 7(e) or 7(f) will be paid in
no event later than 15 days after Executive’s termination of employment unless
not determinable within such period.

 

8.             Definitions Relating to Termination Events.

 

(a)    ”Cause”.    For purposes of this Agreement, “Cause” shall mean
Executive’s

 

(i)            willful and continued failure to substantially perform his duties
hereunder (other than any such failure resulting from incapacity due to physical
or mental illness or disability or any failure after the issuance of a notice of
termination by Executive for Good Reason) which failure is demonstrably and
materially damaging to the financial condition or reputation of the Company
and/or its subsidiaries, and which failure continues more than 48 hours after a
written demand for substantial performance is delivered to Executive by the
Board, which demand specifically identifies the manner in which the Board
believes that Executive has not substantially performed his duties hereunder and
the demonstrable and material damage caused thereby; or

 

19

--------------------------------------------------------------------------------

 

(ii)           the willful engaging by Executive in misconduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise.

 

No act, or failure to act, on the part of Executive shall be deemed “willful”
unless done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Executive a copy of the resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to Executive and an opportunity
for Executive, together with Executive’s counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, Executive was guilty of
conduct set forth above in this definition and specifying the particulars
thereof in detail.

 

(b)    ”Change in Control”.    For purposes of this Agreement, a “Change in
Control” shall be deemed to have occurred if, during the term of this Agreement:

 

(i)            any “Person,” as such term is used for purposes of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the “Beneficial
Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company’s then-outstanding securities;

 

(ii)           during any period of twenty-four months (not including any period
prior to the effectiveness of this Agreement), individuals who at the beginning
of such period constitute the Board, and any new director (other than (A) a
director nominated by a Person who has entered into an agreement with the
Company to effect a transaction described in Sections (8)(b)(i), (iii) or (iv)
hereof, (B) a director nominated by any Person (including the Company) who
publicly announces an intention to take or to consider taking actions
(including, but not limited to, an actual or threatened proxy contest) which if
consummated would constitute a Change in Control or (C) a director nominated by
any Person who is the Beneficial Owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of the
Company’s securities) whose election by the Board or nomination for election by
the Company’s stockholders was approved in advance by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;

 

(iii)          the stockholders of the Company approve any transaction or series
of transactions under which the Company is merged or consolidated with any other
company, other than a merger or consolidation (A) which would result in the
voting securities of the Company outstanding immediately prior thereto

 

20

--------------------------------------------------------------------------------

 

continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 66 2/3% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation and (B) after
which no Person holds 20% or more of the combined voting power of the
then-outstanding securities of the Company or such surviving entity;

 

(iv)          the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets; or

 

(v)           the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Change in Control has occurred.

 

(c)    “Compensation Accrued at Termination”.    For purposes of this Agreement,
“Compensation Accrued at Termination” means the following:

 

(i)            The unpaid portion of annual base salary at the rate payable, in
accordance with Section 4(a) hereof, at the date of Executive’s termination of
employment, pro rated through such date of termination, payable in accordance
with the Company’s regular pay schedule;

 

(ii)           All earned and unpaid and/or vested, nonforfeitable amounts owing
or accrued at the date of Executive’s termination of employment under any
compensation and benefit plans, programs, and arrangements set forth or referred
to in Sections 4(b) and 5(a) and 5(b) hereof (including the guaranteed bonus and
any earned and vested annual incentive compensation and long-term incentive
award) in which Executive theretofore participated, payable in accordance with
the terms and conditions of the plans, programs, and arrangements (and
agreements and documents thereunder) pursuant to which such compensation and
benefits were granted or accrued; and

 

(iii)          Reasonable business expenses and disbursements incurred by
Executive prior to Executive’s termination of employment, to be reimbursed to
Executive, as authorized under Section 5(e), in accordance the Company’s
reimbursement policies as in effect at the date of such termination.

 

(d)    “Disability”.    For purposes of this Agreement, “Disability” means
Executive’s absence from the full-time performance of Executive’s duties
hereunder for six consecutive months as a result of his incapacity due to
physical or mental illness or disability, and, within 30 days after written
notice of termination is thereafter given by the Company, Executive shall have
not returned to the full-time performance of such duties.

