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ATTACHED FORM OF EMPLOYMENT AGREEMENT EXHIBIT 10.2
The attached Employment Agreement, as amended, of Xxxxxxx X. Xxxxxx
serves as a form of Employment Agreement for Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxxx
and Xxxxx X. Xxxxxx, whose individual agreements differ from such form only
with respect to base annual compensation as follows: Xx. Xxxxx, $125,000; Xx.
Xxxxxxx, $110,000 and Xx. Xxxxxx, $110,000.
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this 28th day of May, 1997, by and between HEALTHCARE RECOVERIES, INC., a
Delaware corporation (the "Company"), and XXXXXXX X. XXXXXX, (the "Employee").
STATEMENT OF BACKGROUND INFORMATION
The Company provides subrogation and related recovery services for
healthcare payors (the "Business"), including health maintenance organizations,
indemnity insurers, Blue Cross and Blue Shield organizations, third-party
administrators, self-funded employee health welfare benefit plans, and provider
hospital organizations. The Company's services consist of assisting healthcare
payors to recover the cost or reasonable value of healthcare benefits provided
to insureds who are injured under circumstances where a third party, typically a
property or casualty insurer of an individual, is ultimately responsible for
such healthcare benefits.
The Company desires to obtain the services of Employee and Employee
desires to accept such employment.
STATEMENT OF AGREEMENT
In consideration of the mutual covenants, promises and conditions set
forth in this Agreement, the parties agree as follows:
1. Employment. The Company employs Employee and Employee accepts such
employment upon the terms and conditions set forth in this Agreement. For
purposes of Sections 6, 7 and 8 of this Agreement, "employment" shall mean any
period of time during which the Company is paying the Employee salary under
Section 5(a) of this Agreement, whether or not the Employee is currently
performing services for the Company at the time of such payment. For all other
purposes under this Agreement, "employment" shall have its customary meaning.
Notwithstanding anything in this Agreement to the contrary, if the Company is
paying the Employee salary, wages, benefits, severance or any other sums of
money after termination of Employee's employment with the Company, and Employee
obtains any other employment for consideration in any capacity, then such
payments will (i) cease immediately if Employee's employment with the Company
was terminated as a result of the occurrence of any events described in Section
4(a)(i) through 4(a)(iv) ("terminated for cause"), or (ii) be reduced by an
amount equal to the value of consideration received in connection with or as a
result of such other employment if Employee was terminated other than as a
result of the occurrence of any events described in Section 4(a)(i) through
4(a)(iv) ("terminated without cause"). Cessation of payments by the Company
shall not apply to incentive compensation payments to Employee.
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2. Duties of Employee. Employee agrees to perform and discharge the
Business duties which may be assigned to Employee from time to time by the
Company to the reasonable satisfaction of the Company. Employee also agrees to
comply with all of the Company's policies, standards and regulations, as
promulgated by the officers of the Company. Employee will devote Employee's full
professional and business-related time, skills and best efforts to the Business
and, will not, during the term of this Agreement, be engaged (whether or not
during normal business hours) in any other business or professional activity,
whether or not such activity is pursued for gain, profit or other pecuniary
advantage, without the prior written consent of the President of the Company,
which consent will not be unreasonably withheld. This Section will not be
construed to prevent Employee from (a) investing personal assets in businesses
which do not compete with the Company in such form or manner that will not
require any services on the part of Employee in the operation or the affairs of
the companies in which such investments are made and in which Employee's
participation is solely that of an investor; (b) purchasing securities in any
corporation whose securities are listed on a national securities exchange or
regularly traded in the over-the-counter market, provided that Employee at no
time owns, directly or indirectly, in excess of one percent of the outstanding
stock of any class of any such corporation engaged in a business competitive
with that of the Company; or (c) participating in conferences, preparing and
publishing papers or books or teaching, so long as the President of the Company
gives prior approval to such participation, preparation and publication or
teaching.
3. Term. The term of this Agreement will be for a period of three years
commencing on the closing of sale of the Company by Medaphis Corporation
("Medaphis"), through public or private sale, and expiring on the third
anniversary of that date, subject to earlier termination as provided for in
Section 4. In the event that Medaphis does not consummate the public or private
sale of the Company within six months of the date of this Agreement, this
Agreement shall be terminated.
