CONSULTING AGREEMENT
AGREEMENT dated as of the 1st day of January, 2001 by and between
Netsmart Technologies, Inc., a Delaware corporation with its principal office at
000 Xxxxxx Xxxxxx, Xxxxx, Xxx Xxxx 00000 (the "Company"), and Xxxxxx X. Xxxxxx,
residing at 00 Xxxxxxx Xxxxx, Xxxx Xxxxx, XX 00000 (the "Consultant").
WITNESSETH:
WHEREAS, the Company has been serving in a consulting capacity to the
Company and, prior to his service as a consultant, the Consultant was a senior
executive officer of the Company and its subsidiary, Creative Socio-Medics
Corp. ("CSM");
WHEREAS, the Company desires to continue to obtain the benefits of the
Consultant's knowledge, skill and ability in connection with the operations of
the Company and to continue to engage the Consultant on the terms and conditions
hereinafter set forth; and
WHEREAS, the Consultant desires to provide his services to the Company
and to accept engagement by the Company on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises set forth in
this Agreement, the parties agree as follows:
1. Engagement and Duties.
---------------------
(a) Subject to the terms and conditions hereinafter set forth,
the Company hereby engages the Consultant to perform such services as may be
mutually agreed upon by the Consultant and the Company's board of directors (the
"Board") or its chief executive officer. The Consultant shall report to the
chief executive officer or such other senior executive officer as shall be
designated by the Board or the chief executive officer. The Consultant's
services during the Consulting may include services relating to the Company's
strategy for marketing its products and developing its business plan, it being
understood that Consultant shall devote approximately 50% of his business time
and attention to the business of the Company.
1
(b) The Consultant shall serve as a director of the Company or
any of its subsidiaries, if elected, and he shall receive for services as a
director of the Company during the Consulting Term, compensation of $1,500 per
month.
(c) This Agreement shall have an initial term (the "Initial
Term") of one year and nine months, commencing as of the date of this Agreement
and expiring on December 31, 2002. The Consultant shall have the right, on
notice given not later than sixty (60) days prior to the end of the Initial
Term, to extend the term for a period of one (1) year. The Initial Term and the
one-year extension are collectively referred to as the "Consulting Term."
(d) Notwithstanding the provisions of Paragraph 1(c) of this
Agreement, as long as this Agreement shall not have been terminated pursuant to
Paragraph 5(a), (b) or (c) of this Agreement, the Consultant, on ninety (90)
days written notice to the Board, shall have the right to terminate the
Consulting Term, in which event the Consulting Term shall end on the date set
forth in such notice with the same effect as if such date were the last day of
the Consulting Term set forth in Paragraph 1(c) of this Agreement.
(e) Immediately following the Consulting Term, whether the
Consulting Term shall have expired pursuant to Paragraph 1(c) of this Agreement
or shall have been terminated by the Consultant pursuant to Paragraph 1(d) of
this Agreement, but excluding any termination by the Company pursuant to
Paragraph 5(a), (b) or (c) of this Agreement, the Consultant shall serve as a
consultant to the Company on a reduced time basis during the Subsequent
Consulting Term. The Subsequent Consulting Term shall mean the five (5) year
period immediately following the expiration or termination of the Consulting
Term. The Consulting Term and the Subsequent Consulting Term are collectively
referred to as the Term.
(f) During the Subsequent Consulting Term the Consultant shall
continue to serve as a consultant to the Company and shall report to such
executive officer as shall be designated by the Company's chief executive
officer. The nature of the Consultant's services during the Subsequent
Consulting Term shall be as mutually agreed upon by the Company's chief
2
executive officer and the Consultant. The Consultant shall be required to devote
such time to his services for the Company as he may determine, it being
understood that the services being rendered during the Subsequent Consulting
Term shall not be the Consultant's principal activity and that the Consultant
may engage in such business, charitable and personal activities as he may
determine, subject to the provisions of Paragraphs 6, 7 and 8 of this Agreement.
In rendering services during the Subsequent Consulting Term, the Company shall
not require the Consultant to perform services which would interfere with his
other business, charitable and personal activities or which would require him to
return from or change his plans for any vacations, and, if he so elects, the
Consultant may perform such services from his residence.
2. Performance. The Consultant hereby accepts the employment
-----------
contemplated by this Agreement. The Consultant shall perform his duties pursuant
to this Agreement diligently, in good faith and in a manner consistent with the
best interests of the Company.
