Filed by Bowne Pure Compliance





Exhibit 10.5




EMPLOYMENT AGREEMENT

(Non CEO)




THIS AGREEMENT is executed as of this 5th day of November, 2008, by and between TomoTherapy
Incorporated, a Wisconsin corporation (the “Company”), and Stephen C. Hathaway, an
individual (“Employee”).



RECITALS




The Company desires to employ Employee, and Employee desires to be employed by or continued to
be employed by the Company, on the terms and conditions set forth herein.



The parties believe it is in their best interests to make provision for certain aspects of
their relationship during and after the period in which Employee is employed by the Company.



NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants
contained herein, and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the Company and Employee,



IT IS HEREBY AGREED AS FOLLOWS:



ARTICLE I

EMPLOYMENT




1.1 Term of Employment. The Company employs Employee, and Employee accepts employment by the Company, for the period
commencing on the date hereof and ending on March 31, 2009, subject to earlier termination as
hereinafter set forth in Article III (the “Employment Term”). Following the expiration of
the Employment Term, the Employment Term shall be automatically renewed for successive one-year
periods (collectively, the “Renewal Terms”; individually, a “Renewal Term”) unless,
at least 60 days prior to the expiration of the Employment Term or the then current Renewal Term,
either party provides the other with a written notice of intention not to renew, in which case
Employee’s employment with the Company, and the Company’s obligations hereunder shall terminate as
of the end of the Employment Term or said Renewal Term, as applicable, except to the extent
specifically provided herein. If the Employment Term is renewed, the terms of this Agreement
during such Renewal Term shall be the same as the terms in effect immediately prior to such
renewal, subject to any such changes or modifications as mutually may be agreed between the parties
as evidenced in a written instrument signed by both the Company and Employee.



1.2 Position and Duties. Employee shall be employed in the position of Chief Financial Officer and Treasurer, and shall
be subject to the authority of, and shall report to, the Company’s Chief Executive Officer.
Employee’s duties and responsibilities shall include all those customarily attendant to the
position of Chief Financial Officer and Treasurer, and such other duties and responsibilities as
may be assigned by the Company’s Chief Executive Officer. Employee shall devote Employee’s entire
business time, loyalty, attention and energies exclusively to the business interests of the Company
while employed by the Company, and shall perform his duties and responsibilities diligently and to
the best of his ability.


 


 









 





ARTICLE II

COMPENSATION AND OTHER BENEFITS




2.1 Base Salary. The Company shall pay Employee a salary at the annual rate of $280,000 (“Base Salary”),
payable in accordance with the normal payroll practices of the Company.



2.2 Performance Bonus. Employee will be eligible to earn an annual performance based bonus for that portion of each
full calendar year during which Employee is employed by the Company (a “Bonus Year”), the
terms and conditions of which as well as Employee’s entitlement thereto shall be determined
annually in the sole discretion of the Company’s Board of Directors or an authorized committee
thereof (the “Performance Bonus”). Employee must commence employment with the Company
before October 1 of the Bonus Year in order to be eligible for a Performance Bonus for that Bonus
Year. Any Performance Bonus payable hereunder shall be paid following the Bonus Year not later
than the earlier of (i) 30 days following the Company’s receipt of its annual audited financial
report or (ii) March 15 of the year following the Bonus Year.



2.3 Benefit Plans. Employee will be eligible to participate in the Company’s retirement plans that are qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (“Code”), and in the
Company’s welfare benefit plans that are generally applicable to all executive employees of the
Company (the “Plans”), in accordance with the terms and conditions thereof. The Company
intends to provide Employee with: (a) portable term life insurance with a death benefit equal to
twice the sum of Employee’s current Base Salary and target Performance Bonus; provided, however,
that the minimum benefit shall equal at least $500,000; and (b) long-term disability insurance with
an annual benefit equal to at least 75% of the sum of Employee’s Base Salary and target Performance
Bonus. Both the term life insurance and long-term disability insurance are, however, subject to
the underwriting process. To the extent that the costs of such coverages materially exceed the
average of such costs for other executives at the Company, the Company reserves the right to modify
the scope of coverage for Employee, or not offer it at all.