4. Termination.
(a) Termination by Company for Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate this Agreement
and all of its obligations under this Agreement immediately if any of the
following events occur:
(i) Employee materially breaches any of the terms or
conditions set forth in this Agreement and fails to
cure such breach within ten days after Employee's
receipt from the Company of written notice of such
breach, which notice shall describe in reasonable
detail the Company's belief that Employee is in
breach (notwithstanding the foregoing, no cure period
shall be applicable to breaches by Employee of
Sections 6, 7 or 8 of this Agreement);
(ii) Employee commits any other act materially detrimental
to the business or reputation of the Company;
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(iii) Employee intentionally engages in dishonest or
illegal activities or commits or is convicted of any
crime involving fraud, deceit or moral turpitude; or
(iv) Employee dies or becomes mentally or physically
incapacitated or disabled so as to be unable to
perform Employee's duties under this Agreement.
Without limiting the generality of the foregoing,
Employee's inability adequately to perform services
under this Agreement for a period of sixty
consecutive days will be conclusive evidence of such
mental or physical incapacity or disability, unless
such inability adequately to perform services under
this Agreement is pursuant to a mental or physical
incapacity or disability covered by the Family
Medical Leave Act, in which case such sixty day
period shall be extended to a one hundred and twenty
day period.
(b) Termination by Company Without Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate Employee's
employment pursuant to this Agreement without cause upon at least thirty days'
prior written notice to Employee. Subject to the provisions of clause (ii) of
Section 1, if Employee's employment with the Company is terminated by the
Company without cause, the Company shall remain subject to its obligations
hereunder as if Employee remained employed hereunder for the balance of the
term, as provided in Section 3.
5. Compensation and Benefits.
(a) Annual Salary. For all services rendered by Employee under this
Agreement, the Company will pay Employee a base salary of $125,000 dollars per
annum in equal bi-weekly installments. Such annual salary will be subject to
annual adjustments by any increases given in the normal course of business.
(b) Incentive Compensation. During Employee's Employment with the
Company, Employee shall be entitled to incentive compensation payments in
accordance with the Management Group Incentive Compensation Plan of Healthcare
Recoveries, Inc. If Employee is terminated by the Company without Cause,
Employee shall be entitled to a pro rata share of incentive compensation
payments.
(c) Stock Option Awards. In the event and only in the event Medaphis
closes the sale of the Company pursuant to a registered public offering,
Employee shall be entitled to receive under the Healthcare Recoveries, Inc.
Non-Qualified Stock Option Plan options to purchase 15.75% of the shares of the
Company's common stock reserved under such Plan at such closing for an exercise
price equal to the initial offering price of the Company's Common Stock on the
Nasdaq National Market, which options shall have an effective grant date of the
day such shares first begin trading on the Nasdaq National Market and shall vest
over three years as follows: one-third on each of the first three anniversaries
of the effective grant date. In the event of such public offering, and prior to
the closing of such offering, the Company shall reserve for issuance under the
Healthcare Recoveries, Inc. Non-Qualified Stock Option Plan that number of
shares equal to 5% of the
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Common Stock sold by Medaphis in such offering (but excluding Common Stock sold
by the Company pursuant to an over-allotment option).
(d) Other Benefits. Employee will be entitled to such fringe benefits
as may be provided from time-to-time by the Company to its employees, including,
but not limited to, group health insurance, life and disability insurance,
vacations and any other fringe benefits now or hereafter provided by the Company
to its employees, if and when Employee meets the eligibility requirements for
any such benefit. The Company reserves the right to change or discontinue any
employee benefit plans or programs now being offered to its employees; provided,
however, that all benefits provided for employees of the same position and
status as Employee will be provided to Employee on an equal basis.
(e) Business Expenses. Employee will be reimbursed for all reasonable
expenses incurred in the discharge of Employee's duties under this Agreement
pursuant to the Company's standard reimbursement policies.
(f) Withholding. The Company will deduct and withhold from the payments
made to Employee under this Agreement, state and federal income taxes, FICA and
other amounts normally withheld from compensation due employees.
6. Non-Disclosure of Proprietary Information. Employee recognizes and
acknowledges that the Trade Secrets and Confidential Information of the Company
and its affiliates and all physical embodiments of the same (as they may exist
from time-to-time, collectively, the "Proprietary Information") are valuable,
special and unique assets of the Company's and its affiliates' businesses.
Employee further acknowledges that access to such Proprietary Information is
essential to the performance of Employee's duties under this Agreement.
Therefore, in order to obtain access to such Proprietary Information, Employee
agrees that Employee shall hold in confidence all Proprietary Information and
will not reproduce, use, distribute, disclose, publish or otherwise disseminate
any Proprietary Information, in whole or in part, and will take no action
causing, or fail to take any action necessary to prevent causing, any
Proprietary Information to lose its character as Proprietary Information, nor
will Employee make use of any such information for Employee's own purposes or
for the benefit of any person, firm, corporation, association or other entity
(except the Company) under any circumstances.
