EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), effective as of the 1st day of
October, 1998, is made and entered into by and between Healthcare Imaging
Services, Inc., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx
("Executive").
W I T N E S S E T H :
WHEREAS, Executive has been employed by the Company for the past several
years and is currently the Chairman of the Board, President and Chief Executive
Officer of the Company;
WHEREAS, the Company desires to assure itself of Executive's continued
employment in an executive capacity and to compensate him for such employment;
and
WHEREAS, Executive is willing to continue to be employed by the Company
upon the terms and subject to the conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company agrees to continue to employ Executive, and
Executive hereby agrees to continue to serve the Company, for the Term (as
defined in Section 2 below) of this Agreement, in the position and with the
duties and responsibilities set forth in Section 3 below, and upon the other
terms and subject to the conditions hereinafter stated.
2. Term. The initial term (the "Initial Term") of this Agreement
commenced on November 3, 1997 (the "Commencement Date") and shall continue until
the third anniversary of that date (the "Initial Expiration Date"); provided,
however, that this Agreement at all times shall be subject to earlier
termination in accordance with the provisions hereof. On each anniversary of the
Commencement Date, the term of this Agreement automatically shall be extended
for an additional one (1) year term (the "Extended Term") unless either party
gives written notice to the other not less than one hundred and eighty (180)
days prior to such anniversary that it does not desire to extend the Term. For
purposes of this Agreement, "Term" means the Initial Term and, as so extended,
the Extended Term.
3. Position, Duties and Responsibilities.
3.1 Position, Duties and Responsibilities. During the Term,
Executive shall serve as the Chairman of the Board, President and Chief
Executive Officer of the Company, and shall be responsible for the duties
attendant to such office, which duties will be generally consistent with his
position as an executive officer of the Company and which will generally utilize
his experience with the Company prior to the date hereof, and such other
managerial
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duties and responsibilities with the Company, its affiliates, subsidiaries or
divisions as may be assigned by the Board of Directors of the Company (the
"Board") and agreed to in writing by Executive. Executive will report directly
(and solely) to the Board. The Company intends that Executive will continue to
be elected to and serve as a member of the Board. Executive shall also serve as
an officer and/or member of the Board of Directors of any subsidiary or
affiliate of the Company, if the Board should so request. Executive's duties
shall be performed principally at the Company's executive offices which are
located in the New York City Metropolitan Area (as defined below), and Executive
shall not be required to perform duties which would necessitate changing his
present residence, unless Executive otherwise agrees in writing. For purposes of
this Agreement, the term "New York City Metropolitan Area" shall encompass the
City of New York and the territory within fifty miles from that city in any
direction. The Company will promptly pay (or reimburse Executive for) all
reasonable moving expenses incurred by Executive relating to a change of
Executive's residences in connection with any such relocation to which Executive
has consented. To the extent that any executive relocation benefit program
maintained by the Company, and in which Executive is entitled to participate, is
more favorable to Executive than the provisions of this Agreement with respect
to relocation, Executive shall be entitled to such additional relocation
benefits. Executive acknowledges and agrees that, in connection with his
employment hereunder, he may be required to travel on behalf of the Company.
3.2 Services to be Provided. During the Term, Executive shall
devote such time, attention and energies to the affairs of the Company and its
subsidiaries, affiliates and divisions as necessary to faithfully and diligently
perform his duties and responsibilities hereunder and use his best efforts in
the performance of his duties and responsibilities to promote its and their best
interests; provided, however, that nothing herein shall preclude Executive from
(a) serving on the boards of directors of a reasonable number of other
corporations, trade associations or charitable organizations, (b) engaging in
charitable activities and community affairs or (c) managing his personal
investments and affairs; provided, however, that such activities do not
materially interfere with the performance of Executive's duties and
responsibilities under the Agreement and subject in each case to the covenants
contained in Section 11. It is expressly understood and agreed that the
continued service by Executive on any boards and committees on which he is
serving or with which he is otherwise associated immediately preceding the date
hereof shall not be deemed to interfere with Executive's performance of his
duties and responsibilities hereunder.
4. Salary.
4.1 Base Salary. During the Term, Executive shall be paid a base
salary (the "Base Salary"), payable in equal installments at such intervals as
the other executive officers of the Company are paid but not less often than
bi-weekly, at an annual rate of two hundred-fifty thousand dollars ($250,000).
