EMPLOYMENT AGREEMENT
AGREEMENT
dated as
of the 15th
day of
April, 2006 by and between Netsmart Technologies, Inc., a Delaware corporation
with its principal office at 0000 Xxxxxxx Xxxxxxx, Xxxxx X-000, Xxxxx Xxxxx,
Xxx
Xxxx 00000 (the “Company”), and Xxxxxx Xxxx, residing at 00 Xxxxxxx Xxxxxx, Xxxx
Xxxxxx, XX 00000 (the “Executive”) superceding all other agreements or
understandings heretofore in effect.
WITNESSETH:
WHEREAS,
the
Company formerly employed the Executive as the chief executive officer of its
subsidiary, Creative Socio-Medics Corp. (“CSM”) and as an officer of the
Company; and
WHEREAS,
notwithstanding Executive’s retirement from those positions effective December
31, 2005, the Company desires to continue to obtain the benefits of Executive’s
knowledge, skill and ability and to continue to employ Executive on the terms
and conditions hereinafter set forth; and
WHEREAS,
the
Executive desires to provide his services to the Company and to accept
employment by the Company on the terms and conditions hereinafter set
forth;
NOW,
THEREFORE,
in
consideration of the mutual promises set forth in this Agreement, the parties
agree as follows:
1. Employment
and Duties.
(a) Subject
to the terms and conditions hereinafter set forth, the Company hereby employs
the Executive. During the Employment Term, as hereinafter defined, the Executive
shall report to the Company’s chief executive officer. The Executive shall work
in developing and managing strategic sales opportunities. The Executive shall
also perform such other duties and responsibilities as may be determined by
the
Company’s board of directors (the “Board”) or the Company’s chief executive
officer, as long as such duties and responsibilities are consistent with those
of a senior executive officer.
(b) The
Executive shall serve as a director of the Company or any of its subsidiaries,
if elected, and in such executive capacity or capacities with respect to any
affiliate of the Company to which he may be elected or appointed, provided
that
such duties are consistent with those of a senior executive officer. During
the
Employment Term, the Executive shall receive no additional compensation for
services rendered pursuant to this Paragraph 1(b).
(c) Unless
terminated earlier as provided for in Paragraph 1(d) or Paragraph 6 of this
Agreement, this Agreement shall have a term commencing as of the date of this
Agreement and expiring on the first anniversary date thereof. Notwithstanding
the foregoing, the parties may mutually agree to extend the initial term for
successive one-year periods, which agreement by the Company shall not be
unreasonably withheld in the event that Executive achieves strategic sales
in
accordance with the Company’s 2006 strategic sales commission Plan, attached as
Exhibit A hereto (“Strategic Sales Plan”).
(d) Notwithstanding
the provisions of Paragraph 1(c) of this Agreement, as long as this Agreement
shall not have been terminated pursuant to Paragraph 6(a), (b) or (c) of this
Agreement, the Executive, on ninety (90) days written notice to the Board,
shall
have the right to terminate the Employment Term, in which event (i) the
Employment Term shall end on the date set forth in such notice with the same
effect as if such date were the last day of the Employment Term set forth in
Paragraph 1(c) of this Agreement, and (ii) such termination of the Employment
Term by the Executive shall be deemed to be Retirement by the Executive as
such
term is defined in the Company’s Executive Retirement Plan (the terms and
conditions of which are incorporated by reference herein).
2. Executive’s
Performance of Duties.
The
Executive hereby accepts the employment contemplated by this Agreement. During
the Employment Term, the Executive shall devote one-half of his business time
to
the performance of his duties under this Agreement, and shall perform such
duties diligently, in good faith and in a manner consistent with the best
interests of the Company.
3. Compensation
and Other Benefits.
(a)
For his
services to the Company during the Employment Term, the Company shall pay the
Executive an annual salary (“Salary”) at the rate of $112,000. All Salary
payments shall be payable in such installments as the Company regularly pays
its
executive officers, but not less frequently than semi-monthly.