For purposes of this Agreement, the term "Trade Secrets" means the whole or any
portion of any scientific or technical or other information, design, process,
procedure, formula, computer software product, documentation or improvement
relating to the Company's or its affiliates' businesses which (1) derives
economic value, actual or potential, from not being generally known to other
persons who can obtain economic value from its disclosure or use; and (2) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality. The term "Confidential Information" means any and
all data and information relating to the Company's or its affiliates' Business,
other than Trade Secrets, (1) which has value to the Company or its affiliates;
(2) is not generally known by its competitors or the public; and (3) is treated
as confidential by the Company
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or its affiliates. The provisions of this Section 6 will apply during Employee's
employment by the Company and for a two year period thereafter with respect to
Confidential Information, and during Employee's employment by the Company and at
any and all times thereafter with respect to Trade Secrets. These restrictions
will not apply to any Proprietary Information which is in the public domain,
provided that Employee was not responsible, directly or indirectly, for such
Proprietary Information entering the public domain without the Company's
consent. This Section 6, together with Sections 7, 8, 9, 10, 11 and 12 of this
Agreement, shall survive termination of this Agreement.
7.A. Non-Competition Covenant. During Employee's employment by the
Company and for a period of two years following any termination of Employee's
employment for whatever reason, Employee will not, directly or indirectly, on
Employee's own behalf or in the service of or on behalf of any other individual
or entity, compete with the Company within the Geographical Area (as defined).
The term "compete" means to engage in, have any equity or profit interest in,
make any loan to or for the benefit of, or render any services of any kind to,
directly or indirectly, on Employee's own behalf or in the service of or on
behalf of any other individual or entity, either as a proprietor, employee,
agent, independent contractor, consultant, director, officer, partner or
stockholder (other than a stockholder of a corporation listed on a national
securities exchange or whose stock is regularly traded in the over-the-counter
market, provided that Employee at no time owns, directly or indirectly, in
excess of one percent of the outstanding stock of any class of any such
corporation) any business which provides Business services. For purposes of this
Agreement, the term "Geographic Area" means the territory located within a
seventy-five mile radius of each facility for which Employee has management
responsibility during Employee's employment with the Company.
B. Non-Interference. During Employee's employment by the Company and
for a period of two years following the termination of Employee's employment for
whatever reason, Employee will not, directly or indirectly, on Employee's own
behalf or in the service of or on behalf of any other individual or entity,
interfere with, disrupt, or attempt to disrupt the past, present or prospective
relationships, contractual or otherwise, between the Company and any supplier,
consultant, or client of the Company with whom Employee had material contact
during Employee's employment by the Company. The term "prospective relationship"
is defined as any relationship where the Company has actively sought an
individual or entity as a prospective supplier, consultant, or client.
C. Non-Solicitation of Clients Covenant. Employee agrees that during
Employee's employment by the Company and for a period of two years following the
termination of Employee's employment for whatever reason, Employee will not,
directly or indirectly, on Employee's own behalf or in the service of or on
behalf of any other individual or entity, divert, solicit or attempt to solicit
or accept business from any individual or entity (i) who is a client of the
Company at any time during the six month period prior to Employee's termination
of employment with the Company ("Client"), or was actively sought by the Company
as a prospective client, and (ii) with whom Employee had material contact while
employed by the Company to provide Business services to such Clients or
prospects. Employee further agrees that during Employee's employment by the
Company and for a period of two years following the termination of Employee's
employment for
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whatever reason in accordance with this agreement, Employee will not, directly
or indirectly, as an employee, independent contractor, agent or in any other
capacity, be employed by any Client:
(i) which received Business services from Employee, or
with which Employee otherwise had material contact
while employed by the Company; or
(ii) which received Business services from any employee or
office of the Company over which Employee had
management responsibility;
in either case to provide, directly or indirectly, Business services.
D. Construction. The parties agree that any judicial authority
construing all or any portion of this Section 7 or Section 8 will be empowered
to sever any portion of the Geographical Area, client base, prospective
relationship or prospect list or any prohibited business activity from the
coverage of such Section and to apply the provisions of such Section to the
remaining portion of the Geographical Area, the client base or the prospective
relationship or prospect list, or the remaining business activities not so
severed by such judicial authority. In addition, it is the intent of the parties
that the judicial authority replace each such severed provision with a provision
as similar in terms to such severed provision as may be possible and be legal,
valid and enforceable. It is the intent of the parties that Sections 7 and 8 be
enforced to the maximum extent permitted by law. If any provision of either such
Section is determined not to be specifically enforceable, the Company shall
nevertheless be entitled to bring an action to seek to recover monetary damages
as a result of the breach of such provision by Employee.
