Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated and effective as of the 20th day of January,
1997, by and among Unilab Corporation, a Delaware corporation ("The Company")
and Xxxxx Xxxxxx ("Executive").
WHEREAS, The Company desires to have the benefits of Executive's
knowledge and experience as a full-time employee and considers such employment a
vital element in protecting and enhancing the best interests of The Company and
its shareholders, and Executive desires to be employed full-time with The
Company; and
WHEREAS, The Company and Executive desire to enter into an agreement
reflecting the terms under which Executive will be employed by The Company;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. TERM.
(a) The Company hereby agrees to employ Executive for the period
commencing the date hereof and continuing until the first anniversary hereof,
unless sooner terminated as provided in Sections 5 and 6. Commencing on January
20, 1998 and each January 20 thereafter (the "Renewal Date"), the term of this
Agreement shall automatically be extended for one additional year unless a
Change of Control (as defined in Section 6) occurs. In the event a Change of
Control occurs, this Agreement shall be automatically renewed for a term of two
years from the date of such Change of Control (the "Extended Term").
(b) This Agreement may be terminated by The Company in accordance
with Section 5 or by the Executive in accordance with Section 6; provided that
in the event of termination without Cause (as defined in Section 5) or without
Good Reason (as defined in Section 6), the terminating party shall be required
to give the other party at least six (6) months notice prior to the Renewal
Date; provided, further that in the event of a Change of Control the Agreement
is automatically extended for the two year Extended Term. Following a Change of
Control either party to the Agreement can terminate the Agreement provided they
give the other party at least six (6) months notice prior to the end of the
Extended Term or such period beyond the Extended Term as the Agreement may from
time to time be extended.
2. DUTIES.
(a) From and after the date of this Agreement, Executive will serve
as Chairman, President and Chief Executive Officer of The Company. Executive
shall have such duties, responsibilities and authority as may from time to time
be assigned to Executive by the Board of Directors of The Company.
(b) Executive agrees to devote his full time, attention, and best
efforts to the performance of his duties. During his employment, Executive
agrees that he will not, either directly or indirectly, without the express
written consent of The Company, render any personal service as a director,
employee, independent contractor, consultant, or otherwise to any clinical or
reference laboratory, regardless of its size or location. Executive also agrees
not to have any ownership, direct or indirect, in any private or publicly traded
clinical or reference laboratory; provided that Executive shall be permitted to
beneficially own as an investment, up to 1.0% of a class of publicly traded
equity securities issued by any such firm or institution.
3. COMPENSATION. The Company shall compensate Executive for the
services rendered under this Agreement as follows:
(a) Base Salary. $400,000 per year as base salary, payable in
accordance with the customary payroll practices of The Company for the payment
of officers.
(b) Bonus and Incentive Compensation.
(i) For 1997, Executive shall receive (A) a guaranteed bonus of
$100,000, payable in shares of the Company's common stock based on the closing
market price of such common stock on the American Stock Exchange on January 17,
1997, the last trading day prior to the date hereof and (B) an additional bonus
of $100,000, payable in cash, if The Company meets cash flow objectives for the
third and fourth quarters of 1997 as agreed upon between Executive and the Board
of Directors of The Company no later than March 31, 1997.
(ii) From and after January 1, 1998, Executive shall be entitled
to such bonuses and other incentive compensation, if any, as shall be determined
by the Board of Directors of The Company.
(c) Executive Retirement Plan. Executive shall become a participant
in the Executive Retirement Plan of The Company, effective immediately.
(d) Deferred Compensation. For each fiscal year during the term of
this Agreement, The Company shall establish and maintain for Executive a
deferred compensation account which shall be credited each year during the
period Executive is employed by The Company with an amount equal to 8% of
Executive's total cash compensation (inclusive of bonuses) for that year.
(e) Annual Compensation Review. The Board of Directors shall review
the compensation of Executive annually to determine whether an adjustment in
Executive's compensation is called for. At no time during the term of this
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Agreement shall Executive's annual compensation be less than the amount
specified as the base salary set forth in Section 3 (a) above.