 

(e)    “Good Reason”.    For purposes of this Agreement, “Good Reason” shall
mean, without Executive’s express written consent, the occurrence of any of the
following circumstances unless, in the case of subsections (i), (iv), (vi) or
(viii) hereof, such circumstances are fully corrected prior to the date of
termination specified in the notice of termination given in respect thereof:

 

21

--------------------------------------------------------------------------------

 

(i)            the assignment to Executive of duties inconsistent with
Executive’s position and status hereunder, or an alteration, adverse to
Executive, in the nature of Executive’s duties, responsibilities, and
authorities, Executive’s positions or the conditions of Executive’s employment
from those specified in Section 3 or otherwise hereunder (other than inadvertent
actions which are promptly remedied); for this purpose, it shall constitute
“Good Reason” under this subsection (e)(i) if Executive shall be required to
report to and take direction from any person or body other than the Board of
Directors and the Executive Chairman of the Board; except the foregoing shall
not constitute Good Reason if occurring in connection with the termination of
Executive’s employment for Cause, Disability, Retirement, as a result of
Executive’s death, or as a result of action by or with the consent of Executive;
for purposes of this Section 8(e)(i), references to the Company (and the Board
and stockholders of the Company) refer to the ultimate parent company (and its
board and stockholders) succeeding the Company following an acquisition in which
the corporate existence of the Company continues, in accordance with
Section 12(b);

 

(ii)           (A) a reduction by the Company in Executive’s Base Salary, (B)
the setting of Executive’s annual target incentive opportunity or payment of
earned annual incentive in amounts less than specified under or otherwise not in
conformity with Section 4 hereof, (C) a change in compensation or benefits not
in conformity with Section 5, or (D) a reduction, after a Change in Control, in
perquisites from the level of such perquisites as in effect immediately prior to
the Change in Control or as the same may have been increased from time to time
after the Change in Control except for across-the-board perquisite reductions
similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company;

 

(iii)          the relocation of the principal place of Executive’s employment
not in conformity with Section 3(b) hereof; for this purpose, required travel on
the Company’s business will not constitute a relocation so long as the extent of
such travel is substantially consistent with Executive’s customary business
travel obligations in periods prior to the Effective Date;

 

(iv)          the failure by the Company to pay to Executive any portion of
Executive’s compensation or to pay to Executive any portion of an installment of
deferred compensation under any deferred compensation program of the Company
within seven days of the date such compensation is due;

 

(v)           the failure by the Company to continue in effect any material
compensation or benefit plan in which Executive participated immediately prior
to a Change in Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue Executive’s participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amounts of compensation or benefits provided and the level of
Executive’s participation relative to other participants, as existed at the time
of the Change in Control;

 

22

--------------------------------------------------------------------------------

 

(vi)          the failure of the Company to obtain a satisfactory agreement from
any successor to the Company to fully assume the Company’s obligations and to
perform under this Agreement, as contemplated in Section 12(b) hereof, in a form
reasonably acceptable to Executive;

 

(vii)         any election by the Company not to extend the Term of this
Agreement at the next possible extension date under Section 2 hereof, unless
Executive will have attained age 65 at or before such extension date; or

 

(viii)        any other failure by the Company to perform any material
obligation under, or breach by the Company of any material provision of, this
Agreement.

 

(f)    “Potential Change in Control”.    For purposes of this Agreement, a
“Potential Change in Control” shall be deemed to have occurred if, during the
term of this Agreement:

 

(i)            the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;

 

(ii)           any Person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a Change in Control; or

 

(iii)          the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.

 

9.             Rabbi Trust Obligation Upon Potential Change in Control; Excise
Tax-Related Provisions.

 

(a)    Rabbi Trust Funded Upon Potential Change in Control.    In the event of a
Potential Change in Control or Change in Control, the Company shall, not later
than 15 days thereafter, have established one or more rabbi trusts and shall
deposit therein cash in an amount sufficient to provide for full payment of all
potential obligations of the Company that would arise assuming consummation of a
Change in Control, or has arisen in the case of an actual Change in Control, and
a subsequent termination of Executive’s employment under Section 7(e) or 7(f).
Such rabbi trust(s) shall be irrevocable and shall provide that the Company may
not, directly or indirectly, use or recover any assets of the trust(s) until
such time as all obligations which potentially could arise hereunder have been
settled and paid in full, subject only to the claims of creditors of the Company
in the event of insolvency or bankruptcy of the Company; provided, however, that
if no Change in Control has occurred within two years after such Potential
Change in Control, such rabbi trust(s) shall at the end of such two-year period
become revocable and may thereafter be revoked by the Company.

