EXHIBIT 10.19
Note: Portions of this exhibit indicated by
"[*]" are subject to a confidential treatment
request, and have been omitted from this
exhibit. Complete, unredacted copies of this
exhibit have been filed with the Securities and
Exchange Commission as part of this Company's
confidential treatment request.
CONSULTING AND SEPARATION AGREEMENT
This Consulting And Separation Agreement ("Agreement") is entered into
as of June 14, 2000 between OnHealth Network Company ("OnHealth") and Xxxxxx
Xxxxxxx ("Xxxxxxx").
RECITALS
A. OnHealth has employed Xxxxxxx as President and Chief Executive
Officer under an Employment Agreement dated February 15, 2000 ("Employment
Agreement"), a true and correct copy of which is attached as Exhibit 1. Xxxxxxx
also has served as a Director of OnHealth.
B. Subject to the terms and conditions of this Agreement, Xxxxxxx has
offered to relinquish his duties as President and Chief Executive Officer and
Director, and to serve as a consultant of OnHealth, and OnHealth has agreed.
C. This Agreement is intended to memorialize the change in the
relationship between OnHealth and Xxxxxxx, and to resolve all claims that
Xxxxxxx could assert that arise out of the Employment Agreement or otherwise
arise out of his employment with or separation from OnHealth.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants of this
Agreement, the parties agree as follows:
1. EFFECT OF RECITALS. The recitals to this Agreement are incorporated
by reference in this Agreement.
2. XXXXXXX'X RESIGNATION. Xxxxxxx hereby resigns, effective June 14,
2000, from his employment with OnHealth and from his positions as President,
Chief Executive Officer and Director of OnHealth. OnHealth hereby accepts such
resignation.
3. XXXXXXX'X CONSULTING. As required by the Employment Agreement,
Xxxxxxx shall provide consulting services to OnHealth on a reasonable basis
during the twenty-four (24) months following his resignation. From the date of
this Agreement until the effective date of OnHealth's merger with
Healtheon/WebMD Corporation or its subsidiary or affiliate ("the Merger"),
Xxxxxxx agrees to provide advice and counsel within his areas of expertise for
up to ten (10) hours per week as requested by OnHealth. These services may
require travel. OnHealth shall reimburse Xxxxxxx for all reasonable expenses he
incurs in connection with his consulting duties, upon presentation of such
reasonable documentation as OnHealth may require; provided that individual
expenses in excess of $150 and expenses totaling more than $400 in any month
shall require the prior written approval of OnHealth's Chief Operating Officer.
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4. INDEMNIFICATION RIGHTS.
x. Xxxxxxx shall have such indemnification rights as provided
by Chapter 23B of the Revised Code of Washington (the "RCW") and shall continue
to receive as a contract right all the indemnification rights to which he was
entitled and has received (i.e., advancement of expenses as a witness pursuant
to RCW Section 23B.08.590(2), which "expenses" includes reasonable attorney fees
and costs) as an officer or director pursuant to the Articles of Incorporation
and Bylaws of OnHealth, regardless of any later changes or amendments thereto.
OnHealth agrees to advance Xxxxxxx'x expenses for reasonable attorney fees and
costs in connection with the current SEC investigation and any subsequent SEC
action regarding Xxxxxxx in his capacity as an officer or director of OnHealth,
subject to Xxxxxxx'x commitment to OnHealth as to such advances pursuant to RCW
Section 23B.08.530. In this regard, Xxxxxxx hereby affirms that, in his good
faith belief, his conduct by or on behalf of OnHealth at all times met the
standard of conduct (the "Standard of Conduct") described in RCW Section
23B.08.510. If it is ultimately determined as provided in RCW Section 23B.08.550
that Xxxxxxx'x conduct did not meet the Standard of Conduct (referred to herein
as "Non-Conforming Conduct"), Xxxxxxx hereby covenants and agrees pursuant to
RCW Section 23B.08.530 to promptly repay to OnHealth any and all payments or
advances of expenses paid by OnHealth with respect to such Non-Conforming
Conduct.
