Exhibit 10.113
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 18th
day of May, 1999, by and between Xxxxx X. Xxxxx (the "Employee") and
First Health Group Corp., a Delaware corporation (the "Company").
IN CONSIDERATION of the mutual promises set forth below, and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment with the Company, upon the terms and
subject to the conditions hereinafter set forth.
2. Duties.
a. Employment. The Employee is employed as the President
and Chief Executive Officer of the Company and shall render his
services at the principal business offices of the Company in Downers
Grove, Illinois, unless otherwise agreed by him and the Board of
Directors of the Company. The Employee shall have such authority and
shall perform such duties as are customary for the office to which he
has been appointed, including, without limitation, the full authority
to conduct and direct the day-to-day operations of the Company, subject
to such limitations, instructions, directions and control as the Board
of Directors of the Company or the Chairman of the Board of the Company
(acting at the direction or with the authority of the Board of
Directors) may specify from time to time. He shall not otherwise
devote time to the active pursuit of any other business enterprise, nor
shall he have any interest in any business enterprise which is
competitive with or adverse to the Company, whether as an employee,
officer, director, consultant, creditor, security holder or otherwise
(except to the extent permitted in Paragraph 8 hereof). The foregoing
notwithstanding, the Employee shall be entitled to belong to and
participate in professional organizations and to engage in professional
activities in furtherance of the Company's business.
b. Stock Retention. Employee will own not less than
164,000 shares of the Company's common stock until June 30, 2003.
3. Term. The term of Employee's employment under this Agreement
shall commence on May 18, 1999 and shall terminate on December 31, 2001
unless otherwise terminated in accordance with the terms hereof.
4. Compensation. As compensation for the services rendered
hereunder, the Employee shall be entitled to receive the following:
a. Base Salary. Effective the date of this Agreement,
Employee shall receive an annual salary of $920,700 ("Base Salary").
Effective January 1, 2000 Base Salary will be $950,000, and effective
January 1, 2001 Base Salary will be $975,000. Base Salary will be
payable in installments at such times and in such manner as may from
time to time be in effect for executives of the Company, but not less
often than monthly.
b. Additional Compensation. As soon as practicable after
the end of each fiscal year of the Company during the term of this
Agreement and commencing with the year ending December 31, 2000, the
Company's Pretax Income for such fiscal year (as determined in
accordance with generally accepted accounting principles) will be
compared to the Company's Pretax Income for the immediately preceding
fiscal year (Threshold Year). If Pretax Income has increased by 5% or
more for the year, the resulting percentage increase (rounded to the
nearest whole number) will be used to determine any Additional
Compensation payable to Employee in accordance with the following
table:
Additional
Compensation Factor
Pretax Income (as % of Threshold
Increase Year Base Salary)
-------- ----------------
5% 25%
10% 50%
20% 75%
30% 100%
40% 125%
50%* 150%
*For each additional 10% Pretax Income Increase above 50%, the
Additional Compensation Factor will increase by 25%.
Additional Compensation will be earned pro rata to the Pretax Income
Increase. In example, if the Pretax Income increases 15%, Employee
will receive 62.5% (50% plus 12.5% (the pro rata increase)) of
Threshold Year Base Salary in Additional Compensation.
If a merger, acquisition, accounting pronouncement or other unusual
financial event of the Company causes a material change to the Pretax
Income for any year, Employee and Company agree that for the purpose of
this Agreement only, Pretax Income will not include the unusual event
and/or will be modified to neutralize the financial effect of the
event.
5. Stock Options. Subject to receipt of any required
stockholder approval and effective upon the execution and delivery of
this Agreement, the Company shall grant to the Employee options to
purchase shares of Common Stock of the Company, each such option to be
on the terms and subject to the conditions of the respective stock
option agreements (the "Option Agreements") to be entered into between
the Company and the Employee, the forms of which are attached hereto as
Exhibits 1, 2 and 3.