 

(b)    Gross-up If Excise Tax Would Apply.    In the event Executive becomes
entitled to any amounts or benefits payable in connection with a Change in
Control or other change in control (whether or not such amounts are payable
pursuant to this Agreement) (the “Severance Payments”), if any of such Severance
Payments are subject to the tax (the “Excise Tax”) imposed by Section 4999 of
the Code (or any similar federal, state or local tax that may hereafter be
imposed), the Company shall pay to Executive at the time specified in
Section 9(b)(iii) hereof an additional amount (the “Gross-Up Payment”) such that
the net amount

 

23

--------------------------------------------------------------------------------

 

retained by Executive, after deduction of any Excise Tax on the Total Payments
(as hereinafter defined) and any federal, state and local income tax and Excise
Tax upon the payment provided for by Section 9(b)(i), shall be equal to the
Total Payments.

 

(i)            For purposes of determining whether any of the Severance Payments
will be subject to the Excise Tax and the amount of such Excise Tax:

 

(A)          any other payments or benefits received or to be received by
Executive in connection with a Change in Control or Executive’s termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such Person)
(which, together with the Severance Payments, constitute the “Total Payments”)
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(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of nationally-recognized tax counsel selected
by Executive such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;

 

(B)           the amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (x) the total amount of the
Total Payments and (y) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying Section 9(b)(i)(A)
hereof); and

 

(C)           the value of any non-cash benefits or any deferred payments or
benefit shall be determined by a nationally-recognized accounting firm selected
by Executive in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code.

 

(ii)           For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes 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 Executive’s residence on the Date
of Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of Executive’s employment,
Executive shall repay to the Company within ten days after the time that the
amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal and state and local

 

24

--------------------------------------------------------------------------------

 

income tax imposed on the Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax and/or federal and state and
local income tax deduction) plus interest on the amount of such repayment at 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 at the time
of the termination of Executive’s employment (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 within ten days after the time that the amount of such
excess is finally determined.

 

(iii)          The payments provided for in this Section 9(b) shall be made not
later than the fifteenth day following the date of Executive’s termination of
employment; provided, however, that if the amount of such payments cannot be
finally determined on or before such day, the Company shall pay to Executive on
such day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
day after the date of Executive’s termination of employment. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to
Executive, payable on the fifteenth day after the demand by the Company
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).

 

(iv)          All determinations under this Section 9(b) shall be made at the
expense of the Company by a nationally recognized public accounting firm
selected by Executive, and such determination shall be binding upon Executive
and the Company.

 

10.           Non-Competition and Non-Disclosure; Executive Cooperation;
Non-Disparagement.

 

(a)    Non-Competition.    Without the consent in writing of the Board,
Executive will not, at any time during the Term and for a period of two years
following termination of Executive’s employment for any reason, acting alone or
in conjunction with others, directly or indirectly (i) engage (either as owner,
investor, partner, stockholder, employer, employee, consultant, advisor, or
director) in any business in which he has been directly engaged on behalf of the
Company or any affiliate, or has supervised as an executive thereof, during the
last two years prior to such termination, or which was engaged in or planned by
the Company or an affiliate at the time of such termination, in any geographic
area in which such business was conducted or planned to be conducted; (ii)
induce any customers of the Company or any of its affiliates with whom Executive
has had contacts or relationships, directly or indirectly, during and within the
scope of his employment with the Company or any of its affiliates, to curtail or
cancel their business with the Company or any such affiliate; (iii) induce, or
attempt to influence, any employee of the Company or any of its affiliates to
terminate employment; or (iv) solicit, hire or retain as an employee or
independent contractor, or assist any third party in the solicitation, hire, or
retention as an employee or independent contractor, any person who during the

 