(b) The
Executive will participate in the yearly Strategic Sales Plan. Such commissions
will be paid quarterly strategic.
(c) If
the
Compensation Committee of the Board (“the Committee”) establishes a bonus plan
or bonus pool for the Company’s key management employees, which bonus plan or
bonus pool may be based on a percentage of the Company’s net income or such
other formula as the Committee may determine, or which bonus plan or bonus
pool
may be based on the Committee’s judgmental assessment of the Company’s strategic
progress and performance (including, but not limited to, the successful
completion or implementation of certain acquisitions, divestitures, partnerships
or other business combinations), the Executive shall participate in such bonus
plan or pool commensurate with his position in the Company. In the event a
bonus
pool is established, the parties intend that the Executive shall receive a
bonus
in an amount equal to 50% of the average bonus paid to the Company’s senior
management team, excluding bonuses paid to the Company’s Chief Executive Officer
and Chief Financial Officer. The size of the bonus pool and the extent of
Executive’s participation in the bonus pool will be determined by the
Compensation Committee, whose determination shall be final, binding and
conclusive on the Company and the Executive. If, for any year, no bonus plan
or
bonus pool is established, the Executive shall be eligible for a discretionary
bonus as determined by the Compensation Committee and the Board. Any bonus
payments made to the Executive shall hereinafter be referred to as
“Bonus.”
(d)
The
Executive shall receive the following benefits during the Employment Term and
for a period of six calendar years following Retirement (including the year
in
which Retirement occurs):
(i) Major
medical health insurance for the Executive and members of his immediate
family.
(ii) Accident
and life insurance to the extent such benefits are currently provided to the
Company’s executive officers, and long-term disability insurance which is
currently in effect for the Executive, provided that the aggregate premiums
paid
directly by the Company and/or reimbursed by the Company to the Executive for
such insurance coverage shall not exceed $7,500 per annum, and provided further
that during Retirement such insurance coverage shall only be provided to
Executive to the extent permitted by the Company’s insurers. Should the
aggregate premium for such insurance coverage be less than $7,500 per annum
during the term of this Agreement, the Executive may, in his sole discretion,
obtain additional insurance coverage such that the aggregate premium of such
additional insurance and the insurance then in force shall not exceed $7,500
per
annum, and the premium for such additional insurance shall be timely reimbursed
to the Executive by the Company.
(iii) Long-term
medical care insurance to the extent that the Company is able, by using
reasonable efforts, to obtain such coverage for an annual premium which does
not
exceed $3,000. To the extent that the annual premium for such coverage exceeds
$3,000, if the Executive desires such coverage, he shall be responsible for
the
additional premiums.
(e) The
Executive shall receive the following benefits during the Employment
Term:
(i) An
automobile allowance of $1,200 per month payable monthly.
(ii) Vacation
of five (5) weeks per annum.
(f) Subsequent
to the Employment Term for the balance of the Executive’s life, the Company will
obtain major medical health insurance for the Executive and his spouse which
is
comparable with the major medical and other health insurance provided from
time
to time by the Company to its employees; provided that to the extent that such
insurance costs the Company more than $600 per month, any excess premium shall
be paid by the Executive. In the event that the Executive is covered by major
medical insurance by another company subsequent to the termination of the
Employment Term, the Company shall not be required to provide such benefits
to
the Executive.
(g) Any
payments (“disability insurance payments”) received by the Executive pursuant to
a disability policy obtained through the Company (whether paid for by the
Company or the Executive) shall be applied on a dollar-for-dollar basis to
reduce the Salary or disability payments payable by the Company pursuant to
this
Agreement during the period when such disability insurance payments are being
made.
4. Reimbursement
of Expenses.
The
Company shall reimburse the Executive, upon presentation of proper expense
statements, for all authorized, ordinary and necessary out-of-pocket expenses
reasonably incurred by the Executive during the Employment Term in connection
with the performance of his services pursuant to this Agreement hereunder in
accordance with the Company’s expense reimbursement policy.
5. INTENTIONALLY
OMITTED
6. Termination
of Employment.
