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EXHIBIT 10.47
XXXXX/XXXXXX, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 5th day of April, 1999, between XXXXXX X.
XXXXXXXXX ("the Executive") and XXXXX/XXXXXX, INC. ("CBI").
INTRODUCTION
CBI desires to employ the Executive, and the Executive desires to accept such
employment, on the terms outlined below.
TERMS
1. Employment
a. Position. CBI employs the Executive as President and CEO of CBI
HealthCare Compensation Group ("Division"), and President and
CEO of HealthCare Compensation Strategies (formerly known as
MCG/HealthCare), an operating unit within the Division. In this
position, the Executive shall have overall charge and
responsibility for the business and affairs of the Division,
and shall perform such duties as the Executive shall reasonably
be directed to perform by the President of Xxxxx/Xxxxxx
Holdings, Inc., or any successor thereto ("Parent"). The
Executive's sole responsibilities shall be as described in the
March 18, 1999 memorandum attached hereto as Exhibit A. The
Executive shall report directly to the President.
b. Scope. During the term of the Executive's employment, and
excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive shall devote substantially
all of his business and affairs to the Division. It shall not
be a violation of this Agreement for the Executive to (i) serve
on corporate, civic, or charitable boards or committees, (ii)
deliver lectures, fulfill speaking engagements, or teach
occasional courses or seminars at educational institutions, or
(iii) manage personal investments, so long as such activities
under clauses (i), (ii) and (iii) do not interfere, in any
substantial respect, with the Executive's responsibilities
hereunder.
c. Initial Term. The term of the Executive's employment commences
on the date that CBI closes the acquisition of the assets of
Phynque, Inc. (d/b/a Management Compensation Group/Healthcare)
("MCG") ("Commencement Date") and, subject to the renewal
provisions of d, below, ends on December 31, 2003.
d. Automatic Renewal. Absent notice of termination (described
below), commencing on January 1, 2004, and continuing on each
subsequent anniversary, the term of the
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Executive's employment shall automatically be extended for an
additional 12 months. To cause the Executive's employment to
terminate at the end of the original or an extended term,
either party, at least 12 months prior to such date, shall give
written notice to the other party that the Agreement will
terminate at the end of the then current term.
2. CASH COMPENSATION AND BENEFITS. Until otherwise agreed between the
parties, CBI agrees to compensate the Executive as follows:
a. Base Salary. CBI shall pay to the Executive in bi-weekly
installments an annualized base salary of $335,000. CBI shall
increase the base salary on January 1 each year by the consumer
price index that was used to determine increases in Social
Security retirement for such year. Any additional increases in
base salary shall be as determined by CBI.
b. Marketing Bonus Opportunity
i. Generally. Beginning March 2000, CBI shall pay to the
Executive a marketing bonus in March each year equal to
3% of the Division's "healthcare first year gross
revenues" ("Marketing Bonus"). "Healthcare first year
gross revenues" are gross first year consulting fees,
Commissions and Carrier Payments (except for renewals)
paid to the Division during the immediately preceding
calendar year; provided, that the Marketing Bonus
relating to the 1999 calendar year shall be based on
"healthcare first year gross revenues" paid between the
Commencement Date and December 31, 1999. Subject to
potential reduction under Paragraph 2.e, below, the
minimum annual bonus payable to the Executive shall be
$150,000, prorated for the period from the Commencement
Date through December 31, 1999.
ii. "Commissions and Carrier Payments." The term
"Commissions and Carrier Payments" means first-year
commissions and first-year carrier payments on products
purchased by Division's clients (including add-ons,
whether occurring during or after the first year of the
case), but does not include any renewal commissions on
such products. By way of example, "carrier payments"
include, but are not limited to, Xxxx Xxxxxx Premier
Production 1st Year Incentive, Xxxx Xxxxxx 1st Year
Production Bonus, additional 10% Expense Reimbursement
Allowance from Prudential for Xxxx Xxxxxx disability
policies sold, Prudential SSP Bonus, Equitable
Reimbursement Allowance, UNUM New Business Bonus, and
mutual fund l2b-1 fees. Carrier payments specifically
do not include Xxxx Xxxxxx Premier Production Renewal
Incentive, Xxxx Xxxxxx Disability In-Force Block Bonus,
Prudential QUIP Bonus, and similar payments that do not
vary by level of new products sold in such year.
