EMPLOYMENT AGREEMENT
AGREEMENT dated as of August 15, 1996, by and between Netsmart
Technologies, Inc., a Delaware corporation with its principal office at 000
Xxxxxx Xxxxxx, Xxxxx, XX 00000 (the "Company"), and Xxxxx X. Xxxxxx, residing at
000 Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to obtain the benefits of Executive's
knowledge, skill and ability in connection with managing the operations of the
Company and to employ Executive on the terms and conditions hereinafter set
forth; and
WHEREAS, Executive desires to provide his services to the Company and to
accept employment by the Company on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual promises set forth in the
agreement, the parties agree as follows:
1. Employment and Duties
(a) Subject to the terms and conditions hereinafter set forth, the
Company hereby employs the Executive as a president of the Company. During the
term of his employment pursuant to this Agreement (the "Term"), the Executive
shall report to the Company's Board of Directors (the "Board")' or such senior
executive officer as may be designated by the Board, and Executive shall perform
such duties and responsibilities customarily associated with such positions, and
shall have such other duties and responsibilities consistent with such position
as the Board may assign to him from time to time. The Company understands that
the executive also serves as the president of S-Tech, Inc. and will continue to
devote a portion of his time to that company.
(b) In addition, the Executive shall serve at no additional
compensation as a director of the Company, if elected, and in such executive
capacity or capacities with respect to any affiliate of the Company to which he
may be elected or appointed, provided that such duties are not inconsistent with
those of an executive officer of the Company. The Company agrees that, as long
as Executive shall be employed by the Company pursuant to this Agreement, the
Company shall include Executive as one of management's designees for director of
the Company.
(c) Unless terminated earlier as provided for in Paragraph 5 of this
Agreement, the Term shall be for an initial period commencing as of the date of
this Agreement and expiring on August 15, 2001.
2. Executive hereby accepts the employment contemplated by this Agreement.
During the Term, Executive shall report to the Board and shall devote
substantially all of his business time and attention to the performance of his
duties under this Agreement, and shall perform such duties diligently, in good
faith and in a manner consistent with the best interests of the Company.
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3. Compensation and Other Benefits
(a) (i)For his services to the Company during the Term, the Company
shall pay Executive a salary ("Salary") at the annual rate of one hundred twenty
five thousand dollars ($125.000,00). Commencing August 15, 1996 and on each
August 15 thereafter during the Term of this Agreement, the Executive shall
receive an increase in Salary equal to the cost of living increase. The Salary
shall be payable in such installments as the Company regularly pays its
executive officers, but not less frequently than semi-monthly.
(iiThe cost of living increase shall be computed as follows:
(A) The cost of living index, as hereinafter defined, for
August commencing August 1996, shall be compared with the cost of living index
for August of the previous year. The
cost of living increase shall mean the percentage increase in
the cost of living index from the previous August to the August as of which the
computation is made. Such determination shall be made as soon as possible after
release of the cost of living index for the August as of which the computation
is being made, and the Company shall, on the next payroll date, pay to the
Executive any additional Salary accrued but not paid pending determination of
the cost of living increase.
(B) The cost of living index shall mean the "Consumers Price
Index for Urban Wage Earners and Clerical Workers (Revised Series)-New York
Metropolitan Area", published by the Bureau of Labor Statistics of the United
States Department of Labor. If the said cost of living index in its form as of
the date of this agreement or the calculation basis thereof shall be revised
therefrom or discontinued, the parties shall attempt in good faith to adjust the
provisions of this Paragraph 3(a).
(b) The Company shall also pay Executive a bonus (the "Bonus") equal
to five (5%) percent of the Company's income before income taxes per year for
the year ended December 31, 1996 and for each year thereafter during the Term of
this Agreement; provided that the Bonus shall not exceed three hundred (300%)
percent of the Executive's Salary for the year with respect to which it is paid.
If the Agreement terminates prior-to the end of a fiscal year (other than as a
result of a termination for cause), Executive shall be entitled to a Bonus for
such fiscal year on a pro rata basis, based upon the number of whole months that
Executive was employed by the Company. For purposes of calculating the Bonus,
income before income taxes shall be computed in accordance with generally
accepted accounting principles.
(c) In addition to Salary and Bonus, Executive shall receive the
following benefits:
(i) health insurance for the Executive, his dependents and, to the
extent permitted
by the Company's health insurer, his beneficiary, accident and life insurance
and officer's life insurance to the extent such benefits are currently in effect
or will be put into effect for executive offices during the term of this
Agreement;
(iiuse of a company-owned or leased automobile or an automobile
allowance of $1000 per month, including insurance, fuel, service and maintenance
costs, which shall be paid in accordance with the Company's policies on
automobile benefits; and
(iivacation in accordance with Company policy.