3. Compensation and Other Benefits.
-------------------------------
(a) For his services to the Company during the Consulting Term,
the Company shall pay the Consultant compensation at the monthly rate of $6,250.
(b) If the Compensation Committee of the Board establishes a
bonus pool for the Company's key management employees, which plan may be based
on a percentage of the Company's net income or such other formula as the
Compensation Committee may determine, the Consultant shall participate in the
bonus pool. The size of the bonus pool and the extent of Consultant's
participation in the bonus pool will be determined by the Compensation
Committee, whose determination shall be final, binding and conclusive on the
Company and Consultant. If for any year no bonus pool is established, the
Consultant shall be eligible for a discretionary bonus by the Compensation
Committee or the Board. Any bonus payments made to the Consultant shall
hereinafter be referred to as a "Bonus."
3
(c) During the Subsequent Consulting Term, the Consultant shall
receive compensation at the annual rate of $75,000, payable in regular monthly
installments payable the first day of each month. In addition, if the Consultant
is elected as a director of the Company during the Subsequent Consulting Term,
he shall be entitled to such compensation and other benefits as are provided to
other independent directors.
(d) In addition to his compensation and Bonus, the Consultant
shall receive the following benefits during the Term:
(i) Major medical health insurance for the Consultant and
members of his immediate family.
(ii) Accident and life insurance and life insurance to the
extent such benefits are provided to the Company's executive officers; provided
to the Consultant and members of his immediate family to the extent permitted by
the Company's insurers.
(iii) Long-term medical care insurance to the extent that
the Company is able, by using reasonable efforts, to obtain such coverage for an
annual premium which does not exceed $3,000. To the extent that the annual
premium for such coverage exceeds $3,000, if the Consultant desires such
coverage, he shall be responsible for the additional premiums.
(iv) An automobile allowance of $1,000 per month payable
monthly.
(v) Vacation in accordance with Company policy.
(e) Subsequent to the Term, and for the balance of the
Consultant's life, the Company will obtain major medical health insurance for
the Consultant and his spouse which, to the extent practical, is comparable with
the major medical health insurance provided from time to time by the Company to
its employees; provided, that to the extent that such insurance costs the
Company more than $400 per month, any excess shall be paid by the Consultant. In
the event that the Consultant is or can be covered by major medical insurance by
another company during the Subsequent Consulting Term or thereafter, the Company
shall not be required to provide such benefits to the Consultant.
4
(f) In the event of a termination of Consultant's employment as a
result of his death or Disability, as hereinafter defined, the Company shall
continue to pay to Consultant or his beneficiary, his Cash Compensation at the
annual rate in effect at the date of death or termination resulting from a
Disability, until the earlier of (i) six (6) months from the date of death or
such termination or (ii) the expiration of the Term.
(g) Any payments ("disability insurance payments") received by
Consultant pursuant to a disability policy obtained through the Company (whether
paid for by the Company or Consultant) shall be applied on a dollar-for-dollar
basis to reduce the Cash Compensation or disability payments payable by the
Company pursuant to this Agreement during the period when such disability
insurance payments are being made.
(h) As used in this Agreement, the term "Cash Compensation" shall
mean the annual compensation payable pursuant to Paragraph 3(a) of this
Agreement, Bonus, automobile expenses and vacation pay. One month's Cash
Compensation shall mean one twelfth (1/12) of the sum of (i) the annual
compensation payable to said Paragraph 3(a), (ii) the Bonus for previous year,
(iii) the annual automobile allowance plus (iv) the annual vacation pay. During
the Subsequent Consulting Term, references in this Agreement to the annual
compensation pursuant to Paragraph 3(a) shall mean the annual compensation
payable pursuant to Paragraph (c) of this Agreement.
(i) In the event that, during the Fee Payment Period, the Company
consummates a Covered Transaction, the Company shall (x) issue to the Consultant
the Warrants in respect of the Equity Consideration paid by Company in the
Covered Transaction and (y) pay to the Consultant the Cash Fee with respect to
Other Consideration in the Covered Transaction which is either paid by or
received by the Company, its stockholders or any other party to the Covered
Transaction or the stockholders of any other party to the Covered Transaction.