2.4 Expenses. The Company shall reimburse Employee for all reasonable expenses incurred in the course of the
performance of Employee’s duties and responsibilities pursuant to this Agreement and consistent
with the Company’s policies with respect to travel, entertainment and miscellaneous expenses, and
the requirements with respect to the reporting of such expenses.



2.5 Vacation. Employee shall be entitled to a maximum of four weeks of vacation in any calendar year in
accordance with the Company’s general vacation policies for similarly situated executive employees.


 


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ARTICLE III

TERMINATION




3.1 Right to Terminate; Automatic Termination.



(a) Termination by Company Without Cause. Since Employee is an at-will employee, subject to Section 3.2, the Company may terminate
Employee’s employment and all of the obligations under this Agreement at any time and for any
reason.



(b) Termination by Employee for Good Reason. Subject to Section 3.2, Employee may terminate his employment obligation hereunder for “Good
Reason” (as hereinafter defined) if Employee gives written notice thereof to the Company (which
notice shall specify the grounds upon which such notice is given) within 90 days of the initial
occurrence of a “Good Reason” event and the Company fails, within 90 days of receipt of such
notice, to cure or rectify the grounds for such Good Reason termination set forth in such notice.
If the Company fails to so cure or rectify, the Employee’s termination of employment shall not be
deemed for “Good Reason” unless the Employee terminates employment within one year of the initial
occurrence of Good Reason. “Good Reason” shall mean any of the following: (i) a material reduction
of the Employee’s duties and responsibilities hereunder; (ii) a material adverse change in the
working conditions of the Employee including, without limitation, relocation of Employee’s
principal workplace over 50 miles from the Company’s existing workplace, without the consent of
Employee; or (iii) the Company’s material breach of the Agreement.



(c) Termination by Company For Cause. Subject to Section 3.2, the Company may terminate Employee’s employment and all of the Company’s
obligations under this Agreement at any time for "Cause” (as defined below) by giving notice to
Employee stating the basis for such termination, effective immediately upon giving such notice or
at such other time thereafter as the Company may designate. “Cause” shall mean any of the
following: (i) Employee has materially breached this Agreement or any other agreement to which
Employee and the Company are parties or has materially breached any other obligation or duty owed
to the Company, which material breach remains uncured for 30 days after Employee receives notice
thereof from the Chief Executive Officer; (ii) Employee has committed gross negligence, willful
misconduct or any material violation of law or the Company’s Comprehensive Corporate Compliance
Program in the performance of Employee’s duties to the Company; (iii) Employee has engaged in any
willful misconduct likely to result in material discredit to or material loss of business,
reputation or goodwill of the Company; (iv) Employee has failed to follow in any material respect
lawful instructions from the officer or body to whom Employee reports concerning the operations or
business of the Company, which
material failure to follow lawful instructions remains uncured for 30 days after Employee receives
notice thereof from the Chief Executive Officer; (v) Employee has been convicted of, or pled nolo
contendere to a felony; (vi) Employee has misappropriated funds or property of the Company; or
(vii) Employee has attempted to obtain a personal profit from any transaction in which the Employee
knows the Company has an interest, and which constitutes a corporate opportunity of the Company or
is adverse to the interests of the Company, unless the transaction was approved in writing by the
Company’s Chief Executive Officer after full disclosure of all details relating to such
transaction.



