Exhibit 10.13
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of August 8, 2005, by and
between LabOne, Inc. a Missouri corporation (the "Company"), and L. XXXXXXX
XXXXX, M.D. ("Executive").
WHEREAS, Quest Diagnostics, Inc., a Delaware corporation, ("Parent"),
Fountain, Inc., a Missouri corporation and a wholly owned subsidiary of Parent
("Purchaser") and the Company have entered into an Agreement and Plan of Merger,
dated as of August
WHEREAS, pursuant to the terms of the Merger Agreement, Parent and the
Company will enter into a business combination transaction pursuant to which
Purchaser will merge with and into the Company, with the Company being the
surviving corporation;
WHEREAS, Executive is currently employed by the Company, pursuant to an
Employment Agreement dated as of November 19, 2003 (the "Prior Agreement"); and
WHEREAS, subject to the consummation of the transactions contemplated by
the Merger Agreement, the Company desires to employ Executive on a full-time
basis and Executive desires to be so employed by the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein (including, without limitation, the Company's employment of
Executive and the advantages and benefits thereby inuring to Executive) and for
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged by each party hereto, the parties hereby agree as
follows:
1. Effectiveness of Agreement and Employment of Executive.
1.1 Effectiveness of Agreement. This Agreement shall become effective upon the
Closing (as defined in the Merger Agreement), and Executive's employment under
this Agreement shall commence on the date of the Closing (the "Effective Date").
In the event that the Closing does not occur, this Agreement shall be null and
void and shall have no force and effect.
1.2 Employment by the Company. The Company hereby employs Executive as Senior
Managing Director - Lenexa Operations and Executive hereby accepts such
employment with the Company as of the Effective Date. Executive shall initially
report to, and perform such duties and services for the Company and its
subsidiaries and affiliates (such subsidiaries and affiliates, collectively,
"Affiliates") as may be designated from time to time by the Regional Vice
President, or such other person designated by the Company. During his
employment, Executive shall use his best and most diligent efforts to promote
the interests of the Company and its Affiliates, and shall devote all of his
business time and attention to his employment under this Agreement. During his
employment Executive shall be subject to all policies, practices and procedures
of the Company and the Parent as in effect from time to time. Executive
acknowledges that he shall be required to travel on business in connection with
the performance of his duties hereunder.
2. Compensation and Benefits; Equity Awards.
2.1 (a) Salary. The Company shall pay Executive for services during his
employment under this Agreement a base salary of no less than the annual rate of
$310,000 ("Base Salary"). Any and all increases to Executive's Base Salary shall
be determined by the Company, in its sole discretion. Such Base Salary shall be
payable in equal installments, no less frequently than monthly, pursuant to the
Company's customary payroll policies in force at the time of payment, less any
required or authorized payroll deductions.
(b) Sign-On Bonus. As an inducement for Executive to accept continued employment
with the Company and to enter into this Agreement, Executive shall receive a
bonus (the "Sign-On Bonus") in the amount of $75,000. The Sign-On Bonus shall be
paid to Executive as soon as practicable following the Effective Date.
(c) Special Annual Performance Bonus. For fiscal years 2006, 2007 and 2008
Executive shall be eligible for a special annual performance bonus (the "Special
Annual Performance Bonus"). The Special Annual Performance Bonus opportunity for
target level performance for Executive shall be 15% of Base Salary, based on the
achievement of performance metrics (as determined by Parent) relating to the
effective integration and growth of the business for which Executive is
responsible. The Special Annual Performance Bonus shall be prorated for any
period of service less than a full calendar year during the calendar year in
which the Effective Date occurs. The Company shall pay the Special Annual
Performance Bonus, if any, to Executive on the date on which bonuses are paid to
executives generally.
(d) Quest Diagnostics, Inc., Management Incentive Plan. For each fiscal year
during the Employment Period (as defined below) commencing on the later of (i)
the Effective Date and (ii) 2006, Executive shall be eligible for an annual
bonus (an "Annual Bonus") pursuant to the terms of the Quest Diagnostics, Inc.,
Management Incentive Plan, as amended from time to time (the "MIP"). The target
level Annual Bonus opportunity for Executive shall be 40% of Base Salary. The
Annual Bonus shall be prorated for any period of service less than a full
calendar year during the calendar year in which the Effective Date occurs. The
Company shall pay the Annual Bonus, if any, to Executive on the date on which
bonuses are paid to executives generally. After the Effective Date, during the
period prior to the date Executive commences participation in the MIP, Executive
shall continue to participate in the Company Management Incentive Compensation
Program in accordance with the terms and conditions of such program.