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(d) In the event of a termination of Executive's employment as a
result of his death or Disability, as hereinafter defined, the Company shall
continue to pay to Executive or his beneficiary, his Salary at the annual rate
in effect at the date of death or termination resulting from Disability, until
the earlier of (i) two (2) years from the date of death or such termination or
(ii) August 15, 2001; provided, however, that the Company's obligations to make
such payments are contingent upon Executive having taken and passed a physical
for key man life insurance and the Company having been able to obtain such key
man insurance at standard rates. The beneficiary of Executive shall be the
person designated by Executive as the beneficiary by an instrument executed and
acknowledged by Executive; provided, that if Executive shall fail to designate a
beneficiary as provided in this Paragraph 3(d), the benefits of this Paragraph
3(d) or Paragraph 5(e) of this Agreement, shall not be payable by the Company.
4. Reimbursement of Expenses. The Company shall pay or reimburse
Executive, upon presentation of proper expense statements, for all authorized,
ordinary and necessary out-of-pocket expenses reasonably incurred by Executive
in connection with the performance of his services pursuant to this Agreement
hereunder in accordance with the Company's expense reimbursement policy.
5. Termination of Employment
(a) The Executive's employment hereunder shall terminate immediately
upon the death of the Executive.
(b) The Executive's employment may be terminable by the Executive
or the Company by not less than thirty
(30) days' written notice in the event of Executive's
Disability. The term "Disability" shall mean any illness, disability or
incapacity of the Executive which prevents him from substantially performing his
regular duties for a period of three (3) consecutive months or four (4) months,
even though not consecutive, in any twelve (12) month period.
(c) The Company may terminate Executive's employment, immediately and
without notice, for cause, in which event no further compensation shall be
payable to Executive. The term "Cause" shall mean (i) a material breach by the
Executive of Paragraph 6, 7, 8 and 10(a) of this Agreement, (ii) repeated acts
of dishonesty or deliberate misconduct, (iii) breach of trust or other action by
which Executive obtains personal gain at the expense of or to the detriment of
the Company, (iv) repeated failure to perform customary duties of his position
following notice from the Board (with Executive not participating or voting if
Executive is a director) or (v) conviction of the Executive of any felony or any
other crime relating to the performance of his duties.
(d) In the event that the Company terminates Executive's employment
other than as provided in Paragraphs 5(a), (b) and (c), the Company shall pay to
Executive as severance payments (i) his Salary as provided in this Agreement for
the balance of the term of this Agreement, which shall be paid at such times as
the Company pays its executive officers, and (ii) the Bonus paid to Executive
for the previous year, which shall be paid in twelve (12) equal monthly
installments.
(e) In the event of any termination of Executive's employment,
including termination for cause, Executive shall be entitled to all rights under
the Company's benefit plans which had vested as of the date of termination of
his employment. In addition, for a period of eighteen (18) months after such
termination, the Company shall provide Executive or his beneficiary (provided
that Executive shall have designated a beneficiary as provided in Paragraph 3(d)
of this Agreement) with the hospitalization, life insurance, medical and major
medical benefits which would have been provided to Executive if he had continued
in the employ of the Company, except that the Company shall not be required to
provide life coverage for any beneficiary of Executive.
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6. Trade Secrets and Proprietary Information. Executive agrees that he
will not, during or after the Term of this Agreement or thereafter, use or
disclose to any person, firm, corporation, partnership, business trust,
individual or other business entity any trade secrets or proprietary information
concerning the Company's or any of its subsidiaries' products, services,
business, proposed products and services, marketing strategy and research and
development activities; except that nothing in this Agreement shall be construed
to prohibit him from using or disclosing such information if it shall become
public knowledge other than by or as a result of disclosure by a person not
having a right to make such disclosure and complying with legal process.
7. Covenant Not to Solicit or Compete. Executive recognizes that the scope
of the Company's business is international and is not limited to any single
state or region. Executive covenants and agrees that from the date hereof and
for a period of one (l) year after termination of this Agreement, he will not:
(a) engage in any business in the United States whether as officer,
director, consultant, partner, guarantor, principal, agent, employee, advisor or
in any manner, which directly competes with the business of the Company as it is
engaged in at the time of the termination of this Agreement, unless at the time
of such termination or thereafter during the non-competition period the Company
ceases to be engaged in such activity, provided, however, that nothing in the
Paragraph 7(a) shall be construed to prohibit Executive from owning an interest
of not more than five percent (5%) of any public company engaged in such
activities; or
(b) solicit any present customer (i.e., any customer to whom the
Company sold products or services during the twelve (12) for the sale of any
product or service then being sold or service then being offered by the Company
months prior to such termination) or any customer to whom the Company submitted
bids or proposals, or with whom the Company conducted negotiations, during such
twelve (12) month period.
8. Inventions and Discoveries. Executive agrees promptly to disclose in
writing to the Company any invention or discovery made by him during the Term,
whether or after working hours, in the any business in which the Company or any
of its subsidiaries in then engaged or which otherwise relates to any matter or
product or service dealt in by the Company or any subsidiary or relates in any
manner to the Company's or any subsidiary's businesses, and such inventions and
discoveries shall be the Company's sole property. Upon the Company's request,
Executive shall execute and assign to the Company all applications for
copyrights and patent letters of the United States and such foreign countries as
the Company may designate, and Executive shall execute and deliver to the
Company such other instruments as the Company deems necessary to vest in the
Company the sole ownership of all exclusive rights in and to such inventions and
discoveries, as well as the copyrights and/or patents. If services in connection
with applications for copyrights and/or patents are performed by Executive at
the Company's request after the termination of his employment, the Company shall
pay him reasonable compensation for such services rendered after termination of
this Agreement.