25

--------------------------------------------------------------------------------

 

previous 12 months was an employee of the Company or any affiliate; provided,
however, that the limitation contained in clause (i) above shall not apply if
Executive’s employment is terminated as a result of a termination by the Company
without Cause following a Change in Control or is terminated by Executive for
Good Reason following a Change in Control; and provided further, that activities
engaged in by or on behalf of the Company are not restricted by this covenant.
The provisions of subparagraphs (i), (ii), (iii), and (iv) above are separate
and distinct commitments independent of each of the other subparagraphs. It is
agreed that the ownership of not more than one percent of the equity securities
of any company having securities listed on an exchange or regularly traded in
the over-the-counter market shall not, of itself, be deemed inconsistent with
clause (i) of this Section 10(a).

 

(b)    Non-Disclosure; Ownership of Work.    Executive shall not, at any time
during the Term and thereafter (including following Executive’s termination of
employment for any reason), disclose, use, transfer, or sell, except in the
course of employment with or other service to the Company, any proprietary
information, secrets, organizational or employee information, or other
confidential information belonging or relating to the Company and its affiliates
and customers so long as such information has not otherwise been disclosed or is
not otherwise in the public domain, except as required by law or pursuant to
legal process. In addition, upon termination of employment for any reason,
Executive will return to the Company or its affiliates all documents and other
media containing information belonging or relating to the Company or its
affiliates. Executive will promptly disclose in writing to the Company all
inventions, discoveries, developments, improvements and innovations
(collectively referred to as “Inventions”) that Executive has conceived or made
during the Term; provided, however, that in this context “Inventions” are
limited to those which (i) relate in any manner to the existing or contemplated
business or research activities of the Company and its affiliates; (ii) are
suggested by or result from Executive’s work at the Company; or (iii) result
from the use of the time, materials or facilities of the Company and its
affiliates. All Inventions will be the Company’s property rather than
Executive’s. Should the Company request it, Executive agrees to sign any
document that the Company may reasonably require to establish ownership in any
Invention.

 

(c)    Cooperation With Regard to Litigation.    Executive agrees to cooperate
with the Company, during the Term and thereafter (including following
Executive’s termination of employment for any reason), by making himself
available to testify on behalf of the Company or any subsidiary or affiliate of
the Company, in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and to assist the Company, or any subsidiary
or affiliate of the Company, in any such action, suit, or proceeding, by
providing information and meeting and consulting with the Board or its
representatives or counsel, or representatives or counsel to the Company, or any
subsidiary or affiliate of the Company, as may be reasonably requested and after
taking into account Executive’s post-termination responsibilities and
obligations. The Company agrees to reimburse Executive, on an after-tax basis,
for all expenses actually incurred in connection with his provision of testimony
or assistance.

 

(d)    Non-Disparagement.    Executive shall not, at any time during the Term
and thereafter make statements or representations, or otherwise communicate,
directly or indirectly, in writing, orally, or otherwise, or take any action
which may, directly or indirectly, disparage or be damaging to the Company, its
subsidiaries or affiliates or their respective officers, directors, employees,
advisors, businesses or reputations, nor shall Executive’s successor in office
make any such statements or representations regarding Executive. Notwithstanding
the foregoing,

 

26

--------------------------------------------------------------------------------

 

nothing in this Agreement shall preclude Executive or his successor from making
truthful statements that are required by applicable law, regulation or legal
process.

 

(e)    Release of Employment Claims.    Executive agrees, as a condition to
receipt of any termination payments and benefits provided for in Sections 6 and
7 herein (other than Compensation Accrued at Termination) (the “Termination
Benefits”), that he will execute a general release in the standard form employed
by the Company, releasing any and all claims arising out of Executive’s
employment (other than enforcement of this Agreement and other than with respect
to vested rights or rights provided for under any benefit plan or arrangement of
the Company).

