EMPLOYMENT AGREEMENT
EXHIBIT
10.2
This
EMPLOYMENT AGREEMENT (this “Agreement”)
is
made as of February 10, 2006 (“Agreement
Date”)
by and
between Basic Care Networks, Inc., a Delaware corporation (the “Company”),
and
Xxxxxx X. Xxxxxxxx (“Executive”),
with
reference to the following facts:
A. Basic
Care Networks, Inc., a Delaware corporation (the “Company”),
is a
health care management company that manages and operates a number of
multi-disciplinary medical clinics.
B. Executive
has extensive experience in the field of health care management.
C. The
Company contemplates filing a registration statement on Form S-1 in connection
with its firm commitment underwritten initial public offering (“IPO”), which the
Company anticipates will be declared effective in 2006 (the “Effective
Date”).
D. The
Company desires to employ Executive to perform the duties and responsibilities
described herein on the terms and conditions hereinafter set forth.
NOW,
THEREFORE, the parties agree as follows:
1. Employment.
The
Company hereby employs Executive and Executive hereby accepts such employment
upon the terms and conditions hereinafter set forth.
2. Duties.
Subject
to the terms and provisions of this Agreement, Executive is hereby employed
by
the Company as Chief Executive Officer of the Company. Executive shall have
full
responsibility and authority for such duties as customarily are associated
with
service as Chief Executive Officer of the Company at the direction of the Board
of Directors of the Company (the “Board”).
Executive shall faithfully and diligently perform such duties assigned to
Executive and shall report directly to the Board.
3. Scope
of Services.
Executive shall devote substantially all of his business time, attention,
energies, skills, learning and efforts to the Company’s business.
4. Term.
Subject
to prior termination of this Agreement as hereinafter provided, the term of
this
Agreement shall commence on the Effective Date and shall continue for three
(3)
years thereafter, unless earlier terminated as provided in this Agreement.
5. Compensation.
5.1 Salary.
Executive’s annual compensation (“Base
Compensation”)
under
this Agreement shall be $300,000 per year, prorated for any partial year,
commencing upon the Effective Date. The Base Compensation shall be payable
semi-monthly in arrears from the Effective Date in accordance with the ordinary
payroll procedures of the Company. Any increases in Base Compensation shall
be
in the sole and absolute discretion of the Board.
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5.2 Accrued
Compensation for Prior Services.
The
Company agrees that as compensation for prior services rendered by the Executive
from January 1, 2005 to the Agreement Date, and from the Agreement Date until
the Effective Date, the Executive shall be entitled to a salary at the rate
of
$240,000 per annum, prorated for any partial period, payable within 10 days
after the Closing of the IPO (on the Effective Date), or a sooner date agreed
in
writing by the parties; provided,
however
that the compensation provided under this Section 5.2 shall be due and payable
to the Executive only if the IPO shall have occurred during 2006 while the
Executive is employed by the Company.
5.3 Bonus.
Executive shall be entitled to participate in an executive bonus plan adopted
by
the board of directors, or an individual bonus, which shall provide for bonus
compensation of up to three (3) times Base Compensation based on the
Executive’s achievement of appropriate performance criteria to be determined by
the board of directors (or its compensation committee).
5.4 Expenses.
The
Company shall reimburse Executive for all reasonable business, office personnel,
Company-related entertainment and travel expenses actually incurred or paid
by
Executive in the performance of his services on behalf of the Company
(“Expenses”), in accordance with the Company’s expense reimbursement policy as
from time to time in effect. In the period prior to the Effective Date:
(a)
The
Company agrees to advance, against Expenses incurred by Executive prior to
the
Effective Date, an amount equal to $15,000 per month from December 1, 2004
through and until the earlier of (i) May 15, 2006 or (ii) the Effective Date.
(b)
If
the
IPO shall occur, and if total Expenses incurred by the Executive exceed the
aggregate amount advanced pursuant to Section 5.4(a) as of the Effective Date,
the Company shall, within 30 days after the Effective Date, reimburse the
Executive in the amount of such excess.
(c)
If
the
Effective Date shall occur, the if the aggregate amount advanced pursuant to
Section 5.4(a) are in excess of Expenses incurred by the Executive as of the
Effective Date, the Executive shall, promptly after the Effective Date, return
the amount of such excess to the Company.
