Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of July
1, 1998 by and between NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION, a Nevada
corporation (the Company"), and XXXXX XXXXX, SR., a resident of the State of
Florida ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the provision of medical billing
services to the public; and
WHEREAS, Employee warrants that he is the owner and operator of a medical
billing business with its principal business office being located at 0000 X.X.
00xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 and desires to continue to remain
active in the medical billing business by rendering services to the Company on
the terms and conditions set out in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises in this Agreement
and the payments to be made or received by each party, the Company and Employee
agree as follows:
ARTICLE I. DEFINITIONS
Capitalized terms used in the Agreement shall have their defined meaning
throughout the Agreement. The following terms shall have the meanings set forth
below, unless the context clearly requires otherwise.
1.1 Commencement Date means July 1, 1998.
1.2 Confidential Information means information that; is proprietary to the
Company or proprietary to others and entrusted to the Company, to the
extent such information is a trade secret under applicable law.
1.3 Full-Time means 5 days per week for 46 weeks per year.
1.4 DELETED
1.5 Territory means the geographical area with the boundaries of the
Counties of Dade, Broward, Monroe, Xxxxxxx and Palm Beach in the State
of Florida.
ARTICLE II. EMPLOYMENT, DUTIES AND TERM
2.1 Employment. Upon the terms and conditions set forth in this Agreement,
the
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Company hereby employs Employee, and Employee accepts such employment
by the Company.
2.2 Services and Duties.
(a) During the term of this Agreement, and excluding any periods of
personal time to which Employee is entitled, Employee agrees to
devote his best efforts and attention during normal business
hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to
Employee hereunder, to use Employee's best efforts to perform
faithfully and efficiently such responsibilities, to abide by the
policies and procedures of the Company and to accept no other
gainful employment without the consent of the Company. Employee
will work Full-Time as a staff employee of the Company, the
duties and responsibilities of which are set forth in Exhibit "A"
attached hereto.
(b) All monies paid to or received by Employee for teaching,
research, honoraria, writing and. the like, shall be income to
and the property of Employee;
(c) Employee shall perform the services required hereunder
principally at 0000 X.X. 00xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx
and at such other locations as the Company shall reasonably
direct.
2.3 DELETED
2.4 Certain Proprietary Information. If Employee possesses any proprietary
information of another person or entity as a result of prior
employment or relationship, Employee shall honor any legal obligation
that Employee has with that person or entity with respect to such
proprietary information.
2.5 Term. The employment pursuant to this Agreement shall begin on the
Commencement Date and shall end on the day immediately prior to the
fifth anniversary of the Commencement Date year, unless sooner
terminated as set forth in Article IV hereof.
At the expiration of the initial five-year term of this Agreement,
Employee shall have the option (the exercise of-which must be given in
writing at least 180 days prior to the end of the initial term) to
renew this Agreement for two (2) additional five-year period upon the
same terms and conditions as set forth in this Agreement.
In the event that Employee should remain employed with the Company
beyond the term of this Agreement and no new employment agreement has
been executed: (a) Employee shall be deemed an employee at will, and
his employment may then be terminated upon ninety (90) days written
notice by either party, and (b) all terms
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and conditions of this Agreement shall continue to apply.
2.7 Corporate Development. The development area shall be the Territory.
The Company and Employee will work to develop a medical billing
network in the Territory, with the Company providing capital and
necessary administrative and marketing support, subject to the
Company's historic and current investment and development models.
Employee's responsibilities would include, but not be limited to,
organizing interested parties who may participate in the network,
training of such parties, and providing administrative services to
manage the network. All the foregoing services of Employee are covered
in his compensation under this Agreement.
If the Company acquires the assets of any other medical billing
business in the "Territory" (as defined in Section 1.5), Employee
shall have the option (to be exercised within thirty (30) days after
notice of the acquisition by the Company) to have the net income of
the business included in Net Income for purposes of Article III
hereof, in which case the purchase price of the acquired business will
be amortized as a expense over an 18-year period in the computation of
Net Income.
