Executive Employment Agreement - Quintiles Transnational Corp., Pharma Services Holding Inc. and Dennis B. Gillings
EXECUTION COPY
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
made effective this 25th day of September, 2003, among DENNIS B. GILLINGS, Ph.D.
("Gillings"), PHARMA SERVICES HOLDING, INC. ("Pharma"), and QUINTILES
TRANSNATIONAL CORP. (the "Company").
WHEREAS, Gillings is currently employed by the Company, which will become a
wholly-owned subsidiary of Pharma upon the closing (the "Closing") of the
transactions contemplated by the Merger Agreement among the Company, Pharma and
Pharma Services Acquisition Corp. dated April 10, 2003, as amended, modified or
restated from time to time; and
WHEREAS, the Company recognizes Gillings as its founder and that his vision
has been instrumental to its growth and success; therefore, the Company desires
to provide for his continued employment with the Company following the Closing
as its Executive Chairman and Chief Executive Officer ("CEO") and, effective
upon the Closing, Pharma desires to employ Gillings as its Executive Chairman
and CEO; and
WHEREAS, in order to provide adequate assurances to Gillings, as an
inducement to continue his valuable employment with the Company and commence
employment with Pharma, the Company and Pharma desire to enter into this
Agreement to set forth the terms of his employment; and
WHEREAS, Gillings agrees that the terms of this Agreement will allow him to
continue his employment with and to devote his best efforts to Pharma, the
Company and all of their subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties agree as follows:
1. EMPLOYMENT.
Effective upon the Closing, the Company will employ Gillings as Executive
Chairman and CEO of the Company, with the duties, responsibilities and powers of
such offices as customarily associated with such offices, and Gillings shall
serve the Company in such capacities during the term of this Agreement. Gillings
acknowledges that such duties, responsibilities and powers may be changed from
time to time by the Board of Directors (the "Board") of the Company, and that
the Board may hire a new CEO, in which case Gillings will resign his position as
CEO. Gillings shall faithfully and diligently discharge his duties and
responsibilities hereunder, shall use his reasonable best efforts to implement
the policies established by the Board, and shall devote substantially all of his
business time and attention to the affairs of the Company except as otherwise
agreed by the Board. For so long as Gillings shall be employed as Executive
Chairman and/or CEO of the Company, he shall serve as Executive Chairman and/or
CEO of Pharma, without additional compensation therefor.
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2. TERM.
This Agreement shall become effective, and the term of this Agreement
shall commence, on the date of the Closing and shall continue until terminated
pursuant to Section 4. Notwithstanding termination of this Agreement, the
rights and obligations of the Company and Gillings under Section 5
("Compensation and Benefits Payable upon Termination"), Section 6
("Non-Competition; Confidentiality"), Section 8 ("Arbitration"), Section 9
("Counsel Fees") and Section 10 ("Additional Amount") of this Agreement shall
continue until all such rights and obligations thereunder have been satisfied.
Should the Closing not occur for any reason, this Agreement shall be null and
void.
3. COMPENSATION AND BENEFITS.
The Company shall pay or provide to Gillings the following items as
compensation for his services:
(i) An annual base salary of one million dollars ($1,000,000), payable in
monthly installments, subject to all applicable withholding requirements, which
annual base salary may be increased from time to time in accordance with the
normal business practices of the Company; and
(ii) The opportunity to earn an annual cash bonus based on the
achievement of individual and/or Company-wide performance goals established and
communicated to Gillings at the beginning of each bonus plan year by the Board
or the Board's designee. In the event of termination of Gillings' employment
for any reason, except termination by the Company pursuant to Section 4(c)
("Cause") or by Gillings pursuant to Section 4(i) ("Other Termination by
Gillings"), Gillings shall receive (in addition to such other termination
compensation provided herein) the annual cash bonus and incentive bonus (if
any) for such year, prorated for the number of complete months Gillings was
employed for such year prior to such termination (regardless of whether such
bonus is declared on or after the Gillings employment is terminated); and
(iii) Participation in all general benefit programs of the Company as may
be adopted and maintained by the Company from time to time, including the
Company's Flexible Benefits Plan, which includes medical, dental, life and
general and long term disability insurance; 401(k) and any pension and profit
sharing plans, as may be adopted and maintained by the Company from time to