On each anniversary date of the Commencement Date during the Term, the annual
rate of the Base Salary shall be increased (but not decreased) by the greater of
(a) ten percent (10%) or (b) the same percentage as the increase during the
immediately
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preceding calendar year in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban Consumers (1962-1984 = 100)
(the "CPI") or (c) such greater amount as may be determined by the Board.
4.2 Bonus Compensation.
(a) Executive shall be entitled to participate in the Company's profit
sharing program with other key employees of the Company. The program provides
for a profit pool (the "Bonus Pool") consisting of 15% of the Company's pre-tax
income for each fiscal year of the Company and its consolidated subsidiaries, as
determined by the Company's independent public accountants for financial
reporting purposes in accordance with generally accepted accounting principles,
practices and methods, consistently applied, as adjusted to eliminate any undue
distortions resulting from the pre-tax effects of any extraordinary corporate
transactions or other significant, non-recurring items or adjustments accounted
for during the applicable fiscal year. Executive shall be entitled to an
allocation of not less than 50% of the Bonus Pool (the "Annual Bonus Amount").
The Board, or a duly constituted committee thereof, may allocate additional
amounts of the Bonus Pool to Executive. Subject to the contractual rights of
other persons entitled to participate in the Bonus Pool, and to the concurrence
of the Board, or a duly constituted committee thereof, the entitlement of the
other officers of the Company to the remainder of the Bonus Pool will be made by
Executive. Except as otherwise provided herein, the Annual Bonus Amount shall be
due and payable as soon as practicable after the end of each fiscal year.
Executive shall be paid monthly bonus estimates (the "Monthly Estimates") on or
before the fifth day after the completion of each month during the Term. The
Monthly Estimates to be paid Executive during the Term shall be one-twelfth of
the annualized pre-tax income of the Company calculated in each fiscal year of
the Term based on the pre-tax income of the Company for the fiscal quarter or
quarters which have elapsed in each such fiscal year and for which financial
data is then available; provided, however, that the Monthly Estimates for the
first three (3) months of each fiscal year shall be based on the preliminary
estimate of the pre-tax income of the Company and its consolidated subsidiaries
for the preceding fiscal year. Within thirty (30) days of the end of each fiscal
quarter during the Term (the "Quarterly Adjustment Date"), Executive shall be
paid an amount equal to any shortfall between the aggregate of the Monthly
Estimates paid Executive in the prior fiscal quarter (the "Aggregate Monthly
Payments") and the then estimated annualized income (the "Latest Estimated
Annualized Income"). To the extent that the Aggregate Monthly Estimates exceed
the Latest Estimated Annualized Income, such excess shall be carried forward and
shall reduce equally the amount of each of the Monthly Estimates to be paid to
Executive during the following quarter. When audited financial statements become
available for a fiscal year during the Term, a reconciliation shall be made
between the Monthly Bonus Amounts paid in respect of such year and the Annual
Bonus Amount for such year. To the extent that the Aggregate Monthly Estimates
paid during such fiscal year are less than the Annual Bonus Amount, such
shortfall shall be paid to Executive. If such Aggregate Monthly Estimates
exceeded the Annual Bonus Amount, the excess shall be applied to reduce equally
the amount of each of the Monthly Estimates to be paid to Executive during the
following quarter. The bonus with respect to the first fiscal year shall be
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prorated in accordance with the number of days for which Executive was employed
during such year, commencing with the Commencement Date.
(b) Executive shall receive a cash bonus of $250,000 (the
"Bonus") concurrently with the Company consummating the acquisition of Jersey
Integrated HealthPractice, Inc., as contemplated by that certain Letter of
Intent dated January 28, 1998, as amended (the "JIH Acquisition").
4.3 Equity Opportunity.
(a) In addition to the stock option grants described in clauses (b) and (c)
below, during the Term, Executive shall be eligible to receive stock option
grants and similar awards under existing plans of the Company, and under any
future plans adopted and administered by the Board in which executive officers
of the Company are entitled to participate.