b. Anything in this Agreement notwithstanding, in the event it
shall be determined that any payment, award, benefit or distribution relating to
or concerning the indemnification in Paragraph 4(a) above (the "Payments"),
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, or shall be considered taxable income under the Code, or
in the event that Xxxxxxx must pay any interest or penalties with respect to
such taxes, then OnHealth shall pay to Xxxxxxx an additional payment (the "Gross
Up Payment") in an amount such that after payment by Xxxxxxx of all taxes
imposed upon the Gross-Up Payment, Xxxxxxx retains an amount of the Gross-Up
Payment equal to the sum of (x) the taxes, interest or penalties imposed upon
the Payments and (y) the product of any deductions (not including deductions
attributable to payments under this Agreement) disallowed because of the
inclusion of the Gross-Up Payment in Xxxxxxx'x adjusted gross income and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is made. For purposes of determining the
Gross-Up Payment, Xxxxxxx shall be deemed to (A) pay federal income taxes at the
highest marginal rates of federal income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be made, (B)
pay applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes which could have been obtained
from deduction of such state and local taxes, and (C) have otherwise allowable
deductions for federal income tax purposes at least equal to those which could
be disallowed because of the inclusion of the Gross-Up Payment in Xxxxxxx'x
adjusted gross income.
c. Subject to the provisions of Paragraph 4(b), all
determinations required to be made under this Paragraph 4 including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
a nationally recognized accounting firm that is selected by OnHealth (the
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"Accounting Firm") which shall provide detailed supporting calculations both to
OnHealth and Xxxxxxx within fifteen days of the receipt of notice from Xxxxxxx
or OnHealth that there has been a Payment, or such earlier time as is requested
by OnHealth or Xxxxxxx (collectively, the "Determination"). All fees and
expenses of the Accounting Firm shall be borne solely by OnHealth. The Gross-Up
Payment under this Paragraph with respect to any Payments made to Xxxxxxx shall
be made no later than thirty days following such Payment. If the Accounting Firm
determines that no tax, penalty or interest is payable by Xxxxxxx, it shall
furnish Xxxxxxx with a written opinion to such effect, and to the effect that,
if the Internal Revenue Service contests the failure to report the tax, if any,
on Xxxxxxx'x applicable federal income tax return, it is more likely than not
that Xxxxxxx will prevail against the Internal Revenue Service.
d. As a result of the uncertainty in the application of
Section 4999 of the Code and the application of the income tax to reimbursement
amounts at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by OnHealth that should have been made
("Underpayment"), or Gross-Up Payments are made by OnHealth which should not
have been made, including amounts repaid under Paragraph 4(a) of this Agreement
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that Xxxxxxx thereafter is required to make payment of any income
or excise tax or additional income or excise tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided by Section
1274(b)(2)(B) of the Code) shall be promptly paid by OnHealth to or for the
benefit of Xxxxxxx. In the event the amount of the Gross-Up Payment exceeds the
amount necessary to reimburse Xxxxxxx for his income or excise tax, the
Accounting Firm shall determine the amount of the Overpayment (including
reductions in tax attributable to Gross-Up Payments and repayments under
Paragraph 4(a) of this Agreement for the year of the repayment by Xxxxxxx) that
has been made and any such Overpayment (together with interest at the rate
provided in Section 1274(b)(2) of the Code) shall be promptly paid by Xxxxxxx
(to the extent he received a refund if the applicable income or excise tax has
been paid to the Internal Revenue Service) or utilized to reduce tax for a
subsequent year to or for the benefit of OnHealth. Xxxxxxx shall cooperate to
the extent his expenses are reimbursed by OnHealth, with any reasonable requests
by OnHealth in connection with any content or disputes with the Internal Revenue
Service in connection with the income or excise tax.
5. FINANCIAL BENEFITS TO XXXXXXX UPON RESIGNATION.
a. OnHealth shall provide Xxxxxxx'x salary and benefits
through June 30, 2000. OnHealth shall notify Xxxxxxx of his rights to continue
his medical and dental coverage at his own expense through COBRA. Xxxxxxx shall
contact OnHealth's human resources department if he wishes to convert or
continue any other employee benefits.
b. OnHealth shall pay Xxxxxxx a monthly amount equal to
$18,750, less applicable deductions, for a period of twenty-four (24) months
commencing on July 1, 2000 and ending on June 1, 2002 (the "Severance Period").
Each such payment shall be made on or before the 10th business day of the month.