5.5 Options.
The
Executive shall be eligible to participate in the Company’s 2005 Stock Incentive
Plan, and receive option grant(s) thereunder for the purchase common stock
of
the Company (“Options”
or
“Option”)
at the
discretion of the Board of Directors. The Executive shall receive an initial
Option, provided that the IPO shall have closed, for the purchase of a number
of
shares of Company common stock representing up to five percent (5%) of the
issued and outstanding common stock of the Company at an exercise price per
share equal to the per share price in the IPO. Options granted to the Executive
shall be controlled by the terms and conditions set forth in a Notice of Grant
and Stock Option Agreement approved by the Board of Directors (“Option
Agreement”).
6. Other
Rights and Benefits.
Executive shall receive all other rights and benefits, including health
insurance, life insurance, a car allowance, vacation time, sick pay and
retirement plan participation, as are made available to all other executives
of
the Company and its affiliates.
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7. Termination.
Executive’s employment may be terminated as follows:
7.1 Termination
for Death.
Executive’s employment shall terminate immediately upon Executive’s
death.
7.2 Termination
Upon Disability.
Executive’s employment shall terminate if Executive should become totally and
permanently disabled. For purposes of this Agreement, Executive shall be
considered “totally and permanently disabled” if Executive is treated as
permanently “disabled” under any permanent disability insurance policy
maintained by the Company and is entitled to full benefits payable under such
policy upon a total and permanent disability. In the event any such policy
is
either not in force or the benefits are not available under such policy, then
“total and permanent disability” shall mean the inability of Executive, as a
result of substance abuse, any mental, nervous or psychiatric disorder, or
physical condition, injury or illness to perform substantially all of his
current duties on a full-time basis for a period of six (6) consecutive months,
as determined by a licensed physician selected by the Board.
7.3 Termination
by Company for “Cause”.
The
Company may terminate this Agreement for “Cause” upon three days written notice
so long as the Company has given Executive written notice describing the Cause
pursuant to subsections (c) and/or (e) Executive has not cured such Cause within
a reasonable time, but no less than 14 days. For purposes of this Agreement,
“Cause” shall mean the existence or occurrence of any of the
following:
(a) Executive’s
conviction for or pleading of nolo contendre to any felony involving the Company
or moral turpitude.
(b) Executive’s
misappropriation of Company assets.
(c) Executive’s
willful violation of a Company policy or a directive of the Board previously
delivered to him in writing.
(d) Executive’s
breach of his obligations set forth in Sections 11, 12, or 13
below.
(e) Any
willful neglect or material breach of duty by Executive under this Agreement,
or
any failure by Executive to perform under this Agreement.
8. Change
in Control.
If this
Agreement is not assumed upon a Change in Control, Company shall pay Executive
the balance of all Base Compensation for the remainder of the term set forth
in
Section 4, less all appropriate federal and state income and employment taxes,
promptly upon such Change in Control. If the Executive’s employment is
terminated by Executive without Cause or terminated by the Company for Cause,
death or disability of Executive, Executive shall not be entitled to any
severance pay or other benefits, except as mandated by law. For purposes of
this
Agreement, a “Change
in Control” means
a
change in ownership or control of the Company after the effective date of the
IPO effected through the direct or indirect acquisition by any person or related
group of persons of securities possessing more than fifty percent (50%) of
the
total combined voting power of the Company’s outstanding securities pursuant to
a tender or exchange offer made directly to the Company’s stockholders which a
majority of the directors on the board of directors who are not affiliates
of
the offeror do not recommend such stockholders accept.
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9. Representations
and Warranties.
Executive hereby represents and warrants to Company that as of the date of
execution of this Agreement: (i) this Agreement will not cause or require
Executive to breach any obligation to, or agreement or confidence with, any
other person; (ii) Executive is not representing, or otherwise affiliated in
any
capacity with, any other lines of products, manufacturers, vendors or customers
of the Company; and (iii) Executive has not been induced to enter into this
Agreement by any promise or representation other than as expressly set forth
in
this Agreement.
10. Non-Solicitation.
10.1 Non-Solicitation
of Employees.
Executive agrees that he will not, while employed by the Company and for a
period of two (2) years following termination of such employment:
(a) directly
solicit, encourage, or take any other action which is intended to induce any
other employee of the Company to terminate his or her employment with the
Company; or
(b) directly
interfere in any manner with the contractual or employment relationship between
the Company and any such employee of the Company.
The
foregoing shall not prohibit Executive or any entity with which Executive may
later be affiliated from hiring a former or existing employee of the Company
or
any of its subsidiaries, provided that such hiring does not result from the
direct actions of Executive. For purposes of this Article 10, Article 11,
Article 12 and Article 13, any reference to the Company shall include all of
the
Company’s Affiliates. As used herein, “Affiliate” means any person or entity
controlling, controlled by or under common control with another person or
entity.