(b)Concurrently with the Commencement Date, the Company and
Executive entered into stock option agreements providing for the grant to
Executive (i) under the Company's 1991 Stock Option Plan, of stock options to
purchase an aggregate of four hundred seventy one thousand two hundred (471,200)
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock"), at an exercise price equal to $1.0625 per share and (ii) under the
Company's 1997 Omnibus Incentive Plan (the "Omnibus Plan"), of stock options to
purchase an aggregate of twenty eight thousand eight hundred (28,800) shares of
Common Stock at an exercise price equal to $1.0625 per share (the "Omnibus
Option"). Each such stock option shall vest in 25% increments upon the Common
Stock attaining, for a period of twenty (20) consecutive trading days, a Fair
Market Value (as defined in the Omnibus Plan) of $2.50, $5.00, $7.50 and $10.00,
respectively. Notwithstanding the foregoing, each such stock option shall become
fully vested upon the earlier to occur of (x) the fifth anniversary of the grant
date of such stock option and (y) a "Change in Control" (as defined in the
Omnibus Plan).
(c) Concurrently with the consummation of the JIH Acquisition, the
Company and Executive shall enter into a stock option agreement providing for
the grant to Executive of stock options to purchase two hundred fifty (250,000)
shares of Common Stock, at an exercise price equal to the average of the Fair
Market Values (as defined in the Omnibus Plan) of the Common Stock for the ten
(10) consecutive trading days immediately preceding the closing date of the JIH
Acquisition. Each such stock option shall vest in 25% increments over four (4)
years from the date of grant.
4.4 Supplemental Executive Retirement Benefits. During the Term,
Executive shall be eligible to participate in any supplemental executive
retirement plan(s) available to executive officers of the Company.
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5. Employee Benefits.
5.1 Benefit Programs. In addition to the benefits expressly
provided for herein, during the Term, Executive shall participate with other
members of senior management of the Company in any pension, profit-sharing,
stock option or similar plan or program of the Company now existing or
established hereafter for the benefit of its employees or senior executives of
the Company or its subsidiaries generally, to the extent that he remains
eligible under the general provisions thereof. Executive shall also be entitled
to participate in any group insurance, hospitalization, medical, health and
accident, disability or similar or nonsimilar plan or program of the Company now
existing or established hereafter for the benefit of its employees or senior
executives of the Company and its subsidiaries generally, to the extent that he
is eligible under the general provisions thereof.
5.2 Automobile. In furtherance and not in limitation of Section
5.1 hereof, the Company shall lease an automobile, such automobile to be
mutually agreed upon by Executive and the Company, and shall bear the
responsibility of all expenses incurred in connection with Executive's use of
such automobile, including, but not limited to, lease payments, insurance
payments, gas, tolls, maintenance and repairs.
5.3 Insurance. In furtherance and not in limitation of Section
5.1 hereof, during the Term, the Company, at its sole expense, shall purchase
and maintain (a) a life insurance policy on the life of Executive in the amount
of two million dollars ($2,000,000), the beneficiary or beneficiaries of which
shall be designated by Executive, and (b) a long-term disability insurance
policy which shall provide that, upon the occurrence of a "disability" as
defined in such disability insurance policy, Executive shall be entitled to
long-term disability benefits each year thereafter in an amount not less than
the Base Salary plus the estimated Annual Bonus Amount for such year; provided,
however, that the Company shall not be required to expend more than twenty five
thousand dollars ($25,000) in annual premiums for the two policies referred to
in this Section 5.3.
5.4 Vacation; Personal Days. During the Term, Executive shall be
entitled to four (4) weeks annual vacation with pay during each year of his
employment hereunder provided that the vacation days taken do not materially
interfere with the operations of the Company. Such vacation may be taken, in
Executive's discretion, at such time or times as are not inconsistent with the
reasonable business needs of the Company. Executive shall not be entitled to
additional compensation in the event that Executive, due to the needs of the
Company, is unable to take such vacation during any year of his employment
hereunder. Executive shall also be entitled to all paid holidays and personal
days given by the Company to its executives.
5.5 Key-Man Insurance. Executive agrees that the Company may at
any time and for the Company's own benefit, apply for and take out life, health,
accident, and/or other insurance covering Executive either independently or
together with others in any amount which the Company deems to be in its best
interests and the Company may maintain any existing
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insurance policies on the life of Executive owned by the Company. The Company
shall own all rights in any such insurance policies and in the cash values and
proceeds thereof and, except as otherwise provided, Executive shall not have any
right, title or interest therein. Executive agrees to assist the Company at the
Company's expense in obtaining any such insurance by, among other things,
submitting to the customary examinations and correctly preparing, signing and
delivering such applications and other documents as may be required by insurers.
