CHRONIMED INC.
EXHIBIT 10.17
EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND XXXXX X. XXXXXXXXXXX
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made effective as of the first day of July 1, 2000,
entered into by and between CHRONIMED INC, a Minnesota corporation (the
"Company") and XXXXX X. XXXXXXXXXXX (the "Employee").
WHEREAS, the Company desires to employ the Employee as its Chief
Executive Officer (CEO) and President in accordance with the following terms,
conditions and provisions; and
WHEREAS, the Employee desires to perform such services for the Company,
all in accordance with the following terms, conditions and provisions;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. EMPLOYMENT AND DUTIES.
The Company hereby continues Employee's employment, and Employee hereby
accepts and agrees to serve the Company as the Company's CEO and President,
consistent with the job description for this position, and with duties subject
to review and modification from time to time at the direction of the Company's
Board of Directors (the "Board"). The Employee shall also function as Chairman
of the Board, subject to election by the Company's Board of Directors. The
Employee shall remain a member of the Company's Board of Directors, subject to
election by the shareholders of the Company. The Employee shall apply his best
efforts and devote substantially all of his time and attention to the Company's
affairs.
2. TERM.
The term of this Agreement and Employee's employment under this
Agreement shall commence on July 1, 2000, and shall continue thereafter for a
period of three years. Upon the expiration of the original term of this
Agreement, this Agreement shall automatically renew for successive two-year
terms, subject to termination as provided in Section 7.
3. COMPENSATION.
The Company shall compensate the Employee for his services at the
following salary, bonus, and benefits:
A. Base Salary
The Employee shall be paid a base salary of $295,000
per year, payable on the Company's normal payroll cycle. This
base salary is the minimum salary during the term of this
Agreement, and may be increased from time to time at the
discretion of the Board of Directors. Employee shall receive
an annual performance review, and, contingent upon
satisfactory review results, shall be eligible for increase of
such base salary at the direction of the Board of Directors.
B. Bonus.
The Employee shall continue to participate in a
Company Management Incentive Plan, as approved and amended by
the Board of Directors from time to time, and which is
designed to deliver an annual bonus consistent with current
levels established for this position by the Board of
Directors. Employee shall periodically meet with the Board of
Directors, to establish quantitative and qualitative
initiatives and objectives for the purpose of assessing the
amount of bonus to be paid to Employee at the end of the
associated bonus period. Target annual bonus for satisfactory
performance shall be 60% of base salary. Amount payable to be
determined by Board based on Company and personal performance
criteria established by the Board. Bonus payable may range
from 0% to 150% of target amount (i.e., maximum bonus shall be
90% of base salary), depending on actual performance.
C. Stock Options.
The Employee shall be eligible to participate in the
annual grant of the Company's Stock Option Plan, consistent
with its terms and conditions, and with amounts of options,
including exercise price and vesting provisions determined by
the Board of Directors from time to time. Provisions under
this item 3C, stock options, are also subject to the
provisions found in Section 7, under termination of Agreement.
D. Employee Benefits Plans.
The Employee shall be entitled to participate in any
and all Company employee benefit plans, in accordance with the
eligibility requirements and other terms and provisions of
such plan or plans.
E. Insurance.
The Employee agrees that the Company, at the
discretion of its Board of Directors, may apply for and
procure on its own behalf, life insurance on the life of the
Employee, for the purpose of protecting the Company against
loss caused by the death of the Employee (commonly referred to
as "Key" insurance). Employee agrees to cooperate and submit
to medical examination, and to execute or deliver any
documentation reasonably required by the Company's insurer in
order to effectuate such insurance.
4. VACATION AND TIME OFF.
The Employee shall be entitled to four weeks of paid vacation in each
year of employment under the terms of this Agreement, without reduction of
salary. Unused vacation time may be carried over to future years of employment,
consistent with Company policy affecting use of employee vacation time. In
addition, Employee shall be entitled to such additional time off from work,
without loss of compensation, for attendance at professional meetings,
conventions, approved "other business activities", as per Section 10, and
educational courses in accordance with the Company's general policies in this
regard, and as from time to time determined by its Board of Directors.
