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EXHIBIT 10.19
EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, dated
as of September 25, 1998 (this "Agreement"), is by and between MedicalControl
Network Solutions, Inc., a Delaware corporation ("Employer"), and Xxxxx X.
Xxxxx, Xx. ("Employee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Stock Purchase Agreement (the
"Acquisition Agreement") by and among MedicalControl, Inc. ("MedicalControl"),
the Employer, Employee, Business Health Companies, Inc. ("BHC") and the other
shareholders of BHC, Employer purchased (the "Acquisition") all of the
outstanding shares of capital stock of BHC (the "Shares"); and
WHEREAS, upon the consummation of the transactions contemplated by the
Acquisition Agreement, BHC will become a wholly owned subsidiary of the
Employer; and
WHEREAS, as a result of the consummation of the transactions
contemplated by the Acquisition Agreement, the Employer desires to obtain the
services of the Employee, and the Employee desires to provide such services to
the Employer, all upon the terms and conditions set forth herein; and
WHEREAS, immediately prior to the purchase of the Shares by the
Employer, the Employee was a shareholder, director and an executive officer of
the BHC; and
WHEREAS, in order to induce the Employer to purchase the Shares, the
Employee has agreed to enter into this Agreement and the Employee acknowledges
that he will economically benefit from the sale of the Shares to the Employer;
and
WHEREAS, the execution of this Agreement is a condition precedent to
the closing of the transactions contemplated by the Acquisition Agreement; and
WHEREAS, the Employer would not consummate the purchase of the Shares
pursuant to the Acquisition Agreement absent the execution by the Employee of
this Agreement; and
WHEREAS, the Employer and its Affiliates (the term "Affiliates" shall
include any person or entity that directly or indirectly controls, is
controlled by, or is under the control of such person or entity) are engaged in
the business of providing services in the healthcare industry, including
operating a contracted network of hospitals, physicians and ancillary
healthcare providers; providing healthcare benefit plan administration;
providing management services to preferred provider networks; and
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designing and selling repricing software and services for preferred provider
organizations and certain healthcare network organizations (the "Business");
and
WHEREAS, the Employer and its Affiliates would suffer damages,
including the loss of profits, if the Employee solicited any customers or
employees of the Employer or its Affiliates otherwise than for the benefit of
Employer pursuant to his duties described herein; and
WHEREAS, the Employee recognizes and agrees that the covenants
contained by him herein are essential to the ability of the Employer to retain
the goodwill related to the BHC's business that is being acquired by the
Employer;
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants set forth below, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Compensation and Employment. Employee agrees to be employed by
Employer, and Employer agrees to so employ Employee, on the terms and
conditions set forth below. Employer shall pay, and Employee agrees to accept,
an annual base salary (the "Base Salary") of $200,000 during the term hereof.
Additionally, Employee shall be eligible to participate in the Management
Incentive Program or other bonus programs established by Employer for
executives.
Employee's Base Salary may be increased consistent with
recommendations from the President of Employer. The Base Salary may not be
reduced to less than $200,000 without the consent of Employee. The Base Salary
will be payable according to the normal payroll procedures of the Employer and
subject to all appropriate withholdings. Employee shall be reimbursed his
reasonable and documented business expenses, in accordance with Employer's
policies for other executives. Employee shall be entitled to such fringe
benefits (including life, medical and long-term disability insurance and
participation in the Employer's 401(k) savings plan) that are consistent with
other senior executive employees of Employer. In all instances and for all
purposes, Employee's employment tenure will include his employment time with
BHC as well as Employer. In addition, Employer agrees to provide Employee four
weeks paid vacation and paid membership in The Houstonian on terms consistent
with past practices.
The Employer hereby employs the Employee to serve as a Senior Vice
President of Employer or higher position, and to retain the same position and
title held in BHC prior to employment with the Employer. Employee's duties will
include managing the business and operations of Employer acquired in the
Acquisition and performing such other corporate roles and responsibilities to
be reasonably determined by Employer.