5.6 Medical Expense Reimbursement. During the Term, in addition
to the benefits to be provided to Executive pursuant to Section 5.1 hereof,
Executive shall be entitled to reimbursement for expenses not reimbursed by
insurance or otherwise for "medical care" (as such term in defined in Section
213 of the Internal Revenue Code of 1986, as amended) for himself and his
immediate family; provided, however, that such reimbursement shall not exceed
ten thousand ($10,000) per annum.
5.7 Office Space. The Company shall furnish Executive with a
private office suitable for a senior executive officer and full-time secretarial
assistance and such other office facilities and services as shall reasonably be
required by Executive to perform his duties hereunder.
6. Expenses. Executive is authorized to incur reasonable expenses in
connection with the promotion of the Company's business, including, but not
limited to, business entertainment expenses and expenses for Executive's travel
and similar items. To that end, the Company shall reimburse Executive, upon
presentation of appropriate vouchers or receipts and in accordance with the
Company's expense reimbursement policies, for all reasonable expenses incurred
by Executive in connection with the performance of his duties under this
Agreement.
7. Termination. Executive's employment under this Agreement may be
terminated without any breach of this Agreement only under the following
circumstances:
7.1 Death. Executive's employment shall terminate upon his death.
7.2 Disability. In the event Executive shall be unable to render
the services or perform his duties hereunder by reason of illness, injury or
incapacity (whether physical, mental, emotional or psychological) for a period
of either (a) one hundred eighty (180) consecutive days or (b) two hundred
seventy (270) days in any consecutive three hundred sixty-five (365) day period
(either of such events shall constitute a "Disability" for purposes of this
Agreement), the Company shall have the right to terminate this Agreement.
7.3 Termination of Employment of Executive by the Company for
Cause. The Company may terminate the employment of Executive for Cause (as
hereinafter defined). The term "Cause," as used herein, shall mean (a)
Executive's willful misconduct or gross neglect in the performance of his duties
hereunder which in either case has resulted, or is likely to result, in material
economic damage to the Company, (b) the material breach of this Agreement by
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Executive which has resulted, or is likely to result, in material economic
damage to the Company, (c) the final, non-appealable conviction of Executive of
a felony which constitutes a crime of moral turpitude or (d) habitual drug or
alcohol abuse or (e) the conviction of Executive of, or the entry of an order or
consent decree with respect to, a violation or purported violation of any state
or federal securities laws. For purposes of this Section 7.3(a), no act, or
failure to act, on Executive's part, will be considered "willful" unless done or
omitted to be done by him not in good faith and without a reasonable belief that
his action or omission was in furtherance of the Company's business.
Executive shall not be deemed to have been terminated for Cause unless
and until, after reasonable notice to Executive and an opportunity for him,
together with his counsel, to be heard before the Board, the Board has
determined (by affirmative vote of two-thirds of the full Board, excluding
Executive) based on clear and convincing evidence that Executive was guilty of
the conduct described in clause (a), (b) or (d) of the preceding paragraph, and
delivered to Executive a Notice of Termination (as defined below) stating such
determination and specifying the particulars thereof in detail.
7.4 Termination of Employment by Executive for Good Reason.
Executive may terminate his employment hereunder for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean (i) a Change in Control (as defined
below), (ii) any assignment to Executive of any duties inconsistent with his
present duties as Chairman of the Board, President and Chief Executive Officer
of the Company or a change in his present position, duties, authority or
responsibilities without his express written consent or any other action by the
Company which results in a material diminution of the position, duties,
authority, or responsibility of Executive, which action is not consented to by
Executive, (iii) any removal of Executive from, or any failure to re-elect
Executive to, the office of Chairman of the Board, President and Chief Executive
Officer of the Company, except with Executive's consent or in connection with
termination of Executive's employment for Cause or as a result of his death or
disability or by him other than for Good Reason, (iv) a reduction in Executive's
Base Salary as in effect on the date of this Agreement or as the same may be
increased from time to time, or a reduction in Executive's other benefits
unless, with respect to a reduction of benefits, all members of senior
management of the Company are similarly affected, (v) the Company shall
materially breach any provision of this Agreement, which breach shall continue
unremedied for ten (10) days, (vi) failure of the Company to obtain from any
successor the assumption of or the agreement to perform this Agreement (as
contemplated in Section 15 hereof), or (vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.5.
