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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made April 21, 1998, effective as of January 1, 1998,
by and between RESPONSE ONCOLOGY, INC., a Tennessee corporation (the "Company"),
and XXXXXXX X. XXXX, M.D. (the "Executive").
WHEREAS, the Company is engaged in the business of providing advanced
cancer treatment services;
WHEREAS, the Company desires to employ the Executive to devote full
time to the business of the Company and to continue as the Chairman of the Board
of Directors of the Company; and
WHEREAS, the Executive desires to be employed on the terms and subject
to the conditions hereinafter stated.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Employment Agreement, the parties hereby agree as follows:
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POSITION AND RESPONSIBILITIES
During the Term of this Employment Agreement, the Executive shall
perform such duties for such compensation and subject to such terms and
conditions as are hereinafter set forth.
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TERM AND DUTIES
2.1 Term; Extension. The term of this Employment Agreement (the "Term
of this Employment Agreement") will commence as of January 1, 1998, and shall
continue through December 31, 2000. On the first and each successive anniversary
of the effective date of this Employment Agreement, the Term of this Employment
Agreement shall be extended for an additional one (1) year period, unless either
party gives notice no later than such anniversary date of such party's intent
not to extend the Term of this Employment Agreement. Termination of the
Executive's employment pursuant to this Employment Agreement shall be governed
by Sections 4 and 5.
2.2 Duties. The Executive shall devote substantially all of his time
and attention and best efforts during normal business hours to the Company's
affairs. The Executive shall have such duties and responsibilities as are
assigned to him from time to time by the Board of Directors. As of the effective
date of this Employment Agreement, the Executive shall continue to possess and
assume
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senior operating authority and responsibility as Chairman of the Board of
Directors of the Company, consistent with directions from the Board of Directors
of the Company.
2.3 Location. The duties of the Executive shall be performed at such
locations and places as may be directed by the Board of Directors.
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COMPENSATION AND BENEFITS
3.1 Base Compensation. The Company shall pay the Executive a base
salary ("Base Salary") of $234,000 per annum, subject to applicable
withholdings. Base Salary shall be payable according to the customary payroll
practices of the Company but in no event less frequently than once each month.
The Base Salary shall be reviewed annually and shall be subject to increase
according to the policies and practices adopted by the Board of Directors from
time to time.
3.2 Annual Incentive Awards. The Company will pay the Executive annual
incentive compensation ("Incentive Bonus") of up to 100% of his Base Salary, in
accordance with policies and based on performance targets established annually
by the Compensation Committee of the Board of Directors.
3.3 Additional Benefits. The Executive will be entitled to participate
in all employee benefit plans or programs and receive all benefits and
perquisites to which any salaried employee is eligible under any existing or
future plan or program established by the Company for salaried employees,
including, without limitation, all plans developed for executive officers of the
Company. The Executive will participate to the extent permissible under the
terms and provisions of such plans or programs in accordance with program
provisions. These plans or programs may include group hospitalization, health,
dental care, life or other insurance, tax qualified pension, car allowance,
savings, thrift and profit sharing plans, termination pay programs, sick leave
plans, travel or accident insurance, disability insurance, and contingent
compensation plans, including capital accumulation programs, restricted stock
programs, stock purchase programs and stock options plans. Nothing in this
Agreement will preclude the Company from amending or terminating any of the
plans or programs applicable to salaried employees or executive officers. The
Executive will be entitled to an annual paid vacation as established by the
Board of Directors.
3.4 Business Expenses. The Company will reimburse the Executive for all
reasonable travel and other expenses incurred by the Executive in connection
with the performance of his duties and obligations under this Employment
Agreement upon the Executive's submitting proper documentation in accordance
with Company policies for expense reimbursement.
3.5 Withholding. The Company may directly or indirectly withhold from
any payments under this Employment Agreement all federal, state, city or other
taxes that shall be required pursuant to any law or governmental regulation.
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DEATH BENEFIT; DISABILITY COMPENSATION; KEY MAN INSURANCE
4.1 Payment in Event of Death. In the event of the death of the
Executive during the Term of this Employment Agreement, the Company's obligation
to make payments under this Employment Agreement shall cease as of the date of
death, except for earned but unpaid Base Salary and Incentive Bonus which will
be paid on a pro-rated basis for that year. The Executive's designated
beneficiary will be entitled to receive the proceeds of any life or other
insurance or other death benefit programs provided or referred to in this
Employment Agreement, other than "key man" life insurance benefits.
4.2 Disability Compensation. Notwithstanding the disability of the
Executive, the Company will continue to pay the Executive pursuant to Section 3
hereof during the Term of this Employment Agreement, unless the Executive's
employment is earlier terminated in accordance with this Employment Agreement.
