AGREEMENT OF TERMINATION OF EMPLOYMENT CONTRACT
AND FIRST AMENDMENT TO EMPLOYMENT CONTRACT
This Agreement of Termination ("Agreement") of the Employment Contract and First
Amendment to Employment Contract, by and between HealthAxis Inc. (f/k/a
Provident American Corporation), XxxxxxXxxx.xxx, Inc. and Xxxxx X. Xxxxxxx, is
dated as of the 15th day of August, 2000, by and between HealthAxis Inc. a
Pennsylvania corporation ("HAI"), XxxxxxXxxx.xxx, Inc. ("HealthAxis"), a
Pennsylvania corporation (hereinafter HAI and HealthAxis are sometimes
collectively the "Company") and Xxxxx X. Xxxxxxx, an individual ("Executive"),
residing at 000 Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxxxx 00000.
BACKGROUND
WHEREAS, Pursuant to an Employment Contract dated as of February 19, 1997, as
amended as of July 28, 1999, Executive has been serving as Chairman of the Board
of Directors of HAI and HealthAxis, and
WHEREAS, HAI, HealthAxis and Executive are desirous of terminating the
Employment Contract and reaching a full and final settlement of any and all
compensation due Executive under the terms and conditions of the Employment
Contract, as amended; and
WHEREAS, at a Meeting of the Board of Directors of HAI on August 9, 2000, the
Board of Directors and Executive reached an agreement stipulating the terms and
conditions of a settlement in consideration of the termination of the Employment
Contract, as amended, and the grant to the Company of a full release of
liability by and from Executive; and
WHEREAS, HealthAxis and Executive agree that the full release of liability of
HAI and HealthAxis and the non-competition and confidentiality restrictions are
in consideration of an offer of employment to Executive to serve as
non-executive Chairman on an "employment-at-will" basis with HealthAxis.
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and
undertakings contained in the Employment Contract and First Amendment to
Employment Contract ("Employment Agreements"), and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound hereby, the Company and Executive hereto agree as
follows:
I. Termination of Employment Agreements. Subject as provided in Section
XVII hereof, the Company and Executive agree to terminate in full the
Employment Agreements as of August 15, 2000. Such termination releases
HealthAxis from any and all liability under the terms and conditions of
the Employment Agreements, and releases HAI from all liability under
the terms and conditions of the Employment Agreements other than
payment of the Compensation under Section II herein.
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II. Compensation. Executive agrees to waive all compensation and benefits,
including but not limited to cash compensation for base salary, annual
bonus/incentive compensation, termination benefits, and employee
benefit plans, vacation, expenses (including Country Club dues) and
company-provided automobile, due him under the Employment Agreements,
and to accept in lieu thereof, notwithstanding anything contained to
the contrary in the Employment Agreements relating to severance
compensation or termination payments therein, as full, fair and final
compensation and consideration for the Termination of the Employment
Agreements the following:
(a) Compensation Amount. Subject to the limitations set forth in
subparagraph (b) and the Aggregate Share Limit set forth in
subparagraph (e) hereof, compensation in the amount of Two Million
One Hundred Twenty Five Thousand Dollars ($2,125,000) (the
"Severance Amount") shall be paid to Executive in equal
installments of One Hundred Six Thousand Two Hundred Fifty Dollars
($106,250) (the Installment Severance Amount") on a quarterly
basis with the first installment payable commencing on the first
15th day of the first full month following the earlier of (a)
effectiveness of the merger contemplated by the Amended and
Restated Agreement and Plan of Reorganization between HAI and
HealthAxis and (b) June 30, 2001. Such payments will continue for
an additional nineteen (19) quarters thereafter (collectively the
"Installment Period" and each such quarterly date hereinafter
referred to as a "Quarterly Payment Date"). Pursuant to section
II(e). hereof, this compensation amount is restricted by the
Aggregate Share Limit as defined in subparagraph (e) below.
