EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AGREEMENT is executed as of this 3rd day of December, 1996, by and
between AMERICAN MEDICAL SECURITY HOLDINGS, INC., a Wisconsin corporation (the
"COMPANY"), and a wholly owned subsidiary of United Wisconsin Services, Inc., a
Wisconsin corporation ("UWSI"), and XXXXXX X. XXXXXX, an individual
("EMPLOYEE").
RECITALS
Pursuant to that certain Agreement and Plan of Merger, dated as of July 31,
1996, among the Company, UWSI, American Medical Security Group, Inc. ("AMS"),
Xxxxxxx X. Xxxxxxxx and Employee (the "Merger Agreement"), UWSI has agreed to
acquire AMS by a merger of AMS into the Company, which shall be the surviving
corporation (the "Merger"). The parties further contemplate that, following the
Merger, UWSI will transfer substantially all of the assets received in the
Merger to the Company. UWSI, the Company and AMS anticipate that the Merger
will become effective as of the date hereof.
Employee is a knowledgeable and experienced executive familiar with the
business conducted by the Company. The Company desires to employ Employee, and
Employee desires to be employed by the Company, on the terms and conditions set
forth herein. The parties also believe it is in their best interests to make
provision for certain aspects of their relationship during and after the period
in which Employee is employed by the Company.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by the Company and
Employee,
IT IS HEREBY AGREED AS FOLLOWS:
ARTICLE I
EMPLOYMENT
1.1 TERM OF EMPLOYMENT. The Company hereby employs Employee, and Employee
hereby accepts employment by the Company, for the period commencing on the date
hereof and ending on the sixth anniversary of the date hereof, subject to
earlier termination as hereinafter set forth in Article III (the "EMPLOYMENT
TERM").
1.2 POSITION AND DUTIES. Employee shall be employed in the position of
Vice Chairman of the Board, shall have such duties as may be set forth by the
President consistent with his status and shall be subject to the authority of,
and shall report to, the Company's Board of Directors. Except as provided in
Section 2.1 below, Employee shall be available to devote Employee's entire
business time, attention and energies exclusively to the business interests of
the Company while employed by the Company during the first three (3) years of
the Employment Term, except as otherwise specifically provided for herein by
reason of illness, vacation or otherwise or approved by or on behalf of the
Board of Directors. The Company shall provide such secretarial assistance and
office space to Employee as may be reasonably requested by Employee; provided,
that the Company shall only be required to provide secretarial assistance and
office space to the extent consistent with past practice.
ARTICLE II
COMPENSATION AND OTHER BENEFITS
2.1 BASE SALARY. The Company shall pay Employee an annual salary as
follows: (i) $750,000 per year during the first year; (ii) $500,000 per year
thereafter for the shorter of two years or such time as Employee is not
available to devote Employee's entire business time, attention and energies
exclusively to the business of the Company (as such determination is made by the
Board of Directors including by reason of "disability" as set forth in Section
3.1(c) hereof); and (iii) $100,000 per year thereafter for a period of three
years ("BASE SALARY"), payable in accordance with the normal payroll practices
of the Company.
2.2 COMPENSATORY STOCK OPTIONS. In addition to Base Salary and subject to
the provisions of Article III hereof, Employee has been granted, by the
Management Review Committee of UWSI an option (THE "OPTION") to purchase up to
470,000 shares of common stock, no par value per share, of UWSI ("UWSI COMMON
STOCK") at an exercise price per share equal to 125% of the average closing
price of UWSI Common Stock on the New York Stock Exchange for the ten trading
days immediately preceding the date the Merger becomes effective, all in
accordance with the United Wisconsin Services, Inc. Equity Incentive Plan and
pursuant to a stock option agreement in the form attached hereto as EXHIBIT A.
2.3 BENEFIT PLANS. The Company will establish and maintain welfare
benefit plans substantially identical to those maintained by AMS prior to the
Merger. Employee will be eligible to participate in the Company's other welfare
benefit plans as are generally applicable to all executives of the Company, in
accordance with the terms and conditions thereof. Notwithstanding anything to
the contrary contained in Section 3.2 hereof, the Company will also pay 38% of
the premium due under the Employers Health Insurance Company health policy
covering Employee until Employee's death.
2.4 EXPENSES. The Company shall reimburse Employee for all reasonable
expenses incurred in the course of the performance of Employee's duties and
responsibilities pursuant to this Agreement and consistent with the Company's
policies with respect to travel, entertainment and miscellaneous expenses, and
the Company's requirements with respect to the reporting of such expenses.
2.5 VACATION. The Company shall maintain vacation policies substantially
identical to those maintained by AMS prior to the Merger. Employee shall be
entitled to a
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maximum of eight (8) weeks of non-cumulative vacation in any calendar year in
accordance with the Company's general vacation policies.