 

(f)    Forfeiture of Outstanding Options.    The provisions of Sections 6 and 7
notwithstanding, if Executive willfully and materially fails to substantially
comply with any restrictive covenant under this Section 10, all options to
purchase Common Stock granted by the Company and then held by Executive or a
transferee of Executive shall be immediately forfeited and thereupon such
options shall be cancelled. Notwithstanding the foregoing, Executive shall not
forfeit any option unless and until there shall have been delivered to him,
within six months after the Board (i) had knowledge of conduct or an event
allegedly constituting grounds for such forfeiture and (ii) had reason to
believe that such conduct or event could be grounds for such forfeiture, a copy
of a resolution duly adopted by a majority affirmative vote of the membership of
the Board (excluding Executive) at a meeting of the Board called and held for
such purpose (after giving Executive reasonable notice specifying the nature of
the grounds for such forfeiture and not less than 30 days to correct the acts or
omissions complained of, if correctable, and affording Executive the
opportunity, together with his counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, Executive has engaged and
continues to engage in conduct set forth in this Section 10(f) which constitutes
grounds for forfeiture of Executive’s options; provided, however, that if any
option is exercised after delivery of such notice and the Board subsequently
makes the determination described in this sentence, Executive shall be required
to pay to the Company an amount equal to the difference between the aggregate
value of the shares acquired upon such exercise at the date of the Board
determination and the aggregate exercise price paid by Executive. Any such
forfeiture shall apply to such options notwithstanding any term or provision of
any option agreement. In addition, options granted to Executive on or after the
Effective Date, and gains resulting from the exercise of such options, shall be
subject to forfeiture in accordance with the Company’s standard policies
relating to such forfeitures and clawbacks, as such policies are in effect at
the time of grant of such options.

 

(g)    Survival.    The provisions of this Section 10 shall survive the
termination of the Term and any termination or expiration of this Agreement.

 

11.           Governing Law; Disputes; Arbitration.

 

(a)    Governing Law.    This Agreement is governed by and is to be construed,
administered, and enforced in accordance with the laws of the State of Delaware,
without regard to conflicts of law principles. If under the governing law, any
portion of this Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation, ordinance, or other principle of law, such
portion shall be deemed to be modified or altered to the extent necessary to
conform thereto or, if that is not possible, to be omitted from this Agreement.
The invalidity of any such portion shall not affect the force, effect, and
validity of the remaining portion hereof. If

 

27

--------------------------------------------------------------------------------

 

any court determines that any provision of Section 10 is unenforceable because
of the duration or geographic scope of such provision, it is the parties’ intent
that such court shall have the power to modify the duration or geographic scope
of such provision, as the case may be, to the extent necessary to render the
provision enforceable and, in its modified form, such provision shall be
enforced.

 

(b)    Reimbursement of Expenses in Enforcing Rights.    All reasonable costs
and expenses (including fees and disbursements of counsel) incurred by Executive
in negotiating this Agreement (up to a maximum of $15,000) and thereafter
seeking to interpret this Agreement or enforce rights pursuant to this Agreement
shall be paid on behalf of or reimbursed to Executive promptly by the Company,
whether or not Executive is successful in asserting such rights; provided,
however, that no reimbursement shall be made of such expenses relating to any
unsuccessful assertion of rights if and to the extent that Executive’s assertion
of such rights was in bad faith or frivolous, as determined by arbitrators in
accordance with Section 11(c) or a court having jurisdiction over the matter.

 

(c)    Arbitration.    Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Fairfield, CT
by three arbitrators in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association in effect at the
time of submission to arbitration. Judgment may be entered on the arbitrators’
award in any court having jurisdiction. For purposes of entering any judgment
upon an award rendered by the arbitrators, the Company and Executive hereby
consent to the jurisdiction of any or all of the following courts: (i) the
United States District Court for the District of Connecticut, (ii) any of the
courts of the State of Connecticut, or (iii) any other court having
jurisdiction. The Company and Executive further agree that any service of
process or notice requirements in any such proceeding shall be satisfied if the
rules of such court relating thereto have been substantially satisfied. The
Company and Executive hereby waive, to the fullest extent permitted by
applicable law, any objection which it may now or hereafter have to such
jurisdiction and any defense of inconvenient forum. The Company and Executive
hereby agree that a judgment upon an award rendered by the arbitrators may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Subject to Section 11(b), the Company shall bear all costs and
expenses arising in connection with any arbitration proceeding pursuant to this
Section 11. Notwithstanding any provision in this Section 11, Executive shall be
paid during the pendency of any dispute or controversy arising under or in
connection with this Agreement.