ARTICLE III. COMPENSATION, BENEFITS AND EXPENSES
3.1 Compensation. During the term of Employee's employment by the Company,
Employee shall be entitled to compensation in consideration of his
services hereunder equal to: SIXTY PERCENT (60%) of the "Net Income"
(as hereinafter defined) of the Company attributable to services
rendered at 0000 X.X. 00xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000
(the "Business"), less any compensation paid by the Company to Xxxxx
Xxxxx, Jr. and Xxxxxxx Xxxxx, consistent with the example of the
compensation pool described in Exhibit "B" attached hereto. The
Company shall pay Employee an advance or draw, against anticipated
compensation due hereunder, in the sum of $120,000 per annum, payable
semi-monthly in accordance with the Company's customary payroll
practices. This advance or draw is not additional or guaranteed
compensation, and shall be reconciled on the first anniversary date of
this Agreement and thereafter on a quarterly basis against the actual
compensation due under this Agreement.
3.2 Net Income. "Net Income" shall be computed in accordance with
generally accepted principles using the accrual method of accounting
and shall be equal to net revenues for the period in question,
initially commencing on the Commencement Date, less: (a) all direct
operating expenses of the Company for the period in question,
including but not limited to, all employees' salaries, compensation
and benefits (other than to the Employee, Xxxxx Xxxxx, Jr. and Xxxxxxx
Xxxxx), rent, office and supplies, payroll taxes, health insurance,
general
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liability insurance, telephones, computers, repairs and maintenance,
equipment rental and leases; (b) depreciation and amortization over a
5-year period of leasehold improvements, equipment, other fixed assets
and intangibles purchased after the Commencement Date; (c) interest
costs associated with the acquisition of fixed assets and intangibles
for the Business after the Commencement Date; and (d) an allowance of
four percent (4%) of net revenues for corporate overhead/management
services. For purposes Of this Agreement, the term "net revenues"
shall mean gross revenues, minus contractual adjustments and
uncollectible accounts, computed on an accrual basis in accordance
with generally accepted accounting principles consistently applied.
3.3 Personal Time. Employee shall be entitled during the term of this
Agreement to absent himself voluntarily or due to actual illness from
the performance of his employment under this Agreement, all such
voluntary absences to count as personal time, provided that:
(a) Such personal time shall not exceed six (6) work weeks (30
working days) during each calendar year(prorated for any partial
calendar year) during the period Employee is employed full-time
hereunder.
(b) The timing of personal time shall be scheduled in a reasonable
manner that is consistent with the best interest of the Company.
(c) In addition to the aforesaid personal time, Employee shall be
entitled to the following holidays: New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
In addition, Employee shall be entitled to take as holidays any
additional days that the Company is closed for a holiday.
(d) Employee shall not be entitled to receive any additional
compensation from the Company (or to receive any additional
compensation upon termination or expiration of employment) on
account of his failure to take personal time. Unused personal
time during a calendar year may not be used in a subsequent
calendar year.
Vacation time, educational and sick leave (other than for educational
activities the cost of which is reimbursed under Section 3.6 hereof)
shall be deemed personal time, and shall be subject to the provision
of this Section 3.3. Business-related travel away from the office, for
which expenses are reimbursed pursuant to Section 3.6 below, shall not
be treated as personal time.
3.4 Employee Benefits. During the term of the Employee's employment under
this Agreement, Employee shall be entitled to participate in all of
the employee benefit
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programs which are available to the Company.
3.5 Office and Facilities. During the term of Employee's employment under
this Agreement, the Company shall provide Employee the use of the
Company's facilities and support services.
3.6 Business Expenses. During the term of Employee's employment under this
Agreement, the Company shall bear all ordinary and necessary business
expenses incurred by Employee on behalf of Company, in accordance
with, and to the extent of, its uniform policies in effect from time
to time and subject to Internal Revenue Service guidelines for
business expense reimbursement. Employee is responsible to promptly
account for such expenses to the Company in the manner prescribed from
time to time by the Company, including such records as are required by
the Internal Revenue Service.