time; and
(iv) Reasonable city/country club dues; and
(v) An automobile selected by Gillings or, at his option, a comparable
automobile allowance, in each case consistent with his position with the
Company and its subsidiaries and for his use; and
(vi) Ordinary and necessary expenses, in a reasonable amount, which
Gillings incurs in performing his duties under this Agreement, including, but
not limited to, travel, entertainment, professional dues and subscriptions, all
dues, fees and expenses associated with membership in various professional
business and civic associations and societies of which
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Gillings' participation is in the best interest of the Company and its
subsidiaries, as reasonably determined by Gillings; and
(vii) Tax return preparation and reasonable financial planning,
consultation and advice by the Company's accounting firm and/or legal counsel
and/or financial consultants in each case as may be provided by the Company for
most senior management of the Company; and
(viii) Reimbursement to GF Management Company, LLC ("GFM") for the business
use (related to Pharma, the Company and/or any of their subsidiaries) of the
aircraft owned and/or operated by GFM as of the date hereof (or a substitute
aircraft owned and/or operated by Gillings or an affiliate of Gillings anytime
thereafter) at the rate of $10,794 per business flight hour. The per business
flight hour rate is calculated by the reimbursement formula (the "Formula")
shown in the spreadsheet attached hereto as Exhibit A. In connection with the
foregoing, GFM shall deliver a monthly statement to the Company setting forth
the number of business flight hours and a description of the business purpose
thereof and the Company will reimburse GFM, on the basis of the number of
business flight hours multiplied by the rate per business flight hour, by wire
transfer of immediately available funds to an account designated in writing by
GFM within fifteen (15) business days after receipt of such monthly statement.
The Company and Gillings will reconcile the payments calculated under the
Formula on an annual basis with the actual costs (such costs to include, without
limitation, capital costs, interest expense and operating expenses) incurred by
GFM or Gillings or his affiliates, as applicable for ownership and use of the
aircraft and will make reasonable modifications (whether up or down) to the
Formula and amounts reimbursed, should the payments under the Formula be
materially different from the reconciliation to actual costs incurred by GFM.
(ix) As of the date hereof, Gillings and his wife are the insureds under
split-dollar insurance arrangements and understandings related thereto in effect
among the Company, Gillings and certain irrevocable life insurance trusts
created by Gillings. Under these arrangements, it was intended that the
irrevocable insurance trusts would have certain death benefits payable upon the
death of the last to die of Gillings and his spouse. As a result of regulatory,
statutory, and other developments the arrangements may need to be modified,
revised and/or terminated. The Company hereby agrees to the extent permitted by
applicable law, to effect during or after Gillings employment such modification,
revision and/or termination of these arrangements and understandings with
Gillings and/or the irrevocable life insurance trusts, as reasonably necessary
or appropriate, in a manner that will ultimately result in death benefits no
less favorable to the trusts and Gillings, than those that would have been
provided had such arrangements and understandings prior to the date hereof
remained in place without change. Gillings agrees to cooperate in good faith
with the Company to effect such modifications, revision and/or termination of
these arrangements in response to regulatory, statutory and other developments
in order to minimize the costs to the Company.
(x) Group health coverage (including without limitation, hospitalization
insurance (including major medical) and other health insurance benefits)
following any termination of Gillings employment pursuant to Section 4, except
termination by the Company pursuant to Section 4(c) ("Cause"), for Gillings and
his spouse for his lifetime, and upon his death, for his surviving spouse until
her death, in each case on the same basis as the Company or its subsidiaries
provide group health coverage to their senior executives; provided that such
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coverage shall be secondary to any coverage for which Gillings or his spouse
become covered and Gillings agrees to make good faith applications to obtain
such coverage.
The above-stated items of compensation shall not be deemed all-inclusive,
and Gillings may receive other compensation, as may from time to time be
determined by the Board, including bonuses that may be provided by the Company
under the Company's annual incentive bonus plans or any comparable bonus plan
that may succeed such plans.
