EMPLOYMENT AGREEMENT
EXHIBIT 10.1
This Employment Agreement is made and entered into effective as of April 29, 2008 (the
“Effective Date”), by and between Emageon Inc., a Delaware corporation (the “Company”), and
Xxxx X. Xxxxxxxx, an individual resident of the State of Alabama (the “Employee”), the
terms and conditions of which are as follows:
SECTION 1. EFFECTIVE DATE; POSITION; TERM OF EMPLOYMENT
(a) The Company shall employ Employee as Chief Financial Officer (the “Position”)
during the term of his employment, subject to the terms and conditions set forth in this Employment
Agreement, and Employee hereby accepts such employment.
(b) Unless earlier terminated as provided herein, Employee’s employment under this Employment
Agreement shall be for a rolling, twelve (12) month term (the “Term”) commencing on the Effective
Date, and shall be deemed to automatically, without further action by either the Company or
Employee, extend each day for an additional day, such that the remaining term of the Employment
Agreement shall continue to be twelve months; provided, however, that either party may, by written
notice to the other, cause this Employment Agreement to cease to extend automatically and, upon
such notice, the “Term” of this Employment Agreement shall be the twelve months following the date
of such notice. If no such notice to cease to extend has been given and the Employee’s employment
is terminated by the Employee for Good Reason or by the Company without Cause, for purposes of
calculating the Severance Period as defined in Section 5(c)(2) below, the remaining Term of this
Employment Agreement shall be deemed to be twelve months from the Employee’s Date of Termination.
SECTION 2. POSITION AND DUTIES AND RESPONSIBILITIES
(a) Duties and Responsibilities. Employee’s duties and responsibilities shall be
those normally associated with the Position, plus any additional duties and responsibilities that
the Chief Executive Officer (“CEO”) of the Company from time to time may assign orally or
in writing to Employee. Employee shall report to the CEO and shall have such powers as may be
delegated to him by the CEO. Employee shall undertake to perform all Employee’s duties and
responsibilities for the Company in good faith and on a full-time basis and shall at all times act
in the course of Employee’s employment under this Employment Agreement in the best interest of the
Company.
SECTION 3. COMPENSATION AND BENEFITS
(a) Base Salary. Employee’s initial base salary shall be Two Hundred Ten Thousand
Dollars ($210,000) per year (“Base Salary”), which Base Salary shall be payable in
accordance with the Company’s standard payroll practices and policies for executive officers and
shall be subject to such withholdings as required by law or as otherwise permissible under such
practices or policies. The Base Salary shall be subject to periodic increases (but not decreases)
as determined by the Company.
(b) Annual Bonus and Other Incentive Compensation. During the Term, Employee shall be
eligible to receive an annual bonus based upon achieving targeted financial objectives or
other performance goals, in accordance with the annual bonus plan established by the
Compensation Committee (the “Committee”) of the Company’s Board of Directors (the
“Board”). Employee shall also be eligible to participate in such other annual bonus and
incentive compensation programs as the Board shall make available to similarly situated officers.
(c) Employee Benefit Plans. Employee shall be entitled to participate in the equity
compensation and employee benefit plans, programs and policies (including health, life, disability,
dental and retirement plans) maintained by the Company that cover similarly-situated officers in
accordance with the terms and conditions of such plans, programs and policies as in effect from
time to time.
(d) Vacation. Employee shall be paid time off for vacation in addition to paid time
off for illness, holidays and personal reasons in accordance with the Company’s plans, policies and
practices as in effect from time to time. Such paid vacation shall be taken at such time or times
so as not to materially and adversely interfere with the business of the Company.
(e) Business Expenses. Employee shall have the right to be promptly reimbursed for
Employee’s reasonable and appropriate business expenses which Employee incurs in connection with
the performance of Employee’s duties and responsibilities under this Employment Agreement in
accordance with the Company’s expense reimbursement policies and procedures as in effect from time
to time.
SECTION 4. TERMINATION OF EMPLOYMENT
(a) Death. Employee’s employment shall terminate automatically upon Employee’s death.
(b) Disability. The Company shall have the right to terminate Employee’s employment
on or after the date Employee incurs a Disability. The term “Disability” as used in this
Employment Agreement shall have the meaning ascribed to such term in the Company’s long-term
disability plan covering the Employee, or in the absence of such plan, a meaning consistent with
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The
existence of a Disability shall be determined by the Compensation Committee of the Board in good
faith based upon the information provided to the Committee.