Notwithstanding anything to the contrary in the preceding paragraph,
the Company shall reimburse Employee up to $10,000 annually (which
shall accrue ratably on a monthly basis) for dues, continuing
education seminars and association meeting expenses (including travel
expenses related thereto), journals and books and fees, automobile
expenses, entertainment and any other expenses for which Employee
presents receipts as required by Internal Revenue Service regulations
(the "Expense Allowance"), such expenses to be reimbursed to Employee
within thirty (30) days following delivery of such receipts to the
Company.
Fifty percent (50%) of the difference between $10,000 and the Expense
Allowance during any calendar year shall be paid to Employee in cash
within forty-five (45) days following the end of such calendar year.
This amount shall be in addition to the compensation due under Section
3.1 hereof.
3.7 DELETED
3.8 Earnout Payment. On the fifth anniversary of the Commencement Date,
the Company agrees to pay Employee an amount equal to three (3.0)
times the difference, if positive, between (i) his compensation
hereunder during the preceding twelve (12) months and (iii) 21.50% of
net revenues of the Company attributable to its facilities at 0000
X.X. 00xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 (the "Miami Office")
during the preceding twelve (12) months; provided that, Employee
agrees that the combined compensation of Employee, Xxxxx Xxxxx, Jr.
and Xxxxxxx Xxxxx (the "Compensation Pool") thereafter will change to
21.50% of net revenues of the Company attributable to the Miami
Office.
Example: Suppose that on the fifth anniversary of the Commencement
Date Employee elects to receive the above-described earnout payment.
Suppose that,
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during the previous 12 months, the net revenues of the Company
attributable to the Miami Office were $3,000,000 and that the
Compensation Pool, based on 60% of net income was $700,000. Since the
Compensation Pool ($700,000) was in excess of 21.50% of the relevant
net revenues of the Company (21.50% x $3,000,000 =$645,000), i.e., the
difference ($55,000) was positive, the Company will to pay Employee
the difference ($55,000) times 3.0, or $165,000 as the earnout
payment. Thereafter, the Compensation Pool will be changed to 21.50%
of the net revenues of the Company attributable to the Miami Office,
and no longer be based on a percentage of Net Income.
ARTICLE IV. EARLY TERMINATION
4.1 Early Termination. Subject to the respective continuing obligations of
the parties elsewhere provided in this Agreement, this Article IV sets
forth the terms for early termination of Employee's employment under
this Agreement.
4.2 No Termination Without Cause. This Agreement may not be terminated
without cause.
4.3 Termination by the Company for Cause. The Company may terminate
Employee's employment under this Agreement effective immediately for
cause. For purposes of this Agreement, "Cause" means (a) an act or
acts of personal dishonesty taken by Employee resulting in personal
enrichment of Employee at the expense of the Company, (b) any material
breach by Employee of his duties and other obligations under this
Agreement, after written notice and thirty (30) days in which to cure
the same, (c) if Employee is convicted of or pleads nolo, (or
equivalent) with respect to, a felony or a crime involving moral
turpitude, (d) if any representation of Employee to the Company is
materially untrue and Employee knew or should have known the
representation was untrue, (e) habitual absenteeism (in excess of
personal time permitted hereunder), alcoholism or any form of drug
abuse having an adverse effect on Employee's performance of his duties
or an adverse effect on the Company, and (f) intentional conduct or
activities (excluding conduct or activities engaged in by Employee in
good faith exercise of his business judgment on behalf of the Company)
materially damaging to the Company.
4.4 Termination in the Event of Death. Employee's employment under this
Agreement shall terminate in the event of Employee's death.
4.5 Notice of Termination; Date of Termination. The provisions of this
Section 4.5 shall apply in connection with any early termination of
Employee's employment under this Agreement pursuant to this Article
IV.