As used in this Paragraph 3(i), the following terms shall have the meanings set
forth below:
5
(i) The Fee Payment Period shall mean the period
commencing on the date of this Agreement and ending on the first to occur of (A)
December 31, 2003, (B) the date on which the Consultant resigns from the Company
other than (x) pursuant to Paragraph 5(e) of this Agreement or (y) upon
expiration of the Term, or (C) the date of termination of the Consultant's
relationship if this Agreement and the Consultant's consulting relationship are
terminated pursuant to Paragraph 5(c).
(ii) A Covered Transaction shall mean a Transaction (other
than an Excluded Transaction) with another party who is introduced to the
Company directly or indirectly by the Consultant during the Fee Payment Period
if the Transaction is closed during the Fee Payment Period. If the Transaction
involves more than one closing or the issuance of securities or other
consideration on more than one occasion, the Transaction shall be a Covered
Transaction if the initial closing or the initial payment or issuance of
consideration occurs during the Fee Payment Period.
(iii) A Transaction shall mean any of the following:
(A) Any merger, consolidation, sale by the Company
of all or substantially all of its business or assets or the sale of the stock,
business or assets of any subsidiary; regardless of whether the consideration is
paid to the Company or its stockholders.
(B) The acquisition by the Company of any the stock
or assets of any other corporation, partnership, limited liability company,
regardless of whether the consideration is paid to the other entity or its
stockholders, partners, members or other holders of beneficial interests
therein, other than the purchase of capital assets or other assets by the
Company in the normal course of business.
(C) Any joint venture or similar transaction
pursuant to which the Company and one or more other parties contribute funds or
assets, including intellectual property rights, to a third party.
6
(D) Any licensing, distribution or similar
transaction in which the Company pays or receives consideration for the grant or
receipt of licensing, distribution, marketing or similar rights.
(E) Any other transaction which results in a
business combination.
(iv) An Excluded Transaction shall mean a Transaction with
respect to which either (x) the Consultant introduced the Company to an
investment banker or finder or other third party who receives a commission, fee
or other compensation with respect to the Transaction or (y) a Transaction which
is brought to the attention of the Consultant in the Consultant's position of
chief Consultant officer or a director of or a consultant to the Company. With
respect to Excluded Transaction, the Board or the Compensation Committee shall
have the right to issue to the Consultant Warrants or pay a Cash Fee which is
less than the amount provided for in this Paragraph 3(i).
(v) The Equity Consideration shall mean the shares of the
Company's common stock or Convertible Securities issued by the Company in a
Covered Transaction.
(vi) Convertible Securities shall mean warrants,
convertible debt, convertible preferred stock or other debt or equity
instruments or agreements upon the exercise or conversion of which or pursuant
to the terms of which shares of the Company's common stock may be issued.
(vii) Warrants shall mean warrants to purchase such number
of shares of common stock as equals two percent (2%) of the total number of
shares of common stock issued in the Covered Transaction. The number of shares
of common stock to be issued in the Covered Transaction shall include all shares
of common stock which are issuable upon the conversion or exercise of or
pursuant to the terms of Convertible Securities which are issued in the Covered
Transaction. The Warrants shall have a term of five years from the date of
issuance, provide for a cashless exercise and shall include provisions which
protect the holder in the event that the Company shall (A) pay a dividend or
make a distribution on its shares of common stock in shares of common stock or
convertible securities, (B) subdivide or reclassify its outstanding common stock
7
into a greater number of shares or otherwise effect a stock split, or (C)
combine or reclassify its outstanding common stock into a smaller number of
shares or otherwise effect a reverse split. The exercise price of the Warrants
shall be equal to the closing price of the common stock as reported on the
principal market on which the common stock is traded on the date of the
execution of the definitive agreement relating to the Transaction or the closing
date (or initial closing date if there are more than one closing), whichever
price is lower. The holder of the Warrants shall have piggyback registration
rights with respect to the shares of common stock issuable upon exercise of the
Warrants, subject to the customary right of the Company's underwriters' to
exclude such shares from the registration statement as long as the holders of
the Warrants are not treated less favorably than any other persons with
piggyback registration rights. If the Covered Transaction requires the filing of
a registration statement in connection with the issuance by the Company of
shares of common stock or Convertible Securities in the Transaction, the shares
of common stock issuable upon exercise or conversion of the Warrant shall be
included in such registration statement.
