EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement is made to be effective as of the 10th day of August, 2000,
by and between MedGrup Corporation, a Colorado corporation (the "Company") and
Xxxxx X. Xxxxxxx ("Employee").
W I T N E S S E T H:
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WHEREAS, the Company wishes to engage Employee's services upon the terms
and conditions hereinafter set forth; and
WHEREAS, Employee wishes to be employed by the Company upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual promises set
forth herein, the sufficiency of which is hereby acknowledged, the parties agree
as follows:
1. Employment; Duties. The Company hereby agrees to promote and continue to
employ Employee effective as of the Effective Date as its Vice President of
Finance, and in any other executive capacity as the Company shall determine is
necessary or appropriate in connection with the operation of the Company, and
Employee hereby agrees to serve in such capacity. Employee's principal area of
responsibility, subject to modification by the Company, shall be to serve as the
chief financial officer of the Company. The Employee shall at all times report
to and take direction from, the president and the CEO, and shall perform such
additional duties not inconsistent with his position as shall be designated from
time to time by the Company.
2. Best Efforts. Employee agrees to use his best efforts to promote the
interests of the Company and shall, except for illness, reasonable vacation
periods and leaves of absence, devote his full business time and energies to the
business and affairs of the Company. Employee shall be permitted to perform
outside business endeavors only with the approval of the Board of Directors,
subject to non-competition agreements with the Company and provided that such
outside activities do not interfere with the performance of Employee's duties.
Employee may also engage in work for charitable, benevolent, civic or
educational purposes so long as such endeavors do not interfere with Employee's
duties hereunder.
3. Term of Agreement. The term of this Agreement shall commence on the date
first above written (the "Effective Date") and such term and the employment
hereunder shall continue, unless earlier terminated in accordance with the terms
of Paragraph 5, for a period of three years (the "Original Term"). The Original
Term shall be extended automatically for additional one-year periods (each a
"Renewal Term") unless notice that this Agreement will not be extended is given
by either party to the other at least 90 days prior to the expiration of the
Original Term or any Renewal Term. The period of employment of Employee by the
Company, commencing with the Effective Date and continuing until termination of
the employment by notice hereunder, in accordance with Paragraph 5 or otherwise
shall be known as the "Term of Employment."
4. Compensation.
4.1 Base Salary. As compensation for Employee's services rendered
hereunder, the Company shall pay to Employee a base salary at an annual rate
equal to Seventy Thousand Dollars ($70,000.00) (the "Base Salary"). The Base
Salary shall thereafter be increased annually at the greater of (i) five percent
(5%) or (ii) such other increase as may be approved by the Board of Directors.
The Base Salary shall be payable to Employee on a bi-weekly basis, in accordance
with the Company's standard policies for management personnel.
4.2 Incentive Compensation. With respect to each calendar year, or portion
thereof, beginning with calendar year 2000, Employee shall be eligible to
receive incentive compensation or a bonus, payable solely in the discretion of
the Board of Directors.
4.3 Stock Option.
(i) Commensurate with the Employee's original date of hire (January 3,
2000), and subject to the vesting schedule set forth below, Employee shall
receive an option to purchase up to One Hundred Thousand (100,000) shares of the
Company's common stock, par value $.01 at an exercise price of $1.30 per share
(the "Option"). The Option shall be exercisable beginning with the date of
vesting and for a period of seven years from the Effective Date, subject to the
provisions for termination of employment set forth in Stock Option Agreement
described below.
(ii) The Option shall vest in equal increments of 50,000 shares every
six (6) months beginning six (6) months from January 3, 2000 and continuing on
each six (6) month anniversary thereafter; provided that the Employee shall be
employed by the Company on that date, and provided further that Employee shall
have been continuously employed during the prior twelve (12) months, except for
illness, vacation or permitted leaves of absence. Notwithstanding the forgoing
provisions, the Option shall vest immediately in the event all or substantially
all of the assets of the Company are sold in a single transaction or if the
Company is merged with, or acquired by, another entity in a transaction in which
the shareholders of the Company immediately prior to such transaction own less
than 50% of the stock of the Company immediately after the transaction.
(iii) The terms and conditions of the Option shall be set forth in a
Stock Option Agreement between the Company and the Employee in the form and
substance attached hereto as Exhibit "A" and incorporated herein by reference.
The terms of the Option shall also be governed by the Stock Option Plan of the
Company, to the extent not inconsistent with the Option Agreement.
4.4 Benefits. Employee shall be entitled to participate in all benefit
programs established by the Company and generally applicable to the Company's
executive employees. Employee shall also be reimbursed for reasonable and
necessary business expenses incurred in the course of his employment with the
Company pursuant to Company policies as established from time to time.
