1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 2nd day of
June, 1997 by and between APACHE Medical Systems, Inc., a Delaware corporation
("APACHE"), and Xxxxx X. Xxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive is a primary shareholder in and is employed as
President and Managing Partner of National Health Advisors, Ltd., a Virginia
Corporation ("NHA"); and
WHEREAS, NHA is being merged into and with APACHE pursuant to an
Agreement and Plan of Merger dated on date even herewith (the "Merger
Agreement"), pursuant to which Executive will realize a significant and
substantial personal gain; and
WHEREAS, NHA will become a wholly owned subsidiary of APACHE pursuant
to the Merger Agreement; and
WHEREAS, APACHE desires to employ Executive in accordance with the
terms of this Agreement, and Executive desires to be so employed.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, each party having had the opportunity to consult their own legal
counsel, Executive and APACHE agree as follows:
1. Employment. APACHE agrees to employ Executive and Executive
agrees to accept employment pursuant to the terms and conditions of this
Agreement conditional and effective upon the closing of the transactions
described in the Merger Agreement.
2. Duties. APACHE agrees to employ Executive and Executive
accepts employment as the Executive Vice President of APACHE and President of
NHA, upon the terms and subject to the conditions set forth herein. Management
of APACHE, provided Executive continues to perform his duties hereunder, will
use its best efforts to recommend Executive's election to APACHE's Board of
Directors (the "Board") at an appropriate time within 12 months of the
execution of this Agreement. Executive agrees to devote his full and exclusive
professional time, skills and energies to his employment with APACHE and NHA;
provided that Executive may serve as a board member of certain organizations so
long as such service does not conflict or interfere with his performance under
this Agreement. Executive shall perform such duties commensurate with his
position as may be assigned from time to time during the Employment Term (as
defined below) by the Chief Executive Officer of APACHE or his/her designee
(the "CEO") or the Board. Executive shall abide and be bound by APACHE's and
NHA's by-laws and shall perform his duties in compliance with all policies of
APACHE and NHA as in effect from time to time.
1
2
3. Compensation.
(a) Base Annual Salary. During the Employment Term,
APACHE shall pay to Executive a salary of $175,000 per year, which shall be
subject to review annually by the Compensation Committee of the Board (the
"Compensation Committee") during its annual year-end compensation review (the
"Base Annual Salary"). Executive's Base Annual Salary shall be paid in
substantially equal semi-monthly installments on APACHE's regular pay dates,
subject to customary withholding and other employment taxes as required by
applicable law.
(b) Performance Bonus. Executive shall be eligible to
receive during the Employment Term an annual performance bonus based on the
attainment by NHA and APACHE of annual performance goals formulated and
proposed jointly by Executive and the CEO, such performance goals to be
approved or modified in the sole discretion of the Compensation Committee and,
for 1997, shall be formulated and approved within 30-day period following the
date this Agreement is executed. The amount of actual payment, if any, shall
be based on the level of achievement of the performance goals as determined by
the Compensation Committee (e.g., if 90% of the goal is attained, Executive
would receive 90% of the performance bonus). The actual bonus will be below,
at or above the target bonus upon actual performance as measured against target
performance. For 1997, the target bonus shall be a pro rata share of $125,000
based on the number of months Executive is employed by APACHE during 1997.
(c) Stock Options. Executive shall be eligible to
receive stock options for 180,000 shares of common stock under APACHE's
Employee Stock Option Plan (the "Option Plan") or any amendment or successor to
the Option Plan. Such options shall be granted concurrently with the
commencement of Executive's employment hereunder and shall vest on a pro rata
basis during the five-year period following the commencement of such
employment. If Executive's employment terminates pursuant to Paragraph 6(c) or
6(d) within one of the periods following employment commencement identified in
the table below, any and all stock options granted to Executive pursuant to
this Agreement or otherwise shall be exercisable to the extent vested as of his
termination date for the corresponding period indicated below, but no longer
than the termination date of the option as stated in the option agreement.
PERIOD OF EMPLOYMENT OPTION EXERCISE PERIOD
FOLLOWING TERMINATION DATE
More than 1 yr. but less than 2 yrs. 6 months
More than 2 yrs. but less than 3 yrs. 12 months
More than 3 yrs. but less than 4 yrs. 18 months
More than 4 yrs. but less than 5 yrs. 24 months
More than 5 yrs. 30 months
In the event Executive is terminated under Paragraph 6(a), his options shall be
fully vested and exercisable for one year or such longer period pursuant to the
above table, but in no event longer than the termination date of the option as
stated in the option agreement. In the event Executive is terminated under
Paragraph 6(b), his options shall be forfeited as provided in the Option Plan.
