EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of June
7, 1999 between XXXXXXXXX.XXX INC., a Delaware corporation with a principal
place of business at 00000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000, and Xxxxx X. Xxx ("Employee").
In consideration for the mutual covenants and conditions set forth
herein, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee in the capacity of
Executive Vice President. Employee accepts such employment and agrees to perform
such services as are customary to such office and shall from time to time be
assigned to him by the Chief Executive Officer.
2. TERM. Subject to earlier termination as provided in Section 5, the
employment hereunder shall be for a period of two years, commencing on May 1,
1999 (the "Commencement Date") and ending on April 30, 2001. Employee's
employment will be on a full-time basis requiring the devotion of such amount of
his productive time as is necessary for the efficient operation of the business
of the Company.
3. COMPENSATION AND BENEFITS.
3.1 SALARY. For the performance of Employee's duties
hereunder, the Company shall pay Employee an annual salary of $150,000 (less
required withholdings), payable no less frequently than twice monthly.
3.2 BONUS. Employee will be eligible to earn a cash
performance bonus in the amount of $15,000 (less required withholdings) per
quarter for Company achievement equal to 100% of the Company's quarterly
goals/objectives/benchmarks, payable within 15 days subsequent to release of the
Company's quarterly operating results. Employee will not earn a cash performance
bonus for Company achievement equal to or less than 90% of the Company's
quarterly goals/objectives/benchmarks. Employee will be eligible to earn a
pro-rated cash performance bonus for Company achievement between 90% and 100% of
the Company's quarterly goals/objectives/benchmarks. The bonus will be pro-rated
10% for every 1% achievement over 90% against the board approved business plan,
up to a 100% attainment level, as shown in the example below.
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ATTAINMENT QUARTERLY BONUS PAYMENT BASED ON $15,000 TARGET
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<= 90% No Payment
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91% $1,500 or 10%
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95% $7,500 or 50%
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100% $15,000 or 100%
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105% $15,000 or 100%
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3.3 DISCRETIONARY BONUS. At the discretion of the Board, cash
and/or equity bonus may be paid to Employee for performance deemed to merit
recognition for significant contribution to the Company business plan including
large contracts, alliances, strategic acquisitions and unforeseen positive
developments.
3.4 EQUITY COMPENSATION. The Employee has been previously
granted various stock and stock options which shall remain in full force and
effect, which are specifically listed as follows, giving effect to all stock
splits as of the date hereof.
3.4.1 STOCK GRANT. The Employee was previously granted
46,384 shares of common stock. In connection therewith, On or
about April 14, 1998, the Employee was loaned the amount of
$25,000 by the Company relating to the tax effect of 46,384
shares of common capital stock previously granted to the
Employee. The loan is evidenced by a promissory note in such
amount and will be secured by the common capital stock
granted.
3.4.2 PRIVATE OPTIONS. The Employee was previously
granted private options to purchase 109,189 shares of common
stock pursuant to the following provisions.
a. The Company agrees to cause its
shareholders, Xx X. Xxxxx, Xxxxxx X. Xxxxx and
American Medical Finance, Inc. to grant to the
Employee stock options for 109,189 shares of common
capital stock of the Company (the "Private Option")
(in addition to 46,384 shares currently owned by the
Employee), with the understanding that securities
counsel for the Company shall prepare a definitive
Stock Option Agreement with such terms and conditions
as they deem appropriate, but specifically to include
the following terms and conditions:
i. The "Private Option Price" shall
be $3.88 per share;
ii. The Stock Option Agreement shall
be structured so that Xx X. Xxxxx, Xxxxxx X.
Xxxxx and American Medical Finance, Inc. will
grant the Private Option to the Employee to
buy the shares of common capital stock for
the Private Option Price and, if necessary,
that the Company join in such Stock Option
Agreement;
iii. The Private Option shall be
deemed 100% vested upon execution of the
Stock Option Agreement;
iv. The Private Option shall expire
the earlier of 10 years from date of the
Stock Option Agreement or 12 months from
termination of employment by, or the Employee
from, the Company; and
v. The common capital stock subject
to the Private Option shall also be subject
to normal restrictions as securities counsel
to the Company shall dictate (which may
necessitate a nominal initial consideration
for grant of the options)
3.4.3 IPO OPTIONS. In connection with the Company's
initial public offering on April 6, 1999, the Employee was
granted the option to purchase 20,000 shares of common stock
under the 1997 Stock Option Plan at the price of $8.00 per
share.
3.5 BENEFITS. Employee shall be entitled to such medical,
disability, and life insurance coverage and such vacation, sick leave, and
holiday benefits, if any, as are made available to the Company's top executive
personnel, all in accordance with the Company's benefits program in effect from
time to time.
3.6 REIMBURSEMENT OF EXPENSES. Employee shall be entitled to
reimbursement for all reasonable expenses for travel, meals, and entertainment,
incurred by Employee in connection with and reasonably related to the
furtherance of the Company's business.
