1
EXHIBIT 10(aa)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Amendment effective as of July 30, 2001, to Employment Agreement by and
between Response Oncology, Inc., a Tennessee corporation (the "Company") and
Xxxxxxx XxXxxxxxx (the "Executive"), originally effective as of January 1, 2001
(the "Agreement"),
WHEREAS, the Company desires to continue to employ the Executive to
serve as the President and Chief Executive Officer of the Company;
WHEREAS, the Company and the Executive each deem it necessary and
desirable to modify the Agreement to reflect the conditions that led the Company
to adopt the Response Oncology, Inc. Employee Retention Plan and the Response
Oncology, Inc. Key Employee Severance Plan, neither of which plan provides for
participation by Executive;
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth, the parties agree to amend the Agreement as follows:
1. Section 4(d) of the Agreement shall be amended to read as follows:
(d) Restructuring Bonus. Together with Xxxxx Xxxxx,
Executive has assumed primary responsibility for obtaining the
payment in its entirety of the Company's current bank debt of
$29,198,715 (the "Debt"). If the Debt is so repaid, or if it is
assumed, or if only ministerial steps remain to complete such
repayment or assumption, during the twelve (12) month period
beginning on the date this amended Agreement is approved by the
bankruptcy court (the "Performance Measurement Period"), Executive
shall be entitled to receive a payment ("Unenhanced Restructuring
Bonus") equal to $125,000, provided Executive is employed under the
Agreement at that time.
Executive shall receive the following additional payments
(individually and collectively referred to as "the Unsecured
Creditor Bonus" and, together with the Unenhanced Restructuring
Bonus, the "Restructuring Bonus") if amounts specified in the tiers
below are made available for unsecured creditors at any time after
this amended Agreement is approved by the Bankruptcy Court, provided
the amounts are made available as a result of Executive's efforts,
such as, by way of example and not limitation, as a result of a
reorganization plan that was confirmed by the Bankruptcy Court at a
time the Executive was employed by the Company: (i) $150,000 if a
total of $5 million above the Debt is available for unsecured
creditors; (ii) another $65,000 (in addition to the first $150,000)
if a total of $7 million above the Debt is available for unsecured
creditors; (iii) another $70,000 (in addition to the $150,000 and
the $65,000) if a total of $9 million above the Debt is available
for unsecured creditors; and (iv) in addition to the $150,000,
$65,000 and $70,000 bonus amounts, up to another
2
$320,000 more by calculating four percent (4%) of every dollar
recovered in excess of $9 million up to $17 million total
available to unsecured creditors.
The Restructuring Bonus shall be increased by an additional
$146,000 if the Debt is eliminated or assumed within the first three
(3) months of the Performance Measurement Period, or by $73,000 if
the Debt is eliminated or assumed thereafter, but within the first
six (6) months of the Performance Measurement Period, both additions
(individually a "Time Enhancement") to be conditioned upon
availability of funds to unsecured creditors as follows: Executive
will receive (i) 20 percent of the relevant Time Enhancement if $5
million total recovery is available to unsecured creditors; (ii) 30
percent of the relevant Time Enhancement if $7 million total
recovery is available to unsecured creditors; (iii) 40 percent of
the relevant Time Enhancement if $9 million total recovery is
available to unsecured creditors; and (iv) 100 percent of relevant
Time Enhancement if more than $9 million total recovery is available
to unsecured creditors. The Unenhanced Restructuring Bonus shall be
deposited into escrow upon entry of the order approving the Employee
Retention Plan, and shall be paid to Executive within ten (10) days
of the date the Debt is eliminated or assumed, subject to the
conditions set forth in the final two sentences of this Subsection.
The Unsecured Creditor Bonus, if applicable, shall be paid
to Executive within ten (10) days after achievement of the targets
for sums available to unsecured creditors, subject to the conditions
set forth in the following two sentences of this Subsection,
provided, however, that no Unsecured Creditor Bonus shall be paid
until an Order is entered by the Bankruptcy Court, on notice to all
parties, which includes a finding that a sufficient amount of money
with respect to a specific target is available for payment to
unsecured creditors or, if earlier, actual payment to the unsecured
creditors. Any Restructuring Bonus (including Time Enhancements)
shall be paid only if and to the extent sufficient funds remain
after the Debt is eliminated or assumed. If the remaining funds are
insufficient to pay a full Restructuring Bonus to both Executive and
to Xxxxx Xxxxx, the two shall share the available funds on a pro
rata basis.