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Employee shall report to the President of Employer. Employee's title and duties
will not be materially decreased in a manner inconsistent with his position and
experience or his performance hereunder. Employee agrees to devote his full
business time and his best efforts, skills and abilities to the performance of
his duties hereunder. The Employee shall be provided with his existing office
or comparable office, existing or similar office amenities and a secretary of
his choice who will be initially compensated in accordance with BHC's historic
practices. Employee may serve as a Director or Trustee of other organizations,
provided such service does not prevent Employee from effectively performing his
duties under this Agreement.
Employee's principal place of employment will be Employer's South
Texas Office which will be within a 50 mile radius of Houston, Texas. Employee
can perform his duties hereunder out of his residence if Employer and Employee
agree that such performance in no way diminishes the effectiveness of
Employee's performance hereunder.
Employee shall use his best efforts to preserve the business of
Employer and the good will of all employees, customers, suppliers and other
persons having business relations with Employer.
2. Term. The employment of Employee shall begin on the date of this
Agreement and shall continue until the earliest of (i) September 1, 2003; (ii)
the date Employer terminates it for just cause; (iii) the date Employee
terminates it for just cause; or (iv) the death of Employee.
For purposes of this Section 2, "just cause" for termination for the
purposes of the Employer's termination of Employee shall include: (a) the
failure or inability for any reason of Employee to devote the business time
(other than due to approved vacation time or other approved absences) required
by Section 1 to Employer's business; (b) the failure of Employee to diligently
perform his duties under this Agreement; (c) the conviction by Employee of a
felony or the commission by Employee of an act involving moral turpitude which
adversely affects Employer's business through the loss of clients, contracts,
vendors or suppliers; (d) Employee's material breach or default in the
performance of his obligations hereunder; or (e) Employee's failure or refusal
to follow the reasonable instructions of the President of Employer or the
reasonable policies, standards and regulations of Employer.
The termination of Employee's employment by Employer shall not be
deemed to be for just cause unless the President of Employer provides written
notice to Employee of the conduct on which the termination is based, and
Employee must be given the opportunity during the 30-day period following
written notice to correct the conduct described in such notice, unless such
conduct is a conviction of a felony or
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an act or acts involving moral turpitude which adversely affects the Employer
as described in Section 2(c) or which cannot be cured.
For purposes of this Agreement, "just cause," with respect to the
Employee's termination of employment with the Employer means (i) the Employer's
breach of its obligations to make any payments required hereunder or (ii) the
Employer's breach of any other material provision of this Agreement; provided,
however, the termination of Employee's employment by Employee shall not be
deemed to be for just cause unless Employee provides written notice to Employer
of the conduct on which the termination is based, and Employer must be given
the opportunity during the 30-day period following written notice to correct
the conduct described in such notice, unless such conduct cannot be cured.
If Employee becomes disabled (as defined under the Employer's
long-term disability insurance policy) during the term of this Agreement, then
Employee will be entitled to disability payments for the shorter of (a) three
years following his disability or (b) the remaining term of this Agreement (the
"Disability Period"), such disability payments to be equal to the difference
between (i) Employee's Base Salary during the Disability Period and (ii) the
amount of disability insurance payments collected by Employee during the
Disability Period.
If Employee resigns within 10 business days following a Change of
Control (as defined), he will receive his Base Salary for the one-year period
following the Change of Control. If Employee is terminated within 60 business
days after a Change of Control without just cause, then Employee will be
entitled to his Base Salary through the shorter of (a) three years following
his termination or (b) the remaining term of this Agreement. As used herein, a
Change of Control shall occur if the Employer or MedicalControl (i) sells
substantially all of its assets to a single purchaser (or to a group of
purchasers in a series of related transactions) other than to an affiliated
entity; (ii) sells, exchanges or otherwise disposes of more than 50% of its
outstanding shares other than to an affiliated entity; (iii) dissolves; or (iv)
merges or consolidates in a transaction in which the Employer's or
MedicalControl's shareholders receive less than 50% of the outstanding voting
shares of the new or continuing corporation.
In the event of (i) the Employer's termination of the Employee's
employment without just cause (other than due to a disability of Employee or if
Employee is terminated within 60 business days following a Change in Control)
or (ii) the Employee's termination of employment for just cause (a "Termination
Event"), the Employee shall be paid, in addition to all compensation due up to
the date of termination, severance pay in the amount of his Base Salary through
the remaining term of this Agreement.