(c) Termination by the Company. The Company may terminate Employee’s employment at
any time with or without Cause. The term “Cause” as used in this Employment Agreement shall mean
any of the following reasons:
(1) Employee’s willful and continued breach of his duties after written demand for
performance has been made (other than any such failure resulting from incapacity due to
physical or mental illness, and specifically excluding any failure by Employee, after
reasonable efforts, to meet performance expectations and any failure by Employee to follow
directions or take any action that Employee considers in good faith to be in violation of any
applicable professional or ethical rules or obligations);
(2) Employee’s willfully engaging in illegal conduct or gross misconduct that is
demonstrably and materially injurious to the Company;
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(3) Employee’s material breach of this Employment Agreement, any other material agreement
with the Company, or any Company policy, where such breach proves to be demonstrably and
materially injurious to the Company;
(4) Employee’s breach of any of the covenants contained in Section 8 of this Employment
Agreement relating to confidentiality, non-solicitation or non-competition; or
(5) Employee’s conviction of a felony or a serious misdemeanor involving moral turpitude,
theft or dishonesty.
With respect to paragraphs (1), (2) and (3) above, Employee shall not be deemed to have been
involuntarily terminated for Cause unless and until there shall have been delivered to him a copy
of a resolution duly adopted by the affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board (after reasonable notice to Employee and an
opportunity for him, together with his counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, Employee was guilty of conduct set forth above in paragraphs (1),
(2), or (3) and specifying the particulars thereof in detail. For purposes of this Employment
Agreement, no act or failure to act by Employee shall be deemed to be “willful” unless done or
omitted to be done by Employee not in good faith and without reasonable belief that Employee’s
action or omission was in the best interests of the Company.
(d) Termination by the Employee. The Employee shall have the right to resign at any
time, with or without Good Reason. The term “Good Reason” shall mean the occurrence (without
Employee’s express written consent) of any one of the following acts by the Company, or failures by
the Company to act, unless, in the case of any act or failure to act described below, such act or
failure to act is corrected by the Company prior to the Date of Termination specified in the notice
of termination given in respect thereof:
(1) a material reduction in (A) Employee’s duties or responsibilities, or (B)
Employee’s Base Salary or initial target bonus percentage; provided, however, that the fact
that Employee’s employment after a Change in Control (as defined in Section 7(b) below)
shall be with a non-publicly traded subsidiary of an entity resulting from or surviving the
Change in Control, if that is the case, shall not of itself be deemed a material reduction
in Employee’s duties or responsibilities for purposes of this paragraph;
(2) the relocation of Employee’s office from its location on the Effective Date to a
location more than 35 miles away; or
(3) the Company’s material breach of any other provision of this Employment Agreement.
Employee’s right to terminate the Employee’s employment for Good Reason shall not be affected
by the Employee’s incapacity due to physical or mental illness, except for a Disability as defined
in Section 4(b) above. Employee’s continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason hereunder.
Any claim of Good Reason shall be communicated by the Employee to the Company in writing
within 90 days of the date of the event(s) giving rise to Employee’s claim of Good
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Reason and shall specifically identify the factual details concerning such event(s) giving
rise to Employee’s claim of Good Reason under this Section 4(d). The Company shall have an
opportunity of at least 30 days to cure any claimed event of Good Reason prior to the specified
Date of Termination.
(e) Expiration of Term. Employee’s employment shall automatically terminate upon the
expiration of the Term of this Employment Agreement.
(f) Date of Termination. Employee’s Date of Termination shall be the earliest to
occur of (i) the date specified in the notice of termination (which, unless otherwise required by
this Employment Agreement, may be immediate) as the date upon which Employee’s employment with the
Company is to cease, (ii) the date of Employee’s death, (iii) in the event of Employee’s
Disability, the date determined by the Board, or (iv) the last day of the Term of this Employment
Agreement. In the case of a termination by Employee for Good Reason, the Date of Termination shall
not be less than thirty (30) days nor more than sixty (60) days from the date the notice of
termination is given, unless the Company specifies an earlier Date of Termination. In the case of
a voluntary termination by Employee without Good Reason, the Date of Termination shall not be less
than thirty (30) days from the date the notice of termination is given, unless the Company
specifies an earlier Date of Termination.
SECTION 5. OBLIGATIONS UPON TERMINATION
(a) Termination for Death, Disability, Cause or Expiration of Term at Employee’s
Direction. If Employee’s employment terminates because of the Employee’s death or Disability,
if the Employee delivers written notice of his desire to allow the Agreement to expire in
accordance with Section 1(b) above, or if the Company terminates the Employee’s employment for
Cause, the Company’s only obligation under this Employment Agreement shall be to pay Employee, or,
if Employee dies, Employee’s estate, any earned but unpaid Base Salary then in effect under Section
3(a), through Employee’s Date of Termination; provided that Employee shall have such rights under
the Company’s benefit plans as are provided in such plans.