(viii) The Cash Fee shall be one percent (1%) of the Other
Consideration.
(ix) The Other Consideration shall mean any consideration
of any kind and description, including equity (other than Equity Consideration),
cash, notes or other evidences of indebtedness, Convertible Securities, assets
which are issued or paid by the Company, the other party to the Transaction or a
third party; provided, however, that liabilities assumed by the acquiring party
shall not be included in Other Consideration. In the case of a joint venture or
similar Covered Transaction in which both the Company and one or more other
parties issue or pay consideration, the Other Consideration shall include the
consideration paid by all parties. Other consideration shall be valued as
follows:
(A) If the Other Consideration consists of
promissory notes, debentures or other evidences of indebtedness which are not
Convertible Securities, the Other Consideration with respect thereto shall be
the principal amount thereof.
8
(B) Any consideration paid to any party in respect
of a covenant not to compete or similar covenant and any consideration paid to
Consultants to the extent that the consideration exceeds the amount which would
otherwise be paid to such Consultant based on his or her compensation package in
effect prior to the negotiations relating to the Covered Transaction shall be
included in Other Consideration.
(C) Any equity consideration, including Convertible
Securities, shall be based on the closing price of the common stock on the
principal market on which the common stock is traded on the date of the closing
of the Covered Transaction. For purpose of determining the Other Consideration,
Convertible Securities shall have a value equal to the value of the shares of
common stock issuable upon conversion or exercise of the Convertible Securities,
less any consideration required to be paid pursuant to the term of the
Convertible Securities for the issuance of the common stock; provided, that if
Convertible Securities are issued and there is a public market for the
Convertible Securities, then the Convertible Securities shall be based on the
closing price of the Convertible Security on the principal market on which the
Convertible Securities are traded on the date of the closing of the Covered
Transaction.
(D) Notwithstanding the provisions of Paragraph
3(i)(viii)(C), if the securities to be issued in the Covered Transaction are to
be publicly traded commencing on or about the closing date, the securities shall
be valued based on the average of the closing prices of the securities for the
twenty (20) consecutive trading days commencing five (5) trading days after the
closing of the Covered Transaction.
(x) If all or a portion of the Equity Consideration or
Other Consideration payable in connection with a Covered Transaction includes
future payments, then the Company shall issue to the Consultant any additional
Warrants and pay to the Consultant any additional cash fee, determined in
accordance with this Agreement, when, and if such payments are paid.
9
(xi) In the event that there is a conflict as to whether a
Transaction was brought to the attention of the Company by the Consultant or
another person or in the event that more than one person brought the Transaction
to the attention of the Company, the determination of the persons entitled to
compensation as a result of the Transaction shall be determined by the Board, it
being understood that the total compensation payable to the Consultant and any
other officers, directors or consultants under this provision or similar
provisions contained in the employment or consulting agreement shall not exceed
(A) Warrants to purchase two percent (2%) of the Equity Consideration and (B) a
Cash Fee of one percent (1%) of the Other Consideration.
(xii) The Board may, with the consent of the Consultant,
provide compensation to the Consultant for services rendered in connection with
a business transaction which is different from the compensation described in
this Paragraph 3(i), including, by way of illustration, a phantom stock program
in which the Consultant and other executive officers of the Company participate.
4. Reimbursement of Expenses. The Company shall reimburse Consultant,
-------------------------
upon presentation of proper expense statements, for all authorized, ordinary and
necessary out-of-pocket expenses reasonably incurred by Consultant during the
Term in connection with the performance of his services pursuant to this
Agreement hereunder in accordance with the Company's expense reimbursement
policy.
5. Termination.
-----------
(a) This Agreement and Consultant's consulting relationship
hereunder shall terminate immediately upon the death of the Consultant.
(b) This Agreement and Consultant's consulting relationship
pursuant to this Agreement, may be terminated by the Consultant or the Company
on not less than thirty (30) days' written notice in the event of Consultant's
Disability. The term "Disability" shall mean any illness, disability or
incapacity of the Consultant which prevents him from substantially performing
10
his regular duties for a period of three (3) consecutive months or four (4)
months, even though not consecutive, in any twelve (12) month period. However,
if the Consultant is covered by long-term disability insurance, the Company may
not terminate this Agreement pursuant to this Paragraph 5(b) unless the
Consultant is eligible for disability payments under his long-term disability
insurance.