(d) Termination Upon Death or Disability. Subject to Section 3.2, Employee’s employment and the Company’s obligations under this Agreement
shall terminate: (i) automatically, effective immediately and without any notice being necessary,
upon Employee’s death; or (ii) in the event of the disability of Employee, by the Company giving
notice of termination to Employee. For purposes of this Agreement, “disability” means the
inability of Employee, due to a physical or mental impairment, for 180 days (whether or not
consecutive) during any period of 360 days to perform, with reasonable accommodation, the essential
functions of the work contemplated by this Agreement. In the event of any dispute as to whether
Employee is disabled, the matter shall be determined by the Company’s Chief Executive Officer in
consultation with a physician satisfactory to the Company, and Employee shall cooperate with the
efforts to make such determination. Any such determination shall be conclusive and binding on the
parties. Any determination of disability under this Section 3.1(d) is not intended to alter any
benefits any party may be entitled to receive under any long-term disability insurance policy
carried by either the Company or Employee with respect to Employee, which benefits shall be
governed solely by the terms of any such insurance policy. Nothing in this subsection shall be
construed as limiting or altering any of Employee’s rights under state workers compensation laws or
state or Federal family and medical leave laws.


 


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(e) Termination Upon Resignation or Retirement. Since Employee is an at-will
employee, subject to Section 3.2, Employee may terminate employment and all of the obligations
under this Agreement at any time and for any reason. If Employee terminates employment as a
result of retirement from the Company, Employee shall provide the Company with at least 90 days’
notice.



3.2 Rights Upon Termination; Non-Renewal by Company.



(a) Section 3.1(a) and 3.1(b) Termination. If Employee’s employment is terminated pursuant to Section 3.1(a) or 3.1(b) hereof or upon
expiration of this Agreement pursuant to the Company’s notice of its intention not to renew
pursuant to Section 1.1, Employee shall have no further rights against the Company hereunder,
except that the Company, subject to Section 3.2(g), will:




(i) within 10 days following the termination of employment, pay Employee (a) any unpaid
Base Salary with respect to the period prior to the effective date of termination, (b)
reimbursement of expenses to which Employee is entitled under
Section 2.4 hereof, and payment of any accrued but unused vacation to which Employee is
entitled to under Section 2.5 hereof (collectively, the “Accrued Obligations.”).




(ii) subject to Section 3.2(f), pay Employee a lump-sum severance payment (the
“Severance Payment”) 53 days following the Employee’s termination of employment, in an
amount equal to the sum of: (a) 12 months’ of Employee’s annual base salary as in effect on
the date of termination; and (b) the average of the two annual bonuses paid to Employee for
the two years immediately preceding the year in which such termination occurs; provided that
if the Employee was not employed for the period required to be eligible for two prior full
year annual bonuses, then the amount in this subparagraph (b) shall be the amount of the
annual bonus, if any, received for the year prior to the year in which termination of
employment occurred.




(iii) subject to Section 3.2(f), pay the COBRA premium for group health care coverage
for Employee and Employee’s eligible dependents, as applicable and to the extent eligible,
provided that Employee properly elects COBRA continuation coverage, for up to twelve (12)
months immediately following the date of such termination of Employee’s employment, except
that payment of such premiums shall cease if and when the Employee (and Employee’s eligible
dependents) become eligible for medical, hospital and health coverage under a plan of a
subsequent employer; and




(iv) subject to Section 3.2(f), pay up to $10,000 for outplacement services, such
services to be used within two years of termination of employment.


 


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(b) Section 3.1(c) and 3.1(e) Termination. If Employee’s employment is terminated pursuant to Sections 3.1(c) or 3.1(e) hereof, Employee
shall have no further rights against the Company hereunder, except for the right to receive the
Accrued Obligations.



(c) Section 3.1(d) Termination. If Employee’s employment is terminated pursuant to Section 3.1(d) hereof, Employee or Employee’s
estate shall have no further rights against the Company hereunder, except for the right to receive
(i) the Accrued Obligations, (ii) payment of the COBRA premium for group health care coverage for
Employee and Employee’s eligible dependents, as applicable and to the extent eligible, provided
that Employee or Employee’s estate properly elects COBRA continuation coverage, for up to twelve
(12) months immediately following the date of such termination of Employee’s employment, and (iii)
the continuing rights under the life insurance benefit under Section 2.3.