ARTICLE III
TERMINATION
3.1 RIGHT TO TERMINATE; AUTOMATIC TERMINATION.
(a) TERMINATION WITHOUT CAUSE. Subject to Section 3.2, the Company
may terminate Employee's employment at any time and for any reason.
(b) TERMINATION FOR CAUSE. Subject to Section 3.2, the Company may
terminate Employee's employment and all of the Company's obligations under this
Agreement at any time "FOR CAUSE" (as defined below) by giving notice
to Employee stating the basis for such termination, effective immediately upon
giving such notice or at such other time thereafter as the Company may
designate. A termination For Cause is a termination evidenced by a resolution
adopted in good faith by a majority of the Board of Directors of the Company
that Employee (i) willfully failed to substantially perform his duties under
Section 1.2, above, (other than a failure resulting from Employee's incapacity
due to physical or mental illness or injury), (ii) committed acts of fraud,
embezzlement, theft or dishonesty, as determined by a final judgment or order of
a court of competent jurisdiction, (iii) committed acts which constitute a
felony as determined by a final judgment or order of a court of competent
jurisdiction and which, in a reasonable opinion of the Board of Directors of the
Company, involve moral turpitude and have caused material embarrassment to the
Company, or (iv) Employee has attempted to obtain a personal profit from any
transaction in which the Company has an interest and which constitutes a
corporate opportunity of the Company or is adverse to the interests of the
Company, unless the transaction was approved in writing by the Company's Board
of Directors after full disclosure of all details relating to such transaction;
PROVIDED, HOWEVER, that no termination of Employee's employment shall be For
Cause as set forth in (i), above, until (a) Employee shall have had at least
forty-five (45) days to cure any conduct or act alleged to provide Cause for
termination after a written notice of demand has been delivered to Employee
specifying in detail in the manner in which Employee's conduct violates this
Agreement, and (b) Employee shall have been provided an opportunity to be heard
by the Board of Directors (with the assistance of Employee's counsel if Employee
so desires). No act, or failure to act, on Employee's part, shall be considered
"willful" unless he has acted or failed to act without reasonable belief that
his action or failure to act was in the best interest of the Company.
(c) TERMINATION BY DEATH OR DISABILITY. Subject to Section 3.2,
Employee's employment and the Company's obligations under this Agreement shall
terminate automatically, effective immediately and without any notice being
necessary, upon Employee's death or a determination of disability of Employee.
For purposes of this Agreement, "DISABILITY" means the inability of Employee,
due to a physical or mental impairment, for 180 consecutive days or 210 days
during any period of 360 days to perform the duties and functions
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contemplated by this Agreement. A determination of disability shall be made
by a physician chosen by the President of the Medical Society of Xxxxx
County, Wisconsin, and Employee shall cooperate with the efforts to make such
determination. Any such determination shall be conclusive and binding on the
parties. Any determination of total disability under this Section 3.1(c) is
not intended to alter any benefits any party may be entitled to receive under
any long-term disability insurance policy carried by either the Company or
Employee with respect to Employee, which benefits shall be governed solely by
the terms of any such insurance policy.
(d) TERMINATION BY EMPLOYEE. Notwithstanding anything to the
contrary contained herein, Employee may terminate this Agreement and his
employment hereunder upon sixty (60) days written notice to the Company.
(e) TERMINATION FOR GOOD REASON. Notwithstanding anything to the
contrary contained in this Agreement, Employee, by written notice to the Board
of Directors, shall have the right to terminate his employment for Good Reason.
(f) DEFINITION OF GOOD REASON. For purposes of this Agreement, the
term "Good Reason" shall mean the occurrence, without Employee's written consent
thereto, of any of the following:
(i) the reasonable good faith determination by an arbitrator
mutually acceptable to the Company and the Employee that there has been a
material adverse change in Employee's status, title, position or
responsibilities (including reporting responsibilities); the assignment to
Employee of any duties or responsibilities which, in Employee's reasonable
judgment, are inconsistent with his status, title, position or responsibilities
in effect immediately prior to such assignment; or any removal of Employee from
or failure to reappoint or reelect him to any position, except in connection
with the termination of his employment for Disability, Cause, as a result of his
death or by Employee other than for Good Reason;
(ii) any breach by the Company of any material provision of this
Agreement or other agreements between Employee and the Company regarding
Employee's policy-making responsibilities with the Company;
(iii) any purported termination of Employee's employment For
Cause by the Company which does not comply with the terms of Section 3.1(b) of
this Agreement;
(iv) requirement that Employee relocate his office to a location
more than 50 miles from its location on the date hereof; or
(v) the failure by the Company or any of its subsidiaries or
affiliated companies to continue to provide Employee with employee benefits at
least as favorable in the aggregate to those enjoyed by Employee as the date
hereof except to the extent any such changes are made effective for all
executives of the Company.