4.5 Vehicle Allowance. Employee shall be entitled to a Company-provided
vehicle or a monthly allowance of Seven Hundred Dollars ($700.00).
4.6 Legal Fees. Employee shall be entitled to reimbursement of reasonable
legal fees associated with the negotiating, drafting and execution of this
Agreement.
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4.7 Excise Tax Restoration Payment. In the event that it is determined that
any payment or distribution of any type to or for the benefit of the Employee
made by the Company, by any of its affiliates, by any person who acquires
ownership or effective control or ownership of a substantial portion of the
Company's assets (within the meaning of section 280G of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder (the "Code") or by any
affiliate of such person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments) would be subject to such excise tax imposed by section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties are collectively referred to
as the "Excise Tax"), then the Employee shall be entitled to receive an
additional payment (an "Excise Tax Restoration Payment") in an amount that shall
fund the payment by the Employee of any Excise Tax on the Total Payments as well
as all income taxes imposed on the Excise Tax Restoration Payment, any Excise
Tax imposed on the Excise Tax Restoration Payment and any interest or penalties
imposed with respect to taxes on the Excise Tax Restoration Payment or any
Excise Tax, except where the interest or penalties are the result of the
negligence or willful failure of the Employee to file a return in a timely
manner or report the Total Payments appropriately.
5. Termination of Employment Relationship.
5.1 Death or Incapacity. This Agreement shall terminate immediately upon
the death or Total Disability of Employee, and in such event, the Employee shall
have no further claim against the Company for compensation or benefits
hereunder. The Board of Directors shall make a determination of the Total
Disability of the Employee based upon the definition of disability and terms
contained in the Company's disability insurance policy, or if none, based upon
the inability of the Employee to perform the material functions of his job. Any
such determination by the Board shall be evidenced by its written opinion
delivered to the Employee. Such written opinion shall specify with particularity
the reasons supporting such opinion and be manually signed by at least a
majority of the Board.
5.2 Termination by the Company. The Company may terminate this Agreement
for "Cause" and, in such event, the term of employment shall terminate at the
termination date designated by the Company. For the purpose of this paragraph,
"Termination for Cause" or "Cause" shall include the following:
(a) Breach of fiduciary duty or criminal conduct by the Employee
having the effect of materially adversely affecting the Company and/or its
reputation;
(b) Willful failure by the Employee to substantially perform his
duties hereunder;
(c) Engagement by the Employee in the use of narcotics or alcohol to
the extent that the performance of his duties is materially impaired;
(d) Material breach of the terms of this Agreement by the Employee or
failure to substantially comply with proper instructions of the Company's Board
of Directors;
(e) Misconduct by the Employee which is materially injurious to the
Company; or
(f) Any act or omission on the part of the Employee not described
above, but which constitutes material and willful misfeasance, malfeasance, or
gross negligence in the performance of his duties to the Company.
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Determination of any event or events and circumstances constituting "Cause"
shall be at the sole discretion of the Board of Directors.
5.3 Termination by Employee. Employee may terminate this Agreement for
"Good Reason"; provided, however, that Employee's obligations under Paragraph 6
shall survive any termination of this Agreement by Employee, by the Company or
otherwise. For purposes of this paragraph, Good Reason shall mean:
a) Any assignment to the Employee of any duties materially inconsistent
with the position described in Section 1 hereof,
b) Any material diminution of the duties of the Employee then-existing
without the written consent of the Employee,
c) Any removal of the Employee from or failure to re-elect the Employee
to the positions described in Section 1 hereof, except in connection
with termination of the Employee pursuant to Section 5.1 or 5.2
hereof,
d) A reduction in the Employee's rate of compensation, or a reduction in
the Employee's fringe benefits or any other failure of the Company to
comply with Section 4 hereof,
e) The Employee's principle place of employment is relocated to a place
outside of a forty (40) mile radius from which he was employed on the
Effective Date,
f) Other material breach of this Agreement by the Company, or
g) Following a "Change in Control," defined below.
A "Change of Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of 50% or more of the
outstanding voting securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 50% of the outstanding securities of the surviving or
resulting corporation shall be owned in the aggregate by the former stockholders
of the Company, as the same shall have existed immediately prior to such merger
or consolidation, (iii) the Company shall sell more than 75% of its assets to
another corporation which is not a wholly owned subsidiary.
Any termination by the Board of Directors pursuant to Section 5.2 or by the
Employee pursuant to section 5.3 shall be communicated by written Notice of
Termination to the other party hereto. Notice of Termination shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment under
the provision so indicated.