8. Non-Solicitation of Employees Covenant. Employee agrees and
represents that during Employee's employment by the Company and for a period of
two years following any termination of Employee's employment for whatever
reason, Employee will not, directly or indirectly, on Employee's own behalf or
in the service of, or on behalf of any other individual or entity, divert,
solicit or hire away, or attempt to divert, solicit or hire away, to or for any
individual or entity which is engaged in providing Business services, any person
employed by the Company, whether or not such employee is a full-time employee or
temporary employee of the Company, whether or not such employee is employed
pursuant to a written agreement and whether or not such employee is employed for
a determined period or at will.
9. Existing Restrictive Covenants. Employee represents and warrants
that Employee's employment with the Company does not and will not breach any
agreement which Employee has with any former employer to keep in confidence
confidential information or not to compete with any such former employer.
Employee will not disclose to the Company or use on its behalf any confidential
information of any other party required to be kept confidential by Employee.
10. Return of Confidential Information. Employee acknowledges that as a
result of Employee's employment with the Company, Employee may come into the
possession and control of Proprietary Information, such as proprietary
documents, drawings, specifications, manuals, notes,
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computer programs, or other proprietary material. Employee acknowledges,
warrants and agrees that Employee will return to the Company all such items and
any copies or excerpts thereof, and any other properties, files or documents
obtained as a result of Employee's employment with the Company, immediately upon
the termination of Employee's employment with the Company.
11. Proprietary Rights. During the course of Employee's employment with
the Company, Employee may make, develop or conceive of useful processes,
machines, compositions of matter, computer software, algorithms, works of
authorship expressing any such algorithm, or any other discovery, idea, concept,
document or improvement which relates to or is useful to the Company's Business
(the "Inventions"), whether or not subject to copyright or patent protection,
and which may or may not be considered Proprietary Information. Employee
acknowledges that all such Inventions will be "works made for hire" under United
States copyright law and will remain the sole and exclusive property of the
Company. Employee assigns and agrees to assign to the Company, in perpetuity,
all right, title and interest Employee may have in and to such Inventions,
including without limitation, all copyrights, and the right to apply for any
form of patent, utility model, industrial design or similar proprietary right
recognized by any state, country or jurisdiction. Employee further agrees, at
the Company's request and expense, to do all things and sign all documents or
instruments necessary, in the opinion of the Company, to eliminate any ambiguity
as to the ownership of, and rights of the Company to, such Inventions, including
filing copyright and patent registrations and defending and enforcing in
litigation or otherwise all such rights.
Employee will not be obligated to assign to the Company any Invention
made by Employee while in the Company's employ which does not relate to any
business or activity in which the Company is or may reasonably be expected to
become engaged, except that Employee is so obligated if the same relates to or
is based on Proprietary Information to which Employee will have had access
during and by virtue of Employee's employment or which arises out of work
assigned to Employee by the Company. Employee will not be obligated to assign
any Invention which may be wholly conceived by Employee after Employee leaves
the employ of the Company, except that Employee is so obligated if such
Invention involves the utilization of Proprietary Information obtained while in
the employ of the Company. Employee is not obligated to assign any Invention
which relates to or would be useful in any business or activities in which the
Company is engaged if such Invention was conceived and reduced to practice by
Employee prior to Employee's employment with the Company, provided that all such
Inventions are listed at the time of employment on the attached Exhibit A.
12. Remedies. Employee agrees and acknowledges that the violation of
any of the covenants or agreements contained in Sections 6, 7, 8, 9, 10 and 11
of this Agreement would cause irreparable injury to the Company, that the remedy
at law for any such violation or threatened violation thereof would be
inadequate, and that the Company will be entitled, in addition to any other
remedy, to temporary and permanent injunctive or other equitable relief without
the necessity of proving actual damages.
13. Notices. Any notice or communication under this Agreement will be
in writing and
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sent by registered or certified mail addressed to the respective parties as
follows:
If to the Company: If to Employee:
1400 Xxxxxxxxx Tower 0000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000 Xxxxxxxxxx, XX 00000
Attn: General Counsel
14. Severability. Subject to the application of Section 7(D) to the
interpretation of Sections 7 and 8, if one or more of the provisions contained
in this Agreement is for any reason held to be invalid, illegal or unenforceable
in any respect, the same will not affect any other provision in this Agreement,
and this Agreement will be construed as if such invalid or illegal or
unenforceable provision had never been contained in this Agreement. It is the
intent of the parties that this Agreement be enforced to the maximum extent
permitted by law.
