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EXHIBIT 10.6
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the _____ day of __________, 1998, by and between COMPDENT CORPORATION, a
Delaware corporation (the "Company") and ________________________ (the
"Employee").
I. STATEMENT OF BACKGROUND INFORMATION
The Employee has been an officer and a key employee of the Company and
the parties desire to ensure that the Employee's expertise, knowledge and
experience will continue to be available to the Company in providing
full-service dental benefits and offering network-based dental care, reduced
fee-for-service, third party administration and dental practice management (the
"Business").
II. STATEMENT OF AGREEMENT
In consideration of the mutual covenants, promises and conditions set
forth in this Agreement, and for other good and valuable consideration, the
parties hereto hereby agree as follows:
1. Employment. The Company hereby employs Employee in the position of
________________________ of the Company and/or such other position(s)
as determined by the Board of Directors or its designees and consistent
with the Employee's general area of experience, knowledge and skill,
and Employee hereby accepts such employment upon the terms and
conditions set forth in this Agreement. For purposes of Sections 6, 7
and 8 of this Agreement, "employment" shall mean any period of time
during the term hereof which the Company is paying the Employee salary
or wages. By execution of this Agreement, the parties hereby: (a)
terminate, as of the date hereof, that certain employment agreement
between the Company and Employee dated ______________ (the "Prior
Employment Agreement") and (b) acknowledge and agree that no provisions
of the Prior Employment Agreement shall survive the execution and
delivery of this Agreement.
2. Duties of Employee. Employee agrees to perform and discharge the duties
which may be assigned to Employee from time to time by the Company's
Board of Directors or its designees and consistent with the Employee's
general area of experience, knowledge and skill. Employee also agrees
to materially comply with all of the Company's material policies,
standards and regulations and to follow the reasonable instructions and
directives of Employee's superiors within the Company, as promulgated
by the Board of Directors or its designees. Employee will devote his
full professional and business related time, skills and commercially
reasonable efforts to the Business and
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Employee will not, during the term of this Agreement, be engaged
(whether or not during normal business hours) in any other business or
professional activity (excluding reasonable and appropriate charitable
activities), whether or not such activity is pursued for gain, profit
or other pecuniary advantage without the prior written consent of the
Chief Executive Officer of the Company, which consent will not be
unreasonably withheld.
3. Term. The term of this Agreement will be for a period commencing on the
date hereof and expiring on the later of the fifth anniversary of such
date or, if there is a Change in Control (as defined herein) before
such fifth anniversary date, the date which is 25 months following any
Change in Control, subject to earlier termination as provided for in
Section 4 below.
4. Termination.
(a) By the Company. Notwithstanding anything contained in
Section 3 to the contrary, the Company may terminate this Agreement and
all of its obligations hereunder immediately if any of the following
events (any of which shall constitute "cause" for purposes of this
Agreement) occur:
(i) Employee (A) materially breaches any of the terms or
conditions set forth in Sections 6, 7 or 8 of this Agreement including,
without limitation, the failure to use commercially reasonable efforts
in the performance of duties assigned to the Employee on a full time
basis, or (B) materially breaches any of the other terms and conditions
set forth in this Agreement and fails to cure such breach within twenty
days after Employee's receipt from the Company of written notice of
such breach, which notice shall describe in reasonable detail the basis
for the Company's belief that Employee is in breach hereof;
(ii) Employee commits any act in bad faith materially
detrimental to the business or reputation of the Company;
(iii) Employee is convicted of any crime involving fraud, deceit
or moral turpitude or Employee intentionally engages in dishonest or
illegal activities that have a material adverse effect upon the
business or reputation of the Company; or
(iv) Employee dies or becomes mentally or physically
incapacitated or disabled so as to be unable to perform Employee's
duties under this Agreement. For purposes of this Agreement, Employee
shall be deemed to be mentally or physically incapacitated or disabled
so as to be unable to perform his duties if and to the extent he
becomes permanently disabled under the Company's long-term disability
policy then in effect.
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The Company may also terminate the Employee's employment, upon
reasonable written notice to the Employee, at any time subject to the
fulfillment of the Company's obligations under this Agreement and such
termination by the Company for any other reason shall be deemed
termination "without cause."
(b) By Employee. The Employee may terminate this Agreement:
(i) if the Company materially breaches any of the terms or
conditions set forth in this Agreement and fails to cure its breach
within twenty days after its receipt from Employee of written notice of
such breach, which notice describes in reasonable detail Employee's
belief that the Company is in breach hereof; or
(ii) for "good reason" (as herein defined) at any time during
the two-year period following a Change in Control upon written notice
to the Company.