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iii. Levelized Compensation. A description of the existing
levelized products and existing commission deals is
attached hereto as Exhibit B. This Exhibit shall
identify the portion of the Levelized Compensation that
is counted as first-year commissions for purposes of
Paragraph 2.b.ii, above. Executive will continue to
receive compensation in accordance with such existing
levelized products and commission deals. If commissions
and/or other carrier payments are levelized with
respect to other products in the future, a new
levelized compensation agreement will be negotiated
between the parties.
iv. ADVANCE. CBI shall pay the Executive a monthly advance
on the Marketing Bonus in the annualized amount of
$323,235 ($26,936.25 per month), or such other amount
agreed to between CBI and the Executive. In December of
each year, CBI shall make an interim determination of
the Marketing Bonus, less Contingency Rollback Amount,
due the Executive through October of that year. If the
amount determined by CBI is greater than the amount of
advances paid to the Executive during the year, CBI
shall pay the difference to the Executive on or before
the last business day of the year. If the amount
determined by CBI is less than the amount of advances
paid to the Executive during the year, the Executive
shall pay the difference to CBI on or before the last
business day of the year. CBI shall pay any Marketing
Bonus for the full year, less any Contingency Rollback
Amount, in excess of the advances (as adjusted by the
interim determination) with the first payroll in March
following the end of the year. If the advances exceed
the actual Marketing Bonus earned for the year, the
Executive shall pay the difference to CBI on or before
the date of the first payroll in March following the
end of the year. If the Executive terminates employment
at anytime during the year with amounts remaining to be
recaptured, the balance shall be recaptured from all
cash distributions otherwise payable to the Executive.
In all events, the Executive shall continue to be
liable to CBI for the amount of any unrecovered excess
Marketing Bonus (and advances), which shall include any
amounts Executive owes CBI pursuant to Section 2.e.
v. BONUS CONTINUATION. CBI shall also pay the Marketing
Bonus to the Executive (or to the Executive's estate)
on Levelized Compensation CBI receives within 12 months
following the Executive's termination of employment, to
the extent such amounts would otherwise have been
included in calculating the Executive's Marketing Bonus
but for the termination. CBI shall pay the bonus to the
Executive quarterly based on fees and commissions
received during such quarter.
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c. Basic Benefits. The Executive and his eligible family members
shall be eligible to participate on terms no less favorable to
the Executive and his eligible family members than the terms
offered to CBI employees generally in any group medical, life,
disability, pension, profit sharing, 401(k), stock purchase
plan and similar benefits plans or other fringe benefits of
CBI; provided, however, that CBI shall assume and during the
remainder of 1999 shall maintain the group medical plan
sponsored by MCG immediately prior to the Commencement Date. If
CBI reduces qualified pension plan contributions or benefits
below those provided by MCG immediately prior to the
Commencement Date, CBI shall restore such amounts to the
Executive through a fully vested nonqualified deferred
compensation plan.
d. Supplemental Benefits. CBI shall provide to the Executive
supplemental benefits, as follows:
i. A cash auto allowance of $800.00 per month, plus
reimbursement for fuel, maintenance, insurance and
heated parking.
ii. Membership and dues in the Xxxxxxxxx National Golf Club
and Troon Golf and Country Club.
iii. Employee and dependent medical and dental insurance,
and medical and dental expense reimbursement for
expenses that qualify for a deduction under Section 213
of the Internal Revenue Code of 1986, as amended, not
otherwise covered under CBI's insured plans, subject to
a $10,000 annual maximum.
iv. Four weeks of vacation annually consistent with the
Executive's duties, to be taken as determined by the
Executive using prudent business judgment; provided,
however, that such vacation is in lieu of amounts the
Executive would otherwise be entitled to take under
CBI's generally applicable vacation policy.
v. Premium payments up to $11,800 annually on the
individually owned Variable Universal Life Insurance
policy on the Executive.
vi. Premium payments on the existing Xxxx Xxxxxx individual
Long Term Disability policy in effect for the Executive
on the Commencement Date, including any AIB increases.
vii. Cellular phone and unlimited airtime, including long
distance and roaming charges.
viii. Tax preparation fees, not to exceed $2,000 annually.
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ix. Airline club dues for two airlines.
x. First class airline travel, so long as such first class
travel is actually billed to and paid by Division's
client.
xi. Frequent flyer miles earned on business travel.