5. EXPENSES.
The Company will reimburse Employee for reasonable expenses incurred by
the Employee in connection with the business of the Company, according to
policies promulgated from time to time by the Board of Directors, and upon
presentation by Employee of appropriate substantiation for such expenses.
Further, the Company will allow Employee to travel business class, by air, and
reimburse Employee's monthly dues for country club or private club membership.
Also, the Company will provide reimbursement for tax/financial planning
assistance and preparation, up to $2,500 per year, as well as supplemental
medical examinations.
A. Automobile Allowance.
During the term of this Agreement, Employee shall
receive an automobile allowance of $800.00 per month.
6. DISABILITY.
Not withstanding any other provision of this Agreement, if employee is
totally disabled, as defined below, for an aggregate of 180 calendar days in any
one calendar year of employment, the company shall not be obligated to pay
employee the compensation provided in this contract for any period of total
disability during such year in excess of 120 days. In such event, Employee's
salary under Section 3 shall be prorated for such year of employment in the same
manner as if this Agreement had been terminated at the end of such 120th day.
The Company agrees that, while on disability leave of absence, and for
the duration of such disability, Employee may continue to receive Employer's
group insurance plan coverage by compliance with the provisions of the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"), until the end of such
disability leave, or upon attainment of the age of 65, whichever is earlier.
For purposes of this Agreement, Employee shall be considered to be
totally disabled when he is considered to be as such by any insurance company
used by the Company to provide disability benefits for the Employee, and
Employee shall continue to be considered totally disabled until such insurance
company ceases to recognize him as totally disabled for purposes of disability
benefits. If no such disability policies are in effect for the benefit of the
Employee or for any reason an insurance company fails to make a determination of
the question of whether Employee is totally disabled, Employee shall be
considered to be totally disabled if, because of mental or physical illness or
other cause, he is unable to perform the majority of his usual duties on behalf
of the Company. The existence of a total disability of the Employee, the date it
commenced, and the date it ceases, shall be determined by the Board of Directors
and the Employee, under these circumstances. If the parties cannot agree on the
foregoing questions of disability, then any such determination shall be made
after examination of Employee by medical doctor selected by the Board of
Directors, and a medical doctor selected by the Employee. If the medical doctor
so selected cannot agree on the foregoing questions of disability, a third
medical doctor shall be selected by the two and the opinion of a majority of all
three shall be binding.
7. TERMINATION.
This Agreement shall terminate upon the occurrence of any of the
following:
A. Mutual agreement, in writing, of the parties to terminate;
B. Employee's death. Under circumstance of Employee's death,
Company agrees to make termination payments to Employee's designated
beneficiaries, in the amount of one year of base salary, and annual
bonus payment for bonus payable in the fiscal year in which Employee's
death occurred. Additionally, any unexercised, vested stock options
which were available to Employee immediately prior to date of death
shall be exercisable by beneficiaries in accordance with the Company's
stock option plan. In addition, Employee's designated beneficiaries
may, at their option, continue to pay and to receive insurance coverage
under the COBRA provisions, and beyond, for a period of up to two years
following death, or upon attainment of age 65 of beneficiary, whichever
is earlier.
C. Upon the expiration of the initial or any renewal term of
this Agreement, following 90 days of written notice prior to the date
of renewal by one party to the other indicating the party's intention
not to renew;
D. At the Company's option, if Employee shall be totally
disabled, as defined above for a continuous period in excess of nine
months. The Company's option to terminate in such event shall be
exercised upon at least 30 days written notice to Employee;
E. Termination by the Company for cause.
For purposes of this provision of this Agreement, cause shall
be defined as:
1. Willful failure of the Employee to
substantially perform any duties reasonably
required by the Company that are consistent
with Employees position (except as a result
of any disabling injury for which Employee
has been receiving benefits under a short
term or long term disability program),and
which is not remedied promptly by Employee
after receipt of notice thereof by the
Company; or
2. A. The commission by Employee of any act of
fraud or dishonesty which has a direct,
substantial and adverse affect on the
company, and which is related to or in
connection with his Employment by the
company; or
B. The commission by Employee of any
criminal act which is punishable by a
sentence exceeding 90 days.
3. Employee materially breaches Employee's
other covenants contained in this Agreement.