(b) Employee’s Voluntary Termination Without Good Reason. If the Employee resigns his
employment without Good Reason, the Company’s only obligation under this Employment Agreement shall
be to pay Employee any earned but unpaid Base Salary then in effect under Section 3(a), through
Employee’s Date of Termination; provided that Employee shall have such rights under the Company’s
benefit plans as are provided in such plans.
(c) Termination by Company Without Cause; Expiration of Term at Company’s Direction;
Termination by Employee for Good Reason. If the Company terminates Employee’s employment other
than for Cause, death or Disability, if Company delivers written notice of its desire to allow the
Agreement to expire in accordance with Section 1(b) above, or if Employee resigns for Good Reason,
the Company shall (in lieu of any severance benefits under any Company severance program) pay or
provide to Employee compensation and benefits as follows:
(1) Employee will continue to receive his Base Salary as then in effect through his Date
of Termination.
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(2) Employee shall receive any earned but unpaid annual bonus, through Employee’s Date of
Termination. For purposes of this Section 5(c), an Employee’s annual bonus shall be deemed to
have been earned if such Employee is employed by Company on the last day of Company’s fiscal
year. The amount of any such annual bonus shall be determined by the Compensation Committee
of the Company’s Board of Directors. Such amount shall be paid within thirty (30) days
following the date on which all annual bonuses are calculated and formally approved.
(3) Employee shall receive, no later than 30 days after Employee’s Date of Termination, a
lump sum payment equal to (i) Employee’s monthly Base Salary plus 1/12 of Employee’s target
annual bonus for the year in which Employee’s Date of Termination occurs, calculated as if all
target financial and other performance goals were attained, multiplied by (ii) the number of
months in the Severance Period. The “Severance Period” shall be the 12-month period
commencing on Employee’s Date of Termination.
The lump sum payment under this paragraph (3) shall not alter the amounts Employee is
entitled to receive under the benefit plans described in paragraph (4) below. Benefits
under such plans shall be determined as if Employee had continued to receive his Base Salary
over the applicable Severance Period rather than in a lump sum.
(4) Pursuant to COBRA, Employee may elect to continue the group health and dental care
coverage provided to Employee at his Date of Termination, including any spousal or dependent
coverage in effect on such Date of Termination. Subject to the special payment rules for
specified employees in subsection (7) below, within 30 days after Employee’s Date of
Termination, the Company will pay to Employee an amount equal to the full monthly COBRA
premium for the group health and dental coverage Employee had in place on the Date of
Termination less the monthly cost Employee was paying for such coverages at the time of
termination, multiplied by the number of full or partial months during the Severance Period.
If the terms of any benefit plan referred to in this paragraph (4), or the laws applicable to
such plan do not permit continued participation by Employee, then the Company will pay
Employee within 30 days after his Date of Termination a lump sum amount equal to the estimated
costs of such coverage(s) for the applicable Severance Period, as determined by the Company in
good faith.
(5) Employee will become fully vested in all stock options, stock appreciation rights,
restricted stock and restricted stock units held by the Employee as of the Employee’s Date of
Termination. To the extent necessary, this Employment Agreement is hereby deemed an amendment
of any such outstanding stock option or other equity award.
(6) Except as expressly provided herein, all other fringe benefits provided to Employee
as an active employee of the Company (e.g., long-term disability, AD&D, etc.), shall cease on
his Date of Termination (except to the extent Employee has already qualified for benefits
under any such program), provided that any conversion or extension rights applicable to such
benefits shall be made available to Employee at his Date of Termination or when such coverages
otherwise cease.
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(7) It is the intent of the Company that all payments payable to the Employee pursuant to
this Section 5 shall be exempt from Section 409A of the Code as short-term deferrals.
However, if, at the time of Employee’s Date of Termination, Employee is a “specified employee”
and if the Company reasonably determines that any payment to Employee pursuant to this
Employment Agreement is not exempt as a short-term deferral and must be delayed for six-months
to avoid a violation of Section 409A(a)(2)(B) of the Code, such payment shall be paid on the
next business day following the six-month anniversary of the Employee’s Date of Termination.
For purposes of this Employment Agreement, whether Employee is a “specified employee” shall be
determined under the rules set forth in Section 409A of the Code and the regulations and other
guidance promulgated thereunder, plus any policies and elections properly made by the Company
in accordance with such guidance.