(d) Termination Pursuant to a Change of Control. If, within three (3) months before or twenty four (24) months following a Change of Control, the
Company terminates Employee’s employment without Cause pursuant to Section 3.1(a) or Employee
terminates his employment for Good Reason pursuant to Section 3.1(b), Employee shall have no
further rights against the Company hereunder, except the Company will, subject to Section 3.2(g):




(i) pay the Employee the Accrued Obligations:




(ii) subject to Section 3.2(f), pay Employee a lump-sum severance payment (the
“Severance Payment”) 53 days following the termination of employment, in an amount
equal to the sum of: (a) 2.0 times Employee’s annual base salary as in effect on the date
of termination; and (b) 2.0 times the greater of (x) the average of the two annual bonuses
paid to Employee for the two years preceding the year in which such termination occurs,
provided that if the Employee was not employed for the period required to be eligible for
two prior annual bonuses, then the amount in this subparagraph (b)(x) shall be the amount of
the annual bonus, if any, received for the year prior to the year in which termination of
employment occurred, or (y) the target bonus for the year in which such termination occurs;
provided such lump sum shall be reduced by the amount of any lump sum payable under Section
3.2(a)(ii).




(iii) subject to Section 3.2(f), pay the COBRA premium for group health care
coverage for Employee and Employee’s eligible dependents, as applicable and to the extent
eligible, provided that Employee properly elects COBRA continuation coverage, for the 24
month period immediately following the date of such termination of Employee’s employment,
except that payment of such premiums shall cease if and when the Employee (and Employee’s
eligible dependents) become eligible for medical, hospital and health coverage under a plan
of a subsequent employer; and




(iv) subject to Section 3.2(f), pay up to $10,000 for outplacement services, provided
such payment shall be reduced by the amount of any payment under Section 3.2(a)(iv), and
provided further that such services are used within two years of termination of employment.


 


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(e) Definition of Change of Control. As used herein, “Change of Control” shall mean
the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in
the ownership of a substantial portion of the assets” of the Company, as determined in accordance
with this definition. In determining whether an event shall be considered a “change in the
ownership,” a “change in the effective control” or a “change in the ownership of a substantial
portion of the assets” of the Company, the following provisions shall apply:




(i) A “change in the ownership” of the Company shall occur on the date on which any
one person, or more than one person acting as a group, acquires ownership of stock of the
Company that, together with stock held by such person or group, constitutes more than 50% of
the total fair market value or total voting power of the stock of the Company, as determined
in accordance with Treasury Regulation § 1.409A-3(i)(5)(v). If a person or group is
considered either to own more than 50% of the total fair market value or total voting power
of the stock of the Company, or to have effective control of the Company within the meaning
of part (b) of this definition, and such person or group acquires additional stock of the
Company, the acquisition of additional stock by such person or group shall not be considered
to cause a “change in the ownership” of the Company.




(ii) A “change in the effective control” of the Company shall occur on either of
the following dates:




(A) The date on which any one person, or more than one person acting as a
group, acquires (or has acquired during the 12-month period ending on the date of
the most recent acquisition by such person or persons) ownership of stock of the
Company possessing 30% or more of the total voting power of the stock of the
Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vi).
If a person or group is considered to possess 30% or more of the total voting power
of the stock of the Company, and such person or group acquires additional stock of
the Company, the acquisition of additional stock by such person or group shall not
be considered to cause a “change in the effective control” of the Company; or




(B) The date on which a majority of the members of the Company’s Board of
Directors is replaced during any 12-month period by directors whose appointment or
election is not endorsed by a majority of the members of the Company’s Board of
Directors before the date of the appointment or election, as determined in
accordance with Treasury Regulation § 1.409A-3(i)(5)(vi).




(iii) A “change in the ownership of a substantial portion of the assets” of the
Company shall occur on the date on which any one person, or more than one person acting as a
group, acquires (or has acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) assets from the Company that have a total
gross fair market value equal to or more than 40% of the total gross fair market value of
all of the assets of the Company immediately before such acquisition or acquisitions, as
determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vii). A transfer of
assets shall not be treated as a “change in the ownership of a substantial portion of the
assets” when such transfer is made to an entity that is controlled by the shareholders of
the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vii)(B).