6. Benefits.
a. Benefits During the Term of this Agreement. In addition
to the compensation to be paid to the Employee pursuant to Paragraph 4
hereof, the Employee shall be entitled to participate in all employee
benefit programs currently maintained by the Company as such programs
may be modified from time to time and each such other program or policy
established by the Company from time to time during the term of this
Agreement for its employees and executives generally (to the extent
that it is more favorable to the Employee than an existing program
covering the same benefit). Employee shall be entitled to an annual
paid vacation of four weeks during each year of employment hereunder.
Unused vacation time shall accumulate from year to year, but in no
event shall the Employee be entitled to accumulate more than eight
weeks of vacation time.
b. Benefits After the Term of this Agreement. The Company
hereby confirms the existence of the grant of health benefits to
Employee after the term of this Agreement as first set forth in that
certain Employment Agreement, dated as of July 1, 1993 between Employee
and the Company (the "1993 Employment Agreement").
7. Reimbursement of Expenses. The Company, promptly upon
receipt from the Employee of appropriate documentation, shall reimburse
the Employee for all of his reasonable business expenses, including,
without limitation, travel expenses, necessarily and appropriately
incurred in the performance of his duties hereunder.
8. Confidentiality and Competition.
a. In consideration of the substantial benefits to be
provided hereunder to the Employee by the Company, and in recognition
of the fact that the Employee occupies a position of trust and
confidence with the Company, the Employee acknowledges that he has
provided, created and acquired and hereafter will provide, create and
acquire valuable and confidential information of a special and unique
nature relating to such matters as the Company's trade secrets,
systems, procedures, manuals, confidential reports, employee rosters,
client lists, software systems, products, business and financial
methods and practices, plans, pricing, selling techniques, special
methods and processes involved in designing, assembling and operating
computer programs previously and currently used by the Company and the
application thereof to managed care programs and other related
electronic data processing information respecting the Company's
existing businesses and services and those developed during the term of
this Agreement, as well as credit and financial data relative to the
Company and its clients, and the particular business requirements of
the Company's clients, including the methods used and preferred by the
Company's clients and fees paid by such clients. In addition, the
Employee has developed and may further develop on behalf of the Company
a personal acquaintance with the Company's clients, which acquaintances
may constitute the Company's only contact with such clients. For
purposes of this Paragraph 8, the term "Company" shall mean First
Health Group Corp. and each company which is a subsidiary thereof and
any partnership or joint venture in which the Company or any such
subsidiary owns an equity interest at any time during the term of this
Agreement. In view of the foregoing and in consideration of the
remuneration to be paid to the Employee hereunder, the Employee
acknowledges and agrees that it is reasonable and necessary for the
protection of the goodwill and business of the Company that he make the
covenants contained herein regarding his conduct during and subsequent
to his employment by the Company and that the Company will suffer
irreparable injury if the Employee were to engage in any conduct
prohibited hereby. The Employee represents that his experience and/or
abilities are such that the observance of the aforementioned covenants
will not cause the Employee any undue hardship, nor will it
unreasonably interfere with the Employee's ability to earn a
livelihood. The Employee and the Company further agree that the
covenants contained in this Paragraph 8 shall each be construed as a
separate agreement independent of any other provisions of this
Agreement, and that the existence of any claim or cause of action by
the Employee against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the
Company of any of these covenants; provided, however, that the
covenants contained in this Paragraph 8 shall not be enforceable by the
Company during any period in which the Company has wrongfully failed to
make a required payment under Paragraph 4a hereof. In the event a
court of competent jurisdiction determines that any provision of this
Paragraph 8 is unreasonable as to duration, substantive extent or
geographic scope, the provision will nonetheless be enforced to the
fullest extent reasonable.