 

(d)    Interest on Unpaid Amounts.    Any amount which has become payable
pursuant to the terms of this Agreement or any decision by arbitrators or
judgment by a court of law pursuant to this Section 11 but which has not been
timely paid shall bear interest at the prime rate in effect at the time such
amount first becomes payable, as quoted by the Company’s principal bank.

 

12.  Miscellaneous.

 

(a)    Integration.    This Agreement cancels and supersedes any and all prior
agreements and understandings between the parties hereto with respect to the
employment of Executive by the Company, any parent or predecessor company, and
the Company’s subsidiaries during the Term, except for contracts relating to
compensation under executive compensation and employee benefit plans of the
Company and its subsidiaries. The foregoing

 

28

--------------------------------------------------------------------------------

 

notwithstanding, Executive shall not participate in the Company’s Employee
Protection Plan unless the aggregate benefits provided under such plan would
exceed the aggregate benefits provided to Executive under this Agreement upon
termination of employment. Executive shall remain entitled to any right or
benefit under a Change-in-Control Agreement executed by the Company, for so long
as such Change-in-Control Agreement remains in effect, if and to the extent that
such right or benefit is more favorable than a corresponding provision of this
Agreement, but no payment or benefit under the Change-in-Control Agreement shall
be made or extended which duplicates any payment or benefit hereunder. If and to
the extent that this Agreement may provide enhanced benefits to Executive under
the SERP which benefits are not explicitly provided for under the SERP, the SERP
shall be deemed amended by this Agreement (but only insofar as it pertains to
Executive). This Agreement constitutes the entire agreement among the parties
with respect to the matters herein provided, and no modification or waiver of
any provision hereof shall be effective unless in writing and signed by the
parties hereto. Executive shall not be entitled to any payment or benefit under
this Agreement which duplicates a payment or benefit received or receivable by
Executive under such prior agreements and understandings or under any benefit or
compensation plan of the Company.

 

(b)    Successors; Transferability.    The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise,
and whether or not the corporate existence of the Company continues) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise and, in the case of an acquisition of the Company in which the
corporate existence of the Company continues, the ultimate parent company
following such acquisition. Subject to the foregoing, the Company may transfer
and assign this Agreement and the Company’s rights and obligations hereunder.
Neither this Agreement nor the rights or obligations hereunder of the parties
hereto shall be transferable or assignable by Executive, except in accordance
with the laws of descent and distribution or as specified in Section 12(c).

 

(c)    Beneficiaries.    Executive shall be entitled to designate (and change,
to the extent permitted under applicable law) a beneficiary or beneficiaries to
receive any compensation or benefits provided hereunder following Executive’s
death.

 

(d)    Notices.    Whenever under this Agreement it becomes necessary to give
notice, such notice shall be in writing, signed by the party or parties giving
or making the same, and shall be served on the person or persons for whom it is
intended or who should be advised or notified, by Federal Express or other
similar overnight service or by certified or registered mail, return receipt
requested, postage prepaid and addressed to such party at the address set forth
below or at such other address as may be designated by such party by like
notice:

 

If to the Company:

 

IMS HEALTH INCORPORATED

1499 Post Road

Fairfield, CT  06824

Attention: General Counsel

 

29

--------------------------------------------------------------------------------

 

If to Executive:

 

David R. Carlucci

1499 Post Road

Fairfield, CT 06824

 

Arthur Woodard, Esq.

Kaye Scholer LLP

425 Park Avenue

New York, NY 10022-3598

(212) 836-8005

 

If the parties by mutual agreement supply each other with telecopier numbers for
the purposes of providing notice by facsimile, such notice shall also be proper
notice under this Agreement. In the case of Federal Express or other similar
overnight service, such notice or advice shall be effective when sent, and, in
the cases of certified or registered mail, shall be effective two days after
deposit into the mails by delivery to the U.S. Post Office.

 

(e)    Reformation.    The invalidity of any portion of this Agreement shall not
deemed to render the remainder of this Agreement invalid.

 

(f)    Headings.    The headings of this Agreement are for convenience of
reference only and do not constitute a part hereof.