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3.2 RIGHTS UPON TERMINATION.
(a) SECTION 3.1(a), (c) AND (e) TERMINATIONS. If Employee's
employment is terminated pursuant to Section 3.1(a), (c) or (e) hereof, the
Company shall pay to Employee, or in the case of Employee's death, to Employee's
estate, (i) any unpaid Base Salary with respect to the period prior to the
effective date of termination, (ii) severance payments equal to the Base Salary
in effect for each year remaining in the Employment Term (prorated to account
for a partial year in the case of the year during which termination occurs),
payable in accordance with Section 2.1 hereof and the normal payroll practices
of the Company, (iii) upon payment of the exercise price, shares of UWSI Common
Stock issuable upon exercise of the Option (iv) reimbursement of expenses to
which Employee is entitled under Section 2.4 hereof and (v) to the extent
permitted by law, the Company shall continue the employee benefits which the
Employee was eligible for during the Employment Term until the sixth anniversary
of the date hereof.
(b) SECTION 3.1(b) AND (d) TERMINATIONS. If Employee's employment is
terminated pursuant to Section 3.1(b) or (d), Employee shall have no further
rights against the Company hereunder, except for the right to receive (i) any
unpaid Base Salary with respect to the period prior to the effective date of
termination and (ii) reimbursement of expenses to which Employee is entitled
under Section 2.4 hereof.
(c) Nothing contained in this Agreement shall affect the rights and
obligations of Employee under any of the Company's employee benefit plans in
effect from time to time, and such rights and obligations shall be determined
solely by reference to such employee benefit plan documents.
ARTICLE IV
CONFIDENTIALITY; NONCOMPETITION
4.1 CONFIDENTIAL INFORMATION; INTELLECTUAL PROPERTY.
(a) CONFIDENTIAL INFORMATION. Employee acknowledges that Employee
will be required to use his personal intellectual skills on behalf of the
Company and that it is reasonable and fair that the fruits of such skills should
inure to the sole benefit of the Company. Employee further acknowledges that
Employee already has and will acquire information of a confidential nature
relating to the operation, finances, business relationships and trade secrets of
the Company. During Employee's employment and for a period of two years
following termination thereof, within the geographical area in which such use,
publication or disclosure would reasonably be expected to harm the Company's
existing or potential business interests, Employee will not use (except for use
in the course of the Employee's regular authorized duties on behalf of the
Company), publish, disclose or authorize anyone else to use, publish or
disclose, without the prior written consent of the Company, any confidential
information pertaining to the Company or its affiliated entities, including,
without limitation, any
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information relating to existing or potential business, customers, trade or
industrial practices, plans, costs, processes, or technical or engineering
data; PROVIDED, HOWEVER, that following termination of Employee's employment,
Employee shall be prohibited from using, publishing, disclosing or
authorizing anyone else to use, publish or disclose, any confidential
information which constitutes a trade secret under applicable law.
Employee's obligations under this section apply to, and are intended to
prevent, the direct or indirect disclosure of confidential information to
others where such disclosure of confidential information would reasonably be
considered to be useful to Employer's competitors or to a third party to
become a competitor based in whole or in part on such disclosure of
confidential information. Employee shall not remove or retain any figures,
calculations, formulae, letters, papers, software, abstracts, summaries,
drawings, blueprints, diskettes or any other material, or copies thereof,
which contain or embody any confidential information of the Company, except
for use in the course of Employee's regular authorized duties on behalf of
the Company or with the prior written consent of the Company. The foregoing
notwithstanding, Employee has no obligation to refrain from using, publishing
or disclosing any such confidential information which is or hereafter shall
become available to the public otherwise than by use, publication or
disclosure by Employee. This prohibition also does not prohibit Employee's
use of general skills and know-how acquired during and prior to employment,
as long as such use does not involve the use, publication or disclosure of
the Company's confidential information.
(b) AGREEMENT TO TRANSFER. Employee shall without further payment,
assign, transfer and set over, and does hereby assign, transfer and set over, to
the Company, its successors and assigns, all Employee's right, title and
interest in and to all trade secrets, secret processes, inventions,
improvements, patents, patent applications, trademarks, trademark applications,
copyrights and any and all intellectual property rights which Employee may,
either solely or jointly with others, conceive, develop, make or suggest at any
time during employment or within a one-year period after termination of
employment and which relate to the existing or potential products, processes,
work, research or other activities of the Company.
4.2 NONCOMPETITION. During Employee's employment and for a two-year
period following the termination thereof, Employee shall not, without the prior
written consent of the Company, directly or indirectly, as an employee, officer,
director, partner, consultant, owner (other than a minority shareholder interest
of not more than 1% of a company whose equity interests are publicly traded on a
nationally recognized stock exchange or over-the-counter) solicit any business
regarding services of the kinds that the Company either offered or was planning
to offer and of which Employee was aware at or before the time of Employee's
termination, from any person or entity that (a) was a customer or prospective
customer of the Company as of the date of termination, and (b) was a customer
with which Employee had personal contact in regard to such services within two
years prior to said termination.
