First Amendment to
Employment Agreement Between
Mid Atlantic Medical Services, Inc. and
Xxxxxx X. Xxxx
This amendment shall be the First Amendment to the Employment Agreement
("Agreement") between Mid Atlantic Medical Services, Inc. ("Company") and Xxxxxx
X. Xxxx which was entered into as of January 8, 1999.
WHEREAS, the Agreement provided for a limited retirement benefit to be paid to
Xx. Xxxx in addition to other benefits; and
WHEREAS, the Company believes it is in the best interests of the Company to
provide additional retirement benefits to Xx. Xxxx as well as adjust certain
other benefits;
NOW THEREFORE, the parties agree to amend the Agreement as follows:
1. Stock Options: Add the following to Paragraph 4:
"On both January 1, 2000 and January 1, 2001, the Company will grant
Executive options to purchase no less than 130,000 shares of MAMSI common
stock at the stock price on the date of grant. Such options will vest 50%
on the date of grant and 50% based on performance to be determined by the
Stock Option Committee and the Board at the first Board meeting in 2000 and
2001 respectively."
2. Termination for Disability: Replace "thirty (30)" in Paragraph 5 (a)(i) with
"ninety (90)".
3. Termination Under Change in Control: Delete Paragraph 6 and replace with the
following:
"6. Change in Control. Notwithstanding any other provision to the contrary,
the following provisions will govern in the event of a change in control as
defined herein.
a. A change in control shall be deemed to have occurred if, at any time,
(i) substantially all the assets of the Company shall have been sold or
transferred by sale, merger or otherwise, or if any "person" (as such
term is used in Sections 13(d) or 14(d) of the Exchange Act) is or (ii)
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 50% or more of the combined voting power of
the then-existing outstanding securities of the Company.
b. In the event of a change in control as defined in Section 6(a) above,
Executive shall be entitled to a lump sum payment which shall be equal
to two times the Executive's Base Salary and two times the amount equal
to the maximum bonus the Executive could have earned under the
applicable bonus plan for the year in which such change in control
occurs in lieu of payment under the bonus plan. Upon payment, the
obligations of the Company to employ Executive under this Agreement
shall cease.
c. In the event of a change in control as defined in Section 6(a) above,
all stock options to which Executive has been granted shall immediately
vest and become exercisable. Such acceleration of the vesting of stock
options shall be in addition to, and shall have no affect on, any
payments accrued pursuant to subsection 6(b).
d. In the event of a change in control as defined in Section 6(a) above,
the Company shall also pay to Executive an amount equal to the sum of
(x) excise taxes imposed on the Executive under Section 4999 of the
Internal Revenue Code and (y) income taxes due from the Executive with
respect to the payment of the amount in subsection (x) above as well as
the payment for income taxes under this subsection 6(d).
e. In the event of a change in control as defined in Section 6(a) above,
or any successor changes in control thereafter, the payment of all
retirement benefits as defined in Section 5(d) of this Agreement shall
become the obligation and responsibility of the successor company or
"person" noted in Section 6(a) above."
4. Retirement: Delete Paragraph 5(d) and replace it with the following:
"(d) Retirement. Subject to the vesting schedule set forth below,
retirement benefits shall be payable to Executive beginning on the day
Executive attains age sixty-two (62), (1) if he is at that time still
employed by the Company, and he elects to retire from employment with the
Company, or (2) he is not at the time employed by the Company, and elects
to begin receiving retirement benefits. Notwithstanding the above
provision, the Executive and the Company may agree that the Executive may
continue to be employed by the Company and not to retire at age 62. In
addition, the Executive may elect an early retirement and may elect to
receive payment of the retirement benefit at anytime after attaining age 55
but before age 62 by providing written notice to the Company. Such early
retirement benefit will be actuarially adjusted solely for actual
retirement age and will be subject to the vesting schedule provided below.
The date on which the Executive retires shall be referred to as the
"Retirement Termination Date".