4. TERMINATION.
Gillings' employment under this Agreement shall terminate:
(a) Death. Upon the death of Gillings; or
(b) Disability. Upon notice from the Company or Gillings to the other
party if Gillings becomes "permanently disabled." For purposes of this
Agreement, Gillings shall be deemed "Permanently disabled" six (6) months after
the first date that he has become disabled by a medically determinable bodily
or mental illness, disease, or injury, to the extent that he is prevented from
performing his material and substantial duties of employment, and such
disability has continued uninterrupted for six (6) months. If requested by the
Company, Gillings shall submit at the Company's expense to an examination by a
physician selected by the Company for the purpose of determining or confirming
the existence or extent of any disability; or
(c) Cause. Upon notice from the Company to Gillings for cause. For
purposes of this Agreement, "cause" shall be defined as (i) a willful and
continued failure by Gillings to perform his duties as Executive Chairman of the
Company as established by the Board (other than due to disability), or (ii) a
material breach by Gillings of his fiduciary duties of loyalty or care to the
Company, or (iii) a willful violation of Gillings of any material provision of
this Agreement, Section 7 of the Rollover Agreement between Pharma, Gillings and
certain of his affiliates dated as of the date hereof (the "Rollover
Agreement"), or (iv) a conviction of, or the entering of a plea of nolo
contendere by Gillings for, any felony. In addition, if Gillings shall terminate
his employment for a breach of this Agreement by the Company in accordance with
Section 4(d), and it is ultimately determined that no reasonable basis existed
for Gillings' termination on account of the alleged default of the Company, such
event shall be deemed cause for termination by the Company.
Any notice of termination of Gillings' employment with the Company for
cause shall set forth in reasonable detail the facts and circumstances claimed
to provide the basis for termination of his employment under the provisions
contained herein and the date of such termination. If the cause alleged by the
Company shall be other than (iv) set forth above, Gillings shall be given the
opportunity to explain and, if possible, to cease or correct the performance
(or nonperformance) giving rise to such notice within a reasonable period of
time from receipt of notice, but in no event to exceed thirty (30) days; and,
upon failure, in the judgment of the Board, of Gillings to cease or correct
such performance (or nonperformance) within such thirty (30) day period,
Gillings' employment by the Company shall automatically be terminated; or
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(d) Breach. Upon notice from Gillings to the Company of the Company's or
Pharma's failure to comply with any material provision of this Agreement,
provided that the Company or Pharma shall have thirty (30) days from the receipt
of such notice to cure any default under this Agreement. If such default shall
be cured within such thirty (30) day period, Gillings shall have no right to
terminate his employment under the provisions of this Section 4(d); or
(e) Change in Position, Duties. Upon notice from Gillings to the Company
if Gillings is no longer elected Executive Chairman of the Company with the
duties and powers of such office, as existed on the date of this Agreement, and
which are customarily associated with such office; or
(f) Improper Termination by Company. Upon notice from Gillings to the
Company upon a purported termination of Gillings' employment by the Company for
cause if it shall be ultimately determined that cause did not exist; or
(g) Sale of the Pharma; Qualifying Offering. Upon a "Qualifying
Offering", as defined in the Stockholders Agreement among the Company, Pharma
and its shareholders (the "Stockholders Agreement"), or upon a sale (whether
effected pursuant to Section 2.4(a) of the Stockholders Agreement or by merger,
consolidation, recapitalization, reorganization, sale of securities, sale of
assets or otherwise) in one transaction or series of related transactions to a
Person or Persons that is not a Stockholder or a Permitted Transferee or
Associate (as such terms are defined in the Stockholders Agreement) of any
Stockholder or of any Permitted Transferee of any Stockholder pursuant to which
such Person or Persons (together with its Affiliates) acquires (i) securities
representing at least seventy-five percent (75%) of the voting power of the
Common Stock of Pharma, assuming the conversion, exchange or exercise of all
securities convertible, exchangeable or exercisable for or into Common Stock, or
(ii) of all, or substantially all, of Pharma's assets on a consolidated basis (a
"Sale of Pharma") if at least thirty (30) days prior to the consummation
thereof, Gillings or the Company (at the direction of a majority of the Board)
shall have delivered to the other party a written notice that Gillings
employment shall not be extended beyond the consummation of such Qualifying
Offering or Sale of Pharma, as the case may be; or
(h) Other Termination by the Company. Upon notice from the Company to
Gillings for any reason other than pursuant to Section 4(b), (c) or (g) above;
or
(i) Other Termination by Gillings. Upon notice from Gillings to the
Company of his voluntary termination of employment, for any reason other than as
set forth in Section 4(b), (d), (e), (f) or (g) above.
5. COMPENSATION AND BENEFITS PAYABLE UPON TERMINATION
(a) Upon Gillings' termination of employment for any reason, the Company
shall pay Gillings his full salary and other accrued benefits set forth in
Section 3 through the date of termination, and, except as provided in Sections
3(ii), 3(x), 5(b) and 5(c), no other compensation or benefits shall be paid to
Gillings hereunder; provided, however, that nothing herein shall be deemed to
limit Gillings' rights under any other benefit, life insurance, retirement,
401(k), or
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pension plan of the Company, and the terms of those plans, programs, or
arrangements shall govern.