b. The Employee, while in the employ of the Company or at
any time thereafter, will not directly or indirectly communicate or
divulge, or use for the benefit of himself or of any other person,
firm, association or corporation, any of the Company's trade secrets or
other confidential information, including, without limitation, the
information described in Paragraph 8a, which trade secrets and
confidential information were or will be communicated to or otherwise
learned or acquired by the Employee in the course of his employment
with the Company, except that the Employee may disclose such matters to
the extent that the disclosure thereof is required: (i) in the course
of his employment with the Company, provided such disclosure is made
exclusively for the benefit of the Company, or (ii) by a court,
governmental agency of competent jurisdiction or grand jury.
c. During the term of his employment with the Company and
for a period of three years thereafter, the Employee will not contact,
directly or indirectly, with a view towards selling any product or
service competitive with any product or service sold (or proposed to be
sold) by the Company during the Employee's employment, any person, firm
association or corporation (i) to which the Company has provided its
services, or (ii) which the Employee or, to his knowledge, any other
employee or representative of the Company has solicited, contacted or
otherwise dealt with on behalf of the Company, nor will he directly or
indirectly make any such contact, for the benefit or on behalf of any
other person, firm, association or corporation or in any manner assist
any person, firm, association or corporation to make any such contact.
d. During the term of his employment by the Company and for
a period of three years thereafter, the Employee will not directly or
indirectly acquire any interest in any corporation, firm or business
(other than the Company) which is engaged in any business in the United
States the same as, similar to or competitive with the business of the
Company as conducted at any time during the Employee's employment,
whether as an employee, sole proprietor, director, officer, consultant,
equity security holder or otherwise (except that he may own up to 2% of
the outstanding shares of capital stock of any corporation whose stock
is listed on a national securities exchange or is traded in the over-
the-counter market), nor will the Employee directly or indirectly have
any interest in any corporation, firm or business which is engaged in a
business adverse to the Company's business (except that he may own up
to 2% of the outstanding shares of capital stock of any corporation
whose stock is listed on a national securities exchange or is traded in
the over-the-counter market).
e. During the term of his employment by the Company and for
a period of three years thereafter, neither the Employee nor any entity
by which the Employee is employed or otherwise associated with will
directly or indirectly employ, retain the services of or induce or
attempt to induce, in any manner whatsoever, any present or future
employee of the Company to leave the employ of the Company and/or to
seek or accept employment with the Employee or any other person, firm,
association or corporation.
f. In the event of a breach or threatened or intended
breach of this Agreement and the foregoing covenants by the Employee,
the Employee acknowledges that the Company will suffer irreparable
injury and that determination of the exact amount of the Company's
damages will be difficult, if not impossible, and agrees that the
Company shall be entitled, in addition to remedies otherwise available
to it at law or in equity, to injunctions, both preliminary and
permanent and without bond therefor, enjoining or restraining such
breach or threatened or intended breach, and the Employee hereby
consents to the issuance thereof forthwith by any court of competent
jurisdiction.
9. Termination of Employment.
a. Incapacity. If, during the term of this Agreement, the
Employee should be prevented from performing his duties by reason of
illness or physical or mental disability (hereinafter referred to
collectively as "Incapacity") for a continuous period of between 90 and
180 days, the Employee shall receive one-half his per diem Base Salary
for each day during such time period that he fails, due to his
Incapacity, to render the services contemplated hereunder. If during
the term of this Agreement, the Employee should be prevented from
performing his duties by reason of Incapacity for a continuous period
greater than 180 days, the Company may terminate the Employee's
employment hereunder by giving written notice thereof to the Employee,
effective on the date set forth in the notice (which date shall be not
less than 15 business days after the notice is given).