(b) Form of Compensation. At the sole discretion of the Company, but
subject as provided in Section III(b), the compensation payable
under this Agreement may be made in the form of (i) shares of
common stock of HealthAxis Inc. ("stock"), or (ii) cash. In the
event the Company chooses to pay Executive in the form of shares
of common stock, then the number of shares to be paid and
delivered to Executive on any Quarterly Payment Date shall be
determined by dividing the $106,250 installment by the Average
Closing Price of the common stock of HealthAxis Inc. for the 20
consecutive trading days immediately preceding such Quarterly
Payment Date (the "Trading Period"); provided, however, that, in
the event the Average Closing Price for the Trading Period shall
be less than three dollars ($3.00) per share, then the Average
Share Price for purposes of calculating the number of shares
payable to Executive on such Quarterly Payment Date pursuant to
this subparagraph shall nevertheless be deemed to be three dollars
($3.00) and, accordingly, the maximum number of shares of stock
payable on any Quarterly Payment Date shall be 35,416.
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(c) Timing of Payment. Payments hereunder, whether in the form of
stock or cash shall be delivered to Executive within ten (10)
business days of the Quarterly Payment Date or the Election Date
as described in Section II(f) below.
(d) Payments. Shares of common stock deliverable hereunder shall be
made by delivery of a stock certificate issued in the name of
Executive and delivered to Executive at his then current residence
address via express mail. Payment of cash consideration shall be
in the form of check or wire transfer (at HAI's discretion) less
applicable federal, state and local taxes.
(e) Aggregate Share Limit. Notwithstanding anything in the foregoing
to the contrary, the maximum number of shares payable to Executive
hereunder shall be limited to Five Hundred Thousand (500,000) (the
"Aggregate Share Limit"). In the event the Company delivers (or is
deemed to deliver, as provided in subparagraph (III(b) below) to
Executive a number of shares of stock equal to the Aggregate Share
Limit, or the Company exercises its right to pre-pay Executive in
part or in full pursuant to subparagraph III(f)(2) below, then
Executive agrees that all compensation payable under Section II.a.
of this Agreement shall have been paid in full. In no event may
the sum of (i) the aggregate value of the shares delivered to
Executive (determined as provided in Section II(b) for each share
delivery), and (ii) the aggregate value of the Tax Payments made
pursuant to Section III(b) exceed the total Severance Amount.
(f) Pre-Payment Option. (1) During the first quarter of each calendar
year of the term of the Installment Period outlined in section
II(a) above, but no later than March 31st of each such quarter
(the "Election Date"), at the sole option of the Company, it may
elect and must inform Executive in writing of its intention to pay
Executive the Severance Amount due for the then current year,
either on the quarterly installment basis or as a single annual
installment for the entire calendar year, provided however, that
this option to prepay is subject to the Average Closing Price of
the common stock of HealthAxis Inc. for the 20 consecutive trading
days immediately preceding such Election Date being at or above
$4.25 per share. In the event the Company elects to prepay as a
single annual installment for the entire calendar year, the
Company shall pay such amount pursuant to Section II(c) above. (2)
Notwithstanding the provisions in II(f)(1) above, at any time
during the Installment Period, but subject to the $4.25 price
floor described in II(f)(1) above, the Company may elect to
discharge all (or such portion as may be discharged using the
balance of the shares remaining from the Aggregate Share Limit),
or any part greater than that required to be discharged as at that
Quarterly Payment Date, of its responsibilities under this
Agreement by pre-paying Executive all or such portion of the
outstanding Severance Amount herein using any such number of the
remaining shares within the Aggregate Share Limit valued at the
Average Closing Price for the Trading Period immediately prior to
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such election. [For example: if the remaining compensation due
Executive were $1,000,000, and the Average Closing Price of
HealthAxis Inc. common stock for any immediately preceding
consecutive 20 trading days was $10 per share, then subject to
share availability under the Aggregate Share Limit, the Company
could opt to pay off Executive by issuing 100,000 shares as full
and final payment of its obligations herein.] Nothing in this
Section shall limit the Executive's right to receive cash in lieu
of shares of stock as provided in section III(b) herein.