 

(g)    No General Waivers.    The failure of any party at any time to require
performance by any other party of any provision hereof or to resort to any
remedy provided herein or at law or in equity shall in no way affect the right
of such party to require such performance or to resort to such remedy at any
time thereafter, nor shall the waiver by any party of a breach of any of the
provisions hereof be deemed to be a waiver of any subsequent breach of such
provisions. No such waiver shall be effective unless in writing and signed by
the party against whom such waiver is sought to be enforced.

 

(h)    No Obligation To Mitigate.    Executive shall not be required to seek
other employment or otherwise to mitigate Executive’s damages upon any
termination of employment; provided, however, that, to the extent Executive
receives from a subsequent employer health or other insurance benefits that are
substantially similar to the benefits referred to in Section 5(b) hereof, any
such benefits to be provided by the Company to Executive following the Term
shall be correspondingly reduced.

 

(i)    Offsets; Withholding.    The amounts required to be paid by the Company
to Executive pursuant to this Agreement shall not be subject to offset other
than with respect to any amounts that are owed to the Company by Executive due
to his receipt of funds as a result of his fraudulent activity. The foregoing
and other provisions of this Agreement notwithstanding, all payments to be made
to Executive under this Agreement, including under Sections 6 and 7, or
otherwise by the Company, will be subject to withholding to satisfy required
withholding taxes and other required deductions.

 

30

--------------------------------------------------------------------------------

 

(j)    Successors and Assigns.    This Agreement shall be binding upon and shall
inure to the benefit of Executive, his heirs, executors, administrators and
beneficiaries, and shall be binding upon and inure to the benefit of the Company
and its successors and assigns.

 

(k)    Counterparts.    This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

 

(l)    Due Authority and Execution.    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.

 

(m)    Representations of Executive.    Executive represents and warrants to the
Company that he has the legal right to enter into this Agreement and to perform
all of the obligations on his part to be performed hereunder in accordance with
its terms and that he is not a party to any agreement or understanding, written
or oral, which prevents him from entering into this Agreement or performing all
of his obligations hereunder. In the event of a breach of such representation or
warranty on Executive’s part or if there is any other legal impediment which
prevents him from entering into this Agreement or performing all of his
obligations hereunder, the Company shall have the right to terminate this
Agreement forthwith in accordance with the same notice and hearing procedures
specified above in respect of a termination by the Company for Cause pursuant to
Section 7(a) and shall have no further obligations to Executive hereunder.
Notwithstanding a termination by the Company under this Section 12(m),
Executive’s obligations under Section 10 of this Agreement shall survive such
termination.

 

13.  Indemnification.

 

All rights to indemnification by the Company now existing in favor of Executive
as provided in the Company’s Certificate of Incorporation or By-laws or pursuant
to other agreements in effect on or immediately prior to the Effective Date
shall continue in full force and effect from the Effective Date (including all
periods after the expiration of the Term), and the Company shall also advance
expenses for which indemnification may be ultimately claimed as such expenses
are incurred to the fullest extent permitted under applicable law, subject to
any requirement that Executive provide an undertaking to repay such advances if
it is ultimately determined that Executive is not entitled to indemnification;
provided, however, that any determination required to be made with respect to
whether Executive’s conduct complies with the standards required to be met as a
condition of indemnification or advancement of expenses under applicable law and
the Company’s Certificate of Incorporation, By-laws, or other agreement shall be
made by independent counsel mutually acceptable to Executive and the Company
(except to the extent otherwise required by law). After the date hereof, the
Company shall not amend its Certificate of Incorporation or By-laws or any
agreement in any manner which adversely affects the rights of Executive to
indemnification thereunder. Any provision contained herein notwithstanding, this
Agreement shall not limit or reduce any rights of Executive to indemnification
pursuant to applicable law. In addition, the Company will maintain directors’
and officers’ liability insurance in effect and covering acts and omissions of
Executive during the Term and for a period of six years thereafter on terms
substantially no less favorable than those in effect on the Effective Date.

 

31

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has
caused this instrument to be duly executed as of the date first above written.

 

 

IMS HEALTH INCORPORATED

 

 

 

 

 

 

 

By:

  /s/ David M. Thomas

 

 

 

Name:

David M. Thomas

 

 

Title:

Executive Chairman of the Board

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

  /s/ David R. Carlucci

 

 

David R. Carlucci

 

32

--------------------------------------------------------------------------------