For purposes hereof, a continuous period of Incapacity shall
not be deemed interrupted until the Employee returns to substantially
full time work for a period of at least 30 days.
b. Death. In the event of the Employee's death during the
term of this Agreement, the Employee's employment hereunder shall be
deemed terminated as of the date of the Employee's death.
c. Cause. This Agreement and the Employee's employment
hereunder may be terminated at any time by the Company for cause. As
used herein "cause" shall mean (i) theft, embezzlement or fraud by the
Employee or the Employee's involvement in any other scheme or
conspiracy pursuant to which the Company has lost or could reasonably
be expected to lose assets to the Employee or to others calculated by
the Employee to receive such assets, (ii) incapacity on the job by
reason of the use or abuse of alcohol or drugs, (iii) commission
of a felony or a crime involving moral turpitude, (iv) gross
insubordination, (v) unexplained and continuous absences from work,
(vi) material breach of the Employee of any of the provisions of this
Agreement which is not cured within 30 business days after the Company
gives written notice thereof to the Employee specifying the nature of
such breach, (vii) refusal to act in accordance with a lawful and duly
adopted resolution of the Board of Directors.
d. Termination of Employment by the Employee. If, at any
time during the term of this Agreement, the Employee shall not be
reappointed as President and Chief Executive Officer of the Company but
his services under this Agreement are not terminated by the Company,
the Employee shall have the right, by written notice to the Chairman of
the Board of the Company, to terminate his services hereunder,
effective as of the thirtieth day after receipt of said notice, and the
Employee shall have no further obligations under this Agreement, except
as provided in Paragraph 8 hereof. Termination of the Employee's
services pursuant to this Paragraph shall be treated as a termination
of employment by the Company other than for cause and shall be governed
by the provisions of Paragraph 10e hereof.
e. Termination of Employment by the Company. The Company
may terminate the Employee's employment for any reason deemed
sufficient by the Company.
As used in this Paragraph 9, unless otherwise specified, the
term "days" refers to calendar days.
10. Effect of Termination of Employment.
a. Incapacity. If termination of employment results or
occurs due to Incapacity under Paragraph 9a, the Company shall pay or
cause to be paid in a lump sum (i) such amounts, if any, as the
Employee shall be entitled to under the Company's disability policy and
program applicable to the Employee, (ii) subject to the limitations set
forth in the last sentence of Paragraph 6a hereof, payment in respect
of all unused paid vacation time, to the extent the Employee has not
prior thereto received compensation in lieu thereof, (iii) the
Employee's interest in all Company retirement and investment plans, to
the extent such plans permit such interest to be distributed and (iv)
payment in respect of all compensation earned to date but not
theretofore paid.
b. Death. If termination of employment occurs as a result
of the Employee's death, the Company shall pay to the Employee's estate
a lump sum payment equal to (i) such amounts as the Employee's estate
shall be entitled to receive under the terms of retirement and
investment plans of the Company, to the extent such plans permit such
amounts to be paid, (ii) subject to the limitation set forth in the
last sentence of Paragraph 6a hereof, payment in respect of all unused
paid vacation time, to the extent the Employee has not prior thereto
received compensation in lieu thereof, and (iii) payment in respect of
all compensation earned to date but not theretofore paid. In addition,
the Company will pay to his spouse for a period of 60 days an amount
equal to the Employee's per diem Base Salary.
c. Cause. If the Employee's employment is terminated by
the Company for cause, Employee shall be entitled to all earned but
unpaid compensation, provided, however, the Company shall be entitled
to offset therefrom any amounts lost by the Company as a result of
Employee's action giving rise to such cause.
d. Voluntary Termination. If the Employee shall
voluntarily terminate his employment hereunder, the Company shall be
obligated to pay or cause to be paid in a lump sum (i) payment in
respect of the Employee's interest in all Company retirement and
investment plans, to the extent such plans permit such payment to be
made, (ii) subject to the limitations set forth in the last sentence of
Paragraph 6a hereof, payment in respect of all unused paid vacation
time, to the extent the Employee has not prior thereto received
compensation in lieu thereof.