5.4 Payment Upon Termination.
(a) If this Agreement is terminated by the Company for Cause prior to
the completion of the Original Term or an ongoing Renewal Term, Employee shall
not be entitled to severance pay of any kind but shall be entitled to all
reasonable reimbursable business expenses incurred by Employee and the Base
Salary earned by Employee prior to the date of termination, and all obligations
of the Company under Paragraph 4 hereof shall terminate upon the termination
date designated by the Company, except to the extent otherwise required by law.
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(b) In the event that Employee is terminated without Cause or the
Employee resigns with Good Reason, the Company shall pay Employee one (1) year's
Base Salary at the rate prevailing for Employee immediately prior to such
termination as severance pay, payable in accordance with Company's normal
payroll. Employee shall also be entitled to receive benefits to which he was
entitled immediately preceding the date of termination for a period of twelve
(12) months from date of termination.
6. Non-Competition Agreement.
6.1 Competition; Confidential Information. The Employee and the Company
recognize that due to the nature of his engagements hereunder, and the
relationship of the Employee to the Company, the Employee has had access to and
has acquired, will have access to and will acquire, and has assisted in and may
assist in developing, confidential and proprietary information relating to the
business and operations of the Company and its affiliates, including, without
limiting the generality of the foregoing, information with respect to their
present and prospective products, systems, customers, agents, processes, and
sales and marketing methods. The Employee acknowledges that such information has
been and will continue to be of central importance to the business of the
Company and its affiliates and that disclosure of it to or its use by others
could cause substantial loss to the Company. The Employee and the Company also
recognize that an important part of the Employee's duties will be to develop
good will for the Company and its affiliates through his personal contact with
customers, agents and others having business relationships with the Company and
its affiliates, and that there is a danger that this good will, a proprietary
asset of the Company and its affiliates, may follow the Employee if and when his
relationship with the Company is terminated. Employee acknowledges that his
services to be rendered hereunder have a unique value to the Company, for the
loss of which the Company cannot be adequately compensated by damages in an
action at law. In view of the unique value to the Company of the services of
Employee, and because of the Confidential Information to be obtained by or
disclosed to Employee, and as a material inducement to the Company to enter into
this Employment Agreement and to pay to Employee the compensation referred to in
Paragraph 4 hereof, Employee covenants and agrees that:
6.2 Non-Competition.
(a) While Employee is employed by the Company, and for a period of one
(1) year thereafter, Employee will not, either personally, whether as an
officer, director, owner, manager, principal, partner, employee, agent,
distributor, representative, stockholder, consultant or otherwise, or with or
through any other person or entity operate or participate in the medical records
coding business or any other business which competes with the Company as of the
date of Employee's termination date (for purposes of Paragraph 6 hereof, the
Company shall be deemed to include all subsidiaries and joint ventures of the
Company whether now or hereafter affiliated with the Company) nor will Employee,
while Employee is employed by the Company, and for a period of one (1) year
thereafter, directly or indirectly solicit any person who has been an employee,
supplier or customer of the Company during the period of one (1) year prior to
the termination of employment. This non-competition clause shall apply in the
geographic territory comprised of the entire United States and any other
geographic area in which the Company is engaged in business. Employee
acknowledges that this non-competition/non-solicitation agreement is reasonable
in terms of its scope and duration.
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(b) Nothing in this Section 6.2 shall be construed to prevent the
Employee from owning, as an investment, not more than 1% of a class of equity
securities issued by any competitor of the Company or its affiliates and
publicly traded and registered under Section 12 of the Securities Exchange Act
of 1934.
6.3 Trade Secrets. The Employee will keep confidential any trade secrets or
confidential or proprietary information of the Company and its affiliates which
are now known to him or which hereafter may become known to him as a result of
his employment or association with the Company and shall not at any time
directly or indirectly disclose any such information to any person, firm or
corporation, or use the same in any way other than in connection with the
business of the Company or its affiliates during and at all times after the
expiration of the Term of Employment. For purposes of this Agreement, "trade
secrets or confidential or proprietary information" means information unique to
the Company or any of its affiliates which has a significant business purpose
and is not known or generally available from sources outside the Company or any
of its affiliates or typical of industry practice. Trade secrets or confidential
or proprietary information may include information with respect to the Company's
personnel records, present and prospective products, systems, customers, agents,
processes, and sales and marketing methods.
6.4 Patents. The Employee will assign permanently to the Company exclusive
rights to any patents awarded to him on the basis of ideas developed by the
Employee for the Company during or prior to the Term of Employment and its
affiliates and ideas developed by the Employee within one year following the
termination of his employment from the Company which are related to such
employment and/or the business of the Company.