For purposes of this Agreement, a "Change in Control" of the Company
shall mean a change in control of a nature that would be required to be reported
in a current report on Form 8-K, as in effect on the date of this Agreement, or
pursuant to Section 13 or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); including, without limitation, (A) the acquisition
of beneficial ownership (as defined in Rule 13d-3 under the
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Exchange Act), directly or indirectly, by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Company or
Executive or an entity directly or indirectly controlled by Executive, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities, (B) the failure, for any reason,
of the individuals who presently constitute the Board (the "Incumbent Board") to
constitute at least a majority thereof, provided that any director whose
election has been approved in advance by directors representing at least
two-thirds (2/3) of the directors comprising the Incumbent Board shall be
considered, for these purposes, as though such director were a member of the
Incumbent Board, (C) the stockholders of the Company approving a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least eighty percent (80%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (D) the stockholders of the
Company approving a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets.
7.5 Notice of Termination. Any termination of Executive's
employment by the Company or by Executive (other than a termination pursuant to
Section 7.1 above) shall be communicated by written Notice of Termination to the
other party. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific provision in this Agreement
relied upon to effect such termination and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Any purported
termination not satisfying the requirements of this Section 7.5 shall not be
effected.
7.6 Date of Termination. "Date of Termination" shall mean (a) if
Executive's employment is terminated by his death, the date of his death, and
(b) if Executive's employment is terminated pursuant to Section 7.5 above, the
date specified in the Notice of Termination; provided that if within thirty (30)
days after the Notice of Termination is given pursuant to Sections 7.3(a), (b)
or (d), the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal having expired and no appeal having been perfected); provided, further,
however that if the Company prevails in its determination to terminate Executive
for Cause in such arbitration or litigation, the Date of Termination shall be
the date specified in the Notice of Termination.
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8. Compensation Upon Termination.
8.1 Compensation Upon Termination Upon Death. In the event of the
death of Executive during the Term, Executive's designated beneficiary, or, in
the absence of such designation, the estate or other legal representative of
Executive (collectively, the "Estate"), shall be paid within thirty (30) days of
Executive's death, an amount equal to the sum of Executive's unpaid Base Salary
through the month in which Executive's death occurred, as well as all unpaid and
accrued bonus compensation (including Annual Bonus Amount) through the Date of
Termination. Executive's entitlement to the Annual Bonus Amount under the Bonus
Pool shall be pro-rated for any fiscal year which has commenced but not ended
prior to the Date of Termination and be otherwise payable in accordance with
Section 4.2. The Estate shall be entitled to other death benefits in accordance
with the terms of the Company's benefit programs and plans and the other
provisions of this Agreement, and the Estate shall be entitled to continue to
participate in such benefit programs and plans until the next anniversary of the
Commencement Date on the same terms and conditions as the Executive participated
immediately prior to the Date of Termination to the extent permissible under the
general terms and provisions of such programs and plans.
8.2 Compensation Upon Termination for Disability. If Executive's
employment hereunder is terminated for Disability, Executive shall be paid,
within thirty (30) days of the Date of Termination, an amount equal to the sum
of Executive's unpaid Base Salary through the month in which such date occurred,
as well as all unpaid and accrued bonus compensation (including Annual Bonus
Amount) through the Date of Termination. Executive's entitlement to the Annual
Bonus Amount under the Bonus Pool shall be pro-rated for any fiscal year which
has commenced but not ended prior to the Date of Termination and be otherwise
payable in accordance with Section 4.2. The Company shall continue to pay
Executive the Base Salary (as and when such Base Salary would have been paid had
such termination not taken place) for a period of six (6) months after the month
in which such Date of Termination occurred. The amounts provided for above shall
be reduced by any disability benefits received by Executive. Executive shall be
entitled to other disability compensation and benefits in accordance with the
Company's benefit programs and plans and the other provisions of this Agreement.