In the event the disability continues for a period of three (3) months, the
Company may thereafter terminate this Employment Agreement and the Executive's
employment. Following such termination, the Company will pay the Executive
amounts equal to his regular installments of Base Salary, as of the time of
termination, for a period of the greater of (i) the remaining Term of this
Agreement or (ii) twelve (12) months from the date of such termination. All
other compensation will cease except for earned but unpaid Incentive Bonus
awards which would be payable on a pro-rated basis for the year in which the
disability occurred, through the date of termination.
4.3 Responsibilities in the Event of Disability. During the period the
Executive is receiving payments following his disability and as long as he is
physically and mentally able to do so, the Executive will furnish information
and assistance to the Company and from time to time will make himself available
to the Company to undertake assignments consistent with his position or prior
position with the Company and his physical and mental health. If the Company
fails to make a payment or provide a benefit required as part of this Employment
Agreement, the Executive's obligation to provide information and assistance will
end.
4.4 Definition of Disability. For purposes of this Employment
Agreement, the term "disability" will have the same meaning as is attributed to
such term, or any substantially similar term, in the Company's long term income
disability plan as in effect from time to time.
4.5 Key-Man Life Insurance. Upon request by the Company, the Executive
agrees to cooperate with the Company in obtaining "key man" life insurance on
the life of the Executive, with death benefits payable to the Company. Such
cooperation shall include the submission by the Executive to a medical
examination and his response to inquiries regarding his medical history.
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TERMINATION OF EMPLOYMENT
Notwithstanding anything herein to the contrary, this Employment
Agreement and the Executive's employment with the Company may be terminated by
the Company at any time, subject to the terms and provisions of this Section 5.
5.1 Termination Without Cause; Constructive Termination.
5.1.1 WITHOUT A CHANGE IN CONTROL. If the Executive suffers a
Termination Without Cause (hereinafter defined) or a Constructive Termination
(as hereinafter defined) and a Change in Control (hereinafter defined) shall not
have occurred within one (1) year prior thereto, the Company will continue to
pay the Executive the following:
(a) in a lump sum upon such termination an amount
equal to 200% of the sum of the Executive's combined (i) Base Salary as in
effect at the time of the termination and (ii) the average Incentive Bonus for
the two (2) calendar years immediately preceding the year of termination; and
(b) for the greater of (i) the remaining term of this
Employment Agreement or (ii) twelve (12) months following such Termination
Without Cause or Constructive Termination, the Company shall reimburse the
Executive for the cost of the Executive's major medical health insurance as in
effect at the date of termination. The exercisability of stock options granted
to the Executive shall be governed by any applicable stock option agreements and
the terms of the respective stock option plans.
5.1.2 UPON A CHANGE IN CONTROL. If the Executive suffers a
Termination Without Cause or Constructive Termination within one (1) year
following a Change in Control, the Company will pay to the Executive the
following:
(a) in a lump sum upon such termination an amount
equal to the sum of (i) 299% of the Executive's combined (A) Base Salary as in
effect at the time of the termination and (B) average Incentive Bonus for the
two (2) calendar years immediately preceding the year of termination, and (ii),
to the extent that such foregoing amount or any other payment in the nature of
compensation (within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder ("Section 280G"))
to or for the benefit of the Executive (or any part of such amount or other
payment) constitutes an "excess parachute payment" within the meaning of Section
280G, the amount, if any, of (A) such "excess parachute payment" multiplied by a
fraction, the numerator of which is the number one (1.00) and the denominator of
which is (I) the number one (1.00) minus (II) the effective tax rate under
Section 280G applicable to the Executive expressed as a decimal, minus (B) the
amount of such "excess parachute payment" (such amount being sometimes
hereinafter called the "Excise Tax Gross-Up"); and
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(b) for the greater of (i) the remaining term of this
Employment Agreement or (ii) twelve (12) months following such Termination
Without Cause or Constructive Termination, the Company shall reimburse the
Executive for the cost of the Executive's major medical health insurance as in
effect at the date of termination. The exercisability of stock options granted
to the Executive shall be governed by any applicable stock option agreements and
the terms of the respective stock option plans.
Notwithstanding the provisions of the foregoing subparagraph (a), if
the Excise Tax Gross- Up required to be paid by the Company to all other
employees of the Company ("Affected Employees") shall exceed $5,000,000 (the
"Gross-Up Limitation"), then the amount of Excise Tax Gross-Up payable to the
Executive shall be an amount equal to $5,000,000 times a fraction, the numerator
of which shall be the amount of Excise Tax Gross-Up computed for the Executive
before consideration of the Gross-Up Limitation, and the denominator of which
shall be the aggregate Excise Tax Gross-Up computed for all Affected Employees
before consideration of the Gross-Up Limitation.