(a) This
Agreement and Executive’s employment hereunder shall terminate immediately upon
the death of the Executive.
(b) This
Agreement and Executive’s employment relationship pursuant to this Agreement,
may be terminated by the Executive or the Company on not less than thirty (30)
days’ written notice in the event of Executive’s Disability. For purposes of
this Agreement, the term “Disability” shall mean any illness, disability or
incapacity of the Executive which prevents him from substantially performing
his
regular duties for a period of three (3) consecutive months or four (4)
months, even though not consecutive, in any twelve (12) month period. However,
if the Executive is covered by long-term disability insurance, the Company
may
not terminate this Agreement pursuant to this Paragraph 6(b) unless the
Executive is then eligible for and receiving disability payments under his
long-term disability insurance.
(c)
In the
event of a termination of the Executive’s employment as a result of his death or
Disability, as herein defined, the Company shall continue to pay to the
Executive or his beneficiary, his Salary at the annual rate in effect at the
date of death or date of termination resulting from a Disability, until the
earlier of (i) six (6) months from the date of death or such termination
resulting from a Disability or (ii) the expiration of the Employment
Term.
(d) The
Company may terminate this Agreement and the Executive’s employment relationship
pursuant to this Agreement for Cause, in which event no further compensation
shall be payable to Executive subsequent to the date of such termination. The
term “Cause” shall mean (i) repeated failure to perform material
instructions from the Board, provided that such instructions are reasonable
and
consistent with Executive’s duties as set forth in Paragraph 1 of this
Agreement, (ii) a breach of Paragraphs 7, 8 or 9 of this Agreement; (iii) a
breach of trust whereby the Executive obtains personal gain or benefit at the
expense of or to the detriment of the Company; or (iv) a conviction of the
Executive of any felony. If the Company proposes to terminate this Agreement
pursuant to clauses (i), (ii) or (iii) of this Paragraph 6(d), the Company
shall
notify the Executive in writing setting forth in reasonable detail the basis
for
the proposed termination, and the Executive shall have a reasonable opportunity
to respond to the Board and to be represented before the Board by counsel.
If
this Agreement is terminated pursuant to clause (iv) of this Paragraph 6(d),
and
the conviction is subsequently reversed on appeal, the Company shall pay the
Executive his Salary for the balance of the Employment Term. For purposes of
clause (iv) of this Paragraph 6(d), a guilty plea or plea of nolo contendere
or
similar plea shall be deemed to be a conviction.
(e) In
the
event that the Company terminates the Executive’s employment other than as
provided in Paragraphs 6(a), (b), (c) and (d) hereof, the Company shall pay
to Executive as severance payments (w) his Salary then in effect as
provided in this Agreement for the balance of the Employment Term, (x) his
Bonus for the year immediately preceding such termination for the balance of
the
Employment Term, (y) his automobile allowance, and (z) amounts due in respect
of
earned, but unused vacation, all of which shall be paid annually in twelve
(12)
equal monthly installments commencing within the month following the month
in
which Executive’s termination occurs. The period during which such severance
payments are payable shall be considered the “Severance Period”, and following
any such Severance Period, the Executive’s Retirement shall commence for
purposes of this Agreement and the Company’s Executive Retirement
Plan.
7. Trade
Secrets and Proprietary Information.