Notwithstanding anything in the foregoing to the contrary, to
the extent that CBI determines in its reasonable judgment that
the payment of amounts described in this Section 2.d or under
the plans and programs described in Section 2.c results in
additional taxable income to the Executive, Executive agrees
that he shall be in receipt of such additional taxable income,
and CBI shall be under no obligation to provide the Executive
with any tax gross-up.
e. Contingency Rollback. The base salary, Marketing Bonus and
stock options (described below) shall be subject to the
Contingency Rollback Provisions described in Attachment 1. The
Contingency Rollback Provisions shall not apply to any base
salary and Marketing Bonus earned after December 31, 2003, and
shall not reduce the base salary and marketing bonus by more
than 18% in the first year (i.e., from the Commencement Date
through December 31, 1999), 16% in the second, 15% in the
third, and 10% in the fourth and fifth.
f. Stock Options. The Executive is granted options to purchase
185,000 shares of CBI stock. The purchase price for such shares
shall be the price of the last trade on the Commencement Date
(or, if no trades were made on the Commencement Date, as of the
preceding day on which such shares were traded). The Options
shall vest and become exercisable at the rate of 20% on each
December 30 of the years 1999, 2000, 2001, 2002 and 2003,
subject to the Contingency Rollback provisions described in
Attachment 1. CBI shall have a right of first refusal to
acquire shares acquired by the exercise of the options under
this Section which right is set forth in the Investment
Agreement, dated as of the Commencement Date, which is attached
as Exhibit D to the Asset Purchase Agreement relating to CBI's
acquisition of the assets of Phynque, Inc.
Notwithstanding the foregoing, and subject to the vesting
provisions noted above, the Executive agrees to exercise 1/5 of
the total options (to the extent vested) on the anniversaries
of the Commencement Date; provided, however, that the Executive
shall not be required to exercise the 1/5 options on an
anniversary date unless and until the market price of the
shares (based on last trade of the day) has been greater than
the option price for at least 10 trading days prior to the
agreed exercise date, provided further, that the Executive
agrees to exercise such options as of the first future date
after the applicable anniversary date on which the market price
of the shares meets or exceeds the requirements set forth in
the preceding clause.
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3. Severance Benefits. CBI's obligation to provide severance benefits
depends upon the circumstances surrounding the Executive's termination
of employment, as described below. Capitalized terms are defined at the
end of this Paragraph 3.
a. Voluntary Termination of Employment. If the Executive
voluntarily terminates employment with CBI and all affiliates,
unless the provisions of Paragraphs 3.d or e apply, the
Executive shall not be entitled to any Severance Compensation
under this Agreement, and the Restrictive Covenants shall be
binding on the Executive until the later of December 31, 2003
or the date that is 24 months following termination of
employment. However, CBI shall pay the marketing bonus
continuation described in Paragraph 2.b.v, above ("Bonus
Runoff").
b. Involuntary Termination of Employment without Cause. If CBI
terminates the Executive's employment with CBI and all
affiliates without Cause, (i) CBI shall provide to the
Executive the Severance Compensation for 12 months and the
Bonus Runoff; (ii) the Restrictive Covenants shall be binding
on the Executive during the 12-month period; and (iii) the
Executive shall be 100% vested in all stock options under the
CBI Stock Option Plan and in the Deferred Retention Plan
benefits described above. If such termination occurs within
four years after the effective date of this Agreement, then CBI
shall have the option of extending the period during which
Severance Compensation will be paid, and the corresponding
period during which the Restrictive Covenants will apply, for
any period CBI selects, but not later than the fifth
anniversary of the effective date of this Agreement. CBI shall
communicate the selected period to the Executive in writing
within 5 business days following the date of the Executive's
termination of employment. If CBI fails to give notice during
the 5-day period, then CBI's option to extend the Severance
Compensation and Restrictive Covenant period shall lapse, and
such periods shall be limited to the stated 12 months.
c. Involuntary Termination of Employment for Cause. If CBI
terminates the Executive's employment with CBI and all
affiliates for Cause, the Executive shall not be entitled to
any Severance Compensation under this Agreement, and the
Restrictive Covenants shall be binding on the Executive until
the later of December 31, 2003 or the date that is 24 months
following the termination. However, CBI shall pay to the
Executive the Bonus Runoff.
d. Force-Out Event NOT Following Change of Control. If (i) a
Force-Out Event occurs other than within 12 months following a
Change of Control, and (ii) the Executive voluntarily
terminates employment within 3 months following the Force-Out
Event, the Executive shall elect either (a) to receive a full
12 months of Severance Compensation and be bound by the
Restrictive Covenants for such 12-month period, or (b) to
receive no Severance Compensation and not be bound by the
Restrictive
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Covenants. The Executive shall communicate the selected option
to CBI in writing within 5 business days following the date of
the Executive's termination of employment. If the Executive
fails to give timely notice during the 5-day period, the
Executive shall be deemed to have elected no Severance
Compensation and no Restrictive Covenants. Whether the
Executive elects Severance Compensation or not, CBI shall pay
to the Executive the Bonus Runoff, and the Executive shall be
100% vested in all stock options under the CBI Stock Option
Plan and in the Deferred Retention Plan benefits described
above.