10.2 Non-Solicit
of Customers with respect to Competitive Business Activity.
Executive agrees that he will not, while employed by the Company and for a
period of two (2) years following termination of such employment, directly
or
indirectly, whether for his own account or for the account of any other
individual or entity, solicit the business or patronage of any customers of
the
Company with respect to products and/or services directly related to a
Competitive Business Activity. “Competitive
Business Activity”
shall
mean engaging in, whether independently or as an employee, agent, consultant,
advisor, independent contractor, partner, stockholder, officer, director or
otherwise, any business which is materially competitive with the business of
the
Company as conducted or actively planned to be conducted by the Company during
his employment by it, provided that Executive shall not be deemed to engage
in a
Competitive Business Activity solely by reason of (i) owning 1% or less of
the
outstanding common stock of any corporation if such class of common stock is
registered under Section 12 of the Securities Exchange Act of 1934, or (ii)
after the termination of his employment by the Company, being employed by or
otherwise providing services to a corporation having total revenue of at least
$500 million (or such lower number as may be agreed by the Board) so long as
such services are provided solely to a division or other business unit of such
corporation which does not engage in a business which is then competitive with
the business of the Company.
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11. Confidentiality.
Executive hereby acknowledges that the Company has made and will make available
to Executive certain customer lists, product design information, performance
standards and other confidential and/or proprietary information of the Company
or licensed to the Company, including without limitation trade secrets,
copyrighted materials and/or financial information of the Company (or any of
its
Affiliates), including without limitation, financial statements, reports and
data (collectively, the “Confidential
Material”);
however, Confidential Material does not include any of the foregoing items
which
has become publicly known or made generally available through no wrongful act
of
Executive or of others who were under confidentiality obligations as to the
item
or items involved. Except as essential to Executive’s obligations under this
Agreement, neither Executive nor any agent, employee, officer, or independent
contractor of or retained by Executive shall make any disclosure of this
Agreement, the terms of this Agreement, or any of the Confidential Material.
Except as essential to Executive’s obligations under this Agreement, neither
Executive nor any agent, employee, officer, or independent contractor of or
retained by Executive shall make any duplication or other copy of any of the
Confidential Material. Immediately upon request from the Company, Executive
shall return to the Company all Confidential Material. Executive shall notify
each person to whom any disclosure is made that such disclosure is made in
confidence, that the Confidential Material shall be kept in confidence by such
person. Nothing contained in this Section 11 shall be construed as preventing
Executive from providing Confidential Material in compliance with a valid court
order issued by a court of competent jurisdiction, providing Executive takes
reasonable steps to prevent dissemination of such Confidential
Material.
12. Proprietary
Information.
For
purposes of this Agreement, “Proprietary
Information”
shall
mean any information, observation, data, written material, record, document,
software, firmware, invention, discovery, improvement, development, tool,
machine, apparatus, appliance, design, promotional idea, customer list,
practice, process, formula, method, technique, trade secret, product and/or
research related to the actual or anticipated research, marketing strategies,
pricing information, business records, development, products, organization,
business or finances of the Company. Proprietary Information shall not include
information in the public domain as of execution of this Agreement except
through any act or omission of Executive. All right, title and interest of
every
kind and nature whatsoever in and to the Proprietary Information made,
discussed, developed, secured, obtained or learned by Executive during the
term
of this Agreement shall be the sole and exclusive property of the Company for
any purposes or uses whatsoever, and shall be disclosed promptly by Executive
to
the Company. The covenants set forth in the preceding sentence shall apply
regardless of whether any Proprietary Information is made, discovered,
developed, secured, obtained or learned (a) solely or jointly with others,
(b)
during the usual hours of work or otherwise, (c) at the request and upon the
suggestion of the Company or otherwise, or (d) with the Company’s materials,
tools, instruments or on the Company’s premises or otherwise. All Proprietary
Information developed, created, invented, devised, conceived or discovered
by
Executive that is subject to copyright protection is explicitly considered
by
Executive and the Company to be works made for hire to the extent permitted
by
law. Executive hereby forever fully releases and discharges the Company, and
the
Company and their respective officers, directors and employees, from and against
any and all claims, demands, damages, liabilities, costs and expenses of
Executive arising out of, or relating to, any Proprietary Information. Executive
shall execute any documents and take any action the Company may deem necessary
or appropriate to effectuate the provisions of this Agreement, including without
limitation assisting the Company in obtaining and/or maintaining patents,
copyrights or similar rights to any Proprietary Information assigned to the
Company, if the Company, in their sole discretion, requests such assistance.