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c. If the Merger closes, OnHealth shall pay Xxxxxxx a year
2000 bonus in the amount of $112,500 within five (5) business days after the
closing of the Merger. If the Merger does not close, Xxxxxxx shall not be
entitled to a bonus for 2000.
x. Xxxxxxx hereby is given ownership of his notebook computer
and cellular phone, provided that Xxxxxxx shall treat OnHealth's confidential or
proprietary information contained on the hard drive of the computer or any other
medium in accordance with his obligations under Paragraph 6 of his Employment
Agreement. In addition, Xxxxxxx shall return the notebook computer to OnHealth
before June 30, 2000 for a back-up to be completed by OnHealth IT staff. After
the back-up, OnHealth shall return the notebook computer to Xxxxxxx.
e. Within thirty (30) days of receipt of an itemized invoice,
OnHealth will pay Xxxxxxx'x lawyers for up to $10,000 in reasonable attorney
fees and costs actually incurred on Xxxxxxx'x behalf in negotiation and revision
of this Agreement.
6. STOCK OPTIONS.
a. Contemporaneous with the execution of this Agreement,
Xxxxxxx and OnHealth are entering into a stock option agreement (the "Option
Agreement") which is intended to replace Xxxxxxx'x stock option grant awarded by
OnHealth in January 1999 (the "January 1999 Award"), which January 1999 Award is
terminated and canceled upon execution and delivery of the Option Agreement.
Xxxxxxx acknowledges that the January 1999 Award is so cancelled and represents
that he has no claim for any option or other right to purchase or acquire equity
securities of OnHealth based on the January 1999 Award other than those
contained in the Option Agreement.
x. Xxxxxxx also received option grants in December 1997, June
1998, and July 1999 (the "Prior Awards"). The parties also wish to clarify an
ambiguity in Paragraph 5(b)(ii) of the Employment Agreement regarding options,
and hereby agree that Xxxxxxx shall have the right to exercise each of the Prior
Awards and the Option Agreement award throughout the Severance Period and that
such awards are fully vested.
c. Anything in this Agreement notwithstanding, if it shall be
determined that the accelerated vesting of the options referred to in this
Paragraph 6 (the "Option Vesting") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, then OnHealth shall pay to
Xxxxxxx an additional payment (the "Option Gross Up Payment") in an amount such
that after payment by Xxxxxxx of all taxes imposed upon the Option Gross-Up
Payment, Xxxxxxx retains an amount of the Option Gross-Up Payment equal to the
excise taxes, interest or penalties imposed upon the accelerated vesting of the
Option Vesting. For purposes of determining the Option Gross-Up Payment, Xxxxxxx
shall be deemed to (A) pay federal income taxes at the highest marginal rates of
federal income taxes at the highest marginal rate of taxation for the calendar
year in which the Option Gross-Up Payment is to be made, (B) pay applicable
state and local income taxes at the highest marginal rate of taxation for the
calendar year in which the Option Gross-Up Payment is to be made, net of the
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maximum reduction in federal income taxes which could have been obtained from
deduction of such state and local taxes, and (C) have otherwise allowable
deductions for federal income tax purposes at least equal to those which could
be disallowed because of the inclusion of the Option Gross-Up Payment in
Xxxxxxx'x adjusted gross income.
d. Subject to the provisions of Paragraph 6(c), all
determinations required to be made under this Paragraph 6 including whether and
when an Option Gross-Up Payment is required, the amount of such Option Gross-Up
Payment and the assumptions to be utilized in arriving at such determinations,
shall be made by a nationally recognized accounting firm that is selected by
OnHealth (the "Accounting Firm") which shall provide detailed supporting
calculations both to OnHealth and Xxxxxxx within fifteen days of the receipt of
notice from Xxxxxxx or OnHealth that there has been a Payment, or such earlier
time as is requested by OnHealth or Xxxxxxx (collectively, the "Determination").
All fees and expenses of the Accounting Firm shall be borne solely by OnHealth.
The Option Gross-Up Payment under this Paragraph 6 with respect to any Payments
made to Xxxxxxx shall be made no later than thirty days following such Payment.