(b) If Gillings' employment shall be terminated (i) by Gillings pursuant
to Section 4(b) ("Disability"), 4(d) ("Breach"), Section 4(e) ("Change in
Position, Duties"), Section 4(f) ("Improper Termination by Company"), Section
4(g) ("Sale of Pharma; Qualifying Offering"; except, in the case of a Sale of
Pharma, where Gillings in his capacity as a stockholder either (a) is one of the
"Majority Common Stockholders" (as defined in the Stockholders Agreement) or (b)
votes in favor of such Sale of Pharma), or (ii) by the Company for any reason
other than those set forth in Section 4(c) ("Cause") or Section 4(g) ("Sale of
Pharma; Qualifying Offering"; except in the case of a Sale of Pharma, where
Gillings as a stockholder either (a) is not one of the Majority Common
Stockholders (as defined in the Stockholders Agreement) or (b) does not vote in
favor of such Sale of Pharma), the Company shall pay to Gillings or his estate
or beneficiaries, in addition to amounts payable under Section 5(a), an amount
equal to 2.9 times the aggregate sum of (a) his then annual rate of base salary
plus (b) an amount equal to the annual cash bonus, if any, paid or payable for
the fiscal year ended immediately prior to such termination. Such amount shall
be paid in equal monthly installments during the three year period following
such termination, provided that as soon as practicable following such
termination, the Company shall secure such payments through a letter of credit
or similar arrangement, or deposit the present value of such payments into an
escrow arrangement (such letter of credit, similar arrangement or escrow
arrangement, the "Escrow Arrangement") reasonably acceptable to Gillings
(including, without limitation, protection against other claims from creditors
of the Company). In the event Gillings is required to recognize income tax as a
result of the Escrow Arrangement, the Company will release a portion of the
severance amounts secured by the Escrow Arrangement sufficient to permit
Gillings to pay such taxes, and the severance amounts shall be reduced by the
amount so released. In the event the Company does not release a sufficient
portion of the Escrow Arrangement to satisfy Gillings' income tax liabilities
and Gillings is subject to penalties due to such underpayment of these income
tax liabilities, the Company shall pay such penalties and any income taxes due
as a result of the Company's payment to Gillings of the penalties. In addition
to the obligations of the Company under Section 5(a), the Company shall continue
to pay Gillings' club dues, long term disability premiums, life insurance
premiums, dental insurance premiums and automobile allowance for a period of
three years from the date of termination of employment, and, during such three
year period, Gillings and his spouse shall be entitled to any other benefits
that would be provided to him/them as a result of his participation in any
employee welfare benefit plans, as defined by the Employee Retirement Income
Security Act of 1974, as amended, in which senior management of the Company is
permitted to participate to the same extent and in any amount equal to that
Gillings and his spouse would have received if Gillings had remained employed by
the Company during such period. The compensation and benefits payable under this
Section 5(b) are hereinafter referred to as "Severance Benefits." Nothing
contained herein, however, shall require that Gillings be treated as an active
participant in any plan provided only to active employees of the Company.
The payment of Severance Benefits is in recognition and consideration of
the past and continued services by Gillings to the Company and the release
described below, and is not in any way to be construed as, and is in lieu of, a
penalty or damages. Gillings shall not be required to mitigate the amount of any
payment of Severance Benefits by seeking other employment or
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otherwise; provided, however, if following termination of employment, Gillings
breaches any of the restrictive covenants contained in Section 6(a), then the
Company shall no longer be obligated to provide Severance Benefits. This
forfeiture of Severance Benefits shall be in addition to any rights and
remedies the Company may have under Section 6. The payment of Severance
Benefits shall not affect any other sums or benefits otherwise payable to
Gillings under any other employment compensation or benefit plan of the
Company. The Company's obligation to provide the Severance Benefits is
conditioned upon Gillings' execution of a customary release of all claims
arising out of Gillings' employment against the Company and its affiliates and
the expiration of any revocation period required by law relating thereto
without revocation thereof.