(a) For purposes of this Agreement, a "Notice of Termination" shall
mean a
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notice which shall indicate the specific termination provisions
in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide the basis
for such termination.
(b) For purposes of the Agreement, "Date of Termination" shall mean:
(1) if Employee's employment is terminated due to death, the day
Employee's death occurs; (2) if Employee's employment is
terminated by the Company for Cause, the date specified in the
Notice of Termination; (3) if Employee's employment is terminated
by mutual agreement of the parties, the date specified in such
agreement; (4) if this Agreement is terminated pursuant to
Section 4.2 hereof, the date specified in the Notice of
Termination, which in no event shall be a date earlier than one
hundred and eighty (180) calendar days after the date on which a
Notice of Termination is given, unless an earlier date has been
expressly agreed to by Employee in writing either in advance of,
or after, receiving such Notice of Termination; or (5) in any
other instance not referred to in clauses (1) through (4) above,
the last day of Employee's employment with the Company.
4.6 Compensation upon Termination of Employment. Upon termination of
Employee's employment under this Agreement, the Company shall, within
thirty (30) days following the Date of Termination, pay any amounts
earned by Employee and reimburse Employee amounts due for reimbursable
business expenses incurred by Employee through the Date of Termination
and any additional amounts due Employee in accordance with the terms
of any Plan. Upon termination of employment for any reason whatsoever,
Employee shall not be entitled to be paid for any accumulated (but
unused) personal time under Section 3.2.
4.7 Termination by Employee. In the event that (i) the Company is
determined to be guilty of criminal activity and has exhausted its
right to appeal such determination, or (ii) any payment owed to
Employee under Article III hereof is not made when due and such
default is not cured within thirty (30) days after Employee gives the
Company written notice of such default, then Employee may, within ten
(10) days thereafter, give written Notice of Termination of this
Agreement to the Company and in such case the provisions of Section
6.2 and Section 6.3 hereof shall not apply. In the event Employee
terminates this Agreement under this Section 4.7, then Employee shall
be entitled to keep any compensation to the extent actually received
or accrued (whichever is greater) under Section 3.1 hereof through the
Date of Termination.
4.8 Termination by Exercise of Buy-Back Right. This Agreement is subject
to that certain Buy-Back Agreement dated as of the even date hereof
between the Company and Advanced Physician Billing Inc., and this
Agreement shall terminate in its entirety in accordance with the terms
of said Buy-Back Agreement.
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ARTICLED V. CONFIDENTIAL INFORMATION
Prohibitions Against Use. Employee will not during or subsequent to
the termination or expiration of Employee's employment under this
Agreement use or disclose, other than in connection with Employee's
employment with the Company, any Confidential information to any
person not employed by the Company or not authorized by the Company to
receive such Confidential Information] without the prior written
consent of the Company. Employee will use reasonable and prudent care
to safeguard and protect and prevent the unauthorized use and
disclosure of Confidential Information. The obligations contained in
this Section 5.1 will survive for as long as the Company in its sole
judgment considers the information to be Confidential Information.
ARTICLE VI. NON-COMPETITION
6.1 Acknowledgements. Employee agrees and acknowledges that: (i) he shall
be in a position of confidence and trust with the Company and he shall
have access to Confidential Information; (ii) the nature and periods
of restrictions imposed by the covenants set forth in this Article VI
are fair, reasonable and necessary to protect and preserve for the
Company the benefits of this Agreement and that such restrictions
shall not prevent this Employee from earning a livelihood; (iii) the
Company would sustain irreparable loss and damage if Employee were to
breach any of such covenants; (iv) the Territory is reasonably sized
inasmuch as the business of the Company is conducted over a wide
geographical area and is based on serving customers in the entire
Territory to be successful; and (vi) the covenants herein set forth
are made as an inducement to and have been relied upon by the Company
in entering this Agreement. Employee represents and warrants that
Employee has not, prior to the date hereof, disclosed to any person or
used or otherwise exploited for Employee's own benefit or for the
benefit of any other person any Confidential Information.