4. EMPLOYEE BENEFITS.
(a) Insurance. Executive shall be entitled to full participation, on
a basis commensurate with his position with The Company, in all life, accident,
disability and health insurance plans that generally are made available to
employees of The Company.
(b) Automobile Allowance. The Company shall provide Executive with an
automobile allowance of $1,000 per month.
(c) Expense Reimbursement. Executive shall be entitled to
reimbursement for all reasonable and necessary documented expenses incurred by
him in connection with the performance of his duties hereunder.
(d) Vacation. Executive shall be entitled to an annual vacation leave
at full pay in accordance with the Company's standard vacation policies
applicable to senior executives.
(e) Relocation Benefits. Executive currently resides in Burlington,
North Carolina. Executive agrees to relocate as promptly as practicable to the
Los Angeles, California metropolitan area. In connection with such relocation,
Executive shall receive the following:
(i) The Company shall pay for, or reimburse Executive for, rent,
utilities and related temporary living expenses incurred by Executive
and his immediate family in the Tarzana, California area while
Executive is searching for a permanent California residence, up to a
maximum monthly amount of $4,000 for a maximum period of six months
from the date hereof.
(ii) From and after the date Executive closes on the purchase of
a permanent California residence, through and including the date that
is six months after the date hereof, Executive shall be paid, as an
offset to Executive's mortgage and other carrying costs of the
California house purchased by Executive, an amount equal to the rental
payment paid by The Company for Executive's temporary California
housing pursuant to paragraph 4 (e)(i) above.
(iii) The Company shall pay for, or reimburse Executive for, all
documented moving costs incurred by Executive in moving himself and
his immediate family from North Carolina to California, with an
appropriate tax gross-up.
(iv) Until such time as Executive's immediate family has
relocated to California, Executive shall be reimbursed for all
reasonable travel costs incurred by Executive in traveling back and
forth between California and North Carolina.
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(f) Stock Options. In order to induce the Executive to enter into this
Agreement, subject to obtaining all required corporate and regulatory approvals,
if any, the Company will grant to the Executive options (the "Options") to
acquire 500,000 shares of the Company's common stock, par value $.01 per share.
The Options shall have ten year terms. Such 500,000 share option grant shall be
made as follows: Executive will be granted on the date hereof Options to
purchase 250,000 shares of common stock at an exercise price equal to the
closing market price of the common stock on the American Stock Exchange on
January 17, 1997 and will be granted on January 2, 1998 additional Options to
purchase 250,000 shares of The Company's common stock at an exercise price equal
to the closing market price of the common stock on the American Stock Exchange
on January 2, 1998. Such options shall vest in equal installments over five
years: 20% on the first anniversary of the grant date, 20% on the second
anniversary, 20% on the third anniversary, 20% on the fourth anniversary and 20%
on the fifth anniversary (the "Vesting Schedule"), in accordance with the terms
of, and as more fully set forth in, the Stock Option Agreements, dated of even
date herewith, between the Executive and The Company.
(g) Stock Purchase Obligation.
(i) Executive shall purchase from The Company such number of
newly issued shares of The Company's common stock as can be purchased
for $500,000, based on the closing market price of The Company's stock
on The American Stock Exchange as of January 17, 1997, which shall be
issued promptly after execution of this Agreement.
(ii) The Company shall extend to Executive a $250,000 bridge loan
of up to 180 days duration in order to finance Executive's purchase of
$250,000 worth of Unilab common stock pursuant to Section 4(g)(i).
Such loan shall bear interest at the rate of 6% through the date of
repayment.
(iii) The Company shall loan an additional $250,000 to Executive
in order to finance Executive's purchase of an additional $250,000
worth of Unilab common stock pursuant to Section 4(g)(i). Such loan
shall be evidenced by a written promissory note (the "Note"), which
shall be secured and collateralized by the shares of Unilab common
stock acquired with such loan proceeds (the "Collateral"). The Note
shall be due and payable on the fifth anniversary of the date of the
Note and shall bear interest at the rate of 6%, payable quarterly in
arrears. The Note shall be secured only by the Collateral and shall be
non-recourse to Executive personally.
