Exhibit 10.12
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of August 8, 2005, by
and between LabOne, Inc. a Missouri corporation (the "Company"), and XXXXX X.
XXXXXX ("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 8, 2005 (the "Merger Agreement");
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 August 19, 1993, as amended December 30,
1994, and as amended November 10, 1995 (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 Vice President, Insurance Services Group 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 Senior 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 $210,000 ("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 $125,000.
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 25% 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 maximum Annual Bonus opportunity for Executive shall be 50% 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 12,000 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
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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 $200,000. 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.
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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) $676,878 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).
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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 (a) Change in Control. As of the Effective Date, Executive shall
be entitled to participate in the Quest Diagnostics, Inc., Executive Severance
Plan as it relates to any payments or benefits to be made to Executive in
connection with a change of control of Parent; provided, however, that any
payments or benefits made to Executive pursuant to this Section 4.4(a) shall not
operate to duplicate any other payments or benefits to be made to Executive
pursuant to Section 4 of this Agreement.
(b) 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(b), 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. Termination on or Following the Third Anniversary of the
Effective Date. In the event Executive's employment with the Company is
terminated for any reason on or following the third anniversary of the Effective
Date, the terms and conditions of such termination shall be governed in
accordance with the Quest Diagnostics, Inc., Executive Severance Plan as in
effect at the time of such termination of employment.
6. Restrictive Covenants. Executive agrees that the effectiveness
of this Agreement is contingent upon his execution of, and delivery to the
Company of, a restrictive
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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.
7. 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.
8. 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:
XXXXX X. XXXXXX
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.
9. Miscellaneous.
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9.1 (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.
9.2 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.
9.3 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.
9.4 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.
9.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.6 Governing Law; Interpretation. This agreement and the terms of
Executive's employment shall be governed by the laws of New York.
9.7 Further Assurances. Each of the parties agrees to execute,
acknowledge, deliver and perform, and cause to be executed, acknowledged,
delivered and performed, at any
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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.
9.8 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.
9.9 Withholding Taxes. All payments hereunder shall be subject to
any and all applicable federal, state, local and foreign withholding taxes.
9.10 Counterparts. This Agreement may be executed in one or more
counterparts, which, together, shall constitute one and the same agreement.
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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.
------------------------
Name: W. Xxxxxx Xxxxx, XX.
Title: Chief Executive Officer
EXECUTIVE
/s/ Xxxxx X. Xxxxxx
----------------------------
XXXXX X. XXXXXX
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