3.7 ANNUAL REVIEW. On each anniversary of the Commencement
Date, the Chief Executive Officer will review Employee's performance and
compensation hereunder (including salary, bonus, and stock options and/or other
equity incentives) and will approve an increase in such compensation of not less
than 5% annually, but will not have authority, as the result of such review, to
decrease any portion of such compensation without the written consent of
Employee.
4. CHANGE OF CONTROL. In the event of a Change in Control of the
Company (as defined below), all options then granted to Employee which are
unvested at the date of the Change in Control will be immediately vested. In
addition, in the event of a termination of Employee's employment for any reason
(other than as set forth in Section 5.1(f)) following a Change of Control, the
Company will promptly pay Employee, in addition to the amounts required under
Section 5.2(a), a lump-sum severance amount payable immediately upon such
termination of employment, equal to one-half of his then current annual salary.
This payout shall be in lieu of any amount which may otherwise be due under
Section 5.2(b).
As used herein, a "Change of Control" of the Company shall be deemed to
have occurred:
(a) Upon the consummation, in one transaction or a series of related
transactions, of the sale or other transfer of voting power (including voting
power exercisable on a contingent or deferred basis as immediately exercisable
voting power) representing effective control of the Company to a person or group
of related persons who, on the date of this Agreement, is not affiliated (within
the meaning of the Securities Act of 1933) with the Company, whether such sale
or transfer results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which the
Company is a constituent corporation and in which the Company's stockholders
immediately prior thereto will beneficially own, immediately thereafter,
securities of the Company or any surviving or new corporation resulting
therefrom having less than a majority of the voting power of the Company or any
such surviving or new corporation; or
(c) Upon the consummation of a sale, lease, exchange, or other transfer
or disposition by the Company of all or substantially all its assets to any
person or group of related persons.
5. TERMINATION.
5.1 TERMINATION EVENTS. The employment hereunder will
terminate upon the occurrence of any of the following events:
(a) Employee dies;
(b) The Company, by written notice to Employee or his personal
representative, discharges Employee due to the inability to perform the duties
assigned to him hereunder for a continuous period exceeding 90 days by reason of
injury, physical or mental illness, or other disability, which condition has
been certified by a physician; provided, however, that prior to discharging
Employee due to such disability, the Company shall give a written statement of
findings to Employee or his personal representative setting forth specifically
the nature of the disability and the resulting performance failures, and
Employee shall have a period of ten (10) days thereafter to respond in writing
to the Company's findings;
(c) Employee is discharged by the Company for cause. As used
in this Agreement, the term "cause" shall mean:
(i) Employee's conviction of (or pleading guilty or
NO LO CONTENDERE to) a felony or misdemeanor involving dishonesty or moral
turpitude; or
(ii) (a) the willful and continued failure of
Employee to substantially perform his duties with the Company (other than any
such failure resulting from illness or disability) after a demand for
substantial performance is requested by the Company's Chief Executive Officer,
which specifically identifies the manner in which it is claimed Employee has not
substantially performed his duties, or (b) Employee is willingly engaged in
misconduct which has a direct and material adverse monetary effect on the
Company. For purposes of this subpart (ii) no act or failure to act on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's actions were in the best interest of the Company. No termination
shall be effected for cause pursuant to this subpart (ii) unless Employee has
been provided with specific information as to the acts or omissions which form
the basis of the allegation of cause, and Employee has had an opportunity to be
heard, with counsel if he so desires, before the Board of Directors and such
Board determines in good faith that Employee was guilty of conduct constituting
"cause" as herein defined, specifying the particulars thereof in detail;
(d) Employee is discharged by the Chief Executive Officer of
the Company without cause, which the Company may do at any time upon notice to
Employee;
(e) Employee voluntarily terminates his employment due to
either (i) a default by the Company in the performance of any of its obligations
hereunder, or (ii) an Adverse Change in Duties (as defined below), which default
or Adverse Change in Duties remains unremedied by the Company for a period of
ten (10) days following its receipt of written notice thereof from Employee; or
(f) Employee voluntarily terminates his employment for any
reason other than the Company's default or an Adverse Change in Duties, which
Employee may do at any time with at least 30 days advance written notice.