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Any severance pay or payments made due to Employee's disability or a
Change in Control will be paid periodically in accordance with Employer's
normal payroll procedures and subject to all appropriate withholdings.
Except as specifically provided for herein, the provisions of Sections
3, 4 and 5 shall survive any termination of Employee's employment under this
Agreement. In the event of the termination of Employee's employment prior to
the completion of the term of employment due to Employee's voluntary
resignation other than for just cause by Employee or Employer's termination of
Employee for just cause, Employee shall be entitled only to the compensation
earned by him as of the date of termination.
3. Nondisclosure Agreement. Employee has had and will have access to
and become familiar with various trade secrets and proprietary and confidential
information consisting of, but not limited to, processes, computer programs,
compilations of information, records, sales procedures, customer requirements,
pricing techniques, customer lists, methods of doing business and other
confidential information (collectively referred to as the "Trade Secrets"),
that are owned by Employer (including, but not limited to, Trade Secrets of the
BHC acquired in the Acquisition) and regularly used in the operation of the
Business, but in connection with which Employer take precautions to prevent
dissemination to persons other than certain directors, officers and employees.
Employee acknowledges and agrees that the Trade Secrets (1) are secret and not
known in the industry; (2) are entrusted to Employee after being informed of
their confidential and secret status by Employer and because of the fiduciary
position occupied by Employee with Employer; (3) have been developed by
Employer for and on behalf of Employer through substantial expenditures of
time, effort and money and are used in its business; (4) give Employer an
advantage over competitors who do not know or use the Trade Secrets; (5) are of
such value and nature as to make it reasonable and necessary to protect and
preserve the confidentiality and secrecy of the Trade Secrets; and (6) the
Trade Secrets are valuable, special and unique assets of Employer, the
disclosure of which could cause substantial injury and loss of profits and good
will to Employer. Employee shall not use in any way or disclose any of the
Trade Secrets, directly or indirectly, either during the term of this Agreement
or at any time thereafter, except as required in the course of his employment
under this Agreement. All files, records, documents, information, data and
similar items relating to the business of Employer, whether prepared by
Employee or otherwise coming into his possession, shall remain the exclusive
property of Employer and shall not be removed from the premises of Employer
under any circumstances without the prior written consent of the President of
Employer (except in the ordinary course of business during Employee's period of
active employment under this Agreement), and in any event shall be promptly
delivered to Employer upon termination of this Agreement. Employee agrees that
upon his receipt of any subpoena, process or other request to produce or
divulge, directly or indirectly, any
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Trade Secrets to any entity, agency, tribunal or person, Employee shall timely
notify and promptly hand deliver a copy of the subpoena, process or other
request to the President of Employer.
Notwithstanding the foregoing, Trade Secrets shall not include any
information which is generally available to the public (other than through a
breach of any confidentiality or other contract or a breach of fiduciary duty).
If Employee is requested in any legal proceeding to disclose any Trade Secrets,
Employee will give Employer prompt notice of such request so that Employer may
seek an appropriate protective order. If, in the absence of a protective order,
Employee is nonetheless compelled to disclose any Trade Secrets by a court or
governmental body having the apparent authority to order such disclosure,
Employee may disclose the Trade Secrets without liability hereunder; provided,
however, that Employee must give Employer written notice of the information to
be disclosed as far in advance of its disclosure as is practicable, and, upon
Employer's request, Employee uses his best reasonable efforts to obtain
assurances that confidential treatment will be accorded to the Trade Secrets.
4. Non-Competition Agreement. Employee acknowledges and agrees that he
will be able to injure Employer if he should compete with Employer in a
business that is competitive with the business conducted or to be conducted by
Employer or its Affiliates. In addition, Employer has acquired the Trade
Secrets and the good will of BHC as a result of the Acquisition, and Employer
would not have consummated the Acquisition without Employee executing a
non-competition agreement. For these reasons, Employee hereby agrees as
follows:
(a) Without the prior written consent of Employer, Employee
shall not, during the period of employment with Employer, directly or
indirectly, either as an individual, a partner or a joint venturer, or in any
other capacity, (i) invest (other than investments in publicly owned companies
which constitute not more than 1% of the voting securities of any such company)
or engage in any business that is competitive with the Business, (ii) accept
employment with or render services to a competitor of Employer as a director,
officer, agent, employee or consultant, (iii) contact, solicit or attempt to
solicit or accept business from any (A) customers of Employer or its affiliates
or (B) person or entity whose business Employer or its affiliates is
soliciting, (iv) contact, solicit or attempt to solicit or accept or direct
business that is competitive with the Business during Employee's employment
under this Agreement from any of the customers of Employer or any of its
affiliates, or (v) take any action inconsistent with the fiduciary relationship
of an employee to his employer.