2
3
With respect to all options granted under this Paragraph 3(c) and Paragraph 4,
APACHE shall provide Executive with written stock option agreements stating the
requirements of such Paragraphs and the applicable Option Plan terms. By
approval of this Agreement, the Board has approved the modification to the
Option Plan only to the extent required to provide the foregoing special option
terms to Executive, and only with respect to Executive and not APACHE's and/or
NHA's employees generally.
(d) Signing Bonus. APACHE shall pay the Executive a
one-time signing bonus in the amount of $35,000. Such signing bonus shall be
payable as soon as practicable following execution of this Agreement.
4. Expense Reimbursement. Executive will receive reimbursement
for, or APACHE or NHA will pay directly, all reasonable business expenses
incurred by Executive in the performance of his duties hereunder, provided
Executive provides appropriate documentation of such expenses and seeks prior
approval for any extraordinary individual expenditures over $500.
5. Vacation. Subject to Executive's performance of his duties
hereunder, Executive shall earn 4 weeks of paid vacation during each year of
the Employment Term. Executive's entitlement to vacation will otherwise be
subject to APACHE's vacation policy as in effect from time to time.
6. Long Term Incentive Plan. Executive shall be eligible to
receive additional stock options at the end of each calendar/fiscal year
pursuant to APACHE's Long Term Incentive Plan as in effect from time to time
during the Employment Term. The number of options to be granted to Executive
annually during his Employment Term shall be equal to (i) a percentage of his
Base Annual Salary as determined annually by the Compensation Committee during
its annual year-end compensation review, divided by (ii) the market price of
APACHE common stock as of December 21st of the applicable year. For 1997, the
percentage shall be 25%. The exercise price for each option share shall be
equal to the market price of APACHE common stock utilized pursuant to the
preceding sentences in determining the number of option shares. Vesting of
each option grant shall be pursuant to one of the following as determined under
the terms of the Long Term Incentive Plan:
NO VESTING PRIOR TO: 100% VESTING UPON:
3rd Anniversary of Grant 3rd Anniversary of Grant
4th Anniversary of Grant 4th Anniversary of Grant
5th Anniversary of Grant 5th Anniversary of Grant
6th Anniversary of Grant 6th Anniversary of Grant
7th Anniversary of Grant 7th Anniversary of Grant
7. Other Benefits.
3
4
(a) Except as specifically provided herein, Executive
shall be entitled during the Employment Term to participate on the same basis
as all other employees of APACHE in all employee benefit programs (e.g.,
disability benefits, life insurance or medical insurance) maintained by APACHE
from time to time, subject to the eligibility and participation rules in effect
from time to time for such programs, provided that APACHE will not materially
reduce the value in the aggregate of such benefits to Executive.
(b) In addition, Executive shall be entitled during the
Employment Term to participate in a program of elective nonqualified deferred
compensation for senior executives at APACHE that is established and maintained
by APACHE, which program shall allow such executives to elect, in a
tax-advantaged manner, to defer a portion of the salary that they would
otherwise currently receive, and APACHE shall undertake to adopt this program
no later than December 31, 1997.
(c) Executive agrees and acknowledges that APACHE and NHA
shall have no obligation to maintain or continue any of the employee benefit
programs (the "Prior Programs") that were maintained at NHA prior to the
effective date of the Merger Agreement, including any qualified or nonqualified
retirement programs, and that any changes to or terminations of the Prior
Programs shall be made in the sole discretion of APACHE.
8. Employment Term. APACHE will employ Executive for a term
commencing as of the date first written above and ending on the 12- month
anniversary of such date (the "Employment Term"). The Employment Term shall be
automatically extended for additional 12-month terms; provided that Executive's
employment and this Agreement shall be subject to termination at any time after
his employment commences as set forth below.
(a) Death or Disability. This Agreement and Executive's
employment shall be terminated immediately by reason of his death or Permanent
Disability. For purposes of this Agreement, the term "Permanent Disability"
shall mean the inability of Executive to perform his essential job duties for a
period in excess of 6 months during any 12-month period.
(b) Termination for Cause. APACHE may terminate
Executive's employment and this Agreement at any time for "Cause," which for
purposes of this Agreement shall be determined by the Board and shall include
but not be limited to: (i) a material breach of Executive's duties hereunder;
(ii) intentional or grossly negligent misconduct by Executive in connection
with a failure by Executive in the performance of his duties hereunder; (iii)
conviction of Executive of a felony or violation of any law involving moral
turpitude, dishonesty, disloyalty or fraud; or (iv) willful disregard by
Executive of instructions of the CEO or the Board. In the event of such
termination for Cause, APACHE shall have no further obligations to Executive
other than the payment of Executive's earned and accrued Base Annual Salary
through the date of termination.