The Employee may also resign and terminate his employment on reasonable
written notice at any time and such termination by Employee for any
other reason (other than as provided in Sections 4(b)(i) or (ii)) and
in such event, the Employee shall receive no severance benefits under
this Agreement as a result of such termination.
(c) Certain definitions.
(i) For purposes of this Agreement, "good reason" shall mean the
following:
(A) any material diminution of the Employee's duties or a
reassignment of the Employee to a position not
consistent with the Employee's general area of
knowledge, experience and skills, or the assignment
of substantial additional responsibilities to the
Employee;
(B) any material diminution of the Employee's
compensation or a material diminution of the
Employee's bonus, long-term incentives, employee
benefits or perquisites as in effect immediately
preceding the Change in Control;
(C) any relocation of Employee's principal place of
employment to more than 35 miles from the principal
place of employment immediately preceding the Change
in Control;
(D) any material increase in Employee's travel
obligations;
(E) any failure of any successors to the Company to
assume this agreement; or
(F) any breach of this Agreement by the Company not cured
within ten days after its receipt of notice from
Employee of such breach (in
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the event of such a breach and a termination of this
Agreement by Employee following a Change in Control,
such termination shall be deemed to have occurred
under Section 4(c)(i)(F) and not under Section
4(b)(i) of this Agreement).
(ii) For purposes of this Agreement, "Change in Control" shall mean any
of the following events:
(A) the direct or indirect beneficial ownership (within
the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
and Regulation 13D thereof) of a majority of the
outstanding common stock of the Company is acquired
or becomes held by any person or group of persons
(within the meaning of Section 13(d)(3) of the
Exchange Act);
(B) a change of stock ownership of the Company of a
nature that would be required to be reported in
response to Item 6(e) of Schedule 14A promulgated
under the Exchange Act, and any successor Item of a
similar nature;
(C) the acquisition of beneficial ownership, directly or
indirectly, by any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) of
securities of the Company representing 25 percent or
more of the voting power of the then outstanding
securities of the Company;
(D) the stockholders of the Company shall approve
(provided, however, if the transaction approved by
the stockholders is subsequently terminated, and the
Employee is still employed by the Company at the
termination of the transaction, then no "Change in
Control" shall be deemed to have taken place): (1)
any consolidation, merger, share exchange or other
extraordinary transaction related to the Company
where the stockholders of the Company, immediately
prior to the consolidation, merger, share exchange or
other extraordinary transaction, would not,
immediately after the consolidation, merger, share
exchange or other extraordinary transaction,
beneficially own (as such term is defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, shares representing in the aggregate 50
percent of the voting securities of the corporation
issuing cash or securities in the consolidation,
merger, share exchange or other extraordinary
transaction (or of its ultimate parent corporation,
if any), (2) any lease, exchange, mortgage or other
transfer (in one transaction or series of
transactions contemplated or arranged by any party as
a
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single plan) of all or substantially all of the
assets of the Company and its subsidiaries (taken as
a whole), or (3) any plan or proposal for the
liquidation or dissolution of the Company; or
(E) the following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who, on the date hereof,
constitute the Board of Directors and any new
director (other than a director whose initial
assumption of office is in connection with an actual
or threatened election contest, including but not
limited to a consent solicitation, relating to the
election of directors of the Company) whose
appointment or election by the Board of Directors or
nomination for election by the Company's stockholders
was approved or recommended by a vote of at least
two-thirds of the directors then still in office who
either were directors on the date hereof or whose
appointment, election or nomination for election was
previously so approved or recommended.
(iii) For purposes of this Agreement, "termination of
employment," "termination of Employee" and "termination of this
Agreement" shall have the same meaning unless otherwise agreed to in
writing by the parties hereto.
(d) Severance Payments.
(i) In the event of termination of the Employee by the Company
without cause or termination of this Agreement by Employee pursuant to
Section 4(b)(i) hereof, the Company shall: (A) pay to Employee an
amount equal to one times the Employee's annual salary in effect at the
time of termination (not giving effect to any salary reduction giving
rise to such termination) and (B) either continue the Employee's health
(medical and dental) insurance as provided in Section 5(c) for one year
following the date of such termination to the extent permitted under
applicable law and the Company's group health insurance policies or
reimburse the Employee for his cost for comparable coverage to the
extent such coverage cannot be provided under such policies. Such
severance pay shall be payable in equal monthly installments over the
one-year period beginning on the date of termination of this Agreement
and shall be subject to tax withholding to the extent required under
applicable law. Notwithstanding anything herein to the contrary, the
Company shall not be required to continue to provide Employee with
health benefits under this paragraph if Employee becomes entitled to
receive benefits substantially similar to those which Employee
otherwise would have been entitled to receive hereunder. This severance
pay and continuation of health benefits contemplated by this paragraph
are agreed by the parties hereto to be in full satisfaction and
compromise of any claim arising out of any termination of Employee's
employment without cause or pursuant to Section 4(b)(i).