(b) For a period of 36 months after the termination or
cessation of his employment with Employer for any reason whatsoever, Employee
shall not, directly or indirectly, either as an individual, a partner or a
joint venturer, or in any other
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capacity, in the States of Texas, Louisiana, New Mexico, Arkansas, Oklahoma,
Mississippi, Alabama and Tennessee (the "Designated Territory") (i) invest
(other than investments in publicly owned companies which constitute not more
than 1% of the voting securities of any such company) or engage in any business
that is competitive with the Business, (ii) accept employment with or render
services to a competitor of Employer as a director, officer, agent, employee or
consultant, or (iii) contact, solicit or attempt to solicit or accept business
from any (A) customer of Employer or its affiliates or (B) person or entity
whose Employer or its affiliates are soliciting. For the purposes of this
Agreement, a "competitor" specifically includes persons, firms, sole
proprietorships, partnerships, companies, corporations or other entities that
market products and/or perform services in direct or indirect competition with
the Business within the Designated Territory.
5. Nonemployment Agreement. For a period of 36 months after the
termination or cessation of his employment with Employer for any reason
whatsoever, Employee shall not, on his own behalf or on behalf of any other
person, partnership, association, corporation or other entity, hire or solicit
or in any manner attempt to influence or induce any employee of Employer or its
affiliates to leave the employment of Employer or its affiliates, nor shall he
use or disclose to any person, partnership, association, corporation or other
entity any information obtained while an employee of Employer concerning the
names and addresses of Employer's employees.
The provisions contained in Section 4 and 5 hereof will terminate and
be of no effect if (a) an Event of Default occurs under the convertible
subordinated promissory note issued by Employer to Employee in the Acquisition
and remains uncured during the period provided for in such note, (b) Employer
fails to register the shares of common stock of MedicalControl in violation of
that certain Registration Rights Agreement between MedicalControl, Employee and
certain other individuals, (c) Employer in writing or orally in front of a
third party states to Employee that it is terminating him without just cause
and fails to pay the severance provided for herein or (d) Employer breaches the
terms of that certain Escrow Agreement executed in connection with the
Acquisition (it being acknowledged that the mere act of the escrow agent
depositing the escrow amount into a court in an interpleader action is not a
default by Employer of the Escrow Agreement).
6. Severability. The parties hereto intend all provisions of Sections
3, 4 and 5 hereof to be enforced to the fullest extent permitted by law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any provision of Sections 3, 4 and 5 hereof is too broad to be enforced as
written, the parties intend that the court reform the provision to such
narrower scope as it determines to be reasonable and enforceable. In addition,
however, Employee agrees that the non-competition agreements, nondisclosure
agreements and nonemployment agreements set forth
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above each constitute separate agreements independently supported by good and
adequate consideration and shall be severable from the other provisions of, and
shall survive, this Agreement. The existence of any claim or cause of action of
Employee against Employer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Employer of the covenants
and agreements of Employee contained in the non-competition, nondisclosure or
nonemployment agreements. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
7. Affiliates. Employee will use his best efforts to ensure that no
corporation or other entity of which he is an officer, director, shareholder,
owner, partner or other affiliate, shall take any action that Employee could
not take without violating any provision of this Agreement. In addition, no
family members of Employee shall take any action that Employee could not take
without violating any provision of this Agreement if such family member is
under the direction or control of Employee.
8. Remedies. Employee recognizes and acknowledges that the
ascertainment of damages in the event of his breach of any provision of this
Agreement would be difficult, and Employee agrees that Employer, in addition to
all other remedies it may have, shall have the right to injunctive relief if
there is such a breach.