(c) The Company may terminate this Agreement and the Consultant's
consulting relationship pursuant to this Agreement for cause, in which event no
further Cash Compensation shall be payable to Consultant subsequent to the date
of such termination. The term "Cause" shall mean (i) repeated failure to perform
material instructions from the officer to whom the Consultant reports, provided
that such instructions are reasonable and consistent with Consultant's duties as
set forth in Paragraph 1 of this Agreement, (ii) a breach of Paragraphs 6, 7 or
8 of this Agreement; (iii) a breach of trust whereby the Consultant obtains
personal gain or benefit at the expense of or to the detriment of the Company;
or (iv) a conviction of the Consultant of any felony. If the Company proposes to
terminate this Agreement pursuant to clauses (i), (ii) or (iii) of this
Paragraph 5( c), the Company shall notify the Consultant in writing setting
forth in reasonable detail the basis for the proposed termination, and the
Consultant shall have a reasonable opportunity to respond to the Board and to be
represented before the Board by counsel. If this Agreement is terminated
pursuant to clause (iv) of this Agreement, and the conviction is subsequently
reversed on appeal, the Company shall pay the Consultant his Cash Compensation
for the balance of the Term. For purposes of clauses (iv) of this Agreement, a
guilty plea or plea of nolo contendere or similar plea shall be deemed to be a
conviction.
(d) In the event that the Company terminates Consultant's
engagement as a consultant other than (i) as provided in Paragraphs 5(a), (b)
and (c) or (ii) as a result of or following a change of control (other than as
provided in Paragraph 5(e) of this Agreement), the Company shall pay to
Consultant as severance payments (A) his annual compensation pursuant to
Paragraph 3(a) of this Agreement as provided in this Agreement for the balance
of the Term, (B) the Bonus paid to Consultant for the previous year, both of
11
which shall be paid in twelve (12) equal monthly installments commencing within
the month following the month in which Consultant's termination occurs.
(e) (i) In the event that, following a change of control, as
hereinafter defined, Consultant is either dismissed other than for cause, or
terminates this Agreement and his consulting relationship for any reason, or his
engagement is terminated as a result of a Disability, the Company shall pay
Consultant severance pay in an amount equal to (A) twelve (12) months' Cash
Compensation plus (B) the applicable number of months' Cash Compensation, all of
which shall be paid to the Consultant on the date of the termination of his
employment or consulting relationship. The applicable number of months shall be
the greater of (x) thirty (30) or (y) one and one-half (1.5) multiplied by the
number of full or partial years during which the Consultant served as an officer
or director of or consultant to the Company, with service as an officer of CSM
and its predecessor being counted as service as an officer of the Company;
provide, that in no event shall the applicable number of months exceed thirty
six (36).
(ii) A change of control shall occur or be deemed to have
occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d)
2) of the Securities Exchange Act of 1934, as amended) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing twenty five (25%) percent or more of the combined voting power of
the Company's then outstanding securities, or (B) during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute a least a majority thereof unless
the election of each new director was nominated, ratified or approved by at
least two-thirds (2/3) of the directors then still in office who were either
directors at the beginning of such period or who were elected or appointed with
the approval or ratification of at least two-thirds (2/3) of the directors who
were directors at the beginning of such period, or (C) the Board of Directors
shall have determined that an event, other than as described in clauses (A) and
(B) of this Paragraph 5(e)(ii), results in a change of control, or (D) a CSM
Disposition, as hereinafter defined. For purposes of clause (B) of this
12
Paragraph 5(e)(ii), the directors at the beginning of the initial period shall
mean Messrs. Xxxxxx X. Xxxxxx, Xxxxx X Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxx Xxxx, and
Xxxxxx X. Xxxxxxxx.
(iii) A CSM Disposition shall mean a transaction, however
structured, as a result of which the Company ceases to own the business
presently being conducted by CSM, as the same business may be developed in the
future, and includes, but is not limited to, a sale by CSM of all or a
substantial portion of its business and assets, the sale by the Company of all
or substantially all of the stock of CSM (provided that a public offering by CSM
shall not be treated as a CSM Disposition), the merger or consolidation of CSM
with or into another corporation if, as a result thereof, the Company ceases to
own a controlling interest in CSM.