 


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(f) Exclusive Remedy; Waiver and Release. To the extent permitted by applicable law, the payments contemplated by this Section 3.2 shall
constitute the exclusive and sole remedy for any termination of Employee’s employment by the
Company (whether pursuant to, or in violation of, the terms of this Agreement). Employee covenants
not to assert or pursue any remedies, other than an action to enforce the payments due to Employee
under this Agreement, at law or in equity, with respect to any termination of employment, and shall
execute a release and waiver on such terms and conditions as the Company may require as a condition
of entitlement to such payments. If any applicable revocation period for such release and waiver
has not expired before the date payment is due to be made hereunder, such payment shall be
forfeited.



(g) Limitation of Benefits. If any payments or benefits payable to the employee under this Agreement or otherwise would be
subject to the excise tax under Section 4999 of the Code, such payments and/or benefits will be
reduced to the extent necessary so that no amount will be subject to such excise tax; provided that
such reduction will only occur if the employee will be in a more favorable, after-tax position than
if no such reduction was made.



(h) Six Month Delay. If payment of any amount of “deferred compensation” (as defined under Section 409A of the
Code, after giving effect to the exemptions thereunder) is triggered by a Separation from Service
(as defined in Section 4.7) that occurs while the Employee is a “specified employee” with respect
to the Company (as defined under Section 409A of the Code and determined in good faith), and if
such amount is scheduled to be paid within six (6) months after such Separation from Service, the
amount shall accrue without interest and shall be paid the first business day after the end of such
six-month period, or, if earlier, within 15 days after the appointment of the personal
representative or executor of the Employee’s estate following the Employee’s death.



ARTICLE IV

GENERAL PROVISIONS




4.1 Notices. Any and all notices provided for in this Agreement shall be given in writing and shall be deemed
given to a party at the earlier of (i) when actually delivered to such party, or (ii) when mailed
to such party by registered or certified mail (return receipt requested) or sent to such party by
courier, confirmed by receipt, and addressed to such party at the address designated below for such
party as follows (or to such other address for such party as such party may have substituted by
notice pursuant to this Section 4.1):




	 	(a)	 	If to the Company:





TomoTherapy Incorporated

1240 Deming Way

Madison, WI 53717

Attn: General Counsel





	 	(b)	 	If to Employee:





9254 Bear Claw Way

Madison, WI 53717

Attn: Stephen C. Hathaway




 


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4.2 Entire Agreement. This Agreement contains the entire understanding and the full and complete agreement of the
parties and supersedes and replaces any prior understandings and agreements among the parties, with
respect to the subject matter hereof., provided that the Indemnity Agreement dated November 5,
2008, the Confidentiality and Non-Competition Agreement dated April 1, 2007, (“Confidentiality
Agreement”) and the Assignment of Inventions Agreement dated March 1, 2003, (“Assignment
Agreement”) between the Company and the Employee are and shall remain in effect.



4.3 Amendment. This Agreement may be altered, amended or modified only in a writing, signed by both of the
parties hereto. Headings included in this Agreement are for convenience only and are not
intended to limit or expand the rights of the parties hereto. References to Sections herein shall
mean sections of the text of this Agreement, unless otherwise indicated.



4.4 Assignability. This Agreement and the rights and duties set forth herein may not be assigned by Employee, but
may be assigned by the Company, in whole or in part. This Agreement shall be binding on and inure
to the benefit of each party and such party’s respective heirs, legal representatives, successors
and assigns.



4.5 Severability. If any court of competent jurisdiction determines that any provision of this Agreement is
invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the
other provisions hereof, which shall remain valid, binding and enforceable and in full force and
effect, and such invalid or unenforceable provision shall be construed in a manner so as to give
the maximum valid and enforceable effect to the intent of the parties expressed therein.