(c) The Company shall continue to provide the benefits described in
paragraph (b) above on the same terms and conditions (e.g. employee
contributions for certain benefits that are in effect for active employees who
are similarly situated) as continue to be available for similarly situated
employees of the Company during the period provided herein, with such changes as
may be applicable to such other employees. The foregoing benefits are not
intended to be a substitute for any available coverage benefits (the "COBRA
Rights") under Section 4980B of the Internal Revenue Code of 1986, as amended
(the "Code") and such COBRA Rights shall not commence until after the extended
period specified herein comes to an end, unless otherwise provided by law.
Notwithstanding the foregoing, Gillings' rights to the foregoing benefits shall
terminate as to any benefit for which he becomes covered for substantially
similar benefits on substantially similar terms through a program of a
subsequent employer or otherwise (such as through coverage obtained by Gillings'
spouse) for as long as such coverage continues and provided that such terms are
not less favorable to Gillings in any respect.
6. NON-COMPETITION; CONFIDENTIALITY. Gillings expressly covenants and
agrees:
(a) That from and after the date of the Closing through the latest of (x)
five years from the date hereof, (y) three years following the date Gillings (or
any Permitted Transferee thereof (as defined in the Stockholders Agreement))
cease to own any equity interest in Pharma, the Company or any of its
subsidiaries and (z) the third anniversary of the date of termination of
Gillings' employment for any reason (the "Non-Competition Period"), Gillings
will not, and will not permit any of his Affiliates to, directly or indirectly,
as an officer, director, stockholder, partner, associate, owner, employee,
consultant, lender or otherwise, become or be interested in or associated with
any other organization, corporation, firm or business which is engaged in the
same or a competitive business with Pharma's business or with the business of
the Company or any subsidiary of the Company in any geographical area in which
Pharma, the Company or any of its subsidiaries is so engaged. It is agreed that
ownership, directly or indirectly, of not more than one 1% percent of the issued
and outstanding stock of a corporation, the shares of which are regularly traded
on a national securities exchange or in the over-the-counter market shall not be
deemed in and of itself to be in violation of the preceding sentence. As used
herein, "Affiliates" means, with respect to any Person, any other Person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such Person; "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by
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contract or otherwise. As used herein "Person" means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization or other entity.
(b) Gillings shall not, and shall not permit any of his Affiliates to, at
any time during the Non-Competition Period, directly or indirectly, solicit, or
interfere with Pharma's, the Company's or any of its subsidiaries' relationship
with, or entice away from Pharma, the Company or any of its subsidiaries, any
customer, supplier, Person, firm, or corporation who currently is doing business
or at any time during the Non-Competition Period does business with Pharma, the
Company or any of its subsidiaries or offer employment to or procure employment
for any Person who currently, or at any time during the Non-Competition Period,
is employed by Pharma, the Company or any of its subsidiaries.
(c) Gillings shall not, at any time during or after the Non-Competition
Period, use for any purpose other than in the performance of his work for
Pharma, the Company or its subsidiaries, or divulge, or permit any of his
Affiliates to divulge, directly or indirectly, to any entity or Person any
material information acquired by Gillings concerning Pharma's, the Company's or
any of its subsidiaries' formulae, computer programming techniques,
documentation, software source codes, object codes, documentation, "know-how",
processes, methods, research, development or marketing techniques, programs,
materials or plans, client lists or any other of its or their trade secrets,
confidential information, price lists, or pricing policies ("Confidential
Information"), except information which is (i) in the public domain, or (ii)
becomes public knowledge through no fault of Gillings, or (iii) is required to
be disclosed by court order or other government process or the disclosure of
which is necessary to enable Gillings to comply with applicable law or defend
against claims. If Gillings shall be required to make disclosure pursuant to the
provisions of clause (iii) of the preceding sentence, Gillings shall properly
notify the Company and take, at the expense of the Company (unless the claim
involves a dispute among Gillings and Pharma or the Company or any of its
subsidiaries), all reasonably necessary steps requested by the Company to defend
against the enforcement of such court order or other government process; and
permit the Company to participate with counsel of its choice in any proceeding
relating to the enforcement thereof.