(f) In the event of any termination of Consultant's consulting
relationship hereunder, including termination for cause as provided for herein,
Consultant shall be entitled to all rights if any, under the Company's benefit
plans which had vested as of the date of termination of his employment or his
consulting relationship. In addition, for a period of eighteen (18) months after
any such termination, the Company shall provide Consultant and, to the extent
permitted by the Company's insurance plans, his eligible family members with the
hospitalization, life insurance, medical and major medical benefits which would
have been provided to Consultant if he had continued in the employ of or as a
consultant to the Company pursuant to this Agreement, except that the Company
shall not be required to provide life insurance coverage for any family member.
6. Trade Secrets and Proprietary Information. The Consultant recognizes
-----------------------------------------
and acknowledges that the Company, through the expenditure of considerable time
and money, has developed and will continue to develop in the future information
concerning customers, clients, marketing, products, services, business, research
and development activities and operational methods of the Company and its
customers or clients, contracts, financial or other data, technical data or any
other confidential or proprietary information possessed, owned or used by the
Company, the disclosure of which could or does have a material adverse effect on
the Company, its business, any business it proposes to engage in, its
13
operations, financial condition or prospects and that the same are confidential
and proprietary and considered "confidential information" of the Company for the
purposes of this Agreement. In consideration of his engagement as a consultant,
the Consultant agrees that he will not, during or after the Term, without the
consent of the Board or the chief executive officer, make any disclosure of
confidential information now or hereafter possessed by the Company, to any
person, partnership, corporation or entity either during or after the term here
of, except that nothing in this Agreement shall be construed to prohibit
Consultant from using or disclosing such information (a) if such disclosure is
necessary in the normal course of the Company's business in accordance with
Company policies or instructions or authorization from the chief executive
officer, (b) such information shall become public knowledge other than by or as
a result of disclosure by a person not having a right to make such disclosure,
(c) complying with legal process; provided, that in the event Consultant is
required to make disclosure pursuant to legal process, Consultant shall give the
Company prompt notice thereof and the opportunity to object to the disclosure,
or (d) subsequent to the Term, if such information shall have either (i) been
developed by Consultant independent of any of the Company's confidential or
proprietary information or (ii) been disclosed to Consultant by a person not
subject to a confidentiality agreement with or other obligation of
confidentiality to the Company. For the purposes of Paragraphs 6, 7 and 8 of
this Agreement, the term "Company" shall include the Company, its parent, its
subsidiaries and affiliates.
7. Covenant Not To Solicit or Compete.
----------------------------------
(a) During the period from the date of this Agreement until one
(1) year following the date on which Consultant's consulting relationship is
terminated, Consultant will not, directly or indirectly:
(i) Persuade or attempt to persuade any person or entity
which is or was a customer, client or supplier of the Company to cease doing
business with the Company, or to reduce the amount of business it does with the
Company (the terms "customer" and "client" as used in this Paragraph 7 to
14
include any potential customer or client to whom the Company submitted bids or
proposals, or with whom the Company conducted negotiations, during the Term or
during the twelve (12) months preceding the termination of his employment or
consulting relationship, as the case may be);
(ii) solicit for himself or any other person or entity
other than the Company the business of any person or entity which is a customer
or client of the Company, or was a customer or client of the Company within one
(1) year prior to the termination of his consulting relationship;
(iii) persuade or attempt to persuade any employee of the
Company, or any individual who was an employee of the Company during the one (1)
year period prior to the lawful and proper termination of this Agreement, to
leave the Company's employ, or to become employed by any person or entity other
than the Company; or
(iv) engage in any business in the United States whether
as an officer, director, consultant, partner, guarantor, principal, agent,
employee, advisor or in any manner, which directly competes with the business of
the Company as it is engaged in at the time of the termination of this
Agreement, unless, at the time of such termination or thereafter during the
period that the Consultant is bound by the provisions of this Paragraph 7, the
Company ceases to be engaged in such activity, provided, however, that nothing
in this Paragraph 7 shall be construed to prohibit the Consultant from owning an
interest of not more than five (5%) percent of any public company engaged in
such activities.