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(ii) Notwithstanding anything herein to the contrary, in the
event of termination of the Employee by the Company without cause
within the two-year period following a Change in Control or termination
by Employee under Section 4(b)(i) or (ii) of this Agreement, then in
lieu of the severance pay and benefit continuation provided in Section
4(d)(i) above, the Company shall: (A) pay to Employee an amount equal
to one and one-half times the Employee's annual salary in effect at the
time of termination (not giving effect to any salary reduction giving
rise to such termination), and (B) either continue the Employee's
health (medical and dental) insurance as provided in Section 5(c) for
one and one-half years following the date of such termination to the
extent permitted under applicable law and the Company's group health
insurance policies or reimburse the Employee for his cost for
comparable coverage to the extent such coverage cannot be provided
under such policies. Such severance pay shall be payable in equal
monthly installments over the one and one-half year period beginning on
the date of termination of this Agreement and shall be subject to tax
withholding to the extent required under applicable law.
Notwithstanding anything herein to the contrary, the Company shall not
be required to continue to provide employee with health benefits under
this paragraph if Employee becomes entitled to receive benefits
substantially similar to those which Employee otherwise would have been
entitled to receive hereunder. Notwithstanding anything herein to the
contrary, the Company shall not be required to pay any amount (the
"Excess Amount") that, upon advice of the Company's independent tax
advisor or counsel, would be in excess of 2.99 times Employee's Base
Amount, as defined in Section 280G(b)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"), and, therefore, would trigger the tax
(the "Excise Tax") imposed by Section 4999 of the Code, unless Employee
agrees to be bound by the noncompetition provisions of Section 7 hereof
for one additional year following the termination. Payment of the
Excess Amount shall be consideration for the Employee agreeing to be
bound by such noncompetition provision for such additional year.
Election by the Employee to receive the Excess Amount and to be bound
by the noncompetition provision shall be given in writing to the
Company not later than five days after the date on which the Company
notifies Employee in writing that an Excess Amount may be payable
absent such agreement, and, upon receipt of such notice, the Company
shall be obligated to pay the Excess Amount to Employee.
(e) Security Obligation. The Company shall establish and fund,
not later than 30 days prior to the consummation of a Change in
Control, a grantor trust in an amount sufficient to satisfy the
Company's obligations under Section 4(d). If the Company fails to fund
such trust within such thirty day period, the entire amount of the
Company's severance obligations to the Employee will accelerate and
become immediately due and payable.
(f) Outplacement Services. If, pursuant to or within 24 months
following a Change in Control, Employee terminates this Agreement
pursuant to Sections 4(b)(i) or 4(b)(ii) or the Company terminates this
Agreement without cause, the Company shall provide Employee with the
services of an outplacement firm for a period of one year
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from the date of such termination.
5. Compensation and Benefits.
(a) Annual Salary. For all services rendered by Employee under
this Agreement, the Company will pay Employee a base salary of at least
________________ dollars ($____________) per annum in equal monthly
installments, or a greater amount as determined by the Board of
Directors of the Company.
(b) Annual Bonus Payment. Upon completion of each fiscal year
and as determined by the Board of Directors of the Company, Employee
shall be eligible to receive a bonus ("Bonus") in accordance with any
bonus plan then in effect for executives of the Company of equivalent
position and title, provided Employee is employed by the Company at the
end of such fiscal year. Notwithstanding anything herein to the
contrary, Employee's bonus for any fiscal year ending after a Change in
Control shall not be less than _____% of his base salary then in
effect.
(c) Other Benefits. Employee will be entitled to such fringe
benefits as may be provided from time-to-time by the Company to its
employees, including, but not limited to, group health insurance,
disability, dental, retirement and any other fringe benefits now or
hereafter provided by the Company to its employees, if and when
Employee meets the eligibility requirements for any such benefit. The
Company reserves the right to change or discontinue any employee
benefit plans or programs now being offered to its employees; provided,
however, that all benefits provided for employees of the same position
and status as Employee will be provided to Employee on an equal basis
and the aggregate of such benefits shall not be less than those
currently in effect or otherwise be materially less favorable to the
Employee.
(d) Business Expenses. Employee will be reimbursed for all
reasonable expenses incurred in the discharge of Employee's duties
under this Agreement pursuant to the Company's standard reimbursement
policies.
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(e) Vacation. Employee shall receive paid vacation annually in
accordance with the Company's practices for employees of the Company of
the same position and status as Employee.
(f) Withholding. The Company will deduct and withhold from the
payments made to Employee under this Agreement, state and federal
income taxes, FICA and other amounts normally withheld from
compensation due employees.