(d) All Developments that are at any time conceived, made or suggested by
Gillings, whether acting alone or in conjunction with others, during Gillings'
employment with Pharma, the Company, or any of its subsidiaries, or their
predecessors shall be the sole and absolute property of the Company, free of any
reserved or other rights of any kind on Gillings' part. During the
Non-Competition Period and thereafter, Gillings shall promptly make full
disclosure of all such Developments to the Company and do all acts and things
(including, among others, the execution and delivery under oath of patent and
copyright applications and instruments of assignment) deemed by the Company to
be necessary or desirable at any time in order to effect the full assignment to
the Company of Gillings' right and title, if any, to such Developments. For
purposes of this Agreement, the term "Developments" includes, by way of example
but without limitation, Confidential Information, and all findings, discoveries,
developments, programs, designs, inventions, improvements, methods, practices
and techniques, whether or not patentable, relating to the present and planned
future activities of Pharma, the Company or any of its subsidiaries and all
products or services sold, rented, leased, rendered or otherwise made available
to customers by Pharma, the Company or any of its subsidiaries as well as
products and
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services in any stage of development by Pharma, the Company or any of its
subsidiaries but not yet commercialized or not generally available.
(e) Gillings agrees that the restrictive covenants contained above in this
Section 6 are reasonably necessary to protect Pharma's, the Company's and its
subsidiaries' legitimate business interests, are reasonable with respect to time
and territory and scope of activities prohibited, and do not interfere with
public interest or public policy. Gillings further agrees that the descriptions
of the restrictive covenants contained above in this Section 6 are sufficiently
accurate and definite and Gillings understands the scope and meaning of the
covenants. If any particular provision of Section 6 of this Agreement is
adjudicated to be invalid or unenforceable or shall for any reason be held to be
excessively broad as to duration, geographic scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
extent compatible with applicable law and such provision shall be deemed
modified and amended to the extent necessary to render such provision
enforceable.
(f) Gillings agrees that a breach or violation of any of the restrictive
covenants contained in this Section 6 will result in immediate and irreparable
harm to Pharma, the Company and its subsidiaries in an amount which may be
impossible to ascertain at the time of any breach or violation, and that an
award of monetary damages will not be adequate relief to Pharma, the Company or
its subsidiaries for such harm. Therefore, Gillings agrees that his failure to
perform or comply with any or all of the restrictive covenants shall give rise
to a right for Pharma, the Company and/or any of its subsidiaries to obtain
judicial enforcement of any or all of the restrictive covenants by a decree of
specific performance or other injunctive relief. Gillings agrees such remedy,
however, shall be cumulative and in addition to any other remedy Pharma, the
Company and/or any of its subsidiaries may have. In any action by Pharma, the
Company, and/or any of its subsidiaries to enforce the provisions of this
Section 6 or to recover damages hereunder, the party prevailing in such action
shall have the right to recover from the other party its reasonable attorneys'
fees incurred in prosecuting such action.
(g) For each month during the Non-Competition Period following the
termination of Gillings' employment for any reason, the Company shall pay
Gillings an amount equal to the sum of his annual rate of base salary in effect
immediately prior to the termination of his employment plus an amount equal to
the annual cash bonus, if any, paid or payable for the fiscal year ended
immediately prior to such termination, divided by 12; provided, however, that no
such payments shall be made for the first three (3) years of the Non-Competition
Period following the termination of Gillings' employment where such termination
is under circumstances which entitle Gillings to Severance Benefits set forth in
Section 5(b), without regard to the execution of a release as set forth in
Section 5(b). The Company may, by written notice at least thirty (30) days in
advance of the date any such monthly payment is due, cease all further payments
under this Section 6(g) and relieve Gillings of his obligation to comply with
the non-competition covenant contained in Section 6(a) of this Agreement.
7. LEAVE OF ABSENCE.
Gillings may take a voluntary leave of absence from his employment with the
Company for such purposes and periods of time and upon such conditions as the
Board in its sole discretion so permits.
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8. ARBITRATION.
Except to the extent otherwise provided in Section 6(e) above, any dispute
or controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration. Pharma and the Company on the one hand, and
Gillings on the other hand, shall appoint one arbitrator and shall notify in
writing the other of such appointment and request the other to appoint one
arbitrator within thirty (30) days of receipt of such request. If the party so
requested fails to appoint an arbitrator, the party making the request shall be
entitled to designate two arbitrators. The two arbitrators shall select a third.
The written decision of a majority of the arbitrators shall be binding upon
Pharma, the Company and Gillings and enforceable by law. The arbitrators shall,
by majority vote, determine the place for hearing, the rules of procedure, and
allocation of the expenses of the arbitration.
9. COUNSEL FEES.
If a dispute occurs between the Company and Gillings in connection with or
arising under this Agreement in which Gillings prevails, the Company shall
reimburse Gillings for all reasonable costs, including attorneys' fees,
accounting fees, and any other necessary costs or expenses.