Executive shall comply with any reasonable rules established from time to time
by the Company for the protection of the confidentiality of any Proprietary
Information. Executive irrevocably appoints the President of the Company to
act
as Executive’s agent and attorney-in-fact to perform all acts necessary to
obtain and/or maintain patents, copyrights and similar rights to any Proprietary
Information assigned by Executive to the Company under this Agreement if
(a) Executive refuses to perform those acts, or (b) is unavailable, within
the meaning of any applicable laws. Executive acknowledges that the grant of
the
foregoing power of attorney is coupled with an interest and shall survive the
death or disability of Executive. Executive shall promptly disclose to the
Company, in confidence (a) all Proprietary Information that Executive creates
during the term of this Agreement, and (b) all patent applications, copyright
registrations or similar rights filed or applied for by Executive within six
months after termination of this Agreement. Any application for a patent,
copyright registration or similar right filed by Executive within six months
after termination of this Agreement shall be presumed to relate to Proprietary
Information created by Executive during the term of this Agreement, unless
Executive can prove otherwise. Nothing contained in this Agreement shall be
construed to preclude the Company from exercising all of its rights and
privileges as sole and exclusive owner of all of the Proprietary Information
owned by or assigned to the Company under this Agreement. The Company, in
exercising such rights and privileges with respect to any particular item of
Proprietary Information, may decide not to file any patent application or any
copyright registration on such Proprietary Information, may decide to maintain
such Proprietary Information as secret and confidential, or may decide to
abandon such Proprietary Information or dedicate it to the public. Executive
shall have no authority to exercise any rights or privileges with respect to
the
Proprietary Information owned by or assigned to the Company under this
Agreement. This Agreement does not apply to any Proprietary Information that
qualifies fully under the provisions of California Labor Code Section 2870
or
any similar or successor statute.
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13. Business
Opportunities.
During
the term of this Agreement, if Executive (or any agent, employee, officer or
independent contractor of or retained by Executive) becomes aware of, or
develops, creates, invests, devises, conceives or discovers, any project,
investment, venture, business or other opportunity (any of the preceding, an
“Opportunity”)
that
is similar to, competitive with, related to or in the same field as the Company,
or any project, investment, venture, or business of the Company, then Executive
shall so notify the Company immediately in writing of such Opportunity and
shall
use Executive’s good-faith efforts to cause the Company to have the opportunity
to invest in, participate in or otherwise become affiliated with such
Opportunity.
14. Miscellaneous.
14.1 Section
Headings.
The
section headings or captions in this Agreement are for convenience of reference
only and do not form a part hereof, and do not in any way modify, interpret
or
construe the intent of the parties or affect any of the provisions of this
Agreement.
14.2 Survival.
The
obligations and rights imposed upon the parties hereto by the provisions of
this
Agreement which relate to acts or events subsequent to the termination of this
Agreement shall survive the termination of this Agreement and shall remain
fully
effective thereafter, including without limitation the obligations of Executive
with to any Confidential Material under Section 11.
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14.3 Arbitration.
(a) Any
claim, dispute or other controversy (a “Controversy”)
relating to this Agreement shall be settled and resolved by binding arbitration
in Los Angeles County, California before a single arbitrator under the
Employment Rules of the American Arbitration Association (“AAA”)
in
effect at the time a demand for arbitration is made. If there is any conflict
between the AAA rules and this arbitration clause, this arbitration clause
will
govern and determine the rights of the parties. The Parties to this Agreement
(the “Parties”)
shall
be entitled to full discovery regarding the Controversy as permitted by the
California Code of Civil Procedure. The arbitrator’s decision on the Controversy
shall be a final and binding determination of the Controversy and shall be
fully
enforceable as an arbitration award in any court having jurisdiction and venue
over the Parties. The arbitrator shall also award the prevailing Party any
reasonable attorneys’ fees and reasonable expenses the prevailing Party incurs
in connection with the arbitration, and the non-prevailing Party shall pay
the
arbitrator’s fees and expenses. The arbitrator shall determine who is the
prevailing Party. Each Party also agrees to accept service of process for all
arbitration proceedings in accordance with AAA’s rules.
(b) The
obligation to arbitrate shall not be binding upon either party with respect
to
requests for temporary restraining orders, preliminary injunctions or other
procedures in a court of competent jurisdiction to obtain interim relief when
deemed necessary by such court to preserve the status quo or prevent irreparable
injury pending resolution by arbitration of the actual dispute between the
Parties.