As used herein, "Adverse Change in Duties" means an action or series of
actions taken by the Company, without Employee's prior written consent, which
results in:
(1) A change in Employee's reporting responsibilities, titles,
job responsibilities, or offices, which, in Employee's reasonable judgment,
results in a diminution of his status, control, or authority;
(2) The assignment to Employee of any positions, duties, or
responsibilities which, in Employee's reasonable judgment, are inconsistent with
Employee's positions, duties, and responsibilities or status with the Company;
(3) A requirement by the Company that Employee be based or
perform his duties anywhere other than (i) at the Company's corporate office
location on the date of this Agreement, or (ii) if the Company's corporate
office location is moved after the date of this Agreement, at a new location
that is no more than 60 miles from such prior location; or
(4) A failure by the Company (i) to continue in effect any
material benefit, whether or not qualified, or other compensation, bonus, or
incentive plan in effect on the date of this Agreement or subsequently adopted,
(ii) to continue Employee's participation in such benefits or plans at the same
level or to the same extent as on the Commencement Date or, with respect to
subsequently adopted benefits or plans, on the date of the initial
implementation thereof, or (iii) to provide for Employee's participation in any
newly adopted benefits or plans at a level commensurate, in Employee's
reasonable judgment, with that of other top executives of the Company.
5.2 EFFECTS OF TERMINATION.
(a) Upon termination of Employee's employment hereunder for
any reason, the Company will promptly pay Employee all compensation owed to
Employee and unpaid through the date of termination (including, without
limitation, salary and employee expense reimbursements).
(b) In addition (except in a situation where severance is due
pursuant to Section 4), if Employee's employment is terminated under Sections
5.1(a), (b), (d), or (e), the Company shall also pay Employee, immediately upon
such termination of employment, a lump-sum severance amount equal to his then
current annual salary.
(c) Upon termination of Employee's employment hereunder for
any reason, Employee agrees that for the one year period following the
Termination Event:
(i) Employee will not directly or indirectly, whether
for his own account or as an individual, employee, director, consultant, or
advisor, or in any other capacity whatsoever, provide services to any other
person, firm, corporation, or other business enterprise which is involved in
claims processing or other healthcare related matters unless he obtains the
prior written consent of the Chief Executive Officer.
(ii) Employee will not directly or indirectly
encourage or solicit, or attempt to encourage or solicit, any individual to
leave the Company's employ for any reason or interfere in any other manner with
the employment relationships at the time existing between the Company and its
current or prospective employees.
(iii) Employee will not induce or attempt to induce
any customer, supplier, distributor, licensee, or any other business relation of
the Company to cease doing business with the Company or in any way interfere
with the existing business relationship between any such customer, supplier,
distributor, licensee, or any other business relation and the Company.
Employee acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
breach of the foregoing restrictive covenants. Accordingly, in the event of any
such breach, the Company shall, in addition to any remedies available to the
Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Employee from continuing to engage in such breach.
If any restriction set forth in this paragraph is held to be
unreasonable, then Employee and the Company agree, and hereby submit, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
6. GENERAL PROVISIONS.
6.1 ASSIGNMENT. Neither party may assign or delegate any of
its rights or obligations under this Agreement without the prior written consent
of the other party, except that the Company may assign its rights and
obligations hereunder to a successor by merger or an assignee of all or
substantially all of the Company's assets.
6.2 TAXES. The Employee shall be fully responsible for all
personal tax liabilities related to all compensation components of this
Agreement, with the exception being the normal employer matching contributions
for Medicaid/Medicare and Social Security on the base salary of Employee.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior agreements between the parties relating to such
subject matter.
6.4 MODIFICATIONS. This Agreement may be changed or modified
only by an agreement in writing signed by both parties hereto.
6.5 SUCCESSOR AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and assigns and Employee and Employee's legal representatives, heirs,
legatees, distributees, assigns, and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join and be bound by the terms and conditions hereof.
6.6 GOVERNING LAW. This Agreement shall be governed by, and be
construed in accordance with, the laws of Delaware.
6.7 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect.
6.8 FURTHER ASSURANCES; COMMITTEES OF BOARD. The parties will
execute such further instruments and take such further actions as may be
reasonably necessary to carry out the intent of this Agreement. The term "Board
of Directors" shall include any committee of the Board.
6.9 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed received by the
recipient when delivered personally or, if mailed, five (5) days after the date
of deposit in the United States mail, certified or registered, postage prepaid
and addressed, in the case of the Company, to 00000 Xxxxx Xxxxxxx Xxxxxxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxx 00000, and in the case of Employee, to 0000 Xxxxxxxxxx
Xxxxx, Xxxxx, Xxxxx 00000, or to such other address as either party may later
specify by at least ten (10) days advance written notice delivered to the other
party in accordance herewith.
6.10 NO WAIVER. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver of that
provision, nor prevent that party from thereafter enforcing that provision or
any other provision of this Agreement.
6.11 LEGAL FEES AND EXPENSES. In the event of any disputes
under this Agreement, each party shall be responsible for their own legal fees
and expenses which it may incur in resolving such dispute.
6.12 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Employee have executed
this Agreement effective as of the date first above written.
XXXXXXXXX.XXX INC.
BY: /S/ Xx X. Xxxxx
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XX X. XXXXX
CHIEF EXECUTIVE OFFICER
EMPLOYEE
/S/ Xxxxx X. Xxx
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XXXXX X. XXX
EXECUTIVE VICE PRESIDENT