F. Change of employment or termination without cause by the
Company.
A Change in Employment shall be deemed to have occurred if,
without Employee's consent,
1. Employee's position, duties, or title are
materially and adversely changed without
cause: or
2. Employee's salary or benefits are reduced
without cause, or
3. The location of performance of most of
Employee's duties is moved from the general
geographic location in which Employee
performed such duties prior to the move.
The effective date of a change in employment shall be the date
Employee elects, by written notice to the Company, to treat such action
as termination due to change in employment, provided it occurs within
90 days of the date Employee is notified of the change in employment.
Failure to treat a particular change in employment as a termination of
employment shall not preclude Employee from treating a subsequent
change of employment as a termination of employment.
G. Termination by Employee with Good Reason.
Good reason includes any of the following:
1. Assignment of duties by the Company
inconsistent with Employee's position;
2. Other action by the Company that results in
the diminution of Employee's position,
authority, duties or responsibilities;
3. Breach of Employee's employment agreement by
the Company (including, but not limited to
reduction in Employee's salary, bonus,
long-term compensation, retirement benefits
or welfare benefits);
4. Requirement that Employee maintain his home
or principal place of business outside the
Minneapolis/St. Xxxx metropolitan area;
5. Requirement that Employee travel on business
to a substantially greater extent than he
has in the past twelve (12) months;
6. Failure to assign the employment agreement
to a successor employer.
H. Termination Payments.
In the event Employee's employment with the Company is
terminated without cause, or a change in employment occurs and Employee
elects to treat the change in employment as a termination of employment
and so notifies the Company of such election within 90 days following
the change of employment (with a date of notice to be deemed the
effective date of termination) or the geographic location changes as
defined above, or upon non-renewal of this agreement by the Company, or
upon termination by Employee with good reason, as defined above, then:
(a) Employee shall receive regular pay through date
of termination, including pro-rated bonus earned for
the partial year, if any.
(b) Employee shall receive payment equal to
twenty-four (24) months of Employee's then current
annualized salary; payable monthly, plus the average
of any bonus or incentive compensation paid or
payable for the most recent two full years payable
monthly; and all unvested stock options held by
Employee shall immediately vest.
(c) Employee shall be entitled to continue
participation in the healthcare coverage, life
insurance and general employee benefit plans of the
Company. The Company shall for two years following
the effective date of the termination under this
Section 7H, or until Employee becomes eligible for
such insurance coverages with another employer,
continue to provide such coverage for Employee and
his dependents to the same extent and cost the
Company is then providing for other employees with
comparable coverage during this two year period.
(d) Termination by Company Without Cause or by
Employee With Good Reason - Within Two Years After a
Change in Control.
For purposes of this provision, a change in control
will be defined as follows:
(1.) When any "person" as defined in Section
3(a)(9) of the Securities Exchange Act as
used in sections 13(d) and 14(d) thereof,
including a "group" as defined in Section
13(d) of the Securities Exchange Act, but
excluding the Company or any subsidiary or
parent or any employee benefit plan
sponsored or maintained by the Company or
any subsidiary or parent (including any
trustee of such plan acting as trustee),
directly or indirectly, becomes the
"beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act, as
amended from time to time), of securities of
the Company representing greater than 50
(fifty) percent of the combined voting power
of the Company's then outstanding
securities; or
(2) When, subsequent to the effective date
of this agreement, the individuals who, at
the beginning of such period, constitute the
Board ("Incumbent Directors") cease for any
reason other than death to constitute at
least a majority thereof; provided however
that a Director who was not a Director at
the beginning of this period will be deemed
to have satisfied the definition of
"Incumbent Director" if such Director was
elected by, or with the approval of at least
60% (sixty percent) of the Directors who
then qualified as Incumbent Directors; or
(3) The approval by the shareholders of any
sale, lease, exchange or other transfer (in
one transaction or a series of related
transactions) of all or substantially all of
the assets of the Company or the adoption of
any plan or proposal for the liquidation or
dissolution of the Company.