(h) Registration Rights. Executive shall be granted demand
registration rights with respect to the shares underlying the Options and the
shares purchased pursuant to Section 4(g) above, entitling him to require the
Company to register all or some of such shares once each fiscal year.
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5. TERMINATION BY THE COMPANY. Executive's employment hereunder can be
terminated by The Company without any breach of this Agreement only under the
following circumstances:
(a) DEATH OR DISABILITY. Executive's employment shall terminate on his
death. If Executive shall become totally disabled within the meaning of the
Long-Term Disability Income Benefits Plan of The Company, as in effect on the
date of this Agreement, this Agreement shall terminate as of the date on which
Executive is determined to be totally disabled and disability insurance benefits
become payable to Executive.
(b) CAUSE. The Company can terminate Executive's employment hereunder
for Cause at any time, without advance notice, which shall include termination
because of (i) breach of fiduciary duty involving personal profit, (ii)
violation of Section 9 of this Agreement, (iii) intentional failure to perform
stated duties or abide by The Company's policies that materially adversely
affect The Company's interests, (iv) conviction of a felony, (v) commitment of
an act that would disqualify The Company or any subsidiary of The Company from
maintaining or obtaining a license, permit or other governmental approval
material to the operations of The Company or any such subsidiary, or (vi)
material breach by Executive of any provision of this Agreement. Upon
termination for Cause all of Executive's rights to compensation, fringe
benefits, and other payments shall terminate immediately to the extent permitted
by applicable law.
The termination of Executive's employment for reasons other than those
specified above shall be deemed to be a termination without Cause.
6. TERMINATION BY EXECUTIVE. Executive shall be entitled to terminate
his employment without any breach of this Agreement only for Good Reason.
Termination for "Good Reason" shall mean his resignation within two years of,
the following:
(a) After a Change of Control of The Company shall have occurred, and
without the express written consent of Executive, he is given a title or
assigned any duties materially inconsistent with his position, duties,
responsibilities, and status with The Company as in effect immediately prior to
such Change of Control;
(b) The base salary of Executive, and/or incentive compensation
opportunity under Section 3 above, is reduced below that in effect at the date
hereof or at the time of the Change of Control, as applicable;
(c) Without the express written consent of Executive, he is required
after a Change of Control to be permanently based anywhere other than within a
30 mile radius of his office location immediately prior to Change of Control,
except for required travel on The Company's business to an extent consistent
with his duties hereunder;
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(d) Failure to honor the automatic renewal of this Agreement for the
Extended Term following a Change of Control.
For the purposes of this Agreement, a "Change of Control" of The
Company shall be defined to mean, notwithstanding the prior occurrence of any
other event constituting a "change of control" (a) the acquisition by any person
of, or the entering into of any agreement by any person to acquire by purchase,
merger, consolidation or otherwise of shares resulting in the beneficial
ownership of thirty percent or more of the total number of votes which may be
cast for the election of directors (the "Triggering Percentage"), or (b) the
acquisition of by any person or the entering into of any agreement by any person
to acquire all or substantially all of the assets of the Company, or (c) the
persons who were directors of the Company prior to any contested or other
election, or their successors duly nominated by a majority of such directors,
cease to constitute at least a majority of the Board following any such
election, or (d) any other change in control of a nature that would be required
to be reported (assuming such event has not been previously reported) in
response to Item 1(a) of the Current Report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended.
The Executive's termination of his employment for reasons other than
those specified above shall be deemed to be a termination without Good Reason.
7. SEVERANCE PAYMENT.
(a) If the Executive's employment is terminated by The Company without
Cause and not associated with a Change of Control, the Executive will receive
(i) 18 months of compensation as defined in Sections 3(a), (b) and (d) payable
on the same basis and in the same manner as base salary was paid prior to
termination and (ii) continued participation for 18 months following the date of
such termination in The Company's life, accident, disability and health
insurance programs on the same terms and conditions as in effect on the date of
termination, or if continued participation in The Company's programs is not
available, participation in comparable, alternate programs.