(a) The Consultant acknowledges that the restrictive covenants
(the "Restrictive Covenants") contained in Paragraphs 6 and 7 of this Agreement
are a condition of his consulting relationship and are reasonable and valid in
geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part of any of the
Restrictive Covenants, is invalid or unenforceable, the remainder of the
Restrictive Covenants and parts thereof shall not thereby be affected and shall
remain in full force and effect, without regard to the invalid portion. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such
provision, such court shall have the power to reduce the geographic or temporal
15
scope of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
(b) The Company acknowledges that the payment of Cash
Compensation to Consultant is a necessary prerequisite to Consultant being bound
by the Restrictive Covenants. If the Company fails to pay to Consultant his Cash
Compensation, or any part hereof, within ten business days after receipt of
written notice of such failure, Consultant shall be relieved of his obligations
to comply with the Restrictive Covenants.
8. Inventions and Discoveries. The Consultant agrees promptly to
--------------------------
disclose in writing to the Company any invention or discovery made by him during
the period of time that this Agreement remains in full force and effect, whether
during or after working hours, in any business in which the Company is then
engaged or which otherwise relates to any product or service dealt in by the
Company and such inventions and discoveries shall be the Company's sole
property. Upon the Company's request, Consultant shall execute and assign to the
Company all applications for copyrights and letters patent of the United States
and such foreign countries as the Company may designate, and Consultant shall
execute and deliver to the Company such other instruments as the Company deems
necessary to vest in the Company the sole ownership of all rights, title and
interest in and to such inventions and discoveries, as well as all copyrights
and/or patents. If services in connection with applications for copyrights
and/or patents are performed by Consultant at the Company's request after the
termination of his consulting relationship hereunder, the Company shall pay him
reasonable compensation for such services rendered after termination of this
Agreement.
9. Injunctive Relief. The Consultant agrees that his violation or
-----------------
threatened violation of any of the provisions of Paragraphs 6, 7 or 8 of this
Agreement shall cause immediate and irreparable harm to the Company. In the
event of any breach or threatened breach of any of said provisions, Consultant
consents to the entry of preliminary and permanent injunctions by a court of
competent jurisdiction prohibiting the Consultant from any violation or
threatened violation of such provisions and compelling the Consultant to comply
16
with such provisions. This Paragraph 9 shall not affect or limit, and the
injunctive relief provided in this Paragraph 9 shall be in addition to, any
other remedies available to the Company at law or in equity or in arbitration
for any such violation by Consultant. In the event an injunction is issued
against any such violation by Consultant, the period referred to in Paragraph 7
of this Agreement shall continue until the later of the expiration of the period
set forth therein or one (1) month from the date a final judgment enforcing such
provisions is entered and the time for appeal has lapsed. Subject to Paragraph
7(c) of this Agreement, the provisions of Paragraphs 6, 7, 8 and 9 of this
Agreement shall survive any termination of this Agreement and Consultant's
consulting relationship pursuant to this Agreement.
10. Indemnification. The Company shall provide Consultant with payment
---------------
of legal fees and indemnification to the maximum extent permitted by the
Company's Certificate of Incorporation, By-Laws, and the Delaware General
Corporation Law.
11. Miscellaneous.
-------------
(a) (i) Consultant represents, warrants, covenants and agrees
that he has a right to enter into this Agreement, that he is not a party to any
agreement or understanding, oral or written, which would prohibit performance of
his obligations under this Agreement, and that he will not use in the
performance of his obligations hereunder any proprietary information of any
other party which he is legally prohibited from using.
(i) The Company represents, warrants and agrees that it
has full power and authority to execute and deliver this Agreement and perform
its obligations hereunder. The Company further represents, warrants and agrees
that the Agreement: (A) has been duly authorized by the Board and no other
corporate action is required of the Company to enter into this Agreement and
perform its obligations hereunder; (B) does not require the consent of any third
party; and (C) does not violate any law, regulation, rule or material agreement,
mortgage, bond, pledge, note or other instrument to which it or its properties
are bound.
17
(b) Any notice, consent or communication required under the
provisions of this Agreement shall be given in writing and sent or delivered by
hand, overnight courier or messenger service, against a signed receipt or
acknowledgment of receipt; or by registered or certified mail, return receipt
requested, or te1ecopier or similar means of communication if receipt is
acknowledged or if transmission is confirmed by mail as provided in this
Paragraph 11 (b), to the parties at their respective addresses set forth at the
beginning of this Agreement or by telecopier to the Company at (000) 000-0000 or
to Consultant at (000) 000-0000, with notice to the Company being sent to the
attention of the individual who executed this Agreement on behalf of the
Company. Either party may, by like notice, change the person, address or
telecopier number to which notice is to be sent. If no telecopier number is
provided for Consultant, notice to him shall not be sent by telecopier.