10. ADDITIONAL AMOUNT.
(a) The Company shall pay to Gillings an amount (the "Additional Amount")
equal to the excise tax under Section 4999 of the Code (the "Excise Tax"), if
any, plus all taxes incurred with respect to such payment, if any, incurred by
Gillings by reason of the payments under this Agreement and any other plan,
agreement, or understanding between Gillings (but not his Affiliates), Pharma,
and the Company or its subsidiaries or affiliates, other than payments made
pursuant to this Section 10, (the "Separation Payments") constituting excess
parachute payments pursuant to Code Section 280G. The Additional Amount shall
also include an amount equal to (i) the Excise Tax and (ii) all federal, state,
and local income and payroll taxes and Excise Tax incurred by Gillings with
respect to receipt of the Additional Amount.
(b) All determinations required to be made under this Section 10, including
whether an Additional Amount is required and the amount of any Additional
Amount, shall be made by the Company prior to the event triggering such
determination. In computing taxes, the Company shall use the highest marginal
federal, state, and local income tax rates applicable to Gillings and shall
assume the full deductibility of state and local income taxes for purposes of
computing federal income tax liability, unless Gillings demonstrates that he
will not in fact be entitled to such a deduction for the year of payment.
(c) The Additional Amount shall be paid to Gillings with the Separation
Payments unless the Company at the same time as the payment of the Separation
Payments determines that Gillings will not incur an Excise Tax on part or all of
the Separation Payments.
(d) The Additional Amount shall be subject to adjustment so as to avoid
either an over- or underpayment of the Additional Amount to Gillings, including
any adjustment as may be necessary if additional liability (including interest
and penalties) is assessed under Code Section 280G despite the contrary
determination of the Company as to the applicability of
-10-
<PAGE>
Section 280G to the Separation Payments. In the event the Internal Revenue
Service or other taxing authority or a court determines that there has been an
underpayment of the Excise Tax, the Company will, on Gillings' behalf, and at
the Company's cost, assume any challenge (or other response as the Company shall
determine to be proper) to such assessment or imposition of additional liability
and Gillings will assist and cooperate with the Company with respect to any such
challenge or other response, provided that such challenge or other response is
not likely to adversely affect Gillings' other tax positions. Should Gillings
receive a refund of all or any portion of the Excise Tax previously paid,
because the Excise Tax is determined to be less than the amount taken into
account at the time the Additional Amount is paid, Gillings shall repay to the
Company the portion of the Additional Amount paid in connection with such Excise
Tax so refunded.
11. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Pharma and/or the Company,
and the Company and/or Pharma shall require any such successor to assume
expressly and agree to perform this Agreement. As used in this Agreement,
"Company" and "Pharma" shall mean the Company and Pharma as hereinbefore
respectively defined and any successor to its business and/or assets as
aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable by
Gillings' personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees. If Gillings should die
while any amount would still be payable hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Gillings' devisee, legatee or other designee or, if there is no
such designee, to Gillings' estate.
12. VACATION.
Gillings shall be entitled each calendar year to a vacation of six (6)
weeks, during which time his compensation shall be paid in full. Such vacation
shall be taken at such time or times as Gillings shall determine, taking into
consideration the needs and requirements of Pharma and the Company for his
services.
13. MISCELLANEOUS.
(a) All notices required or permitted hereunder shall be given in writing
by actual delivery, by reputable overnight courier or by registered or
certified mail (postage prepaid) at the following addresses or at such other
places as shall be designated in writing and shall be deemed received on the
date actually delivered, on the next business day if sent by overnight courier,
or the third business day if sent by registered or certified mail:
Gillings: Dennis B. Gillings, Ph.D.
c/o GF Management Company, LLC
4825 Creekstone Drive, Suite 130
Durham, NC 27703
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<PAGE>
with a copy to: White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attn: John M. Reiss, Esq.
Pharma: Pharma Services Holding Corp.
c/o One Equity Partners LLC
320 Park Avenue, 18th Floor
New York, New York 10022
Attn: Richard Cashin
with a copy to: Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10078
Attn: Ira White, Esq.
with a copy to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: Robert J. Raymond, Esq.
with a copy to: Temasek Holdings (Pte) Limited
60B Orchard Road, #06-18, Tower 2
The Atrium@Orchard, Singapore 238891
Attention: S. Iswaran
Company Quintiles Transnational Corp.