(g) Expense Reimbursement. Executive shall be reimbursed for all
reasonable, legitimate and documented business-related expenses
incurred by Executive through the date of this Agreement subject
to the approval of the President and CEO of HAI.
(h) Bankruptcy. In the event HAI files a case of voluntary or
involuntary bankruptcy, this obligation shall be treated as a cash
obligation.
III. TAXES.
(a) Executive shall be liable for all federal, state and local taxes
that are rightfully payable by Executive on all compensation
received hereunder.
(b) At and upon the election of Executive (to be made by written
notice to HAI not later than ten (10) business days prior to any
Quarterly Payment Date), HAI agrees to reduce the compensation
otherwise payable in the form of stock in accordance with section
II(b)(i) above by an amount equal to 33-1/3% of the value of such
stock and to pay such amount in cash (the "Tax Payment") to
Executive on the Quarterly Payment Date; provided, however, that,
for purposes of the Aggregate Share Limit, HAI shall be deemed to
have issued to Executive (in addition to the shares of stock
actually issued on such Quarterly Payment Date) a number of shares
of stock equal to the amount of the Tax Payment divided by the
applicable Average Closing Price. The Tax Payment is designed to
permit Executive to pay his federal, state and local taxes
associated with income to be recognized by Executive with respect
to payments made hereunder on each Quarterly Payment Date, which
Tax Payment the Company further agrees to forward to the
appropriate taxing authorities.
IV. RELEASE.
(a) Consideration. HealthAxis agrees to employ Executive on an
"at-will" basis as a non-executive Chairman compensated at an
annual salary rate of $100,000 per year, including standard
medical benefits, business-related expense reimbursement, and the
use of an office and secretary as further described in an offer
letter dated September 19, 2000 from HealthAxis to Executive.
Executive will also be entitled to be considered for an annual
bonus, as determined by HealthAxis' Board of Directors based on
criteria developed by it regarding Executive's contribution to the
business and profitability of HealthAxis. THIS EMPLOYMENT IS ON AN
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"AT-WILL" BASIS, FOR NO DEFINITE PERIOD OF TIME, AND THE
RECITATION OF THE COMPENSATION HEREIN DOES NOT CREATE AN
EMPLOYMENT CONTRACT BETWEEN HEALTHAXIS AND EXECUTIVE. EXECUTIVE
AGREES TO ACCEPT SUCH AN OFFER OF EMPLOYMENT IN EXCHANGE FOR THE
RELEASE OF LIABILITY GRANTED TO HEALTHAXIS AND HAI AS OUTLINED
BELOW. EXECUTIVE FURTHER UNDERSTANDS AND ACCEPTS THAT HIS
EXECUTION OF THIS AGREEMENT AND THE RELEASE OF LIABILITY INCLUDED
HEREIN IS A MATERIAL CONDITION FOR THE SUBSEQUENT EMPLOYMENT WITH
HEALTHAXIS AND FORMS A SEPARATE CONSIDERATION ABOVE AND BEYOND
THAT WHICH IS PAYABLE TO EXECUTIVE UNDER THE TERMS OF THE
EMPLOYMENT AGREEMENTS.