(d) Release of Claims. To be entitled to any of the compensation and benefits
described above in Section 5(c), the Employee shall sign a release of claims in the form required
by the Company. No payments shall be made under Section 5(c) until such release has been properly
executed and delivered to the Company and until the expiration of the revocation period, if any,
provided under the release. If the release is not properly executed by the Employee and delivered
to the Company within the reasonable time periods specified in the release, the Company’s
obligations under Section 5(c) will terminate.
(e) Full Settlement; No Obligation to Mitigate. The Company’s obligation to make the
payments provided for in this Employment Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against Employee or others. In no event shall Employee
be obligated to seek other employment or take any other action by way of mitigation of the amounts
payable to Employee under any of the provisions of this Employment Agreement and, except as
explicitly provided herein, such amounts shall not be reduced whether or not Employee obtains other
employment.
(f) Club Dues and Other Benefits. Employee understands and acknowledges that any
Company paid club membership or due reimbursement program in which Employee was a participant shall
cease as of the Employee’s Date of Termination and that Employee shall be required to return all
Company-provided automobiles, computer equipment, cell phones, and other Company assets of any kind
in the possession of Employee as a condition to receipt of any severance benefits pursuant to this
Section 5.
SECTION 6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Employment Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any payment or distribution by the Company to
or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Employment Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a “Payment”) would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or any
interest or penalties are incurred by Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
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collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 6(c), all determinations required to be made under
this Section 6, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be used in arriving at such determination, shall be made by
a certified public accounting firm selected by Employee (other than the Company’s regular
accounting firm) and reasonably acceptable to the Company (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Company and Employee within 15 business days
of the receipt of notice from Employee that there has been a Payment, or such earlier time as is
reasonably requested by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be
paid by the Company to Employee within five days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding upon the Company and
Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 6(c) and Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit
of Employee.
(c) Employee shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of a Gross-Up Payment (or an
additional Gross-Up Payment). Such notification shall be given as soon as practicable but no later
than ten business days after Employee is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the 30-day period following the date
on which he gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies Employee in writing
prior to the expiration of such period that it desires to contest such claim, Employee shall:
(1) give the Company any information reasonably requested by the Company relating to
such claim,
(2) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected by the
Company,
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(3) cooperate with the Company in good faith in order effectively to contest such
claim, and
(4) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such contest and shall
indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation of the foregoing provisions of this Section
6(c), the Company shall control all proceedings taken in connection with such contest (to the
extent applicable to the Excise Tax and the Gross-Up Payment) and, at its sole option, may pursue
or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct Employee to pay the
tax claimed and xxx for a refund or contest the claim in any permissible manner, and Employee
agrees to prosecute such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs Employee to pay such claim and xxx for a refund, the
Company shall, if permitted by law, advance the amount of such payment to Employee, on an
interest-free basis and shall indemnify and hold Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations relating to payment of taxes for
the taxable year of Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company’s control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and
Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section
6(c), Employee becomes entitled to receive any refund with respect to such claim, Employee shall
(subject to the Company’s complying with the requirements of Section 6(c) promptly pay to the
Company the amount of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Employee of an amount advanced by the Company
pursuant to Section 6(c), a determination is made that Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
SECTION 7. CHANGE IN CONTROL.
(a) Vesting Upon Change in Control. Employee will become fully vested in all stock
options, stock appreciation rights, restricted stock and restricted stock units held by the
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Employee as of the effective date of any Change in Control. To the extent necessary, this
Employment Agreement is hereby deemed an amendment of any such outstanding stock option or other
equity award.