If Executive retires on or after reaching age 62, Executive will be
entitled to receive from the Company a retirement benefit which will
provide an annual lifetime benefit in an amount equal to three percent of
the total average annual Base Salary and bonus compensation for the years
beginning on or after January 1, 1999 times the total number of months of
service with the Company, including all months prior to January 1, 1999,
divided by 12 to a limit of 60% of Executive's total compensation defined
as the total amount of annual salary and maximum annual bonus that
Executive could have earned in the calendar year of Executive's termination
of employment with the Company. If Executive elects early retirement and
retires after reaching age 55 but before age 62, the annual payment shall
be adjusted so that the total amount of retirement benefits to be paid do
not exceed the actuarial equivalent of the amount which would then have
been payable in retirement benefits had Executive reached and retired at
age 62. For the purposes of determining actuarial equivalency, the
retirement benefit will be reduced by .25% per month for each month that
the actual retirement age is below age 62.
Retirement benefits will vest 50% if Executive is employed by the Company
on January 1, 2000 and the remaining 50% if the Executive is employed on
January 1, 2001 and 100% immediately upon a change in control, death or
disability. Such retirement benefit shall be paid in single annual payments
for the life of the Executive with the initial payment made to the
Executive on the Retirement Termination Date. The Company shall not be
obligated to pay any retirement benefit under this subsection if the
Executive is terminated for cause by the Company.
Executive may elect a beneficiary to receive a survivor benefit upon the
Retirement Termination Date. If Executive dies prior to retirement without
naming a beneficiary, then Executive's surviving spouse shall be deemed to
be his named beneficiary or if Executive has no surviving spouse, to his
issue per stirpes. If Executive dies prior to retirement, the Executive's
named beneficiary shall be entitled to elect a lump sum benefit, payable
immediately or in annual payments over the beneficiary's lifetime, of the
actuarial equivalent of the retirement benefit earned to the date of death.
For this purpose, the Company will use the lower of the U.S. Government
T-Xxxx Rate or 5% and a mortality table in general use at the time of the
Executive's death.
If Executive is employed by the Company on the Retirement Termination Date,
the Company shall pay to Executive his Base Salary as then in effect that
has accrued to the last day of the month in which the Retirement
Termination Date occurs and any non-reimbursed business expenses."
5. Business Automobile: Add the following new paragraph:
"10. Business Automobile. The Company shall pay to Executive a car
allowance of $450 monthly."
6. Health Insurance: Add the following new paragraph:
"11. Health Insurance. Both the Executive and the spouse of the Executive
at the time of retirement or spouse upon death of the Executive will be
eligible for health coverage from the Company or its successor during the
term of their respective lives. Such health coverage to be paid for by
Executive or the spouse of the Executive with the normal Company
contribution for active employees in effect during the period of coverage."
7. Covenant Not to Compete: Add the following new paragraph:
"12. Covenant Not to Compete. Executive covenants and agrees that, in
consideration of the amounts to be paid Executive hereunder and other good
and valuable consideration, for a period of one (1) year beyond the Without
Cause Termination Date, Executive shall not be employed as an executive
officer of, control, manage, or otherwise participate in the management of
the business of a "significant competitor" of the Company. The term
"significant competitor" shall mean any company or division of a company
that, on Effective Date, directly or indirectly, is materially (10% or more
of its revenues) engaged in the operation or management of a health
maintenance organization or any other similar provider, payer or insurer
for medical services. The Company and Executive agree that the terms and
conditions of this Section 12 shall survive the termination of this
Agreement following the Termination Date."
8. All other terms and conditions of the Agreement remain unchanged and in full
force and effect.
9. This Amendment shall be effective as of August 11, 1999.
Signed and delivered this ____ day of September, 1999 in the Company's offices
at 0 Xxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx.
By: Mid Atlantic Medical Services, Inc. By: Xxxxxx X. Xxxx
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxx
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Name Name
President and CEO Senior EVP and CFO
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