(b) If (i) Executive's employment is terminated by The Company without
Cause in association with a Change of Control, or (ii) Executive shall terminate
his employment for Good Reason then Executive shall be entitled to receive (A)
the lump sum severance payment provided for in subsection (c) below (the "Lump
Sum Severance Payment"), plus (B) continued coverage under, or entitlement to,
all of the benefits set forth in Section 4 above for a period of two years
following the date of termination, at no cost to the Executive.
(c) The Lump Sum Severance Payment shall be equal to Executive's Total
Compensation for the Extended Term (two years) as set forth in Section 1 above.
"Total Compensation" for purposes of this Agreement shall be defined as all
compensation specified in Section 3. Executive's bonus for this purpose will be
defined as the average of the bonus actually paid by The Company for the two
years prior to termination. The Lump Sum Severance Payment shall be made in cash
within 30 days after termination of employment and
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shall not be discounted by reason of the fact that the time of payment is
accelerated in advance of the ordinary course under this Agreement. Executive
shall be under no duty to mitigate damages and the Lump Sum Severance Payment
shall not be reduced by any earnings of Executive subsequent to the termination
that gives rise to the Severance Payment.
(d) If the Executive's employment is terminated due to Cause, death or
disability, or is voluntarily terminated for other than Good Reason, base salary
will be continued through the date of termination, the amounts accrued in
Executive's deferred compensation account will be paid at termination and
eligibility for incentive compensation and/or benefits will be in accordance
with the respective provisions of those plans.
(e) Executive agrees that the remedies for employment termination under
this Section 7 and Sections 5 and 6 hereof reasonably reflect liquidation
damages for such termination and that such provisions state his entire and
exclusive claim, rights, entitlements, and remedies against The Company and its
successors, assigns, affiliates, and representatives.
8. NON COMPETE. Executive agrees that following termination of
Executive's employment pursuant to Section 7(a) and during the 18 month period
specified in Section 7(a), Executive will not beneficially own securities (other
than 1.0% of a class of publicly traded equity securities) of, or render
directly or indirectly any personal service as a director, employee, independent
contractor, or consultant for, any clinical or reference laboratory located
within 100 miles of any laboratory location of The Company at the time of
termination. If Executive violates the provisions of this Section 8, Executive
will without limiting other remedies available to the Company, forfeit the
severance payments under Section 7(a) for such period of time that Executive is
in violation hereof.
9. DISCLOSURE OF INFORMATION. Executive recognizes that as an executive
of The Company he occupies a position of trust with respect to business
information of a secret or confidential nature that is the property of The
Company and that will be imparted to him from time to time in the course of his
duties. He therefore agrees that he shall not at any time, whether in the course
of his employment or thereafter, use or disclose directly or indirectly to any
person outside The Company any of such information, except as required in the
ordinary course of his duties under this Agreement.
10. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
California, in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. Each party shall bear its own cost of such arbitration,
including attorneys' fees.
11. NOTICES. All notices, requests, demands, and other communication
called for or contemplated hereunder shall be in writing and shall be deemed to
have been fully given when delivered personally or when mailed by United States
certified or registered mail, postage prepaid, addressed to the parties, their
successors in interest, or assignees at the following addresses or such other
addresses as the parties may designate by notice in the
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manner aforementioned.
THE COMPANY:
Unilab Corporation
00000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Corporate Secretary
EMPLOYEE:
Xxxxx Xxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
12. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
13. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, and preliminary agreements.
This Agreement may not be amended except in a writing executed by the parties
hereto.
15. EFFECT ON SUCCESSORS IN INTEREST. This Agreement shall inure to
the benefit of and be binding on successors and assigns of The Company. This
Agreement may not be assigned or transferred by the Executive.
16. WITHHOLDING. Any payments made in accordance with this Agreement
will be net of applicable federal, state and local taxes required to be withheld
on such payments.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
UNILAB CORPORATION EXECUTIVE
By: _______________________ ___________________________
Name: Name: Xxxxx Xxxxxx
Title:
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