(c) The
provisions of this Section shall be construed as independent of any other
covenant or provision of this Agreement; provided that, if a court of competent
jurisdiction determines that any such provisions are unlawful in any way, such
court shall modify or interpret such provisions to the minimum extent necessary
to have them comply with the law.
(d) This
arbitration provision shall be deemed to be self-executing and shall remain
in
full force and effect after expiration or termination of this Agreement. In
the
event either party fails to appear at any properly noticed arbitration
proceeding, an award may be entered against such party by default or otherwise
notwithstanding said failure to appear.
14.4 Severability.
Should
any one or more of the provisions of this Agreement be determined to be illegal
or unenforceable in any relevant jurisdiction, then such illegal or
unenforceable provision shall be modified by the proper court, if possible,
but
only to the extent necessary to make such provision enforceable, and such
modified provision and all other provisions of this Agreement shall be given
effect separately from the provision or portion thereof determined to be illegal
or unenforceable and shall not be affected thereby; provided
that,
any such modification shall apply only with respect to the operation of this
Agreement in the particular jurisdiction in which such determination of
illegality or unenforceability is made.
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14.5 Waiver.
The
failure of either party to enforce any provision of this Agreement shall not
be
construed as a waiver of any such provision, nor prevent such party thereafter
from enforcing such provision or any other provision of this Agreement. The
rights granted both parties herein are cumulative and the election of one shall
not constitute a waiver of such party’s right to assert all other legal remedies
available under the circumstances.
14.6 Parties
in Interest.
Nothing
in this Agreement, except as expressly set forth herein, is intended to confer
any rights or remedies under or by reason of this Agreement on any persons
other
than the parties to this Agreement and the successors, assigns and affiliates
of
the Company, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third person to any party to this Agreement,
nor shall any provision give any third person any right of action over or
against any party to this Agreement.
14.7 Assignment.
The
rights and obligations under this Agreement shall be binding upon, and inure
to
the benefit of, the heirs, executors, successors and assigns of Executive and
the Company. Except as specifically provided in this Section 14, neither the
Company nor Executive may assign this Agreement or delegate their respective
responsibilities under this Agreement without the consent of the other party
hereto. Upon the sale, exchange or other transfer of substantially all of the
assets of the Company, the Company shall assign this Agreement to the transferee
of such assets. No assignment of this Agreement by the Company shall relieve
the
Company of, and the Company shall remain obligated to perform, its duties and
obligations under this Agreement, including, without limitation, payment of
the
Base Compensation set forth in Section 5, above.
14.8 Attorneys’
Fees.
In the
event of any Controversy, suit, action or arbitration to enforce any of the
terms or provisions of this Agreement, the prevailing party shall be entitled
to
its reasonable attorneys’ fees and costs. The foregoing entitlement shall also
include attorneys’ fees and costs of the prevailing party on any appeal of a
judgment and for any action to enforce a judgment.
14.9 Modification.
This
Agreement may be modified only by a contract in writing executed by the
party(ies) to this Agreement against whom enforcement of such modification
is
sought.
14.10 Prior
Understandings.
This
Agreement contains the entire agreement between the parties to this Agreement
with respect to the subject matter of this Agreement, is intended as a final
expression of such parties’ agreement with respect to such terms as are included
in this Agreement, is intended as a complete and exclusive statement of the
terms of such agreement, and supersedes all negotiations, stipulations,
understandings, agreements, representations and warranties, if any, with respect
to such subject matter, which precede or accompany the execution of this
Agreement.
14.11 Interpretation.
Whenever the context so requires in this Agreement, all words used in the
singular shall be construed to have been used in the plural (and vice versa),
each gender shall be construed to include any other genders, and the word
“person” shall be construed to include a natural person, a corporation, a firm,
a partnership, a joint venture, a trust, an estate or any other
entity.
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14.12 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
14.13 Applicable
Law.
This
Agreement and the rights and obligations of the parties hereunder shall be
construed under, and governed by, the laws of the State of California without
giving effect to conflict of laws provisions.
14.14 Drafting
Ambiguities.
Each
party to this Agreement has reviewed and revised this Agreement. Each party
to
this Agreement has had the opportunity to have such party’s legal counsel review
and revise this Agreement. The rule of construction that any ambiguities are
to
be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or of any amendments or exhibits to this
Agreement.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
above written.
THE
COMPANY:
BASIC
CARE NETWORKS, INC.,
a
Delaware corporation
By: /s/
Xxxxx Xxxxxxxx
Name: Xxxxx
Xxxxxxxx
Title: President
EXECUTIVE:
/s/
Xxxxxx Xxxxxxxx
Xxxxxx
Xxxxxxxx
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