(b) Change in Control. For purposes of this Employment Agreement, a “Change in
Control” shall mean any of the following events:
(1) individuals who, on the Effective Date, constitute the Board of Directors of the
Company (the “Incumbent Directors”) cease for any reason to constitute at least a
majority of such Board, provided that any person becoming a director after the Effective Date
and whose election or nomination for election was approved by a vote of at least a majority of
the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a director of the Company as a result of
an actual or threatened election contest with respect to the election or removal of directors
(“Election Contest”) or other actual or threatened solicitation of proxies or consents
by or on behalf of any “person” (such term for purposes of this Section 7 being as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and as
used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy
Contest”), including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest, shall be deemed an Incumbent Director; or
(2) any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of either (i) 50% or more of the then-outstanding shares of common stock of the Company (“Company Common Stock”) or (ii) securities of
the Company representing 50% or more of the combined voting power of the Company’s then
outstanding securities eligible to vote for the election of directors (the “Company Voting
Securities”); provided, however, that for purposes of this paragraph (2), the following
acquisitions of Company Common Stock or Company Voting Securities shall not constitute a
Change of Control: (A) an acquisition directly from the Company, (B) an acquisition by the
Company or a subsidiary of the Company, (C) an acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary of the Company, or (D)
an acquisition pursuant to a Non-Qualifying Transaction (as defined in paragraph (3) below);
or
(3) the consummation of a recapitalization, reorganization, merger, consolidation,
statutory share exchange or similar form of transaction involving the Company or a subsidiary
of the Company (a “Reorganization”), or the sale or other disposition of all or
substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or
stock of another entity (an “Acquisition”), unless immediately following such
Reorganization, Sale or Acquisition:
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Company Common Stock and
outstanding Company Voting Securities immediately prior to such Reorganization, Sale
or Acquisition beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote
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generally in the election of directors, as the case may be, of the entity
resulting from or surviving such Reorganization, Sale or Acquisition (including,
without limitation, an entity which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets or stock either directly or
through one or more subsidiary entities, the “Surviving Entity”) in
substantially the same proportions as their ownership, immediately prior to such
Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the
outstanding Company Voting Securities, as the case may be, and
(ii) no person (other than (x) the Company or any subsidiary of the Company,
(y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit
plan (or related trust) sponsored or maintained by any of the foregoing) is the
beneficial owner, directly or indirectly, of 50% or more of the total common stock
or 50% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Surviving Entity, and
(iii) at least a majority of the members of the board of directors of the
Surviving Entity were Incumbent Directors at the time of the Board’s approval of the
execution of the initial agreement providing for such Reorganization, Sale or
Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed to be a
“Non-Qualifying Transaction”); or
(iv) approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
SECTION 8. COVENANTS BY EMPLOYEE.
(a) General. Employee and the Company understand and agree that the purpose of the
provisions of this Section 8 is to protect legitimate business interests of the Company, as more
fully described below, and is not intended in an unreasonable manner to impair or infringe upon
Employee’s right to work or earn a living after termination or expiration of this Employment
Agreement. Employee hereby acknowledges that Employee has received and will continue to receive
good and valuable consideration for the restrictions set forth in this Section 8 in the form of the
compensation and benefits provided for herein as well as other consideration. Therefore, Employee
shall be subject to the restrictions set forth in this Section 8.
(b) Definitions. The following capitalized terms used in this Section 8 shall have
the meanings assigned to them below, which definitions shall apply to both the singular and plural
forms of such terms:
(1) “Competitive Services” means the business of providing intelligent visual medical
systems, and providing enterprise-level information technology solutions for the clinical
analysis and management of digital medical images. A “Company Competitor” is a Person that
sells, licenses or otherwise offers Competitive Services to its customers, clients or end
users.
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(2) “Person” means any individual or any corporation, partnership, joint venture, limited
liability company, association or other entity or enterprise.
(3) “Principal or Representative” means a principal, owner, partner, stockholder, joint
venturer, investor, lender, member, trustee, director, advisor, officer, manager, employee,
agent, representative or consultant.
(4) “Protected Customers” mean customers of the Company within the United States or
prospective customers of the Company within the United States that have been actively
solicited by the Company. After Employee’s Date of Termination, Protected Customers shall
include only those customers and prospective customers of the Company with whom Employee had
material contact during his employment with the Company (with “material contact” meaning
direct personal contact or direct supervisory contact with other employees or personnel of the
Company who in turn had direct personal contact with the prospective customers), or about whom
Employee learned or had ready access to Confidential Information, during the one year period
immediately prior to the Date of Termination of the Employee.
(5) “Restricted Period” means the period of time beginning on the Effective Date and
ending on the date that is twelve months after Employee’s Date of Termination.
(c) The Company’s Property.
(1) Upon the termination of Employee’s employment for any reason or, if earlier, upon the
Company’s request, Employee shall promptly return all “Property” which had been entrusted or
made available to Employee by the Company.
(2) The term “Property” means all records, files, memoranda, reports, price lists,
customer lists, drawings, plans, sketches, keys, codes, computer hardware and software and
other property of any kind or description prepared, used or possessed by Employee during
Employee’s employment by the Company and, if applicable, any of its affiliates (and any
duplicates of any such property) together with any and all information, ideas, concepts,
discoveries, and inventions and the like conceived, made, developed or acquired at any time by
Employee individually or, with others during Employee’s employment which relate to the Company
business, products or services.