8.3 Compensation Upon Termination for Cause. If Executive's
employment is terminated by the Company for Cause, the Company shall pay
Executive his Base Salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, as well as all accrued and unpaid
bonus compensation (including Annual Bonus Amount) through the Date of
Termination, and the Company shall have no further obligations to Executive
under this Agreement. Executive's entitlement to the Annual Bonus Amount under
the Bonus Pool shall be pro-rated for any fiscal year which has commenced but
not ended prior to the Date of Termination and be otherwise payable in
accordance with Section 4.2.
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8.4 Improper Termination; Good Reason. If (a) in breach of this
Agreement, the Company shall terminate Executive's employment other than
pursuant to Section 7.1, 7.2 or 7.3 (it being understood that a purported
termination pursuant to Section 7.2 or 7.3 which is disputed and finally
determined not to have been proper shall be a termination by the Company in
breach of this Agreement) or (b) Executive shall terminate his employment for
Good Reason, then:
(i) The Company shall pay Executive his full Base Salary
through the Date of Termination at the rate in effect at the time Notice
of Termination is given, as well as all accrued bonus compensation
(including Annual Bonus Amount) through the Date of Termination.
(Executive's entitlement to the Annual Bonus Amount under the Bonus Pool
shall be pro-rated for any fiscal year which has commenced but not ended
prior to the Date of Termination and be otherwise payable in accordance
with Section 4.2.)
(ii) In lieu of all salary and incentive compensation
payments which Executive would have earned under this Agreement but for
his termination, the Company shall pay to Executive as liquidated
damages a lump sum amount equal to the present value, based on the
Applicable Federal Rate (as defined in Section 1274(d) of the Internal
Revenue Code of 1986, as amended (the "Code")), of the product of (A)
the sum of (1) the Base Salary in effect as of the Date of Termination
(as such Base Salary would have been adjusted pursuant to Section 4.1
hereof during the remainder of the Term (assuming the CPI in effect for
the year preceding the year in which the Date of Termination occurs
remains in effect)) and (2) the largest bonus compensation paid or
payable to the Executive with respect to any of the three years
preceding the year in which the Date of Termination occurs, whether or
not such years were a part of the Term, and (B) 2.99 (such payment being
referred to as the "Termination Payment"). All payments under this
clause (ii) shall be made on or before the fifth day following the Date
of Termination. In addition, if the receipt of the lump sum pursuant to
the foregoing sentence would cause Executive to pay federal income tax
for the year of receipt at a higher marginal rate than Executive would
have paid for such year had Executive's employment not been terminated
(the "Original Marginal Amount"), Executive shall receive an additional
amount such that the amount retained by Executive after the payment of
federal income taxes on such lump sum shall be the same as if such lump
sum had been taxed at the Original Marginal Rate. Executive shall not be
required to mitigate the amount of compensation payable to Executive
hereunder, by securing other employment or otherwise, nor will such
compensation be reduced by reason of Executive securing other employment
or for any other reason.
(iii) In the event that Executive becomes entitled to the
Termination Payment provided for in clause (ii) and any of the
Termination Payment will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code, the Company shall pay to Executive,
at the time specified below, an additional amount (the "Gross-Up
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Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the Termination Payment and any federal,
state and local income tax and Excise Tax upon the payment provided for
by this paragraph, shall be equal to the Termination Payment. For
purposes of determining whether any of the Termination Payment will be
subject to the Excise Tax and the amount of such Excise Tax, (x) any
other payments or benefits received or to be received by Executive in
connection with a Change in Control of the Company or the termination of
Executive's employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Company, any person
whose actions result in a Change in Control or any person having such a
relationship with the Company or such person as to require attribution
of stock ownership between the parties under Section 318(a) of the Code)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the Excise
Tax, unless, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to Executive, such other payments or
benefits (in whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code, (y) the amount of the
Termination Payment which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of the Termination
Payment or (B) the amount of excess parachute payments within the
meaning of Sections 280G(b)(1) and (4) (after applying clause (x) above
and after deducting any excess parachute payments in respect of which
payments have been made under this clause (y)), and (z) the value of any
non-cash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rates of
taxation in the state and locality of Executive's residence upon the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of Executive's employment, Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment attributable to
such reduction plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Executive's employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
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(iv) If termination of Executive's employment arises out
of a breach by the Company of this Agreement, the Company shall pay all
other damages to which Executive may be entitled as a result of such
breach, including damages for any and all loss of benefits which
Executive would have received under the Company's employee benefit plans
if the Company had not breached this Agreement and had Executive's
employment continued for the full Term as then in effect (including,
without limitation, benefits Executive would have been entitled to
receive pursuant to any of the Company's pension plans had his
employment continued for such Term at the rate of compensation specified
herein), and including all legal fees and expenses incurred by him as a
result of such termination and in enforcing his rights.