The
Executive recognizes and acknowledges that the Company, through the expenditure
of considerable time and money, has developed and will continue to develop
in
the future, information concerning customers, clients, marketing, products,
services, business, research and development activities and operational methods
of the Company and its customers or clients, contracts, financial or other
data,
technical data or any other confidential or proprietary information possessed,
owned or used by the Company, the disclosure of which could or does have a
material adverse effect on the Company, its business, any business it proposes
to engage in, its operations, financial condition or prospects and that the
same
are confidential and proprietary and considered “confidential information” of
the Company for the purposes of this Agreement. In consideration of his
employment hereunder, the Executive agrees that he will not, during or after
the
Term, without the consent of the Board make any disclosure of
confidential information
now or hereafter possessed by the Company, to any person, partnership,
corporation or entity either during or after the term here of, except that
nothing in this Agreement shall be construed to prohibit the Executive from
using or disclosing such information (a) if such disclosure is necessary in
the
normal course of the Company’s business in accordance with Company policies or
instructions or authorization from the Board, (b) such information shall become
public knowledge other than by or as a result of disclosure by a person not
having a right to make such disclosure, (c) complying with legal process;
provided, that in the event the Executive is required to make disclosure
pursuant to legal process, the Executive shall give the Company prompt notice
thereof and the opportunity to object to the disclosure, or (d) subsequent
to
the Term, if such information shall have either (i) been developed by the
Executive independent of any of the Company’s confidential or proprietary
information or (ii) been disclosed to the Executive by a person not subject
to a
confidentiality agreement with or other obligation of confidentiality to the
Company. For the purposes of Paragraphs 7, 8 and 9 of this Agreement,
the term “Company” shall include the Company, its parent, its subsidiaries and
affiliates.
8. Covenant
Not To Solicit or Compete.
(a) During
the period from the date of this Agreement until one (1) year after the
Executive is no longer receiving payments from the Company hereunder or under
the Company’s Executive Retirement Plan, the Executive will not, directly or
indirectly:
(i) Persuade
or attempt to persuade any person or entity which is or was a customer, client
or supplier of the Company to cease doing business with the Company,
or to
reduce
the amount of business it does with the Company (the terms “customer” and
“client” as used in this Paragraph 8 to include any potential customer or
client to whom the Company submitted bids or proposals, or with whom the Company
conducted negotiations, during the term of Executive’s employment hereunder or
during the twelve (12) months preceding the termination of his
employment);
(ii) solicit
for himself or any other person or entity other than the Company the business
of
any person or entity which is a customer or client of the Company, or was a
customer or client of the Company during the one (1) year period prior to the
termination of his employment;
(iii) persuade
or attempt to persuade any employee of the Company, or any individual who was
an
employee of the Company during the one (1) year period prior to the termination
of his employment, to leave the Company’s employ, or to become employed by any
person or entity other than the Company; or
(iv) engage
in
any business in the United States whether as an officer, director, consultant,
partner, guarantor, principal, agent, employee, advisor or in any manner, which
directly competes with the business of the Company as it is engaged in at the
time of the termination of this Agreement, unless, at the time of such
termination or thereafter during the period that the Executive is bound by
the
provisions of this Paragraph 8, the Company ceases to be engaged in such
activity, provided, however, that nothing in this Paragraph 8 shall be
construed to prohibit the Executive from owning an interest of not more than
five (5%) percent of any public company engaged in such activities.
(b) The
Executive acknowledges that the restrictive covenants (the “Restrictive
Covenants”) contained in Paragraphs 7, 8 and 9 of this Agreement as a
condition of his employment are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any
of
the Restrictive Covenants, or any part of any of the Restrictive Covenants,
is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall remain in full force and effect,
without regard to the invalid portion. If any court determines that any of
the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have
the
power to reduce the geographic or temporal scope of such provision, as the
case
may be, and, in its reduced form, such provision shall then be
enforceable.
(c)
The
Company acknowledges that the payment of his severance hereunder and/or any
other compensation or benefit due to the Executive is a necessary prerequisite
to the Executive being bound by the Restrictive Covenants. If the Company fails
to pay to the Executive his severance hereunder, and/or any other compensation
or benefit due to the Executive, or any part thereof, within ten business days
after receipt of written notice of such failure, the Executive shall be relieved
of his obligations to comply with the Restrictive Covenants.
9. Inventions
and Discoveries.