5.2 Termination With Cause; Voluntary Termination. If the Executive
suffers a Termination with Cause or the Executive terminates his employment with
the Company (a "Voluntary Termination"), then, whether or not there has been a
Change in Control, the Company will not be obligated to pay the Executive any
amounts of compensation or benefits following the date of termination. However,
earned but unpaid Base Salary through the date of termination will be paid in a
lump sum at such time, and Incentive Bonus, if any, for the year during which
such termination occurs will be pro rated for the portion of the year prior to
the date of termination and paid at the time of termination. The exercisability
of stock options granted to the Executive shall be governed by any applicable
stock option agreements and the terms of the respective stock option plans.
5.3 Definitions. For purposes of this Employment Agreement, the
following terms have the following meanings:
5.3.1 A "Change in Control" shall occur if an event or series
of events occurs after the effective date of this Employment Agreement which
would constitute either a change in ownership of the Company, within the meaning
of Section 280G, or a change in the ownership of a substantial portion of the
Company's assets, within the meaning of Section 280G, but for purposes of this
definition, the fair market value threshold for determining "substantial portion
of the Company's assets" shall be "greater than 50%."
5.3.2 "Constructive Termination" means termination of the
Executive's employment by the Executive (a) from a declined reassignment of a
job that is not the equivalent of his then current position as set forth herein
(in responsibility, compensation or geographic area of service), or (b) on
account of conduct by the Company or the Board that constitutes continuous and
material interference by the Company or the Board with the Executive's
performance of his duties as set forth in Section 2 hereof or the intentional or
material breach by the Company of this Agreement. The
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Executive shall have a period of one (1) year after termination of his
employment to assert against the Company that he suffered a Constructive
Termination, and after the expiration of such one year period, the Executive
shall be deemed to have irrevocably waived the right to such assertion.
5.3.3 "Termination With Cause" means termination of the
Executive's employment by the Company, acting in good faith, by written notice
to the Executive specifying the event relied upon for such termination, due to
the Executive's conviction for a felony, the Executive's perpetration of a
fraud, embezzlement or other act of dishonesty or the Executive's breach of a
trust or fiduciary duty which materially adversely affects the Company or its
shareholders.
5.3.4 "Termination Without Cause" means termination of the
Executive's employment by the Company other than due to the Executive's death or
disability or Termination With Cause.
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OTHER DUTIES OF THE EXECUTIVE DURING
AND AFTER THE TERM OF THIS EMPLOYMENT AGREEMENT
6.1 Additional Information. The Executive will, upon reasonable notice,
during or after the Term of this Employment Agreement, furnish information as
may be in his possession and cooperate with the Company as may reasonably be
requested in connection with any claims or legal actions in which the Company is
or may become a party. The Executive shall receive reasonable compensation for
the time expended by him pursuant to this Section 6.1.
6.2 Confidentiality. The Executive recognizes and acknowledges that all
information pertaining to the affairs, business, clients, customers or other
relationships of the Company, as hereinafter defined, is confidential and is a
unique and valuable asset of the Company. Access to and knowledge of this
information are essential to the performance of the Executive's duties under
this Employment Agreement. The Executive will not during the Term of this
Employment Agreement or thereafter, except to the extent reasonably necessary in
the performance of his duties under this Agreement, give to any person, firm,
association, corporation or governmental agency any information concerning the
affairs, business, clients, customers or other relationships of the Company
except as required by law. The Executive will not make use of this type of
information for his own purposes or for the benefit of any person or
organization other than the Company. The Executive will also use his best
efforts to prevent the disclosure of this information by others. All records,
memoranda, etc. relating to the business of the Company whether made by the
Executive or otherwise coming into his possession are confidential and will
remain the property of the Company.
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6.3 Noncompetition.
6.3.1 DURING THE TERM OF EMPLOYMENT. The Executive will not
Compete with the Company (as defined in Section 6.3.4 hereafter) at any time
while he is employed by the Company or receiving payments from the Company.
6.3.2 VOLUNTARY TERMINATION; TERMINATION WITHOUT CAUSE;
TERMINATION WITH CAUSE; CONSTRUCTIVE TERMINATION. In the event of a Voluntary
Termination, Termination With Cause, Termination Without Cause, or Constructive
Termination, with or without a Change in Control, the Executive will not Compete
with the Company for a period of one (1) year from the date of such termination;
provided that if a Voluntary Termination follows a notice by the Company under
Section 2.1 that the Term of this Employment Agreement will not be automatically
extended, there will be no restriction on the Executive's right to Compete with
the Company after the date his employment terminates.