(b) Subject as provided in Section IV(e) hereof and as to the split
dollar, Executive for himself, and for his respective heirs,
executors, administrators, affiliates, successors and assigns (all
such entities and individuals hereinafter collectively referred to
as the "Releasing Parties"), hereby releases, acquits, and forever
discharges HAI and HealthAxis, jointly and severally, and their
former and present agents, directors, officers, stockholders,
employees, servants, affiliates, owners, subsidiaries, divisions,
successors, predecessors and assigns (all such entities and
individuals hereinafter collectively referred to as the "Released
Parties"), of and from any and all claims, actions, causes of
action, demands, rights, damages, debts, compensation, costs, or
other expenses, including without limitation attorneys' fees, of
any nature whatsoever, whether known or unknown, which Executive
ever had, now has, or which he, his heirs, executors,
administrators, successors and assigns hereafter can, shall or may
have against the Released Parties arising out of employment
agreements and any matter, cause, acts, conduct, claims or events
from the beginning of the world to the date hereof, pertaining to
or relating to the Executive's employment with HealthAxis Inc. and
XxxxxxXxxx.xxx, Inc. (with the exception of Executive's right to
enforce the payment of compensation hereunder), including but not
limited to, each and every claim, demand or cause of action which
Executive, ever had or now has arising out of Executive's
employment and employment agreements with the Released Parties,
any and all compensation, benefits (including but not limited to
medical, retirement & pension, termination benefits, business and
travel expense accounts (including country club and professional
dues, vacation and use of company-leased automobile or automobile
allowances), as an employee, officer, independent contractor or
consultant, or the cessation thereof, under any federal, state, or
local statute, rule, regulation or principle of common law,
including, but not limited to, any claims under Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C.ss.ss.2000e et
seq.; the Age Discrimination in Employment Act, as amended, 29
U.S.C.ss.ss.621 et seq.; the Americans with Disabilities Act, 42
U.S.C.ss.ss.12101 et seq.; the Employee Retirement Income Security
Act of 1974, as amended, 29 U.S.C.ss.ss.1001 et seq.; or under any
other federal state or local statute, rule or regulation or
principle of employment or contract law.
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(c) Executive understands and agrees that this release is the
compromise of all past, present and future doubtful and disputed
claims and does not constitute an admission of liability by the
RELEASED PARTIES under any federal, state or local statute,
regulation or principle of common law, any such liability being
expressly denied.
(d) RELEASING PARTIES EXPRESSLY FOREVER AND COMPLETELY WAIVE ANY
RIGHTS OR CLAIMS RELEASING PARTIES MAY HAVE UNDER LAW NOW OR IN
THE FUTURE TO ASSERT CLAIMS OR FILE ACTIONS OR DEMANDS AGAINST THE
COMPANY ALLEGING THAT THIS RELEASE IS INVALID OR UNENFORCEABLE FOR
FAILURE OF THE COMPANY TO PROVIDE ADDITIONAL CONSIDERATION ABOVE
AND BEYOND THAT WHICH IT IS REQUIRED TO PROVIDE UNDER THE TERMS OF
THE EMPLOYMENT AGREEMENTS. RELEASING PARTIES EXPRESSLY ACCEPT THE
CONSIDERATION GRANTED HEREIN AS FULL AND FINAL PAYMENT FOR THE
TERMINATION OF THE EMPLOYMENT AGREEMENTS AND THE ADDITIONAL
CONSIDERATION OF AN OFFER OF EMPLOYMENT ON AN AT-WILL BASIS AS THE
CONSIDERATION FOR THE RELEASE OF LIABILITY OF COMPANY PURSUANT TO
THE TERMS AND CONDITIONS OUTLINED HEREIN.
(e) This Release does not limit Executive's right to indemnification
as a Director or Officer either directly from the Company or
through its Directors & Officers Liability Insurance Policy for
damages arising out of Executive's service to the Company as a
Director or Officer, nor does it limit Executive's rights as a
shareholder or option holder, provided however that Executive
waives all rights as a shareholder to bring any claims, actions,
causes of action, demands, rights, damages, debts, compensation,
costs or expenses, which make reference to or are based in whole
or in part on Executive's employment with the Company, his
employment and compensation agreements or the termination of any
of such foregoing. Executive's rights as an option holder shall be
strictly limited to those necessary to enforce the terms and
conditions of any options granted to him. Finally, except for
HealthAxis, as to which the Release set forth herein shall be
effective immediately, the Release contained in this Section IV
shall be effective upon closing of the Merger Transaction referred
to and described in Section XVII.