2. Section 4(e) of the Agreement shall be deleted.
3. Section 4 of the Agreement shall be further amended by adding a new
subsection at the end thereof to read as follows:
(m) Stay Bonus. Executive shall become entitled to receive
a bonus (the "Stay Bonus") in the amount of $325,000
2
3
upon the first to occur of (a) the effective date of the
Company's emergence from bankruptcy (e.g., confirmation of a plan,
conversion to Chapter 7), (b) Executive's termination of employment
without Cause or his resignation for Good Reason, provided, however,
Executive is employed under the Agreement on such date (the earlier
of (a) and (b) referred to as the "Entitlement Date"). The entire
amount of such bonus shall be paid to Executive no later than ten
(10) days following the Entitlement Date. The Company shall deposit
with an escrow agent, pursuant to an escrow agreement between the
Company, Executive, and such escrow agent, a sum of money or
marketable securities which is sufficient in the opinion of the
Company's management to fund one hundred percent (100%) of the
amounts which may become due to Executive under this Subsection,
which money or marketable securities shall be utilized to satisfy
the Company's obligation to pay the Stay Bonus. The escrow agreement
shall provide that such agreement may not be terminated until the
earlier of (i) Executive's employment has been terminated and all
amounts due to Executive as set forth in this Subsection have been
paid to Executive, as certified in writing by the Company and the
Executive, or (ii) the mutual written consent of the Executive and
the Company.
4. Section 8 of the Agreement shall be amended by adding the following
new subsection at the end thereof to read as follows:
(d) Severance Upon Court Approval. Upon approval by the
Bankruptcy Court of this Amendment, Executive shall not be entitled
to the cash severance payments and health and welfare benefits
provided under Subsection (a), but he shall instead be eligible to
receive the payments and benefits described in this Subsection,
provided, however, that any such benefits may be subject to
mitigation as set forth below in this Subsection.
If Executive's employment is terminated without Cause prior
to a Change of Control and within the first four (4) months of the
Performance Measurement Period, he shall be entitled to receive
within ten (10) days thereafter a lump-sum payment of $325,000, plus
any unpaid Stay Bonus. In addition, the Company shall continue the
Executive's health and welfare benefits for a period of twenty-four
(24) months or, if a lesser period, until Executive obtains
comparable benefits from another employer. If Executive is so
terminated during the final eight (8) months of the Performance
Measurement Period or any period thereafter, the amount of the lump
sum payment described above shall instead equal two (2) times the
sum of his then Base Salary (or $650,000, if greater) and any unpaid
Stay Bonus, and the Company shall continue Executive's health and
welfare benefits for a period of
3
4
twenty-four (24) months or, if a lesser period, until the
Executive obtains comparable benefits from another employer;
provided, however, of the $650,000, $162,500 shall be held in an
interest bearing escrow account (principal and interest accruing
thereon referred to collectively as the "Escrowed Amount") for the
purpose set forth in the following paragraph.
To the extent that Executive receives compensation within a
two-year period after the date of such termination from a source
other than Company, the Escrowed Amount, if any, shall be reduced
dollar for dollar from the amount held in escrow and returned to
Company (or as otherwise ordered by the Bankruptcy Court). To the
extent that the remainder of such Amount is not reduced, Executive
is entitled to receive such amount.
5. Section 9 of the Agreement shall be amended by adding the following
new subsection at the end thereof to read as follows:
(f) Severance Upon Change of Control. Upon approval by the
Bankruptcy Court of this Amendment, Executive shall not be entitled
to the cash severance payments and health and welfare benefits
provided under Subsection (b), or the escrow arrangement described
in Subsection (d) but Executive shall instead be eligible to receive
the payments and benefits described in this Subsection. If the
Executive's termination occurs after a Change in Control or in
contemplation of Change in Control, Executive shall be entitled to
receive a lump sum payment equal to the lesser of (a) his Stay
Bonus, plus an amount of money equal to 2.5 times the sum of (i) his
Base Salary plus (ii) his Base Bonus, which is fifty percent (50%)
of his Base Salary; or (b) the Stay Bonus, Restructuring Bonus
(including any Time Enhancement), plus the cash severance payments
provided under Section 8(d) hereof; provided, however, (i) no such
payment shall be made unless the Debt is paid in full or assumed,
and (ii) Executive shall be entitled to a Restructuring Bonus in the
event of a Change of Control only as provided in this subparagraph
(f) and only if he is not terminated for Cause. In addition, the
Company shall continue the Executive's health and welfare benefits
for a period of thirty (30) months or, if a lesser period, until the
Executive receives comparable coverage from another employer.
6. If the Company remains under the protection of the Bankruptcy Court
on or about May 31, 2002, the Executive's award opportunity under the Corporate
Annual Incentive Plan will be reviewed and implemented, as appropriate.
4
5
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
the Agreement effective as of May 1, 2001.
RESPONSE ONCOLOGY, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
EXECUTIVE
-------------------------------------------
XXXXXXX XXXXXXXXX
5