(c) Termination Without Cause. APACHE may terminate this
Agreement and Executive's employment at any time, for any reason or no reason,
upon 90 days' advance written notice to Executive; provided that in the event
of his termination pursuant to this Section 8(c), Executive shall be entitled
to continuation of his Base Annual Salary and company-provided
4
5
health benefits, life insurance and other welfare benefits (the "Severance
Benefits") for a period of 12 months (including the 90-day notice period), and
to a pro rata payment of the performance bonus award (as determined pursuant to
Paragraph 3(b)) that he would have been entitled to receive had he been
employed for the entire year in which termination occurs, with pro-ration based
on the number of days employed during such year. Such bonus award, if any,
shall be paid to Executive following the calendar year in which termination
occurs. Notwithstanding the above, in the event Executive's employment is
terminated pursuant to this Paragraph 8(c) prior to December 31, 1997,
Executive shall be entitled to Severance Benefits through December 31, 1997 and
for a period of 12 months thereafter, and to a pro rata payment of the
performance bonus award (as determined pursuant to Paragraph 3(b)) that he
would have been entitled to receive had he been employed through December 31,
1997, with proration based on the number of days employed during 1997. Payment
of Executive's Base Annual Salary shall be made in equal installments on dates
corresponding with APACHE's regular pay dates during the months it is payable
pursuant to this Paragraph 8(c).
(d) Termination By Executive. Executive may terminate
his employment and this Agreement at any time prior to the expiration of the
Employment Term for any reason upon 90-days' advance written notice to APACHE.
In such event, Executive shall continue to receive regular payments of the Base
Annual Salary through the effective date of Executive's termination. APACHE
reserves the right to substitute pay in lieu of any part or all of such 90-day
notice period.
9. Incorporation By Reference. Executive agrees and acknowledges
that he is bound by the terms of the Proprietary Information, Inventions,
Non-Competition and Non-Solicitation Agreement signed by Executive simultaneous
with his execution of this Agreement and the Merger Agreement, and attached and
incorporated by reference in the Merger Agreement as Attachment __ ("the
Proprietary Information Agreement").
10. Notices.
(a) Any notice pursuant to this Agreement shall be in
writing and shall be delivered personally or by first class mail, either
registered or certified, with return receipt requested, postage prepaid, and
addressed as follows:
(i) If to APACHE:
APACHE Medical Systems, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Xx., Ph.D.
5
6
(ii) If to Executive:
At such address as Executive may designate by notice
given in accordance with this Paragraph.
or such other address of which either party may from time to time notify the
other party as provided herein.
11. Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of APACHE. The rights and
obligations of Executive under this Agreement are expressly agreed to be
personal, nonassignable and nontransferable.
12. Entire Agreement; Amendment and Modification. This Agreement,
the Merger Agreement and the Proprietary Information Agreement constitute the
entire understanding of the parties with respect to the subject matter hereof,
and there are no representations, written or oral, warranties, agreements or
commitments between the parties hereto with respect to the employment and
compensation of Executive or any other matter described herein. Except as set
forth herein, no amendment or modification of the terms of this Agreement shall
be binding upon either party unless reduced to writing and signed by Executive
and a duly appointed officer of APACHE.
13. Governing Law. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Virginia and where
appropriate, the United States. Any action regarding this Agreement or
Executive's employment with APACHE shall be brought exclusively in state and
federal courts serving Fairfax County, Virginia, and APACHE and Executive
hereby submit to personal jurisdiction in such courts.
14. Unenforceability/Severability. If any paragraph, term or
provision of this Agreement shall be held to be illegal, unenforceable or in
conflict with any law, such illegality, unenforceability or conflict shall not
invalidate the whole Agreement; instead, such paragraph, term or provision
shall be deemed to be modified or restricted to the maximum extent and in a
manner necessary to render the same valid and enforceable, and this Agreement
shall be construed, interpreted and enforced to the maximum extent permitted by
law. If such paragraph, term or provision cannot be so modified or restricted,
it shall not affect the validity of any other provision herein, and this
Agreement shall be interpreted and enforced as if such paragraph, term or
provision had not been included herein.
IN WITNESS WHEREOF, APACHE and Executive have executed this Agreement
on the day and year first written above.
XXXXX X. XXXXX APACHE MEDICAL SYSTEMS, INC.
/s/ Xxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxxx, Xx.
------------------- --------------------------
Its Chairman and Chief Executive Officer
6