e. Force-Out Event Following Change of Control. If (i) a Force-Out
Event occurs within 12 months following a Change of Control,
and (ii) the Executive voluntarily terminates employment within
3 months following the Force-Out Event, the Executive shall
immediately upon such termination become 100% vested in all
benefits (including, but not limited to, stock options under
the CBI Stock Option Plan and benefits under the Deferred
Retention Plan), and the Executive shall elect either (a) to
receive a full 12 months of Severance Compensation and be bound
by the Restrictive Covenants for such 12-month period, or (b)
to receive no Severance Compensation and not be bound by the
Restrictive Covenants. The Executive shall communicate the
selected option to CBI in writing within 5 business days
following the date of the Executive's termination of
employment. If the Executive fails to give timely notice during
the 5-day period, the Executive shall be deemed to have elected
no Severance Compensation and no Restrictive Covenants. In
either case, CBI shall pay to the Executive the Bonus Runoff.
f. Termination of Employment for Disability. Termination of the
Executive's employment for disability shall be deemed to arise
on the earlier of (i) the commencement of disability benefit
payments under any group or individual long-term disability
insurance covering the Executive, the premiums for which
coverage are paid by CBI, or (ii) the agreement of the
physician retained by CBI and the Executive's physician that
the Executive has suffered a sickness, accident or injury which
prevents the Executive from performing substantially all of the
Executive's normal duties for the Company. Upon termination of
employment for disability, CBI shall provide to the Executive
the Severance Compensation for 12 months, commencing on the
date of the termination, but reduced by any benefits the
Executive receives under group or individual disability
insurance, to the extent the premiums for such coverage over
the 12 months preceding the date of termination have been paid
by the Company. CBI shall also pay to the Executive the Bonus
Runoff, and the Executive shall be 100% vested in all stock
options under the CBI Stock Option Plan and in the benefits
under the Deferred Retention Plan. The Restrictive Covenants
shall be binding on the Executive for 24 months following the
date of termination of employment.
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g. Termination of Employment for Death. If the Executive's
employment with CBI and all affiliates terminates due to the
Executive's death, no Severance Compensation shall be payable
under this Agreement, but the Executive's estate shall be 100%
vested in all stock options under the CBI Stock Option Plan and
in the Deferred Retention Plan benefits described above, and
CBI shall pay the Bonus Runoff to the Executive's estate.
h. Termination of Employment at Expiration of Contract. If the
Executive's employment with CBI and all affiliates terminates
due to a party giving notice of nonrenewal under Section 1,
above, CBI shall not pay any Severance Compensation, and the
Restrictive Covenants shall not apply, but CBI shall pay the
Bonus Runoff to the Executive. However, if CBI gives such
notice, the Executive shall be 100% vested in benefits under
the Deferred Retention Plan.
i. Definitions. Capitalized terms in this Paragraph 3 are defined
as follows:
i. Cause means any of the following:
o Loss (other than for non-payment of licensure
fees) of any insurance or securities license
o Gross negligence or willful misconduct in
connection with the Executive's
responsibilities
o Fraudulent activity
o Embezzlement
o Felonious conduct
o Substantial failure of performance by the
Executive that is repeated and continued after
thirty (30) days written notice to the
Executive of such failure by the President of
Xxxxx/Xxxxxx Holdings, Inc., or any successor
thereto, which failure is not cured by the
Executive within such thirty (30) day period.
ii. CHANGE OF CONTROL means either of the following:
o An individual or group of individuals acting in
concert acquiring actual ownership or control
of 30% or more of the outstanding voting shares
of CBI, or Xxxxx/Xxxxxx Holdings, Inc., or of
the Division
o Sale of all or substantially all of the assets
of Xxxxx/Xxxxxx Holding, Inc., CBI, or the
Division.
iii. FORCE-OUT EVENT means any of the following:
o 25% or more reduction in total compensation
(i.e., the sum of salary, benefits and bonus
opportunity) that, except for reductions that
result from the Contingency Rollback, is
disproportionately greater for the Executive
than for other employees of CBI with similar
responsibilities and compensation levels. If a
change in total
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compensation involves a reduction in any
incentive or commission percentage, the
percentage reduction in total compensation shall
be determined by applying the new compensation
formula to the Executive's performance over the
12 months preceding the effective date of the
reduction to determine whether total
compensation actually earned over such period
would have been reduced by 25% or more under the
new formula.