If during a two year period subsequent to a change in
control, Employee is terminated without cause, or Employee
terminates for good reason, the then controlling Company
agrees to pay Employee regular pay through the date of
termination, including pro-rated bonus for partial year; base
salary equal to 36 months of Employee's then current
annualized salary; sum of the annual bonus compensation paid
for preceding three full years or three times the target bonus
for the year of termination, whichever is greater; vesting of
all outstanding stock options; and continued participation in
medical, dental, life and disability insurance benefits at
same premium cost in effect for active employees for two
years.
(e) Termination by Company with Cause.
Upon termination of the Employee by the Company with
cause, regular pay will continue through the date of
termination, including pro-rated bonus for the
partial year.
(f) Termination by Employee Without Good reason.
Upon termination of the Employee by the Company with
cause, regular pay will continue through the date of
termination, including pro-rated bonus for the
partial year.
8. PAYMENT OF "PARACHUTE" TAX.
Company agrees to pay an amount sufficient to restore the full amount
payable under the other terms of the employment agreement, after application of
excise tax on excess Parachute payments within the meaning of Code Section
280(g), including the excise tax, penalities and interest.
9. OUTPLACEMENT ASSISTANCE.
Upon termination of employment without cause, with good reason by
employee, or change-in-control, the Company will pay for outplacement assistance
to assist Employee in job transition process. The Company will select the
service provider to be used for this purpose.
10. PAYMENT OF LEGAL FEES.
Subject to a total expenditure of up to $10,000 maximum, the Company
agrees to pay all reasonable legal fees incurred by Employee in connection with
the drafting and negotiation of Employee's employment agreement and any
amendments thereto. Subject to the same maximum mentioned above, the Company
will also pay for reasonable legal fees incurred by Employee in connection with
any claim or dispute regarding Employees employment agreement, as amended from
time to time; providing however, that before he retains counsel in connection
with such a claim or dispute, he notifies the Company of any alleged failure to
abide by the terms of the employment agreement, and, to the extent the matter
can be cured, provides the Company with a reasonable opportunity to cure.
11. COVENANT NOT TO COMPETE.
Employee hereby covenants and agrees that during the initial and any
renewal term of this Agreement, and for a period of one year following the
termination of this Agreement, Employee shall not be engaged within the United
States, either directly or indirectly, in any matter or capacity, whether as an
advisor, principal, agent, partner, officer, director, employee, member of an
association, or otherwise, in any business or activity, or own beneficially or
of record, five percent or more of the outstanding stock of any class of equity
securities in any corporation in competition with the business then being
conducted by the Company. If Employee should breach the foregoing covenant, the
Company will cease making payments described in the previous section regarding
Termination of Agreement, and any associated payments contained therein; and
remaining unexercised stock options shall immediately be cancelled and benefit
plan provisions described in the Termination Section 7 shall be immediately
discontinued.
Additionally, at the option of the Board of Directors, the Company may
choose to extend the covenant not to compete set forth herein for a period of up
to an additional twelve months, beyond the initial twelve month period already
stipulated herein. In consideration for such election, the Company agrees to
make payment to the Employee the annualized salary and bonus equal to that in
effect during the fiscal year at the time of termination.
During this additional period of extension and payment, Employee agrees
not to solicit, directly or indirectly, any current employee of the Company for
employment or engagement in any capacity outside of the Company, its
subsidiaries or affiliates.
12. CONFIDENTIALITY.
Employee will, in the course of his employment with the Company have
access to confidential and proprietary data or information belonging to the
Company. Employee will not at any time divulge or communicate to any person
(other than to a person bound by confidentiality obligations to the Company
similar to those contained in this Agreement) or use to the detriment of the
Company, or for the benefit of any other person such data or information. The
provisions of this section shall survive Employee's employment hereunder
regardless of the cause of termination of employment or this Agreement. The
phase "confidential or proprietary data or information" shall mean information
not generally available to the public, including, but not limited to, personnel
information, financial information, customer lists, supplier lists, trade
secrets, secret processes, computer data and programs, pricing, marketing and
advertising data. Employee acknowledges and agrees that any confidential or
proprietary information that Employee has already acquired was in fact received
in confidence in Employees fiduciary capacity with respect to the Company.