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9. Injunctive Relief. Executive agrees that his violation or threatened
violation of any of the provisions of Paragraphs 6, 7 and 8 of this Agreement
shall cause immediate and irreparable harm to the Company. In the event of any
breach or threatened breach of said provisions, Executive consents to the entry
of preliminary and permanent injunctions by a court of competent jurisdiction
prohibiting such party from any violation or threatened violation of these
provision and compelling Executive to comply with these provisions. This
Paragraph 9 shall not affect or limit, and injunctive relief provided in this
Paragraph 9 shall be in addition to, any other remedies available to the Company
at law or in equity. In the event or any breach or threatened breach of said
provisions, Executive consents to the entry of preliminary and permanent
injunctions by a court of competent jurisdiction prohibiting such party from any
violation or threatened violation of these provisions and compelling Executive
to comply with these provisions. This Paragraph 9 shall not affect or limit, and
the injunctive relief provided in this Paragraph 9 shall be in addition to, any
other remedies available to the Company at law or in equity. In the event an
injunction is issued against any such conduct by Executive, the period referred
to in Paragraph 7 of this Agreement shall continue until the later of the
expiration of the period set forth therein or one (1) month from the date a
final judgment enforcing such provisions is entered and the time for appeal has
lapsed.
10. Indemnification. The Company shall provide Executive with payment
of legal fees and indemnification to the maximum extent permitted
by the Company's certificate of incorporation and the
Delaware General Corporation Law.
11. Miscellaneous
(a) Executive represents, warrants, covenants and agrees that he has
a right to enter into this Agreement, that he is not a party to any agreement or
understanding, oral or written, which would prohibit performance of his
obligations under this Agreement, and that he will not use in the performance of
his obligations hereunder any proprietary information of any other party which
he is legally prohibited from using.
(b) Executive will cooperate with the Company in connection with the
Company's application to obtain key-man life insurance on his life, on which the
Company will be the beneficiary. Such cooperation shall include the execution of
any applications or other documents requiring his signature and submission of
insurance applications and submission to a physical.
(c) Any notice under the provisions of this Agreement shall be given
in writing and by hand, overnight courier or messenger service, against signed
receipt or acknowledgment of receipt, registered or certified mail, return
receipt requested, or telecopier or similar means of communication if receipt is
acknowledged or if transmission is confirmed by mail as provided in this
Paragraph 7(d), to the parties at their respective addresses set forth at the
beginning of this Agreement or by telecopier to the Company at (000) 000-0000 or
to Executive at (000) 000-0000, with notice to the Company being sent to the
attention of the individual who executed this Agreement on behalf of the
Company. Either party may, by like notice, change the person, address or
telecopier number to which notice should be sent.
(d) If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to parties or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Agreement shall be valid and be
enforced to the fullest extent permitted by law, and any court having
jurisdiction may reduce the scope of any provision of this Agreement so that it
complies with applicable law.
(e) The Agreement constitutes the entire agreement of the Company and
Executive as to the subject matter hereof, superseding all prior written or
prior or contemporaneous oral understanding or agreements, including any
previous employment agreements, or understandings with respect to the subject
matter covered in this Agreement. This Agreement may not be modified or amended
nor may any right be waived, except by a writing which expressly refers to this
Agreement, states that it is intended to be a
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modification, amendment or waiver and is signed by both parties in the case of a
modification or amendment or by the party granting the waiver. No course of
conduct or dealing in the case of a modification or amendment or by the party
granting the waiver. No course of conduct or dealing between the parties and no
custom or trade usage shall be relied upon to vary the terms of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement.
(f) Neither party hereto shall have the right to assign or transfer
any of its or his rights hereunder.
(g) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors, executors,
administrators and assigns.
(h) The headings in this Agreement are for convenience of reference
only and shall not affect in any way the construction or interpretation of this
Agreement.
(i) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed wholly within such State, except that the provisions of Paragraph 10
shall be governed by the Delaware Corporation Law. Each of the parties hereby
(i) irrevocably consents and agrees that any legal or equitable action or
proceeding under or in connection with this Agreement shall be brought
exclusively in any Federal or state court in the County of New York, State of
New York, (ii) by execution and delivery of this Agreement, irrevocably submits
to and accepts, with respect to its properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid court and (iii) agrees that
any action against such party may be commenced by service of process by any
method set forth in Paragraph 1 l(c) of this Agreement, other than by
telecopier, to such party as provided in said Paragraph 11 (c).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NETSMART TECHNOLOGIES, INC. NETSMART TECHNOLOGIES, INC.
By:/s/ Xxxxx X. Xxxxxxxx By:/s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxxxx (Company) Name: Xxxxx X. Xxxxxx (Executive)
Xxxxxx: Chief Executive Officer Title: President
Chairman of the Board
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