(c) This Agreement shall in all respects be construed and
interpreted in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York applicable to contracts executed and to be
performed wholly within such State, without regard to principles of conflicts of
laws except that the provisions of Paragraph 10 shall be governed by the
Delaware General Corporation law.
(d) Except for actions, suits, or proceedings taken pursuant to
or under Paragraph 6, 7, 8 or 9 of this Agreement, any dispute concerning this
Agreement or the rights of the parties hereunder shall be submitted to binding
arbitration in New York City before a single arbitrator under the rules of the
American Arbitration Association. The award of the arbitrator shall be final,
binding and conclusive on all parties, and judgment on such award may be entered
in any court having jurisdiction. The arbitrator shall have the power, in his
discretion, to award counsel fees and costs to the prevailing party. The
arbitrator shall have no power to modify or amend any specific provision of this
Agreement except as expressly provided in Paragraph 11(f) of this Agreement.
(e) Notwithstanding the provisions of Paragraph 11(d) of this
Agreement, with respect to any claim for injunctive relief or other equitable
remedy pursuant to Paragraph 9 of this Agreement or any claim to enforce an
18
arbitration award or to compel arbitration, the parties hereby (i) consents to
the exclusive jurisdiction of the United States District Court for the Southern
or Eastern District of New York and Supreme Court of the State of New York in
the County of New York or Suffolk, (ii) agree that any process in any action
commenced in such court under this Agreement may be served upon him personally,
either (A) by certified or registered mail, return receipt requested, or by
Federal Express or other courier service which obtains evidence of delivery,
with the same full force and effect as if personally served upon him in New York
City or Suffolk County, as the case may be, or (B) by any other method of
service permitted by law, and (iii) waives any claim that the jurisdiction of
any such court is not a convenient forum for any such action and any defense of
lack of in personam jurisdiction with respect thereof.
(f) If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any extent, be
determined to be invalid or unenforceable, the remainder of this Agreement, or
the application of such term, covenant or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law, and any court or
arbitrator having jurisdiction may reduce the scope of any provision of this
Agreement, including the geographic and temporal restrictions set forth in
Paragraph 7 of this Agreement, so that it complies with applicable law.
(g) This Agreement constitute the entire agreement of the Company
and Consultant as to the subject matter hereof, superseding all prior or
contemporaneous written or oral understandings or agreements, including any and
all previous employment agreements or understandings, all of which are hereby
terminated, with respect to the subject matter covered in this Agreement. This
Agreement may not be modified or amended, nor may any right be waived, except by
a writing which expressly refers to this Agreement, states that it is intended
to be a modification, amendment or waiver and is signed by both parties in the
case of a modification or amendment or by the party granting the waiver. No
19
course of conduct or dealing between the parties and no custom or trade usage
shall be relied upon to vary the terms of this Agreement. The failure of a party
to insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
(h) Neither party hereto shall have the right to assign or
transfer any of its or his rights hereunder except in connection with a merger
of consolidation of the Company or a sale by the Company of all or substantially
all of its business and assets.
(i) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors, executors,
administrators and permitted assigns.
(j) The headings in this Agreement are for convenience of
reference only and shall not affect in any way the construction or
interpretation of this Agreement.
(k) No delay or omission to exercise any right, power or remedy
accruing to either party hereto shall impair any such right, power or remedy or
shall be construed to be a waiver of or an acquiescence to any breach hereof. No
waiver of any breach hereof shall be deemed to be a waiver of any other breach
hereof theretofore or thereafter occurring. Any waiver of any provision hereof
shall be effective only to the extent specifically set forth in an applicable
writing. All remedies afforded to either party under this Agreement, by law or
otherwise, shall be cumulative and not alternative and shall not preclude
assertion by such party of any other rights or the seeking of any other rights
or remedies against any other party.
[Signatures on following page]
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NETSMART TECHNOLOGIES, INC.
By: /*/
------------------------
Xxxxx X. Xxxxxx
Chief Executive Officer
By: /*/
------------------------
Xxxxxxx X. Xxxxxxxx
Chief Financial Officer
CONSULTANT:
/*/
----------------------------
Xxxxxx X. Xxxxxx