V. ASSIGNMENT. This Agreement shall be assignable by either HAI or
HealthAxis to any person or entity acquiring all or substantially all
of the assets of either thereof.
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VI. SEVERABILITY OF PROVISIONS. If any of the provisions of this Agreement
or the application of any such provision shall for any reason be held
invalid by a court of competent jurisdiction, such invalidity shall not
affect or impair any other provision, it being the intention of the
parties that such other provisions shall be and remain in full force
and effect.
VII. BINDING EFFECT. This Agreement shall inure to the benefit of and shall
be binding upon HAI and HealthAxis, its and their respective successors
and assigns, and any corporation which may acquire all or substantially
all of the assets of either HAI or HealthAxis or into which the parties
may be consolidated or merged, and shall inure to the benefit of
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
Upon the Executive's death, all amounts to which he is entitled
hereunder, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee, or, if there be no such designee, to the
Executive's estate.
VIII. GOVERNING LAW/CONSENT TO JURISDICTION. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. The parties hereto agree to consent to the jurisdiction
and venue of the courts of the Commonwealth of Pennsylvania located in
Xxxxxxxxxx County, Pennsylvania, and of the United States District
Court for the Eastern District of Pennsylvania, and agree that all
disputes between the parties shall be litigated only therein.
IX. ENTIRE AGREEMENT. This Agreement and the Offer Letter of September 19,
2000, represents the entire agreement of the parties, and supersedes
all prior understandings and agreements between the parties relating to
the subject matter of the employment of Executive, including all
employment contracts and amendments thereto. This Agreement may not be
modified or amended except by an instrument in writing signed by all of
the parties hereto.
X. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the
parties hereto signing the same instrument, or by each party hereto
signing a separate counterpart or counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute
one and the same instrument. The parties agree that documents executed
by facsimile shall be acceptable in this transaction, and the
signatures thereof shall have the same force and effect as original
signatures.
XI. WAIVER. The failure of any party to insist in any one or more instance
upon the performance of any of the terms or conditions of this
Agreement shall not be construed as a waiver of future performance of
any such terms, convenants or conditions, but the obligations of either
party with respect thereto shall continue in full force and effect.
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XII. ACKNOWLEDGEMENT. Executive declares and represents that he has read and
fully understands the terms of this Agreement and the Release herein,
has had advice and assistance of counsel with respect thereto, and
knowingly and of his own free will, without any duress, being fully
informed and after due diligence, voluntarily accepts the terms of this
Agreement and Release and signs the same as his own free act for the
purpose of making full compromise, termination and settlement of all
contract and other claims.
XIII. REPRESENTATION. Each of HealthAxis and HAI represents and warrants that
it is entering into this Agreement with the approval of its respective
Board of Directors.
XIV. NON-COMPETITION. In consideration of HealthAxis' agreement to employ
Executive on an at-will basis as herein provided, Executive agrees that
for a period of twenty-four (24) months following his last day of
employment with HealthAxis, he shall not, within a geographic limit of
50 miles of any location of the Company, any of its affiliated
companies, or any agency, directly or indirectly own, manage, operate,
consult, join, control, invest in (other than as a holder of not in
excess of 5% of the outstanding voting shares of any publicly traded
company), be employed by, participate in the formation, ownership,
management, operation or control of, or be connected in any manner
with, any existing or proposed technology or e-commerce company that
directly competes with the business of HealthAxis. In the event
Executive is terminated without cause from employment with HealthAxis,
the terms and conditions of this section shall be null and void.