9. Indemnification.
(a) The Company agrees to indemnify Executive to the fullest
extent permitted by applicable law consistent with the Company's Certificate of
Incorporation and ByLaws as in effect on the date hereof with respect to any
acts or non-acts he may have committed while he was an officer, director, and/or
employee (i) of the Company or any subsidiary or affiliate thereof, or (ii) at
the request of the Company, of any other entity.
(b) The Company agrees to maintain for Executive a directors' and
officers' liability insurance policy not less favorable than any policy that the
Company maintains for its directors and executive officers in general.
10. Confidential Information.
(a) Executive hereby acknowledges that, in the course of his
employment by the Company, he has had and will have access to secret and
confidential information which relates to or affects all aspects of the business
and affairs of the Company, its subsidiaries, affiliates or divisions, and which
are not available to the general public ("Confidential Information"). Without
limiting the generality of the foregoing, Confidential Information shall include
information relating to inventions, developments, specifications, technical and
engineering data, business ideas, trade secrets, products under development,
production methods and processes, sources of supply, marketing plans, and the
names of any customers or prospective customers or of any persons who have or
shall have traded or dealt with the Company. Accordingly, Executive agrees that,
except as required by the performance of his duties hereunder, he will not, at
any time during the Term and for a period commencing on the Date of Termination
and concluding upon the earlier to occur of (i) three (3) years after such Date
of Termination and (ii) the date subsequent to such Date of Termination upon
which the Company is in material breach of any material provision of this
Agreement (provided that Executive notifies the Company in writing of such
breach and the Company does not cure such breach within ten (10) days of the
receipt of such notice from Executive), disclose or furnish any Confidential
Information to any person, firm, corporation or other entity without the express
prior written consent of the Company. Notwithstanding the foregoing, the term
Confidential
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Information shall not include information or data which (w) is now or hereafter
in the public domain, other than as a result of the breach of this Section 10 by
Executive, (x) prior to the date of commencement of Executive's employment by
the Company was known to Executive, (y) is lawfully acquired by Executive from a
third party who, to Executive' s knowledge, is not prohibited from disclosing
such data or information to Executive or (z) is required to be disclosed by
court order or other legal process.
(b) Executive hereby acknowledges and agrees that any and all
models, prototypes, notes, memoranda, notebooks, drawings, records, plans,
documents or other material in physical form which contain or embody
Confidential Information, whether created or prepared by Executive or by others
("Confidential Materials"), which are in Executive's possession or under his
control, are the sole property of the Company. Accordingly, Executive hereby
agrees that, upon the termination of his employment with the Company, whether
pursuant to this Agreement or otherwise, or at the Company's earlier request,
Executive shall return to the Company all Confidential Materials and all copies
thereof in his possession or under his control and shall not retain any copies
of Confidential Materials.
11. Non-Competition.
(a) Executive agrees that he shall not, so long as he shall be
employed by the Company in any capacity (whether pursuant to this Agreement or
otherwise), own, manage, operate, control or participate in the ownership,
management, operation or control of, or be employed by or connected in any
manner with, any business, firm or corporation which is or may be in competition
with the business of the Company or its subsidiaries without the express written
consent of the Company.
(b) Executive agrees that for a period commencing on the
effective Date of Termination and for so long thereafter as he is entitled to
receive and receives any payments pursuant to this Agreement or, in the case of
the termination of Executive's employment for Cause by the Company or without
Good Reason by Executive, for a period of twelve (12) months after the effective
Date of Termination, Executive shall not own, manage, operate, control or
participate in the ownership, management, operation or control of, or be
employed by or connected in any manner with, any business, firm or corporation
which is engaged in or competes with the business of the Company or its
subsidiaries as such business is constituted on the Date of Termination.