(e) Long Term Incentive Plan. For each fiscal year during the Employment Period
commencing on the later of (i) the Effective Date and (ii) 2006, Executive shall
be eligible to participate in Parent's Employee Long Term Incentive Plan, as
amended from time to time (the "ELTIP"). For fiscal year 2006 the Company shall
recommend to the Compensation Committee of the Board of Directors of Parent or
its designee that it approve and grant to Executive a nonqualified option (the
"Parent Option") to purchase 10,000 shares of Parent common stock, par value
$0.01 (the "Common Stock"), which amount reflects the Common Stock as adjusted
pursuant to the two for one split of the Common Stock on June 20, 2005. The
terms and conditions of the Parent Option, including, without limitation, the
vesting schedule shall be as set forth in the ELTIP and a stock option agreement
to be entered into between Parent and Executive. For fiscal years thereafter,
awards under the ELTIP, if any, shall be made at such times as awards are made
to executives generally.
(f) Parent Restricted Stock Award. The Company shall recommend to the
Compensation Committee of the Board of Directors of Parent or its designee that
it approve and grant to Executive, effective as of the Effective Date, shares of
restricted stock of Parent (the "Parent Restricted Stock") with a fair market
value (based on the closing price of the common stock of Parent on the Effective
Date) equal to $75,000. The Parent Restricted Stock shall vest and the
restrictions thereon lapse, subject to Executive's continued employment with the
Company or one of its Affiliates on the applicable dates, as follows: 25% of the
Parent Restricted Stock shall vest on the first anniversary of the date of
grant, an additional 25% of the Parent Restricted Stock shall vest on the second
anniversary of the date of grant and the remaining 50% of the Parent Restricted
Stock shall vest on the third anniversary of the date of grant. The Parent
Restricted Stock shall be granted pursuant to and subject to the terms of the
ETLIP and a restricted stock agreement to be entered into between Parent and
Executive.
2.2 Benefits. During the Employment Period, Executive shall be entitled to
participate, on the same basis and at the same level as generally available to
other similarly situated executives of the Company, in any group insurance,
hospitalization, medical, health and accident, disability, fringe benefit,
deferred compensation and tax-qualified retirement plans or programs of the
Company now existing or hereafter established to the extent that he is eligible
under the general provisions thereof. Executive shall be entitled to vacation
time consistent with the Company's policies. The date or dates of such vacations
shall be selected by Executive having reasonable regard to the business needs of
the Company.
2.3 Expenses. Pursuant to the Company's customary policies in effect at the time
of payment, Executive shall be promptly reimbursed, against presentation of
vouchers or receipts therefor, for all authorized expenses properly and
reasonably incurred by Executive on behalf of the Company or any of its
Affiliates in the performance of Executive's duties hereunder.
3. Employment Period. Executive's employment under this Agreement shall commence
as of the Effective Date, and this Agreement shall terminate on the third
anniversary thereof, unless terminated earlier in accordance with the terms of
this Agreement (the "Employment Period"). The term (the "Term") of this
Agreement shall continue until the end of the Employment Period. Thereafter
Executive shall become an "at will" employee of the Company. In the event
Executive remains in the employ of the Company following the Term, Executive
shall continue to be eligible to participate in the employee benefit plans and
arrangements set forth in Section 2.2 of this Agreement.
4. Termination Prior to the Third Anniversary of the Effective Date. In the
event Executive's employment with the Company is terminated for any reason prior
to the third anniversary of the Effective Date, the terms and conditions of such
termination shall be governed by the provisions set forth in this Section 4.
4.1 Termination by the Company for Cause. Executive's employment with the
Company may be terminated at any time by the Company for Cause. Upon such a
termination, the Company shall have no obligation to Executive pursuant to this
Agreement other than the payment of Executive's earned and unpaid Base Salary to
the date of such termination.