(d) Trade Secrets.
(1) Employee agrees that Employee will hold in a fiduciary capacity for the benefit of
the Company, and any of its affiliates, and will not directly or indirectly use or disclose,
any “Trade Secret” that Employee may have acquired during the term of Employee’s employment by
the Company or any of its affiliates for so long as such information remains a Trade Secret.
(2) The term “Trade Secret” means information, including, but not limited to, technical
or nontechnical data, formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans, product plans, or a list of
actual or potential customers or suppliers that (a) derives economic value, actual or
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potential, from not being generally known to, and not being generally readily
ascertainable by proper means by any other person who can obtain economic value from its
disclosure or use and (b) is the subject of reasonable efforts by the Company and any of its
affiliates to maintain its secrecy.
(3) This Section 8(d) and Section 8(e) are intended to provide rights to the Company
which are in addition to, and not in lieu of, those rights the Company has under the common
law or applicable statutes for the protection of Trade Secrets. Any provision under
applicable trade secret law that provides the Company with more liberal or generous protection
of its Trade Secrets shall prevail over any narrower protection afforded by this Agreement.
(e) Confidential Information.
(1) Employee, while employed under this Employment Agreement and thereafter during the
Restricted Period, shall hold in a fiduciary capacity for the benefit of the Company and any
of its affiliates, and shall not directly or indirectly use or disclose, any “Confidential
Information” that Employee may have acquired (whether or not developed or compiled by Employee
and whether or not Employee is authorized to have access to such information) during the term
of, and in the course of, or as a result of Employee’s employment by the Company or any of its
affiliates. Notwithstanding anything to the contrary in this Agreement, the foregoing
durational limitation shall not apply to any Confidential Information that constitutes a
“Trade Secret” and Employee’s obligation to hold in confidence and not use such Trade Secret
Confidential Information shall continue for as long as the information retains its status as a
Trade Secret.
(2) The term “Confidential Information” means any secret, confidential or proprietary
information possessed by the Company or any of its affiliates relating to their business,
including, without limitation, Trade Secrets, customer lists, details of client or consultant
contracts, current and anticipated customer requirements, pricing policies, price lists,
market studies, business plans, operational methods, marketing plans or strategies, legal
advice and communications with the Company’s counsel, product development techniques or flaws,
computer software programs (including object code and source code), data and documentation
data, base technologies, systems, structures and architectures, inventions and ideas, past
current and planned research and development, compilations, devices, methods, techniques,
processes, financial information and data, business acquisition plans and new personal
acquisition plans (not otherwise included in the definition of a Trade Secret under this
Employment Agreement) that has not become generally available to the public by the act of one
who has the right to disclose such information without violating any right of the Company or
any of its affiliates. Confidential Information may include, but not be limited to, future
business plans, licensing strategies, advertising campaigns, information regarding customers,
executives and independent contractors and the terms and conditions of this Employment
Agreement.
(f) Non-Solicitation of Employees. Employee (i) while employed under this Employment
Agreement shall not, either directly or indirectly, solicit or attempt to induce any other officer,
employee or independent contractor of the Company or any of its affiliates to
12
terminate his or her employment or other relationship with the Company or any of its
affiliates and shall not assist any other person or entity in such a solicitation (regardless of
whether any such officer, employee or independent contractor would commit a breach of contract by
terminating his or her employment), and (ii) during that part of the Restricted Period following
Employee’s Date of Termination, shall not, either directly or indirectly, solicit or attempt to
induce any other officer, employee or independent contractor of the Company or any of its
affiliates with whom Employee had contact, knowledge of, or association in the course of Employee’s
employment with the Company or any of its affiliates as the case may be, during the twelve month
period immediately preceding the beginning of the Restricted Period, to terminate his or her
employment or other relationship with the Company or any of its affiliates and shall not assist any
other person or entity in such a solicitation (regardless of whether any such officer, employee or
independent contractor would commit a breach of contract by terminating his or her employment).
(g) Non-Solicitation of Customers. Employee understands and agrees that the
relationship between the Company and each of its “Protected Customers” constitutes a valuable asset
of the Company and may not be converted to Employee’s own use and that any such actions by Employee
would constitute a material breach of this Employment Agreement as well as a breach of Employee’s
duties of loyalty to the Company as a senior executive officer. Accordingly, Employee hereby
agrees that, during the Restricted Period, Employee shall not, without the prior written consent of
the Company, directly or indirectly, on Employee’s own behalf or as a Principal or Representative
of any Person, solicit or attempt to solicit a Protected Customer for the purpose of providing or
selling or having a Company Competitor provide Competitive Services to the Protected Customer.