(c) Anything to the contrary herein notwithstanding, the
provisions of this Section 11 shall not be deemed violated by the purchase
and/or ownership by Executive of shares of any class of equity securities (or
options, warrants or rights to acquire such securities, or any securities
convertible into or exchangeable or exercisable for such securities) (i) of the
Company (or any successor thereto), (ii) representing (together with any
securities which would be acquired upon the exercise of any such options,
warrants or rights or upon the conversion of any other security convertible into
or exchangeable or exercisable for such securities) five percent
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(5%) or less of the outstanding shares of any such class of equity securities of
any issuer whose securities are traded on a national securities exchange or
listed by The Nasdaq Stock Market, the National Quotation Bureau Incorporated or
any similar organization; provided, however, that Executive shall not be
otherwise connected with or active in the business of the issuers described in
this clause (ii), or (iii) of any entity which is then employing Executive not
in breach of this Section 11.
12. Remedy For Breach. Executive hereby acknowledges that, in the event
of any breach or threatened breach by him of any of the provisions of Sections
10 or 11 of this Agreement, the Company would have no adequate remedy at law and
could suffer substantial and irreparable damage. Accordingly, Executive hereby
agrees that, in such event, the Company shall be entitled, and notwithstanding
any election by the Company to claim damages, to obtain a temporary and/or
permanent injunction to restrain any such breach or threatened breach or to
obtain specific performance of any such provisions, all without prejudice to any
and all other remedies which the Company may have at law or in equity.
13. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid, or
by telecopy (immediately followed by telephone confirmation of delivery of such
telecopy with the intended recipient of such notice and by notice in writing
sent promptly by registered or certified mail as provided above) to the parties
to this Agreement at the following addresses or at such other address for a
party as shall be specified by like notice:
To the Company: Healthcare Imaging Services, Inc.
000 Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Secretary
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To Executive: Xxxxxxx X. Xxxxxx
00 Xxxxxx Xxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
All such notices and communications shall be deemed to have been
received on the date of personal delivery, on the date that the telecopy is
confirmed as having been received or on the third business day after the mailing
thereof, as the case may be.
14. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the employment matters contemplated
herein and supersedes all
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prior agreements or understandings among the parties related to such employment
matters, including, without limitation, the Employment Agreement, dated October
22, 1991, between the Company and Executive, as amended. Notwithstanding the
foregoing, all stock option agreements between Executive and the Company shall
remain in full force and effect.
15. Binding Effect; Third Party Beneficiaries. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Company and its successors and assigns and upon Executive. "Successors
and assigns" shall mean, in the case of the Company, any successor pursuant to a
merger, consolidation, or sale, or other transfer of all or substantially all of
the assets of the Company. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as if Executive terminated his employment for Good Reason, except that,
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean Healthcare Imaging Services, Inc. and any
successor to its business and/or assets.
16. No Assignment. Except as contemplated by Section 15 above, this
Agreement shall not be assignable or otherwise transferable by either party.
17. Amendment or Modification; Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is authorized by the
Board and is agreed to in writing, signed by Executive and by an officer of the
Company thereunto duly authorized. Except as otherwise specifically provided in
this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar provision
or condition at the same or at any prior or subsequent time.
18. Fees and Expenses. Except as expressly provided herein, if either
party institutes any action or proceeding to enforce any rights the party has
under this Agreement, or for damages by reason of any alleged breach of any
provision of this Agreement, or for a declaration of each party's rights or
obligations hereunder or to set aside any provision hereof, or for any other
arbitral or judicial remedy, each party shall be responsible for its own costs
and expenses incurred thereby, including but not limited to, attorneys' fees and
disbursements.
19. Governing Law; Arbitration. The validity, interpretation,
construction, performance and enforcement of this Agreement shall be governed by
the internal laws of the State of New Jersey, without regard to its conflicts of
law rules. Any controversy or claim
- 15 -
arising out of or relating to this Agreement, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association, and judgment
upon such award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The arbitration shall be held in Monmouth County, New
Jersey or such other place as may be agreed upon at the time by the parties to
the arbitration. The expense of such arbitration shall be borne by the Company.
20. Titles. Titles to the Sections and subsections in this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any Section.
21. Counterparts. This Agreement may be executed in one or more
counterparts, which together shall constitute one agreement. It shall not be
necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.
22. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms and
provisions of this Agreement in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
HEALTHCARE IMAGING SERVICES, INC.
By: _________________________
Name:
Title:
/s/ Xxxxxxx X. Xxxxxx
XXXXXXX X. XXXXXX
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