e. Termination of Employment Pursuant to Paragraphs 9d or
9e. In the event that this Agreement is terminated by the Employee
pursuant to Paragraph 9d hereof or by the Company pursuant to Paragraph
9e hereof, the Company shall be obligated to pay or cause to be paid to
the Employee (i) the balance of the Base Salary payments required to be
paid during the remaining term of this Agreement, which payments shall
be made at regular intervals in accordance with the Company's regular
pay periods, (ii) payment in respect of the Employee's interest in all
Company retirement and investment plans, to the extent that such plans
permit such payment to be made, and (iii) subject to the limitations
set forth in the last sentence of Paragraph 6a hereof, payment in
respect of all unused paid vacation times, to the extent Employee has
not prior thereto received compensation in lieu thereof. Payments
pursuant to subsections (ii) and (iii) shall be paid in a lump sum.
f. Effect of Termination of Employment: Survival. In the
event that the Employee's employment with the Company terminates, this
Agreement shall be deemed terminated, provided, however, that the terms
and conditions of Paragraphs 2b, 6b (to the extent provided therein),
8, 9 and 10 shall survive such termination and be fully binding and
enforceable.
11. Return of Documents. Upon termination of this Agreement for
any reason, the Employee shall deliver to the Company any property then
in his possession belonging to the Company. For purposes of this
Agreement, the parties hereto do hereby agree that any original or
copies of any books, papers, customer lists, files, books of accounts,
summaries, notes and other documents and data or other writings, tapes
or records, relating to the company or prepared in connection with the
Employee's performance of his duties hereunder, are owned by and are
the property of the Company.
12. Best Efforts. The Company and the Employee each agree to use
its or his best efforts to operate the business of the Company in a
manner designed to maximize the revenues and net income of the Company
and to preserve and enhance its goodwill and other assets.
13. Termination of Prior Employment Agreement. All prior
employment agreements between Company and Employee are hereby
terminated.
14. Notices. Any notices to be given hereunder by either party
to the other may be effected either by personal delivery in writing or
by mail, registered or certified, postage prepaid, with return receipt
requested. Mailed notices shall be addressed to the respective
addresses shown below. Either party may change its address for notice
by giving written notice in accordance with the terms of this Paragraph
14.
a. If to the Employee:
Xxxxx X. Xxxxx
First Health Group Corp.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
b. If to the Company:
Xxxxx X. Xxxxx
General Counsel
First Health Group Corp.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
with a copy to:
Chairman of the Compensation Committee
of the First Health Group Corp. Board of Directors
15. Acknowledgment of Reading. The Employee acknowledges,
represents and warrants to the Company that he has received a copy of
this Agreement, that he has read and understands this Agreement, that
he has had the opportunity to seek the advice of legal counsel before
signing this Agreement and that he has either sought such counsel or
has voluntarily decided not to do so.
16. General Provisions.
a. Governing Law. This Agreement shall be governed and
construed in accordance with the law of the State of Illinois.
b. Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term hereof, such provisions shall be
fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provisions had never
comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provisions or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision as similar in terms to the illegal, invalid or
unenforceable provision as may be possible and still be legal, valid or
enforceable.
c. Entire Agreement. This Agreement and the Option
Agreements set forth the entire understanding of the parties with
respect to the matters specified herein. No other terms, conditions or
warranties, and no amendments or modifications hereto, shall be binding
unless made in writing and signed by the parties hereto.
d. Binding Effect: Assignment and Assumption of Agreement.
This Agreement shall be binding upon the parties hereto and inure to
the benefit of such parties, their respective heirs, representatives,
successors and permitted assigns. This Agreement may not be assigned
by the Employee nor may it be assigned by the Company without the
Employee's consent.
e. Waiver. The waiver by either party hereto of any breach
of any term or condition of this Agreement shall not be deemed to
constitute the waiver of any other breach of the same or any other term
or condition hereof.
f. Titles. Title of the paragraphs herein are used for
convenience only and shall not be used for interpretation or
construction of any word, clause, paragraph, or provision of this
Agreement.
g. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Company and the Employee have executed
this Agreement as of the date and year first written above.
COMPANY:
FIRST HEALTH GROUP CORP.
By:
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Xxxxxx X. Xxxxxxxx
Chairman of the Board
EMPLOYEE:
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XXXXX X. XXXXX