6.5 It is agreed that Employee's services are unique, and that any breach
or threatened breach by Employee of any provisions of this Paragraph 6 may not
be remedied solely by damages. Accordingly, in the event of a breach or
threatened breach by Employee of any of the provisions of this Paragraph 6, the
Company shall be entitled to injunctive relief, restraining Employee and any
business, firm, partnership, individual, corporation, or entity participating in
such breach or attempted breach, from engaging in any activity which would
constitute a breach of this Paragraph 6. Nothing herein, however, shall be
construed as prohibiting the Company from pursuing any other remedies available
at law or in equity for such breach or threatened breach, including the recovery
of damages.
6.6 The provisions of this Paragraph 6 shall survive the termination of
this Agreement and the termination of Employee's employment.
7. Miscellaneous.
7.1 Assignability. Employee may not assign his rights and obligations under
this Agreement without the prior written consent of the Company, which consent
may be withheld for any reason or for no reason.
7.2 Severability. In the event that any of the provisions of this Agreement
shall be held to be invalid or unenforceable, the remaining provisions shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. Without limiting the
generality of the foregoing, in the event that any provision of Paragraph 6
relating to time period and/or areas of restriction shall be declared by a court
of competent jurisdiction to exceed the maximum time period or areas(s) such
court deems enforceable, said time period and/or area(s) of restriction shall be
deemed to become, and thereafter be, the maximum time period and/or area for
which such are enforceable.
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7.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior agreements or understandings among the parties hereto with respect to the
subject matter hereof.
7.4 Amendments. This Agreement shall not be amended or modified except by a
writing signed by both parties hereto.
7.5 Waiver. The failure of either party at any time to require performance
of the other party of any provision of this Agreement shall in no way affect the
right of such party thereafter to enforce the same provision, nor shall the
waiver by either party of any breach of any provision hereof be taken or held to
be a waiver of any other or subsequent breach, or as a waiver of the provision
itself. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Colorado without regard to the conflict of laws of such
State. The benefits of this Agreement may not be assigned nor any duties under
this Agreement be delegated by Employee without the prior written consent of the
Company, except as contemplated in this Agreement. This Agreement and all of its
rights, privileges, and obligations will be binding upon the parties and all
successors and agreed to assigns thereof.
7.6 Binding Agreement. This Agreement shall be effective as of the date
hereof and shall be binding upon and inure to the benefit of the Employee, his
heirs, personal and legal representatives, guardians and permitted assigns. The
rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon any successor or assignee of the Company.
7.7 Headings. The headings or titles in this Agreement are for the purpose
of reference only and shall not in any way affect the interpretation or
construction of this Agreement.
7.8 Arbitration. Any dispute between the Company and the Employee with
respect to this Agreement shall be submitted to binding arbitration in El Paso
County, Colorado pursuant to the rules of the American Arbitration Association
then in effect and before an arbitrator fully licensed and authorized by any and
all applicable rules, statutes, regulations or the like to hear such cases in
the State of Colorado. The arbitrators shall have the power to award any legal
or equitable remedies that would be available in proceedings conducted before a
state or federal court of competent jurisdiction in Colorado. Judgment on the
award of the arbitrators may be entered in any court of competent jurisdiction.
All arbitration proceedings and the results thereof shall be confidential,
except to the extent that any party is required to make disclosure concerning
such proceedings under applicable law.
7.9 No Conflict. The Employee represents and warrants that he is not
subject to any agreement, order, judgment or decree of any kind which would
prevent him from entering into this Agreement or performing fully his
obligations hereunder.
7.10 Survival. The rights and obligations of the parties shall survive the
Term of Employment to the extent that any performance is required under this
Agreement after the expiration or termination of such Term of Employment.
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7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
7.12 Notices. Any notice to be given hereunder by either party to the other
may be effected in writing by personal delivery, or by mail, certified with
postage prepaid, or by overnight delivery service. Notices sent by mail or by an
overnight delivery service shall be addressed to the parties at the addresses
appearing following their signatures below, or upon the employment records of
the Company but either party may change its or his address by written notice in
accordance with this paragraph.
7.13 Opportunity to Consult Counsel. The Parties hereto represent and agree
that, prior to executing this Agreement, each has had the opportunity to consult
with independent counsel concerning the terms of this Agreement.
7.14 Attorney Fees. In the event of any dispute, arbitration, litigation
between the Parties or proceeding before any court of competent jurisdiction,
the prevailing party shall be entitled to reasonable attorney fee, costs and
expenses.
IN WITNESS WHEREOF, the parties hereto have properly and duly executed this
Agreement as of the date first written above.
THE COMPANY:
MedGrup Corporation
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Chief Executive Officer
0000 Xxxxxxxx Xxxxx, xxxxx 000
Xxxxxxxx, XX 00000
EMPLOYEE:
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
19810 Top o' the Xxxx Xxxx
Xxxxxxxx, XX 00000
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