6.3.3 DEFINITION OF "COMPETE" WITH THE COMPANY. For the
purposes of this Section 6, the term "Compete with the Company" means action by
the Executive, direct or indirect, for his own account or for the account of
others, either as an officer, director, stockholder, owner, partner, member,
promoter, employee, consultant, advisor, agent, manager, creditor or in any
other capacity, resulting in the Executive having any pecuniary interest, legal
or equitable ownership, or other financial or non-financial interest in, or
employment, association or affiliation with, any corporation, business trust,
partnership, limited liability company, proprietorship or other business or
professional enterprise that provides oncology services or management services
to any oncology or hematology practice within a fifty mile radius of any
location where the Company or any subsidiary or affiliate of the Company
performs such services at the date of a termination of the Executive's
employment; provided, however, that the term "Compete with the Company" shall
not include ownership (without any more extensive relationship) of a less than a
five percent (5%) interest in any publicly-held corporation or other business
entity.
6.3.4 REASONABLENESS OF SCOPE AND DURATION; REMEDIES. The
Executive acknowledges that the covenants contained herein are reasonable as to
geographic and temporal scope. The Executive acknowledges that his breach or
threatened or attempted breach of any provision of Section 6 would cause
irreparable harm to the Company not compensable in monetary damages and that the
Company shall be entitled, in addition to all other applicable remedies, to a
temporary and permanent injunction and a decree for specific performance of the
terms of Section 6 without being required to prove damages or furnish any bond
or other security.
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INDEMNIFICATION OF EXECUTIVE
7.1 Indemnification of Executive In Third Party Proceedings. The
Company shall indemnify Executive, if Executive was or is a party, or is
threatened to be made a party to any third party proceeding, by reason of the
fact that Executive was or is an authorized representative of the Company,
against expenses, judgments, fines and amounts paid in settlement actually and
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reasonably incurred by Executive in connection with such third party proceeding
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Company and, with respect to any
criminal third party proceeding, had no reasonable cause to believe such conduct
was unlawful. The termination of any third party proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that Executive did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to,
the best interests of the Company, and, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
7.2 Indemnification of Executive in Corporate Proceedings. The Company
shall indemnify Executive if he was or is a party or is threatened to be made a
party to any corporate proceeding, by reason of the fact that he was or is an
authorized representative of the Company, against expenses actually and
reasonably incurred by him in connection with the defense or settlement of such
corporate proceeding, if he acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the Company; except
that no indemnification shall be made in respect of any claim, issue or matter
as to which the Executive shall have been adjudged to be liable to the Company
unless and only to the extent that a court of competent jurisdiction or the
court in which such corporate proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Executive is fairly and reasonably entitled to
indemnity for such expenses which a court of competent jurisdiction shall deem
proper.
7.3 Mandatory Indemnification of Executive. To the extent that the
Executive has been successful on the merits or otherwise in defense of any third
party or corporate proceeding or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith.
7.4 Determination of Entitlement to Indemnification. Any
indemnification under Section 7.1, 7.2 or 7.3 (unless ordered by a court) shall
be made by the Company only as authorized in the specific case upon a
determination that indemnification of the Executive is proper in the
circumstances because he has either met the applicable standard of conduct set
forth in Section 7.1 or 7.2 or has been successful on the merits or otherwise as
set forth in Section 7.3 and that the amount requested has been actually and
reasonably incurred. Such determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such third
party or corporate proceeding; or
(b) if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or
(c) by the stockholders.
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7.5 Advancing Expenses. Expenses actually and reasonably incurred in
defending a third party or corporate proceeding shall be paid on behalf of
Executive by the Company in advance of the final disposition of such third party
or corporate proceeding upon receipt of an undertaking by or on behalf of the
Executive to repay such amount if it shall ultimately be determined that the
Executive is not entitled to be indemnified by the Company as authorized in this
Section 7. The financial ability of the Executive to make a repayment
contemplated by this section shall not be a prerequisite to the making of an
advance.