15. Entire Agreement. This Agreement embodies the entire agreement of
the parties relating to the subject matter of this Agreement and supersedes all
prior agreements, oral or written, regarding the subject matter of this
Agreement. No amendment or modification of this Agreement will be valid or
binding upon the parties unless made in writing and signed by the parties.
16. Binding Effect. This Agreement will be binding upon the parties and
their respective heirs, representatives, successors, transferees and permitted
assigns.
17. Assignment. This Agreement is one for personal services and will
not be assigned by Employee. The Company may assign this Agreement to any of its
subsidiaries or affiliated companies; provided that such subsidiary or affiliate
fulfills the obligations of the Company under this Agreement.
18. Governing Law. This Agreement is entered into and will be
interpreted and enforced pursuant to the laws of the Commonwealth of Kentucky.
The parties agree that the appropriate forum and venue for any disputes between
any of the parties arising out of this Agreement shall be any federal court in
the Commonwealth of Kentucky and each of the parties submits to the personal
jurisdiction of any such court. The foregoing shall not limit the rights of any
party to obtain execution of judgment in any other jurisdiction. The parties
further agree, to the extent permitted by law, that a final and unappealable
judgment against either of them in any action or proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified exemplified copy
of which shall be conclusive evidence of the fact and amount of such judgment.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY: EMPLOYEE:
HEALTHCARE RECOVERIES, INC.
/s/ XXXXX X. XxXXXXXX /s/ XXXXXXX X. XXXXXX
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XXXXX X. XxXXXXXX XXXXXXX X. XXXXXX
Chairman and Chief Executive Officer
Medaphis Corporation
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EXHIBIT A
INVENTIONS
Employee represents that there are no Inventions.
/s/ DRS
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Employee Initials
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AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") by and between
the undersigned employee and HEALTHCARE RECOVERIES, INC., a Delaware
corporation, is entered into effective as of May 28, 1997 and amends the
Employment Agreement between the parties dated May 28, 1997 (the "Employment
Agreement").
The parties agree as follows:
1. Section 4(a)(ii) of the Employment Agreement is deleted in its
entirety and the following is substituted:
"Employee commits any other act in bad faith materially
detrimental to the business or reputation of the Company."
2. The first two sentences of Section 5(c) of the Employment
Agreement are deleted in their entirety, and the following is
substituted:
"The Company shall issue to Employee under the Healthcare
Recoveries, Inc. Non-Qualified Stock Option Plan for Eligible
Employees options to purchase that number of shares of the
Company's common stock (at an exercise price equal to the
initial offering price) listed next to Employee's name as
follows:
Xxxxxxx X. XxXxxxxx 200,000
Xxxxxx X. Xxxxx 78,750
Xxxxxxx X. Xxxxxx 78,750
Xxxxx X. Xxxxxxx 65,000
Xxxxx X. Xxxxxx 65,000
These options shall have an effective grant date on the day
the Company's common stock first begins trading on the Nasdaq
National Market and shall vest over three years as follows:
one-third on each of the first three anniversaries of the
effective grant date."
3. Section 5(a) of the Employment Agreement is hereby amended by
deleting the last sentence and substituting the following for
such sentence:
"Such annual salary will be subject to annual percentage
increases for inflation equivalent to those increases given in
the normal course of business to employees of the Company,
pursuant to the Company's present policy or, as the case may
be, a future policy approved by the Board to apply
substantially on a Company-wide basis."
4. Section 5(b) of the Employment Agreement is deleted in its
entirety and the following is substituted:
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"Incentive Compensation. During the term of the Agreement,
Employee shall be entitled to incentive compensation payments
in accordance with the Management Group Incentive Compensation
Plan of Healthcare Recoveries, Inc. If Employee is terminated
by the Company without Cause, Employee shall be entitled to a
pro rata share of incentive compensation payments. A 'pro
rata' share of incentive compensation payments shall mean that
portion of the incentive compensation payments that would have
been paid to Employee had Employee not been terminated without
Cause, assuming Employee worked for the balance of the term
and performed consistently with Employee's past performance."
IN WITNESS WHEREOF, each party has executed this Amendment individually
or by its duly authorized representative.
HEALTHCARE RECOVERIES, INC.
By: /s/ XXXXXXX X. XXXXXXXX
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Xxxxxxx X. XxXxxxxx
Chairman and Chief Executive Officer
EMPLOYEE
/s/ XXXXXXX X. XXXXXX
---------------------------------------------
Printed Name: Xxxxxxx X. Xxxxxx
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