6.2 Non-Competition by Employee. Employee agrees that, during the term of
his employment by the Company and for a period of two (2) years
following the termination or expiration of Employee's employment with
the Company for any reason, Employee will not directly or indirectly,
alone or as a partner, officer, director, shareholder or employee of
any other firm, engage in any commercial activity in competition with
any part of the Company's business as conducted during the term of the
Agreement or as of the date of such termination or expiration of
employment or with any part of the Company's contemplated business
with respect to which Employee has Confidential Information as
governed by Article VI, within the Territory.
6.3 Solicitation of Customers. Employee will not solicit any person or
entity who is
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or was a customer of the Company, for a period of two (2) years after
the termination or expiration of Employee's employment with the
Company for any reason.
6.4 Covenant Not to Recruit. Employee recognizes that the Company
workforce represents a substantial financial and educational
investment and constitutes an important and vital aspect of its
business. Employee agrees that, during the term of his employment by
the Company and for a period of two (2) years following the
termination or expiration of Employee's employment with the Company
for any reason whatsoever, he shall not solicit, or assist anyone else
in the solicitation of, any of the Company's then current employees to
terminate their employment with the Company and to become employed by
any business enterprise with which Employee may then be associated,
affiliated or connected.
6.5 Severability. If any of the provisions of this Article VI should in
whole or part be held invalid in a final judgment by a court of
competent jurisdiction, such invalidity shall not affect the validity
of the rest of this Article VI, the parties intending that Such
provision be severable.
6.6 Injunctive Relief. The parties hereto recognize and hereby acknowledge
that iris impossible to measure in money the damages which would
result to the Company or its successors or assigns by reason of a
failure by Employee to perform any of the obligations imposed upon him
under Article VI of this Agreement. Therefore, the Company or its
successors or assigns shall be entitled to injunctive and other
equitable relief to enforce the terms of Article VI of this Agreement.
If the Company or its successors or assigns should institute an action
or proceeding to enforce the provisions of Article VI hereof, Employee
hereby waives the claim or defense that any such party has an adequate
remedy at law, and Employee shall not urge in any action or proceeding
the claim or defense that such a remedy at law exists. At the
discretion of the court or arbitrator before which an injunctive
proceeding is brought, the running of the covenants herein may be
tolled and extended for a period of time equal to the time period
Employee shall be in violation of any such covenant.
ARTICLE VII. GENERAL PROVISIONS
7.1 DELETED
7.2 DELETED
7.3 Physical and Mental Condition. Employee represents that he is in good
physical and mental health, has no chronic illness nor any prior
physical or mental problems, the recurrence of which would impair his
ability to function under all
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the terms and conditions of this Agreement.
7.4 Assignment. The Agreement is not assignable by Employee. This
Agreement may be assigned by Company.
7.5 Offsets. Any amount payable to Employee pursuant to this Agreement may
be reduced for purposes of offsetting, either directly or indirectly,
any indebtedness or liability of Employee to the Company.
7.6 Withholding. To the extent required by any applicable law, including
without limitation, any federal or state income tax or excise tax law
or laws, the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act or any comparable federal, state or local laws,
the Company retains the right to withhold such portion of any amount
or amounts payable to Employee under this Agreement as the Company
deems necessary.
7.7 Governing Law; Arbitration. The validity and construction of this
Agreement shall be governed by the laws of the State of Florida. The
parties (meaning Employee on one hand and the Company on the other
hand) agree that all disputes concerning this Agreement shall be
submitted to binding arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association and the
provisions contained herein. The arbitration shall be conducted in
Tampa, Florida, by one arbitrator. The party initiating arbitration
shall give the other party notice of the matter in dispute and, if
such party is the obligor, shall deposit any disputed amount in escrow
during the pendency of the arbitration. If the parties fail to agree
upon an arbitrator within ten days after notice of initiation of the
arbitration is given, then the American Arbitration Association shall
select the arbitrator. All determinations and the final decision of
the arbitrator shall be made in writing. The fees and expenses of the
arbitrator shall be awarded by the arbitrator in his discretion as
part of the award. The arbitrator's award shall be binding on the
parties hereto and may be entered in any court of competent
jurisdiction. The parties reserve the right to seek a judicial
temporary restraining order, preliminary injunction, or other similar
short term equitable relief prior to the appointment of the
arbitrator. The arbitrator will have the right to make a final
determination of the parties' rights including, without limitation,
whether to make permanent, modify or dissolve the judicial order.