XV. NON-SOLICITATION AND CONFIDENTIALITY. Executive acknowledges that he
has and will acquire confidential information of a special and unique
nature and value relating to HealthAxis' intentions, plans, procedures,
confidential reports, financial resources, shareholders, investors, and
prospective clients and business. In this regard and in consideration
of HealthAxis' agreement to employ Executive on an at-will basis as
herein provided, Executive agrees that for a period of eighteen (18)
months from the date of this Agreement he will not :
1. persuade or attempt to persuade any customer of HealthAxis to
cease doing business with HealthAxis, or persuade or attempt to
persuade any potential customer not to become a customer of
HealthAxis; and
2. persuade or attempt to persuade any employee of HealthAxis to
leave the HealthAxis' employ, or to become employed by any person,
firm, or corporation other than HealthAxis; and
3. divulge to anyone (other than HealthAxis or any person employed or
designated in writing by HealthAxis), make any unauthorized use
of, or publish or use for their benefit or to HealthAxis'
detriment, any knowledge or information of any type whatsoever of
a confidential nature relating to the businesses of HealthAxis.
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In the event Executive is terminated without cause from employment with
HealthAxis, the terms and conditions of this section shall be null and
void.
XVI. PiggyBack Registration Rights. Each time that the Company proposes for
any reason to register under the Securities Act of 1933, as amended,
shares of its authorized but unissued Common Stock or shares held in
Treasury for its account or shares of its Common Stock held by or on
account of other stockholders (collectively "Registrable Securities"),
other than pursuant to a Registration Statement on Form S-4 or Form S-8
or similar or successor forms, the Company shall promptly give written
notice of such proposed registration to Executive of its intention to
so register such Registrable Securities, and, upon the written request
of Executive given within fifteen (15) days after delivery of any such
notice by the Company to include in such registration any or all of the
Executive's Shares so designated by him, the Company shall use its best
efforts to cause all such Executive's shares of Common Stock issued
pursuant to this Agreement to be included in such registration;
provided however, that if such registration would in the judgment of
the underwriter managing such offering (in the case of a firm
commitment underwriting) interfere with the successful marketing
(including pricing) of any Registrable Securities proposed to be
registered by the Company, then the number of Executive's shares to be
included in such registration may be reduced to such appropriate number
as would in the judgment of such managing underwriter (in the case of a
firm commitment underwriting), if applicable, be necessary in order to
make the registration practicable.
XVII. Condition. Except for the release of HealthAxis under Section IV hereof
(which shall be effective immediately upon the execution and delivery
of this Agreement by all parties hereto), this Agreement, and all
terms, conditions, rights, releases and obligations hereunder, shall
only be effective upon, and shall be conditioned upon, the closing of
the Merger Transaction provided for in the Agreement and the Plan of
Reorganization between HAI and HealthAxis, dated January 26, 2000, and
as amended thereafter, including amendments after the date hereof, or
any successor agreement providing for the merger of HAI with and into
HealthAxis (or the acquisition by HealthAxis of all or substantially
all of the stock or assets of HAI) (the "Merger Transaction"). In the
event the Merger Transaction does not close on or before June 30, 2001,
this Agreement (except for the release hereinabove described) shall be
null and void, ab initio, with no force or effect upon any of the
parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year above first written.
WITNESS: EXECUTIVE
/S/EVA XXXXX XXXXXX /S/ XXXXX X. XXXXXXX
--------------------------------- ---------------------------
EVA XXXXX XXXXXX XXXXX X. XXXXXXX
ATTEST: HEALTHAXIS INC.
/S/XXXXXXX X. XXXXXXXXX /S/XXXXXXX XXXXXX
--------------------------------- ---------------------------
XXXXXXX X. XXXXXXXXX, ASST. SEC'Y XXXXXXX XXXXXX, CEO & PRES.
ATTEST: XXXXXXXXXX.XXX, INC.
/S/XXXXXXX X. XXXXXXXXX /S/XXXXXXX XXXXXX
--------------------------------- ---------------------------
XXXXXXX X. XXXXXXXXX, SECRETARY XXXXXXX XXXXXX, CEO &PRES.
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