Executive
agrees promptly to disclose in writing to the Company any invention or discovery
made by him during the period of time that this Agreement remains in full force
and effect, whether during or after working hours, in any business in which
the
Company is then engaged or which otherwise relates to any product or service
dealt in by the Company and such inventions and discoveries shall be the
Company’s sole property. Upon the Company’s request, Executive shall execute and
assign to the Company all applications for copyrights and letters patent of
the
United States and such foreign countries as the Company may designate, and
Executive shall execute and deliver to the Company such other instruments as
the
Company deems necessary to vest in the Company the sole ownership of all rights,
title and interest in and to such inventions and discoveries, as well as all
copyrights and/or patents. If services in connection with applications for
copyrights and/or patents are performed by Executive at the Company’s request
after the termination of his employment hereunder, the Company shall pay him
reasonable compensation for such services rendered after termination of this
Agreement.
10. Injunctive
Relief.
Executive
agrees that his violation or threatened violation of any of the provisions
of
Paragraphs 7, 8 or 9 of this Agreement shall cause immediate and
irreparable harm to the Company. In the event of any breach or threatened breach
of any of said provisions, Executive consents to the entry of preliminary and
permanent injunctions by a court of competent jurisdiction prohibiting Executive
from any violation or threatened violation of such provisions and compelling
Executive to comply with such provisions. This Paragraph 10 shall not
affect or limit, and the injunctive relief provided in this Paragraph 10
shall be in addition to, any other remedies available to the Company at law
or
in equity or in arbitration for any such violation by Executive. In the event
an
injunction is issued against any such violation by Executive, the period
referred to in Paragraph 8 of this Agreement shall continue until the later
of the expiration of the period set forth therein or one (1) month from the
date
a final judgment enforcing such provisions is entered and the time for appeal
has lapsed. Subject to Paragraph 8(c) of this Agreement, the provisions of
Paragraphs 7, 8, 9 and 10 of this Agreement shall survive any termination of
this Agreement and Executive’s employment relationship with the Company pursuant
to this Agreement.
11. Indemnification.
The
Company shall provide the Executive with payment of legal fees and
indemnification to the maximum extent permitted by the Company’s Certificate of
Incorporation, By-Laws, and the Delaware General Corporation Law.
12. Miscellaneous.
(a) Executive
represents, warrants, covenants and agrees that he has a right to enter into
this Agreement, that he is not a party to any agreement or understanding, oral
or written, which would prohibit performance of his obligations under this
Agreement, and that he will not use in the performance of his obligations
hereunder any proprietary information of any other party which he is legally
prohibited from using. The Company represents, warrants and agrees that it
has
full power and authority to execute and deliver this Agreement and perform
its
obligations hereunder. The Company further represents, warrants and agrees
that
the Agreement: (x) has been duly authorized by the Board and no other corporate
action is required of the Company to enter into this Agreement and perform
its
obligations hereunder; (y) does not require the consent of any third party;
and
(z) does not violate any law, regulation, rule or material agreement, mortgage,
bond, pledge, note or other instrument to which it or its properties are bound.
(b) Any
notice, consent or communication required under the provisions of this Agreement
shall be given in writing and sent or delivered by hand, overnight courier
or
messenger service, against a signed receipt or acknowledgment of receipt, or
by
registered or certified mail, return receipt requested, or facsimile or similar
means of communication if receipt is acknowledged or if transmission is
confirmed by mail as provided in this Paragraph 12(b), to the parties at
their respective addresses set forth at the beginning of this Agreement or
by
facsimile to the Company at (000) 000-0000 or to Executive at 00 Xxxxxxx
Xxxxxx, Xxxx Xxxxxx, XX 00000, with notice to the Company being sent to the
attention of the individual who executed this Agreement on behalf of the
Company. Either party may, by like notice, change the person, address or
facsimile number to which notice is to be sent. If no facsimile number is
provided for the Executive, notice to him shall not be sent by
facsimile.
(c) This
Agreement shall in all respects be construed and interpreted in accordance
with,
and the rights of the parties shall be governed by, the laws of the State of
New
York applicable to contracts executed and to be performed wholly within such
State, without regard to principles of conflicts of laws except that the
provisions of Paragraph 11 shall be governed by the Delaware General
Corporation law.