4.6 Arbitration. Any controversy, dispute or claim arising out of or relating to this Agreement (including, but
not limited to, any claim regarding the scope or effect of this Section and any claim that this
Section is invalid or unenforceable), or the breach hereof, shall be settled by a single arbitrator
in binding arbitration conducted in Milwaukee, Wisconsin in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”)(or such other arbitration service
as the parties may agree upon), and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitrator’s decision shall be in writing.
In addition to the Commercial Arbitration Rules of the AAA and unless otherwise agreed to by the
parties, the following rules shall apply:



(a) Each party shall be entitled to discovery exclusively by the following means: (i) requests
for admission, (ii) requests for production of documents, (iii) up to 15 written interrogatories
(with any subpart to be counted as a separate interrogatory), and (iv) depositions of no more than
six individuals.



(b) Unless the arbitrator finds that delay is reasonably justified or as otherwise agreed to
by the parties, all discovery shall be completed, and the arbitration hearing shall commence within
five months after the appointment of the arbitrator.



(c) Unless the arbitrator finds that delay is reasonably justified, the hearing will be
completed, and an award rendered within 30 days of commencement of the hearing.


 


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The arbitrator’s authority shall include the ability to render equitable types of relief and, in
such event, any aforesaid court may enter an order enjoining and/or compelling such actions or
relief ordered or as found by the arbitrator. The arbitrator also shall make a determination
regarding which party’s legal position in any such controversy or claim is the more substantially
correct (the “Prevailing Party”) and the arbitrator shall require the other party to pay the legal
and other professional fees and costs incurred by the Prevailing Party in connection with such
arbitration proceeding and any necessary court action. In addition, the parties expressly agree
that a court of
competent jurisdiction may enter a temporary restraining order or an order enjoining a breach of
the Assignment Agreement, the Confidentiality Agreement or any similarly subsequently executed
agreement between the parties, pending a final award or further order by the arbitrator. Such
remedy, however, shall be cumulative and nonexclusive, and shall be in addition to any other remedy
to which the parties may be entitled.



4.7 Separation from Service. “Separation from Service,” “termination of employment,” or words of similar import shall mean,
with respect to any payments of deferred compensation subject to Section 409A of the Code, the
Employee’s “separation from service” as defined in Section 409A of the Code. For this purpose, a
“separation from service” is deemed to occur on the date that the Company and the Employee
reasonably anticipate that the level of bona fide services the Employee would perform after the
date (whether as an employee or independent contractor) would permanently decrease to a level that,
based on the facts and circumstances would constitute a separation from service; provided that a
decrease to a level that is 50% or more of the average level of bona fide services provided over
the prior 36 months shall not be a Separation from Service, and a decrease to a level that is 20%
or less of the average level of such bona fide services shall be a Separation from Service. The
bona fide services taken into account for purposes of determining whether there has been a
Separation from Service shall be services performed for the Company and any person or entity that
would be considered a single employer with the Company under Section 414(b) or 414(c) of the Code;
provided that, in applying Section 1563(a)(1),(2), and (3) of the Code, the language “at least 50
percent” shall be used instead of “at least 80 percent;” and further provided that “at least 20
percent” shall be used instead of “at least 50 percent” where based on legitimate business
criteria.



4.8 Waiver of Breach. The waiver by either party of the breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach by either party.


 


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4.9 Governing Law; Construction. This Agreement shall be governed by the internal laws of the State of Wisconsin, without regard
to any rules of construction concerning the party responsible for the drafting hereof.



IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written
above.



	 	 	 	 	 	 	 
	EMPLOYEE:

	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	Stephen C. Hathaway

	 	TomoTherapy Incorporated	 	 
	 
	 	 	 	 	 	 
	/s/ Stephen C. Hathaway

	 	By:
	 	/s/ Frederick A. Robertson	 	 
	 


	 	 	 	 

Frederick A. Robertson, M.D.
	 	 
	 

	 	 	 	Chief Executive Officer	 	 







 


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