(h) Non-Competition. During the Term and during the Restricted Period, Employee shall
not, without the Company’s express prior written consent, directly or indirectly, on Employee’s own
behalf or as a Principal or Representative of any Person other than the Company or an affiliate of
the Company provide services to, invest in, lend funds to, advise, consult with, represent, be
employed by or contract with a Company Competitor where such relationship involves substantial
similarity to one or more material aspects of Employee’s relationship with Company and where it
could reasonably be concluded that such relationship is adverse to the legitimate business
interests of the Company or Employee’s contractual commitments to and corporate duties of loyalty
to the Company (a “Competing Position”). After Employee’s Date of Termination, the
foregoing restrictions shall apply only to affiliations or relationships with a Company Competitor
whose primary business location is in the continental United States. The parties acknowledge that
the Company’s business extends throughout and beyond the continental United States and that as a
result of Employee’s Position, Employee can be deemed to be providing services to the Company and
serving the Company throughout this entire geographic area. Nothing in the foregoing covenants
shall prevent or limit Employee from owning a passive interest of not more than one percent (1%) of
the equity of a Company Competitor if the equity is listed and traded on the New York Stock
Exchange or NASDAQ provided that neither such ownership nor any contract or other right gives
Employee control of the entity in which Employee owns equity.
(i) Non-Disparagement. The Employee agrees not to make false, misleading or
disparaging statements regarding the Company, its management (including individual executives
13
or managers) or practices, and agrees not to take any action that disrupts or impairs the
Company’s normal, ongoing business operations, or that xxxxx the Company’s reputation with its
employees, customers, suppliers, or the public. Employee understands that the foregoing provision
does not apply on occasions when Employee is subpoenaed or ordered by a court or other governmental
authority to testify or give evidence and must, of course, respond truthfully, or to conduct
otherwise protected by the Xxxxxxxx-Xxxxx Act.
(j) Reasonable and Continuing Obligations. Employee agrees that Employee’s
obligations under this Section 8 are obligations which will continue beyond the date Employee’s
employment terminates and that such obligations are reasonable and necessary to protect the
Company’s legitimate business interests. The Company in addition shall have the right to take such
other action as the Company deems necessary or appropriate to compel compliance with the provisions
of this Section 8.
(k) Remedy for Breach. Employee agrees that the remedies at law of the Company for
any actual or threatened breach by Employee of the covenants in this Section 8 would be inadequate
and that the Company shall be entitled to seek specific performance of the covenants in this
Section 8, including entry of an ex-parte , temporary restraining order in state or federal court,
preliminary and permanent injunctive relief against activities in violation of this Section 8, or
both, or other appropriate judicial remedy, writ or order, in addition to any damages and legal
expenses which the Company may be legally entitled to recover. Employee acknowledges and agrees
that the covenants in this Section 8 shall be construed as agreements independent of any other
provision of this or any other agreement between the Company and Employee, and that the existence
of any claim or cause of action by Employee against the Company, whether predicated upon this
Employment Agreement or any other agreement, shall not constitute a defense to the enforcement by
the Company of such covenants.
(l) Severability of Covenants. Employee acknowledges and agrees that the Restrictive
Covenants are reasonable and valid in time and scope and in all other respects. The covenants set
forth in this Employment Agreement shall be considered and construed as separate and independent
covenants. Should any part or provision of any covenant be held invalid, void or unenforceable,
such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any
other part or provision of this Employment Agreement. If any portion of the foregoing provisions
is found to be invalid or unenforceable because its duration, the territory, the definition of
activities or the definition of information covered is considered to be invalid or unreasonable in
scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided,
such that the intent of the Company and Employee in agreeing to the provisions of this Employment
Agreement will not be impaired and the provision in question shall be enforceable to the fullest
extent of the applicable laws.
(m) Reformation. The parties hereunder agree that it is their intention that the
provisions of this Section 8 be enforced in accordance with their terms to the maximum extent
possible under applicable law. The parties further agree that, in the event any tribunal of
competent jurisdiction shall find that any provision hereof is not enforceable in accordance with
its terms, the tribunal shall reform these covenants such that they shall be enforceable to the
maximum extent permissible at law.