7.8 Rules of Construction. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of a party by
reason of such party having or being deemed to have drafted,
structured or dictated such provisions.
7.9 Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor
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shall any single or partial exercise of any right or remedy hereunder
preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by any related document or by
law.
7.10 Modification. This Agreement may not be modified or amended except by
written instrument signed by the parties hereto and, if on behalf of
the Company, only by its President.
7.11 Notices. All notices, demands and other communications hereunder shall
be written and shall be deemed to have been duly given if delivered in
person or mailed by certified mail, postage prepaid, to the address
set forth below:
To the Company: National Medical Financial
Services Corporation
0000 Xxxx Xx., Xxxxx 000
Xxxxxx, XX 00000
with a copy to: Xxxxx X. Xxxxxxx & Associates, P.C.
X.X. 000
Xxxxxxx, XX 00000-0000
To Employee: Xxxxx Xxxxx, Sr.
0000 X.X. 00xx Xxx., Xxxxx 000
Xxxxx, XX 00000
with a copy to: Xxxxxxxxxxx X. Xxxxx, Esq..
000 X. Xxxxxxx Xxx., Xxxxx 000
Xx.Xxxxxxxxxx, XX 00000.
or to such other address as either party may designate by written
notice to the other. Notices delivered in person shall be deemed
delivered on the date of delivery and notices mailed, as aforesaid,
shall be deemed delivered forty-eight (48) hours after the date
mailed. Rejection or other refusal to accept or inability to deliver
because of a changed address of which no notice, was given shall be
deemed to be a receipt of the notice, request or other communication.
Any notice, request or other communication required or permitted to be
given by any party may be given by such party' s legal counsel.
7.12 No Restrictive Covenants. Employee represents and warrants that he is
not subject to any restrictive covenant which would prohibit or limit
any of the services that Employee must perform as contemplated by this
Agreement.
7.13 Sole Employer; No Guarantor. The Company shall be the sole employer of
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Employee hereunder, and no officer, director, employee or shareholder
of the Company shall be a guarantor of this Agreement.
7.14 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to the subject
matter hereof all the matters herein agreed upon. This Agreement
replaces in full all prior employment agreements or understandings of
the parties hereto, and any and all such prior agreements or
understandings are hereby rescinded by mutual agreement.
7.15 Non-arbitral Attorneys Fees. In the event that a suit, action, or
other proceeding of any nature whatsoever other than arbitration),
including, without limitation, any proceeding under the U.S.
Bankruptcy Code and involving issues peculiar to federal bankruptcy
law, any action seeking a declaration of rights or any action for
rescission, is instituted to interpret or enforce this Agreement or
any provision of this Agreement, the prevailing party shall be
entitled to recover from the losing party the prevailing party's
reasonable attorneys', paralegals', accountants' and other experts'
professional fees and all other fees, costs, and expenses actually
incurred and reasonably necessary in connection therewith, as
determined by the judge at trial or other proceeding, or on any appeal
or review, in addition to all other amounts provided by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EMPLOYEE: COMPANY:
/s/ Xxxxx Xxxxx, Sr. NATIONAL MEDICAL FINANCIAL
--------------------- SERVICES CORPORATION
XXXXX XXXXX, SR.
By: /s/ Xxxxxxx X. Xxxxxxx, M.D.
-----------------------------
CEO
Address: Address:
0000 X.X. 00xx Xxx., Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 000
--------------------------------
Xxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------
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