If the Accounting Firm determines that no tax, penalty or interest is payable by
Xxxxxxx, it shall furnish Xxxxxxx with a written opinion to such effect, and to
the effect that, if the Internal Revenue Service contests the failure to report
the tax, if any, on Xxxxxxx'x applicable federal income tax return, it is more
likely than not that Xxxxxxx will prevail against the Internal Revenue Service.
e. As a result of the uncertainty in the application of
Section 4999 of the Code, it is possible that Gross-Up Payments which will not
have been made by OnHealth that should have been made ("Underpayment"), or
Option Gross-Up Payments are made by OnHealth which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that Xxxxxxx thereafter is required to make payment of any income
or excise tax or additional income or excise tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided by Section
1274(b)(2)(B) of the Code) shall be promptly paid by OnHealth to or for the
benefit of Xxxxxxx. In the event the amount of the Option Gross-Up Payment
exceeds the amount necessary to reimburse Xxxxxxx for his income or excise tax,
the Accounting Firm shall determine the amount of the Overpayment (including
reductions in tax attributable to Option Gross-Up Payments for the year of the
repayment by Xxxxxxx) that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by Xxxxxxx (to the extent he received a refund if the applicable
income or excise tax has been paid to the Internal Revenue Service) or utilized
to reduce tax for a subsequent year to or for the benefit of OnHealth. Xxxxxxx
shall cooperate to the extent his expenses are reimbursed by OnHealth, with any
reasonable requests by OnHealth in connection with any content or disputes with
the Internal Revenue Service in connection with the income or excise tax.
7. EFFECT OF TERMINATION.
x. Xxxxxxx'x resignation shall not affect or diminish any of
OnHealth's rights to enforce any of the covenants in Paragraphs 6 through 9 of
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his Employment Agreement (collectively, "the Covenants"). Xxxxxxx hereby
reaffirms his obligations to conform his conduct in accordance with the
Covenants and the rights of OnHealth and its successors and assigns to enforce
the Covenants under Paragraph 10(a) of the Employment Agreement.
b. OnHealth's obligations under Paragraphs 5(b) and 5(d) shall
immediately cease if Xxxxxxx breaches any of the Covenants, and Xxxxxxx shall
repay to OnHealth all amounts previously paid to Xxxxxxx during the period of
such breach. The parties intend the amounts withheld and the amounts repaid as a
reasonable forecast of only some of the damages that would result from Xxxxxxx'x
breach of any of the Covenants and not as a penalty. Xxxxxxx'x repayment
obligation in this Paragraph 7(b) shall not preclude OnHealth's exercise of any
other right or remedy available to it at law or in equity.
8. RELEASES AND OTHER OBLIGATIONS.
x. Xxxxxxx represents that he has no pending complaints,
charges or lawsuits relating to OnHealth.
b. On behalf of himself, his marital community, if any, and
his heirs, executors, administrators, successors and assigns, Xxxxxxx hereby
forever and completely GIVES UP, WAIVES, DISCHARGES, and RELEASES OnHealth, its
affiliated companies (including Healtheon/WebMD Corporation), and OnHealth's and
its affiliated and predecessor companies' officers, directors, employees,
successors, assigns, representatives and agents (collectively, "Released
Parties") from any claim, liability, cause of action, damage or charge he has or
may have against any of them which is related to or arises out of anything
occurring before execution of this Agreement. This includes, but is not limited
to, anything RELATED TO EMPLOYMENT OR SEPARATION FROM EMPLOYMENT. Xxxxxxx also
promises that he will never file or press or join in any claim, charge,
complaint or lawsuit based on any such thing. However, this release shall not
prevent Xxxxxxx from (i) filing a lawsuit for the sole purpose of enforcing
rights under this Agreement; (ii) bringing before any administrative agency
matters for which such agencies have jurisdiction; (iii) filing a lawsuit based
upon events, acts or omissions occurring after the execution of this Agreement.
Moreover, nothing in this release shall be construed as a waiver of any rights
Xxxxxxx may have to vested benefits under OnHealth's 401(k) Plan.
x. Xxxxxxx acknowledges that this Agreement completely and
forever releases, discharges and extinguishes ANY AND ALL claims, liability,
causes of action, charges and damages he has or may have or could assert against
any of the OnHealth Parties, even those which he does not know about or suspect
or anticipate that he may have, and even those which he may not discover until
after signing this Agreement.
d. OnHealth represents that it has no pending complaints,
charges or lawsuits against Xxxxxxx.
e. OnHealth hereby forever and completely GIVES UP, WAIVES,
DISCHARGES, and RELEASES Xxxxxxx and his marital community, if any, from any
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claim, liability, cause of action, damage or charge it has or may have against
any of them which is related to or arises out of anything actually known to the
Board of Directors before execution of this Agreement. OnHealth also promises
that it will never file or press or join in any claim, complaint or lawsuit
based on any such thing. However, this release shall not prevent OnHealth from
(i) filing a lawsuit for the sole purpose of enforcing rights under this
Agreement; (ii) bringing before any administrative agency matters for which such
agencies have jurisdiction; (iii) filing a lawsuit based upon events, acts or
omissions occurring after the execution of this Agreement.