7.6 Certain Terms. For purposes of this Section 7:
(a) "corporate proceeding" shall mean any threatened, pending or
completed action or suit by or in the right of the Company to
procure a judgment in its favor or investigative proceeding by
the Company;
(b) "criminal third party proceeding" shall include any action or
investigation which could or does lead to a third party
proceeding that could result in criminal penalties, and any
such proceeding;
(c) "expenses" shall include, but not be limited to, attorneys'
fees and disbursements;
(d) "fines" shall include, but not be limited to, any excise taxes
assessed on a person with respect to an Executive benefit
plan;
(e) "not opposed to the best interests of the Company" shall
include actions taken in good faith and in a manner the
Executive reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan;
(f) "other enterprises" shall include employee benefit plans;
(g) "party" to a proceeding shall include a person who gives
testimony or is similarly involved in such proceeding;
(h) "third party proceeding" shall mean any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or
in the right of the Company.
7.7 Insurance. The Company may purchase and maintain insurance on
behalf of Executive against any liability asserted against the Executive and
incurred by the Executive in such capacity, or arising out of his status as
such, whether or not the Company would have the power or the obligation to
indemnify Executive against such liability under the provisions of this Section
7.
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7.8 Scope of Section. The indemnification of Executive and advancement
of expenses, as authorized by the preceding provisions of this Section 7, shall
not be deemed exclusive of any other rights to which may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
employed by the Company. The indemnification and advancement of expenses
provided by or granted pursuant to this Section 7 shall continue after the
Executive ceases to be an authorized representative of the Company and shall
inure to the benefit of his heirs, executors and administrators.
7.9 Reliance on Provisions. Executive's actions as an authorized
representative of the Company shall be deemed so done in reliance upon rights of
indemnification provided by this Section 7.
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CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Employment Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or substantially all
of its assets to, another corporation or organization which assumes this
Employment Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or sale of assets, the term "the
Company" as used herein will mean or include the other corporation or
organization and this Employment Agreement shall continue in full force and
effect. This Section 8 is not intended to modify or limit the rights of the
Executive hereunder.
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MISCELLANEOUS
9.1 Entire Agreement. This Employment Agreement contains the entire
understanding between the Company and the Executive with respect to the subject
matter and supersedes any prior employment or severance agreements between the
Company and its affiliates, and the Executive.
9.2 Amendment; Waiver. This Employment Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Employment Agreement will be deemed to have been waived except in writing by the
party charged with waiver. A waiver shall operate only as to the specific term
or condition waived and will not constitute a waiver for the future or act on
anything other than that which is specifically waived.
9.3 Severability; Modification of Covenant. Should any part of this
Employment Agreement be declared invalid for any reason, such invalidity shall
not affect the validity of any remaining portion hereof and such remaining
portion shall continue in full force and effect as if this Employment Agreement
had been originally executed without including the invalid part. Should any
covenant of this Employment Agreement be unenforceable because of its geographic
scope or term,
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its geographic scope or term shall be modified to such extent as may be
necessary to render such covenant enforceable.
9.4 Effect of Captions. Titles and captions in no way define, limit,
extend or describe the scope of this Employment Agreement nor the intent of any
provision thereof.
9.5 Counterpart Execution. This Employment Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.6 Governing Law; Arbitration. This Employment Agreement has been
executed and delivered in the State of Tennessee and its validity,
interpretation, performance and enforcement shall be governed by the laws of
that state. Any dispute among the parties hereto shall be settled by arbitration
in Memphis, Tennessee, in accordance with the rules then obtaining of the
American Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. All provisions hereof are for
the protection and are intended to be for the benefit of the parties hereto and
enforceable directly by and binding upon each party. Each party hereto agrees
that the remedy at law of the other for any actual or threatened breach of this
Employment Agreement would be inadequate and that the other party shall be
entitled to specific performance hereof or injunctive relief or both, by
temporary or permanent injunction or such other appropriate judicial remedy,
writ or orders as may be decided by a court of competent jurisdiction in
addition to any damages which the complaining party may be legally entitled to
recover together with reasonable expenses of litigation, including attorney's
fees incurred in connection therewith, as may be approved by such court.
9.7 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first-class postage prepaid by registered mail, return
receipt requested, or when delivered if by hand, overnight delivery service or
confirmed facsimile transmission, to the following:
(i) If to the Company, at 0000 Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx 00000, Attention: Chairman of the
Compensation Committee, or at such other address as may have been
furnished to the Executive by the Company in writing; or
(ii) If to the Executive, at 0000 Xxxxxx Xxxxx Xxxx,
Xxxxxxx, XX 00000 or such other address as may have been furnished to
the Company by the Executive in writing.
9.8 Binding Agreement. This Employment Agreement shall be binding on
the parties' successors, heirs and assigns.
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IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date first above written.
RESPONSE ONCOLOGY, INC.
By:
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Xxxxx X. Xxxxxxxx
Chairman Emeritus
EXECUTIVE:
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XXXXXXX X. XXXX, M.D.
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