For purposes of this Agreement, the term "Cause" shall mean any of the
following:
(i) Executive's willful failure to perform his duties or
Executive's bad faith in connection with the
performance of his duties, following written notice
from the Chief Executive Officer of the Parent or his
designee detailing the specific acts and a 30-day
period of time to remedy such failure;
(ii) Executive engaging in any misconduct, negligence,
violence or threat of violence that is injurious to
the Company or any of its Affiliates;
(iii) Executive's material breach of a policy of the
Company or any of its Affiliates, which breach is not
remedied (if susceptible to remedy) following written
notice by the Chief Executive Officer of the Parent
or his designee detailing the specific breach and a
30-day period of time to remedy such breach;
(iv) Any breach by Executive of this Agreement, which
breach is not remedied (if susceptible to remedy)
following written notice by the Chief Executive
Officer of the Parent or his designee detailing the
specific breach and a 30-day period of time to remedy
such breach; or
(v) Executive's commission of a felony in respect of a
dishonest or fraudulent act or other crime of moral
turpitude involving the Company or any of its
Affiliates, or which could reflect negatively upon
the Company or any of its Affiliates or otherwise
impair or impede its operations.
4.2 Termination due to Death, Permanent Disability or by the Company Without
Cause. In the event that Executive's employment with the Company is terminated
due to death, Permanent Disability (as defined below) or by the Company without
Cause, in addition to the payment of Executive's earned and unpaid Base Salary
to the date of such termination, Executive shall receive a lump sum payment in
an amount equal to (X) $300,000 minus (Y) (the sum of (i) the Sign-On Bonus
payment and Special Annual Performance Bonus payments, if any, made to Executive
on or prior to the date of termination, plus (ii) the greater of the value, if
any, as of (a) the date of such termination or (b) the date of the sale of the
Parent Restricted Stock award granted to Executive pursuant to Section 2.1(f) of
this Agreement which has vested, and for which the restrictions had lapsed, as
of the date of such termination). In the event of a termination by the Company
without Cause or a termination due to Executive's Permanent Disability the
payments set forth in this Section 4.2 are subject to (i) Executive's execution
and non-revocation of a waiver and release of claims, in a form provided by the
Company and (ii) his continued compliance with the Restrictive Covenant
Agreement (as defined below).
For purposes of this Agreement, the term "Permanent Disability" shall mean:
(i) Executive shall become ill, mentally or physically disabled, or otherwise
incapacitated so as to be unable regularly to perform the duties of his position
for a period in excess of 90 consecutive days or more than 180 days in any
consecutive 12-month period, or (ii) a qualified independent physician
determines that Executive is mentally or physically disabled so as to be unable
to regularly perform the duties of his position and such condition is expected
to be of a permanent duration.
4.3 Resignation by Executive. Executive may voluntarily resign from his
employment with the Company, provided that Executive shall provide the Company
with 60 days' advance written notice (which notice requirement may be waived, in
whole or in part, by the Company in its sole discretion) of his intent to
resign. Upon such resignation, the Company shall have no obligation other than
the payment of Executive's earned but unpaid Base Salary to the effective date
of such resignation.
4.4 Limitation on Payments. Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution
or benefit received or to be received by Executive pursuant to the terms of this
Agreement or any other payment or distribution or benefit made or provided by
the Company or any of its Affiliates, to or for the benefit of Executive
(whether pursuant to this Agreement or otherwise) constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and, but for this Section 4.4, would be subject to
the excise tax imposed by Section 4999 of the Code, the Company shall reduce the
aggregate amount of such payments and benefits such that the present value
thereof (as determined under the Code and the applicable regulations) is equal
to 2.99 times the Employee's "base amount" as defined in Section 280G(b)(3) of
the Code.
4.5 Section 409A. Notwithstanding anything in the foregoing to the contrary, any
lump sum payment forth in Section 4 of this Agreement shall be deferred for six
months and one day following termination (i) if necessary to comply with Section
409A of the Code or (ii) in the event such payment, as determined in the sole
discretion of the Company, could cause Executive to be subject to interest and
penalties under Section 409A of the Code.
5. Restrictive Covenants. Executive agrees that the effectiveness of this
Agreement is contingent upon his execution of, and delivery to the Company of, a
restrictive covenant agreement (the "Restrictive Covenant Agreement"), which
shall include provisions relating to non-competition, non-solicitation of
employees and customers, non-disclosure and confidentially. The Restrictive
Covenant Agreement shall be in substantially the same form provided by Quest
Diagnostics, Inc., to its employees generally.
6. Arbitration. Any dispute or controversy arising under or in connection with
this Agreement or otherwise in connection with Executive's employment by the
Company that cannot be mutually resolved by the parties to this Agreement and
their respective advisors and representatives shall be settled exclusively by
arbitration in New York and in accordance with the rules of the American
Arbitration Association before one arbitrator of exemplary qualifications and
stature, who shall be selected jointly by an individual to be designated by the
Company and an individual to be selected by Executive, or if such two
individuals cannot agree on the selection of the arbitrator, who shall be
selected by the American Arbitration Association.