9. CONFIDENTIALITY.
a. The parties agree that the terms and conditions of this
Agreement shall remain confidential between them and shall not be disclosed to
any other person. This provision shall not preclude Xxxxxxx from disclosing the
terms of this Agreement to his attorney and accountant, the Internal Revenue
Service and immediate family. Likewise, this provision shall not preclude
OnHealth from disclosing the terms of this Agreement on a need to know basis to
its top managerial employees and Board of Directors, and to outside attorneys,
accountants and regulatory agencies. The persons (except for government
agencies) to whom disclosure is permitted by this Paragraph shall be subject to
the same restrictions in this Paragraph 9 as OnHealth and Xxxxxxx.
b. [*]
c. [*]
d. Nothing in this Agreement shall preclude Xxxxxxx, OnHealth,
and OnHealth officers and directors from testifying truthfully in a legal
proceeding, or otherwise disclosing truthful information as required by law or
NASDAQ requirements.
10. REMEDIES. The parties acknowledges that any violation of Paragraph
9 of this Agreement could cause irreparable injury, and that the non-breaching
party shall be entitled to extraordinary relief in court for any such violation
or threatened violation, including but not limited to temporary restraining
orders, preliminary injunctions and permanent injunctions, without the necessity
of posting bond or security. Moreover in addition to any other remedies
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available to it for violation of Paragraph 9, OnHealth shall be entitled to
recover from Xxxxxxx any amounts paid under Paragraph 5(b). Nothing in this
Agreement shall limit any right of OnHealth or its successors and assigns to
enforce rights under the Employment Agreement.
11. NON-ADMISSION. No provision or statement in this Agreement shall
be construed as an admission that either party committed an illegal act or
otherwise acted improperly.
12. SEVERABILITY. This Agreement, the Employment Agreement and the
Option Agreement contain the entire agreement between the parties on their
subject matters, and supersede all prior and contemporaneous discussions and
understandings. Xxxxxxx shall continue to be bound by his duties under
Paragraphs 6, 7, 8, 9, and 10(a) of his Employment Agreement. The provisions of
this Agreement are severable, and if any part of the Agreement is found to be
unenforceable, the remainder of the Agreement shall remain fully valid and
enforceable.
13. ASSIGNMENT. OnHealth may assign rights and duties under this
Agreement, but Xxxxxxx may not. This Agreement shall bind Xxxxxxx'x heirs and
personal representatives, and bind and inure to the benefit of OnHealth and any
entity that acquires all or substantially all of the stock of OnHealth.
14. CONTROLLING LAW/FORUM. Washington law shall govern this Agreement.
For any claim or cause of action arising under this Agreement, OnHealth and
Xxxxxxx consent to the non-exclusive jurisdiction of any state or federal court
within Seattle, Washington. The parties retain the right to object to venue in
Seattle, including on the basis of forum non conveniens.
15. MISCELLANEOUS. No waiver, modification or termination of any term
of this Agreement shall be effective unless in writing and signed by all
parties. If any provision as written is deemed unlawful, overbroad or otherwise
unenforceable, the parties submit to the construction which will give OnHealth
the maximum protection which is reasonable and permissible under the
circumstances, or if this is not possible, it shall be deemed severed.
OnHealth's failure, delay or forbearance to insist on strict performance of any
provision of this Agreement, or to exercise any right or remedy, shall not be
construed as a waiver. OnHealth's waiver of any right or remedy in one or more
instances shall not excuse Xxxxxxx'x later strict performance. As the parties
have cooperated in the drafting and negotiation of this Agreement, this
Agreement shall not be construed against either party as the drafter. This
Agreement may be executed in counterparts.
XXXXXXX HAS REVIEWED THIS AGREEMENT WITH HIS ATTORNEY. XXXXXXX HAS ENTERED INTO
THIS AGREEMENT KNOWINGLY AND VOLUNTARILY AND BASED UPON HIS OWN JUDGMENT AND
DECISION.
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XXXXXX XXXXXXX ONHEALTH NETWORK COMPANY
\S\XXXXXX XXXXXXX By \S\ XXX XXXXXXX
------------------------ --------------------------
Its President
\s\ XXXXXXX XXXXXX
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