All written materials, records and documents made by Employer or coming
into Employee's possession during the term of employment concerning any product,
processes, information or services used, developed, investigated or considered
by the Company, or otherwise concerning the business or affairs of the Company,
shall be the sole property of the Company and upon termination of Employee's
employment for any reason, or upon request of the Board of Directors during
Employee's employment, Employee shall promptly deliver the same to the Company.
In addition, upon termination of Employee's employment for any reason, or upon
request of the Board of Directors during Employee's employment, Employee shall
deliver to the Company all of the property of the Company in Employee's
possession or under Employee's control, including, but not limited to, financial
statements, marketing and sales data, computers, and Company credit cards.
13. OTHER BUSINESS ACTIVITIES.
Employee shall not serve as an officer of another company, whether for
compensation or otherwise, requiring more than nominal duties by the Employee,
during the term of this contract without the express prior written consent of
the Company's Board of Directors. Employee may not serve as a Director of any
other organizations without express prior written approval by the Company's
Board of Directors, such approval not to be unreasonably withheld.
14. INVENTIONS AND PATENTS.
Employee agrees to assign all rights, ownership and related privileges
and benefits associated with inventions and patents to the Company. Employee
agrees that any inventions or patents obtained in association with ideas or
concepts initiated by Employee related to the Company's business are deemed to
be Company property. This includes but is not limited to product ideas, changes
or improvements; process ideas, changes or improvements; pertinent intellectual
property, or other pertinent information.
15. ARBITRATION/DISPUTE RESOLUTION.
The Company and the Employee agree that as a first option prior to any
legal action arising out of the dispute over provisions in this agreement,
parties may seek arbitration, and submit to authority of binding arbitration.
16. COOPERATION IN CLAIMS.
Both during employment and post employment, Employee agrees that in the
event of a legal action against the Company, or legal action initiated by the
Company against another party, in which Employee is deemed by the Company to be
a material witness or affiant, Employee agrees to make reasonable and best
efforts to cooperate with the Company in such matters. If Employee is no longer
employed, Company will reimburse Employee for time and expenses incurred as a
result of cooperation for this purpose.
17. INDEMNIFICATION.
The Company agrees to make its best efforts to indemnify and hold
harmless the Employee from liability incurred as a result of performance of
duties as an Officer and member of the Board of Directors. This includes but is
not limited to applicable statute, as well as efforts to secure coverage under
pertinent insurance policies.
18. NOTICES.
All notices, requests, demands and other communications provided for by
this Contract shall be in writing and shall be deemed to have been given when
mailed at any general or branch United States Post Office enclosed in a
certified postpaid envelope, return receipt requested, and addressed to the
address of the respective party stated below or to such changed address as the
party may have fixed by notice:
If to the Employee:
Xxxxx X. Xxxxxxxxxxx
000 Xxxx Xxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
If to the Company:
Chairman of The Board of Directors
Chronimed Inc.
00000 Xxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Any notice of change of address shall only be effective, however, when
received.
19. SUCCESSORS AND ASSIGNS.
This Contract shall inure to the benefit of, and be binding upon, the
Company, its successors and assigns, including, without limitation, any
corporation which may acquire all or substantially all of the Company's assets
and business or into which the Company may be consolidated or merged, and the
Employee, his heirs, executors, administrators and legal representatives. The
Employee may assign his right to payment, and his obligations, under this
Contract.
20. APPLICABLE LAW.
This Contract shall be governed by the laws of the State of Minnesota.
21. OTHER AGREEMENTS
This Contract supersedes all prior understandings and agreements
between the parties. It may not be amended orally, but only by a writing signed
by the parties hereto.
22. NON-WAIVER.
No delay or failure by either party in exercising any right under this
Contract, and no partial or single exercise of that right, shall constitute a
waiver of that or any other right.
23. HEADINGS.
Headings in this Contract are for convenience only and shall not be
used to interpret or construe its provisions.
24. COUNTERPARTS.
This Contract may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
CHRONIMED INC.
By /s/ Xxxxx X. Xxxxxxxxxxx
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Its Vice President Human Resources
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AND /s/ Xxxxxxx X. Xxxxx
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Its Chairman, Compensation Committee
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EMPLOYEE
/s/ Xxxxx X. Xxxxxxxxxxx
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Xxxxx X. Xxxxxxxxxxx