4.3 NON-SOLICITATION. For a period of two years after termination of
Employee's employment, Employee will not solicit, or assist any person or entity
to solicit, any employee, agent, supplier or other person having business
relations with the Company to terminate
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such employee's employment or terminate or curtail such supplier's or other
person's business relationship with the Company.
4.4 RETURN OF DOCUMENTS. Immediately upon termination of employment,
Employee will return to the Company, and so certify in writing to the Company,
that Employee has returned to the Company all the Company's papers, documents
and things, including information stored for use in or with computers and
software applicable to the Company's business (and all copies thereof), which
are in Employee's possession or under Employee's control, regardless whether
such papers, documents or things contain confidential information
or trade secrets.
4.5 NOTICE; DISCLOSURE. For a period of three years after the termination
of Employee's employment hereunder, Employee shall keep the Company promptly and
fully informed of any person or persons, partnerships, associations, limited
liability companies or corporations by whom Employee may be employed.
4.6 NO CONFLICTS. Employee represents and warrants that Employee has not
previously assumed any obligations inconsistent with those of this Agreement and
that employment by the Company does not conflict with any prior obligations to
third parties.
4.7 AGREEMENT ON FAIRNESS. Employee acknowledges that: (i) this
Agreement has been specifically bargained between the parties and reviewed by
Employee, (ii) Employee has had an opportunity to obtain legal counsel to review
this Agreement, and (iii) the covenants made by and duties imposed upon Employee
hereby are fair, reasonable and minimally necessary to protect the legitimate
business interests of the Company, and such covenants and duties will not place
an undue burden upon Employee's livelihood in the event of termination of
Employee's employment by the Company and the strict enforcement of the covenants
contained herein.
4.8 EQUITABLE RELIEF. Employee acknowledges that any breach of this
Agreement will cause substantial and irreparable harm to the Company for which
money damages would be an inadequate remedy. Accordingly, the Company shall in
any such event be entitled to obtain injunctive and other forms of equitable
relief to prevent such breach and to recover from Employee the Company's costs
(including without limitation reasonable attorneys' fees) incurred in connection
with enforcing this Agreement, in addition to any other rights or remedies
available at law, in equity or by statute.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES. Any and all notices, consents, documents or communications
provided for in this Agreement shall be given in the manner, and to the persons,
specified in Section 9.01 of the Merger Agreement.
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5.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and the full and complete agreement of the parties and supersedes and replaces
any prior understandings and agreements between the parties with respect to the
subject matter hereof and supersedes and replaces the employment agreement
between Employee and AMS.
5.3 AMENDMENT. This Agreement may be altered, amended or modified only in
a writing, signed by both of the parties hereto. Headings included in this
Agreement are for convenience only and are not intended to limit or expand the
rights of the parties hereto. References to Sections herein shall mean sections
of the text of this Agreement, unless otherwise indicated.
5.4 ASSIGNABILITY. This Agreement and the rights and duties set forth
herein may not be assigned by Employee or the Company, in whole or in part.
This Agreement shall be binding on and inure to the benefit of each party and
such party's respective heirs, legal representatives, successors and assigns.
5.5 SEVERABILITY. If any court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other provisions
hereof, which shall remain valid, binding and enforceable and in full force and
effect, and such invalid or unenforceable provision shall be construed in a
manner so as to give the maximum valid and enforceable effect to the intent of
the parties expressed therein.
5.6 WAIVER OF BREACH. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.
5.7 GOVERNING LAW; CONSTRUCTION. This Agreement shall be governed by the
internal laws of the State of Wisconsin, without regard to any rules of
construction concerning the draftsman hereof.
5.8 ATTORNEY'S FEES. If any case of action is brought before any court to
enforce any provision of this Agreement, the Company shall reimburse Employee
for reasonable costs incurred (including reasonable attorney's fees) by Employee
if Employee prevails to any extent in any such action.
5.9 NO MITIGATION. If Employee's employment hereunder is terminated by
the Company without Cause because of Employee's Disability or by Employee for
Good Reason, Employee shall not be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to Employee
hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written above.
COMPANY:
AMERICAN MEDICAL SECURITY
HOLDINGS, INC.
By: /s/ C. Xxxxxx Xxxxx
----------------------------------
C. Xxxxxx Xxxxx
EMPLOYEE:
/s/ Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
IN WITNESS WHEREOF, United Wisconsin Services, Inc. has executed this
Agreement as of the day and year written above for the purpose of granting the
stock option contemplated in Section 2.2 hereof.
UNITED WISCONSIN SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx, President
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