(d) Except
for actions, suits, or proceedings taken pursuant to or under Paragraph 8,
9, 10
or 11 of this Agreement, any dispute concerning this Agreement or the rights
of
the parties hereunder shall be submitted to binding arbitration in New York
City
before a single arbitrator under the rules of the American Arbitration
Association. The award of the arbitrator shall be final, binding and conclusive
on all parties, and judgment on such award may be entered in any court having
jurisdiction. The arbitrator shall have the power, in his discretion, to award
counsel fees and costs to the prevailing party. The arbitrator shall have no
power to modify or amend any specific provision of this Agreement except as
expressly provided in Paragraph 12(f) of this Agreement.
(e) Notwithstanding
the provisions of Paragraph 12(d) of this Agreement, with respect to any
claim for injunctive relief or other equitable remedy pursuant to
Paragraph 10 of this Agreement or any claim to enforce an arbitration award
or to compel arbitration, the parties hereby (i) consent to the exclusive
jurisdiction of the United States District Court for the Southern or Eastern
District of New York and Supreme Court of the State of New York in the County
of
New York or Suffolk, (ii) agree that any process in any action commenced in
such court under this Agreement may be served upon them personally, either
(x)
by certified or registered mail, return receipt requested, or by Federal Express
or other courier service which obtains evidence of delivery, with the same
full
force and effect as if personally served upon them in New York City or Suffolk
County, as the case may be, or (y) by any other method of service permitted
by
law, and (iii) waives any claim that the jurisdiction of any such court is
not a convenient forum for any such action and any defense of lack of in
personam jurisdiction with respect thereof.
(f) If
any
term, covenant or condition of this Agreement or the application thereof to
any
party or circumstance shall, to any extent, be determined to be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term,
covenant or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced
to
the fullest extent permitted by law, and any court or arbitrator having
jurisdiction may reduce the scope of any provision of this Agreement, including
the geographic and temporal restrictions set forth in Paragraph 8 of this
Agreement, so that it complies with applicable law.
(g) This
Agreement constitute the entire agreement of the Company and the Executive
as to
the subject matter hereof, superseding all prior or contemporaneous written
or
oral understandings or agreements, including any and all previous employment
agreements or understandings, all of which are hereby terminated, with respect
to the subject matter covered in this Agreement. This Agreement may not be
modified or amended, nor may any right be waived, except by a writing which
expressly refers to this Agreement, states that it is intended to be a
modification, amendment or waiver and is signed by both parties in the case
of a
modification or amendment or by the party granting the waiver. No course of
conduct or dealing between the parties and no custom or trade usage shall be
relied upon to vary the terms of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on any occasion
shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement.
(h) Neither
party hereto shall have the right to assign or transfer any of its or his rights
hereunder except in connection with a merger of consolidation of the Company
or
a sale by the Company of all or substantially all of its business and
assets.
(i) This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, executors, administrators and permitted
assigns.
(j) The
headings in this Agreement are for convenience of reference only and shall
not
affect in any way the construction or interpretation of this
Agreement.
(k) No
delay
or omission to exercise any right, power or remedy accruing to either party
hereto shall impair any such right, power or remedy or shall be construed to
be
a waiver of or an acquiescence to any breach hereof. No waiver of any breach
hereof shall be deemed to be a waiver of any other breach hereof theretofore
or
thereafter occurring. Any waiver of any provision hereof shall be effective
only
to the extent specifically set forth in an applicable writing. All remedies
afforded to either party under this Agreement, by law or otherwise, shall be
cumulative and not alternative and shall not preclude assertion by such party
of
any other rights or the seeking of any other rights or remedies against any
other party.
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first above
written.
| NETSMART TECHNOLOGIES, INC. | ||
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| By: | /s/ Xxxx S.T. Xxxxxxxxx | |
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Chairman, Compensation Committee |
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| By: | /s/ Xxxxx X. Xxxxxx | |
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Xxxxx X. Xxxxxx, Chief Executive Officer |
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| THE EXECUTIVE | ||
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/s/ Xxxxxx Xxxx | |
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Xxxxxx Xxxx |
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