9. Acknowledgments. Employee acknowledges and recognizes that the
enforcement of any of the non-competition provisions in this Agreement by
Employer will not interfere with Employee's ability to pursue a proper
livelihood. Employee further represents that he is capable of pursuing a career
in other industries to earn a proper livelihood. Employee recognizes and agrees
that the enforcement of this Agreement is necessary to ensure the preservation
and continuity of the business and good will of Employer. Employee agrees that
due to the nature of Employer's business, the non-competition restrictions set
forth in this Agreement are reasonable as to time and geographic area. At any
time during the 36 months commencing on the date hereof, Employer may request
Employee to supply such information as Employer deems necessary to ascertain
whether or not Employee has complied with, or has violated, the restrictive
covenants of Sections 3, 4, and 5 hereof. Any such request for information will
be sent to Employee by certified mail, return receipt
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requested, addressed to Employee's last known address. Employee shall furnish
the requested information to Employer within 10 days following the receipt of
such request.
10. Notices. Any notices, consents, demands, requests, approvals and
other communications to be given under this Agreement by either party to the
other shall be deemed to have been duly given if given in writing and
personally delivered or sent by mail, registered or certified, postage prepaid
with return receipt requested, as follows:
If to Employer: MedicalControl Network Solutions, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: President
If to Employee: 000 Xxxxx Xxxx Xxx Xxxx
Xxxxxxx, Xxxxx 00000
With a copy (which shall Xxx Xxxxx
not constitute notice) to: Xxxxx, Xxxxx and Xxxxxxxx
00000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx Xxxxx
The Xxxxx Law Firm
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Notices delivered personally shall be deemed communicated as of actual receipt;
mailed notices shall be deemed communicated as of three days after mailing.
11. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof and contains all of the covenants and agreements
between the parties with respect thereto.
12. Modification. No change or modification of this Agreement shall be
valid or binding upon the parties hereto, nor shall any waiver of any term or
condition in the future be so binding, unless such change or modification or
waiver shall be in writing and signed by the parties hereto.
13. Governing Law and Venue. The parties acknowledge and agree that
this Agreement and the obligations and undertakings of the parties hereunder
will be performable in Houston, Xxxxxx County, Texas. This Agreement shall be
governed by,
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and construed in accordance with, the laws of the State of Texas. If any action
is brought to enforce or interpret this Agreement, venue for such action shall
be in Xxxxxx County, Texas.
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original, but all of which shall constitute one
document.
15. Costs. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which he or it may be entitled.
16. Estate. If Employee dies prior to the expiration of the term of
employment, any monies that may be due him from Employer under this Agreement
as of the date of his death shall be paid to his estate.
17. Assignment. Upon notice to Employee, Employer shall have the right
to assign this Agreement to its affiliates, successors or assigns. The terms
"successors" and "assigns" shall include any person, corporation, partnership
or other entity that buys all or substantially all of Employer's assets or all
of its stock, or with which Employer merges or consolidates. The rights, duties
and benefits to Employee hereunder are personal to him, and no such right or
benefit may be assigned by him.
18. Binding Effect. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
19. Waiver of Breach. The waiver by Employer of a breach of any
provisions of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.
20. Mutual Contribution. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no provision
of this Agreement shall be construed against any party on the ground that such
party drafted the provision or caused it to be drafted or the provision
contains a covenant of such party.
21. Guaranty. By its execution hereof, MedicalControl irrevocably and
unconditionally guarantees to Employee the prompt payment when due of all of
the Employer's payment obligations under Sections 1 and 2 hereof, together with
and as adjusted by any and all amendments or modifications thereto in
accordance with the terms of this Agreement.
(Signature Page to Follow)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EMPLOYEE:
/s/ XXXXX X. XXXXX, XX.
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Xxxxx X. Xxxxx, Xx.
Employer:
MEDICALCONTROL NETWORK SOLUTIONS, INC.
By: /s/ XXXXXX X. XXXXXX
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Xxxxxx X. Xxxxxx
President and Chief Executive Officer
Guarantor:
MEDICALCONTROL, INC.
By: /s/ X. XXXX XXXX
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X. Xxxx Xxxx
President and Chief Executive Officer
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