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SECTION 9. MISCELLANEOUS
(a) Non-Exclusivity of Rights. Nothing in this Employment Agreement shall prevent or
limit Employee’s continuing or future participation in any employee benefit plan, program, policy
or practice provided by the Company and for which Employee may qualify, except as specifically
provided herein. Amounts which are vested benefits or which Employee is otherwise entitled to
receive under any employee benefit plan, policy, practice or program of the Company, its
subsidiaries or any of its affiliated companies at or subsequent to the Date of Termination (other
than severance benefits) shall be payable in accordance with such plan, policy, practice or program
except as explicitly modified by this Employment Agreement.
(b) Notices. Notices and all other communications shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by United States registered
or certified mail. Notices to the Company shall be sent to: Emageon Inc., 0000 Xxxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000. Attention: General Counsel. Notices and communications to
Employee shall be sent to the address Employee most recently provided to the Company.
(c) No Waiver. No failure by either the Company or Employee at any time to give
notice of any breach by the other of, or to require compliance with, any condition or provision of
this Employment Agreement shall be deemed a waiver of any provisions or conditions of this
Employment Agreement.
(d) Alabama Law. This Employment Agreement shall be governed by Alabama law without
reference to the choice of law principles thereof.
(e) Assignment. This Employment Agreement shall be binding upon and inure to the
benefit of the Company and any successor to all or substantially all of the business or assets of
the Company. The Company may assign this Employment Agreement to any affiliate or successor, and
no such assignment shall be treated as a termination of Employee’s employment under this Employment
Agreement. Employee’s rights and obligations under this Employment Agreement are personal and
shall not be assigned or transferred.
(f) Other Agreements. This Employment Agreement supercedes, replaces and merges any
and all previous agreements and understandings regarding all the terms and conditions of Employee’s
employment relationship with the Company, and this Employment Agreement constitutes the entire
agreement between the Company and Employee with respect to such terms and conditions.
(g) Amendment. No amendment to this Employment Agreement shall be effective unless it
is in writing and signed by the Company and by Employee.
(h) Invalidity. If any part of this Employment Agreement is held by a court of
competent jurisdiction to be invalid or otherwise unenforceable, the remaining part shall be
unaffected and shall continue in full force and effect, and the invalid or otherwise unenforceable
part shall be deemed not to be part of this Employment Agreement.
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(i) Disputes; Indemnification.
(1) Disputes — All claims by Employee for compensation and benefits under this
Employment Agreement shall be in writing and shall be directed to and be determined by the
CEO. Any denial by the CEO of a claim for benefits under this Employment Agreement shall be
provided in writing to Employee within 30 days of such decision and shall set forth the
specific reasons for the denial and the specific provisions of this Employment Agreement
relied upon. To the extent permitted by applicable law, any further dispute or controversy
arising under or in connection with this Employment Agreement shall be settled exclusively by
arbitration in Birmingham, Alabama, in accordance with the commercial arbitration rules of the
American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s
award in any court having jurisdiction.
(2) Legal Fees. If Employee terminates his employment for Good Reason or if
the Company involuntarily terminates Employee without Cause, then, in the event Employee
incurs legal fees and other expenses in seeking to obtain or to enforce any rights or
benefits provided by this Employment Agreement and is successful, in whole or in any
significant part, in obtaining or enforcing any such rights or benefits through settlement,
mediation, arbitration or otherwise, the Company shall promptly pay Employee’s reasonable
legal fees and expenses and related costs incurred in enforcing this Employment Agreement
including, without limitation, attorneys fees and expenses, experts fees and expenses,
investigative fees, and travel expenses. Except to the extent provided in the preceding
sentence, each party shall pay its own legal fees and other expenses associated with any
dispute under this Employment Agreement.
(3) Indemnification. During the Term of this Employment Agreement and after
Employee’s termination, the Company shall indemnify Employee and hold Employee harmless from
and against any claim, loss or cause of action arising from or out of Employee’s performance
as an officer, director or employee of the Company or any of its subsidiaries or other
affiliates or in any other capacity, including any fiduciary capacity, in which Employee
serves at the Company’s request, in each case to the maximum extent permitted by law and under
the Company’s Articles of Incorporation and By-Laws (the “Governing Documents”),
provided that in no event shall the protection afforded to Employee hereunder be less than
that afforded under the Governing Documents as in effect on the date of this Employment
Agreement except for changes mandated by law.
IN WITNESS WHEREOF, the Company and Employee have executed this Employment Agreement as of the
date first above written to be effective on the Effective Date.
| EMAGEON INC. | EMPLOYEE: | |||||||
By: |
/s/ Xxxxxxx X. Xxxx, Xx. | /s/ Xxxx X. Xxxxxxxx | ||||||
Its:
|
Chief Executive Officer | |||||||
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