4709 Creekstone Drive
Riverbirch Building
Suite 200
Durham, NC 27703
Attn: John Russell, Esq.
with a copy to: Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10078
Attn: Ira White, Esq.
with a copy to: Smith, Anderson, Blount, Dorsett,
Mitchell & Jemigan, LLP
2500 First Union Capital Center
Post Office Box 2611
Raleigh, NC 27602-2611
Attn: Gerald F. Roach, Esq.
-12-
<PAGE>
with a copy to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: Robert J. Raymond, Esq.
with a copy to: Temasek Holdings (Pte) Limited
60B Orchard Road, #06-18, Tower 2
The Atrium@Orchard, Singapore 238891
Attention: S. Iswaran
(b) If any provision of this Agreement shall be determined to be void by
any court of competent jurisdiction, then such determination shall not affect
any other provision of this Agreement, all of which shall remain in full force
and effect.
(c) The failure of the parties to complain of any act or omission on the
part of either party, no matter how long the same may continue, shall not be
deemed to be a waiver of any of its rights hereunder.
(d) This Agreement contains the entire agreement of the parties. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument. It may be changed or terminated only by a writing signed
by the party against whom enforcement of any waiver, change, modification,
extension, discharge or termination is sought.
(e) The recitals contained in this Agreement are expressly made a part
hereof.
(f) This Agreement shall replace and supersede the Employment Agreement
between the Company and Gillings dated February 22, 1994, as such agreement was
amended on October 26, 1999 and April 1, 2001 (the "Prior Agreement"), and
neither the Company, Pharma nor any subsidiary shall have any obligations under
the Prior Agreement.
(g) This Agreement shall be governed by the laws of the State of North
Carolina, without giving effect to any choice of law or conflict of law
provision or rule that would cause the application of the laws of any
jurisdiction other than the State of North Carolina.
-13-
<PAGE>
IN WITNESS WHEREOF, the undersigned individual has executed this Agreement
under seal by adopting the word "SEAL" beside his name and the undersigned
corporation has executed this Agreement under seal through its duly authorized
officers as of the day and year first above written.
/s/ Dennis B. Gillings, Ph.D.(SEAL)
-------------------------------------
Dennis B. Gillings, Ph.D.
QUINTILES TRANSNATIONAL CORP.
By: /s/ John S. Russell
-----------------------------------
ATTEST:
[/s/ ILLEGIBLE]
----------------------------------
Secretary
(CORPORATE SEAL)
PHARMA SERVICES HOLDING, INC.
By: /s/ Dennis B. Gillings, Ph.D.
-----------------------------------
ATTEST:
/s/ James S. Rubin
----------------------------------
Secretary
(CORPORATE SEAL)
-14-
<PAGE>
PROPOSED REIMBURSEMENT FOR BUSINESS USE OF AIRCRAFT EXHIBIT A
BASED ON NETJETS G V PRICING
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
HOURS %
--------- ---------
<S> <C> <C>
ESTIMATED BUSINESS HOURS 700 77.78%
TOTAL NONBUSINESS HOURS 200 22.22%
--------- ---------
Total 900 100.00%
========= =========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ANNUAL
ALL AMOUNTS FROM NETJETS PRICING SHEET COST
-----------
<S> <C> <C>
Capital cost 45,500,000 -------------------------- Full Share Cost - New $43,500,000
Estimated Business % 77.78%
-----------
Business Capital Cost 33,833,333
Less residual value (21,989,345) -------------------------- Residual Value Estimate 65.0%
----------- Annual Market Depreciation 9.0%
Business Capital Cost 11,843,988
Years to Amortize 5
Annual Capital Cost - Business $2,368,798
Annual Interest Expense 1,300,000
Estimated Business % 77.78% $1,011,111
-----
Stated Assumed Adjusted
Monthly Fee 208,413 ----------------------------- Monthly Monthly Monthly
Estimated Business % 77.78% Fee Profit Fee
----- $231,570 10% $208,413
Business Monthly Fee 162,099 (X 12 months) 1,945,188
NetJets Assumed Adjusted
--------------------------------- Stated NetJets NetJets
Per Hour Rate 3,187 (X 700 Hours) 2,230,900 Rate Profit Rate
---------- $3,187 0% $3,187
TOTAL REIMBURSEMENT $7,555,997
----------
PER HOUR REIMB. FOR BUSINESS HOURS $ 10,794
----------
</TABLE>
Capital Cost and Monthly Fee use NetJets 700 hours rates to reflect the cost
of "empty flights" built into NetJets rates.