o Relocation of the Executive's primary place of
employment without his consent more than 25
miles from its location as of the date of this
Agreement
o Significant reduction in the Executive's
authority or responsibilities
iv. Restrictive Covenants means any of the Non-Compete and
Non-Solicitation provisions in Paragraph 4, and the
restrictive covenants in CBI's standard Intellectual
Property and Confidentiality Agreement.
x. Xxxxxxxxx Compensation means the Executive's cash
compensation (defined as (i) base salary at the rate in
effect on the date of termination, plus (ii) Marketing
Bonus based on the "healthcare first year gross
revenues" for the 12 complete calendar months prior to
the Executive's date of termination), and all benefits
as in effect for the Executive at the date of
termination.
CBI shall have the option to pay in cash the value of any benefit that
CBI elects not to provide in kind. The "value" of an insured benefit is
the premiums CBI would have paid to continue the coverage during the
severance period.
Commencing upon the Executive's termination of employment, the Executive
shall cease to be an employee of CBI for any purpose. The payment of
Severance Compensation under this Agreement shall be payments to a
former employee.
If the Executive dies during the severance benefit period, CBI shall
continue to pay the cash elements of the Severance Compensation to the
Executive's estate for the balance of the severance period.
4. Non-Compete; Non-Solicitation. In consideration of the compensation and
benefits described above, the Executive covenants as follows:
a. Executive acknowledges that as a director, officer and/or
employee of CBI, Executive has become familiar with trade
secrets and other confidential information and data concerning
CBI and its affiliates. Executive covenants and agrees that for
a period of time set forth in the applicable subsection of
Section 3 (the "Non-Compete Period") Executive shall not, in
North America, including the United States, Canada
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and Mexico, and in any other areas in which CBI or its
affiliates have done business within five (5) years preceding
the first date of the Non-Compete Period (collectively, the
"Territory"), directly or indirectly, either alone or in
partnership or jointly or in conjunction with any person or
persons, firm, association, syndicate, company or corporation as
principal, agent, employee, director, shareholder or in any
other manner whatsoever (i) carry on or be engaged in any
business which is in competition with CBI or any of its
affiliates, or (ii) solicit business from, or sell to, any of
CBI's or its affiliates' customers in the Territory or any other
person, firm or corporation in the Territory to whom CBI or its
affiliates have sold products within five (5) years preceding
the first date of the Non-Competition Period where such
solicitation or sale would involve the sale of products
competitive with CBI or any of its affiliates. Nothing herein
shall prohibit Executive from being an owner of not more than 2%
of the outstanding stock of any class of a corporation which is
publicly traded, so long as Executive has no active
participation in the business of such corporation.
b. Executive agrees that during the Non-Compete Period, Executive
will not directly or indirectly offer employment to or hire any
person who is currently or was within the last year employed by
CBI or any of its affiliates, or, is or will be employed by CBI
or any of its affiliates, except with the prior written consent
of CBI.
c. Executive shall abide by the terms of CBI's standard
Intellectual Property and Confidentiality Agreement.
The limitations under this Paragraph 4 shall survive any other
termination of this Agreement.
5. Specific Performance. The Executive recognizes that CBI, in addition to
ceasing Severance Compensation, may recover Severance Compensation
previously paid and use any legal means, including obtaining an
injunction, to enforce the restrictive covenants under Paragraph 4.
6. Severability. If any portion of this Agreement is determined by a court
to be unenforceable as written, such portion shall be limited to the
extent necessary to be enforceable, and the remaining provisions of
this Agreement shall remain in effect.
7. Arbitration. Except as provided in Paragraph 5 regarding CBI's ability
to use any legal means, including obtaining an injunction, to enforce
the restrictive covenants under Paragraph 4, any dispute arising under
this Agreement shall be resolved through nonbinding arbitration by a
panel of three individuals -- one selected by each party, and a third
selected jointly by the first two. The parties shall select the first
two representatives within 15 days after one party gives written notice
to the other party of a dispute. The two representatives shall then
designate the third arbitrator within 15 days after the end of the
first 15-day period. The dispute shall then be resolved by the majority
vote of the three arbitrators. Except as
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modified in this section, the evidentiary and hearing rules of the
American Arbitration Association shall control.
8. Governing Law. This Agreement is entered into and shall be construed
under the laws of the State of Minnesota.
[Signatures Follow]
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SIGNATURE PAGE TO XXXXXXXXX EMPLOYMENT AGREEMENT
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XXXXXX X. XXXXXXXXX
XXXXX/XXXXXX, INC.
BY
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ITS
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