7. Notices. Any notice or communication given by either party hereto to the
other shall be in writing and personally delivered or mailed by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses:
if to the Company:
Quest Diagnostics, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile No: (000) 000-0000
Attention: General Counsel
With a copy to:
Shearman & Sterling LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
if to Executive:
L. XXXXXXX XXXXX, M.D.,
at the last known address on file with the Company.
Any notice shall be deemed given when actually delivered to such address,
or two days after such notice has been mailed or sent by a recognized courier
company, whichever comes earliest. Any person entitled to receive notice may
designate in writing, by notice to the other, such other address to which
notices to such person shall thereafter be sent.
8. Miscellaneous.
8.1 (a) Representations and Covenants. In order to induce the Company to enter
into this Agreement, Executive makes the following representations and covenants
to the Company and acknowledges that the Company is relying upon such
representations and covenants:
(b) No Agreements. No agreements or obligations exist to which Executive is
a party or otherwise bound, in writing or otherwise, that in any way interfere
with, impede or preclude him from fulfilling all of the terms and conditions of
this Agreement.
(c) Disclosure of Information. Executive, during his employment, shall use
his best efforts to disclose to the Chief Executive Officer and General Counsel
of Parent in writing or by other effective method any bona fide information
known by him and which he reasonably believes is not known to the Chief
Executive Officer and General Counsel of Parent, and which he reasonably
believes would have any material negative impact on the Company or any of its
Affiliates.
8.2 Entire Agreement. This Agreement contains the entire understanding of the
parties in respect of their subject matter and supersede upon their
effectiveness all other prior agreements and understandings (including, without
limitation, the Prior Agreement) between the parties with respect to such
subject matter. This Agreement shall also supersede the Merger Agreement to the
extent of any inconsistencies thereto.
8.3 Amendment; Waiver. This Agreement may not be amended, supplemented, canceled
or discharged, except by written instrument executed by the party against whom
enforcement is sought. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof. No waiver
of any breach of any provision of this Agreement shall be deemed to be a waiver
of any preceding or succeeding breach of the same or any other provision.
Notwithstanding the foregoing, the Company shall, in its sole discretion, amend
this Agreement to the extent necessary or desirable to ensure that this
Agreement complies with Section 409A of the Code and that any payments or
benefits under this Agreement are not subject to interest and penalties under
Section 409A of the Code.
8.4 Binding Effect; Assignment. The rights and obligations of this Agreement
shall bind and inure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any assignee of all or substantially
all of the Company's business and properties. The Company may assign its rights
and obligations under this Agreement to any of its Affiliates without the
consent of Executive. Executive's rights or obligations under this Agreement may
not be assigned by Executive.
8.5 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
8.6 Governing Law; Interpretation. This agreement and the terms of Executive's
employment shall be governed by the laws of New York.
8.7 Further Assurances. Each of the parties agrees to execute, acknowledge,
deliver and perform, and cause to be executed, acknowledged, delivered and
performed, at any time and from time to time, as the case may be, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably necessary to carry out the provisions or intent
of this Agreement.
8.8 Severability. The parties have carefully reviewed the provisions of this
Agreement, and agree that they are fair and equitable. However, in light of the
possibility of differing interpretations of law and changes in circumstances,
the parties agree that if any one or more of the provisions of this Agreement
shall be determined by a court of competent jurisdiction or an arbitrator to be
invalid, void or unenforceable, the remainder of the provisions of this
Agreement shall, to the extent permitted by law, remain in full force and effect
and shall in no way be affected, impaired or invalidated. Moreover, if any of
the provisions contained in this Agreement are determined by a court of
competent jurisdiction or arbitrator to be excessively broad as to duration,
activity, geographic application or subject, it shall be construed, by limiting
or reducing it to the extent legally permitted, so as to be enforceable to the
extent compatible with then applicable law.
8.9 Withholding Taxes. All payments hereunder shall be subject to any and all
applicable federal, state, local and foreign withholding taxes.
8.10 Counterparts. This Agreement may be executed in one or more counterparts,
which, together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
LABONE, INC.
By: /s/ W. Xxxxxx Xxxxx, XX.
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Name: W. Xxxxxx Xxxxx, XX.
Title: Chief Executive Officer
EXECUTIVE
/s/L. Xxxxxxx Xxxxx
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L. XXXXXXX XXXXX