6. Non-Disclosure and Use of Confidential Information. Employee recognizes
and acknowledges that the trade secrets and confidential information of
the Company (the "Proprietary Information"), as they may exist from
time-to-time, are valuable, special and unique assets of the Business.
Employee further acknowledges that access to such Proprietary
Information relating to the Business of the Company is essential to the
performance of Employee's duties under this Agreement. Therefore, in
order to obtain access to such Proprietary Information, Employee agrees
that Employee will not, in whole or in part, disclose such Proprietary
Information to any person, firm, corporation, association or any other
entity for any reason or purpose whatsoever, nor will Employee make use
of any such information for Employee's own purposes or for the benefit
of any person, firm, corporation, association or other entity (except
the Company). For purposes of this Agreement, the term "trade secrets"
means the whole or any portion of any scientific or technical or
non-technical information, design, process, procedure, formula,
computer software product, documentation or improvement relating to the
Business which: (1) derives economic value, actual or potential, from
not being generally known to other persons who can obtain economic
value from its disclosure or use; and (2) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy or
confidentiality. The term "confidential information" means any and all
other data and information relating to the Business which: (1) has
value to the Company; (2) is not generally known by its competitors or
the public; and (3) is treated as confidential by the Company. The
provisions of this Section 6 will apply during Employee's employment by
the Company and, with respect to trade secrets, at any and all times
thereafter and, with respect to confidential information, for three
years thereafter. These restrictions will not apply to any Proprietary
Information which: (i) is in the public domain, provided that Employee
was not responsible, directly or indirectly, for such Proprietary
Information entering the public domain without the Company's consent;
(ii) becomes known to Employee, during the term of this Agreement, from
a third party not known to Employee to be under a confidential
relationship with the Company; or (iii) is required by law or
governmental tribunal to be disclosed; provided, however, that if
Employee is legally compelled to disclose any Proprietary Information,
Employee will provide the Company with prompt written notice of such
legal compulsion so that the Company may seek a protective order or
other available remedy.
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7. (a) Non-Competition Covenant. During the term of this Agreement and for
a period of one year following termination of this Agreement for any
reason, Employee will not, directly or indirectly, on Employee's own
behalf or in the service of or on behalf of any other individual or
entity, compete with the Company in the Business within the
Geographical Area (as hereinafter defined). The term "compete" means to
engage, directly or indirectly, on Employee's own behalf or in the
service of or on behalf of any other individual or entity, either as a
proprietor, employee, agent, independent contractor, consultant,
director, officer, partner or stockholder (other than a stockholder of
a corporation listed on a national securities exchange or whose stock
is regularly traded in the over-the-counter market, provided that
Employee at no time owns, directly or indirectly, in excess of five
percent of the outstanding stock of any class of any such corporation)
in providing management, executive, marketing or other services. For
purposes of this Agreement, the term "Geographical Area" means those
areas in the United States and in foreign countries in which Employee
is or has engaged in providing or marketing Business products or
services as of the date of this Agreement. The Geographical Area
currently includes Alabama, Arkansas, Colorado, Florida, Georgia,
Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi,
Missouri, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania,
South Carolina, Tennessee, Texas, Virginia and West Virginia. The
Company may, from time to time and after giving Employee notice (but
only while the Employee is employed by the Company), amend this
Agreement to expand the Geographical Area to include additional areas
in which the Company may conduct the Business after the date hereof.
(b) Non-Interference. During the term of this Agreement and for a
period of one year following termination of this Agreement for any
reason, Employee will not, directly or indirectly, on Employee's own
behalf or in the service of or on behalf of any other individual or
entity, interfere with, disrupt, or attempt to disrupt the past,
present or prospective relationships, contractual or otherwise, between
the Company and any supplier, consultant, or client of the Company with
whom Employee had material business contact during the two-year period
ending on the date of the termination of this Agreement. The term
"prospective relationship" is defined as any relationship where the
Company has actively sought an individual or entity as a prospective
supplier, consultant, or client.
(c) Construction. The parties hereto agree that any judicial authority
construing all or any portion of this Section 7 or Section 8 below will
be empowered to sever any portion of the Geographical Area, Business or
time period, client base, prospective relationship or prospect list or
any prohibited business activity from the coverage of such Section and
to apply the provisions of such Section to the remaining portion of the
Geographical Area, Business or time period, the client
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base or the prospective relationship or prospect list, or the remaining
business activities not so severed by such judicial authority. In
addition, it is the intent of the parties that the judicial authority
replace each such severed provision with a provision as similar in
terms to such severed provision as may be possible and be legal, valid
and enforceable. It is the intent of the parties that Sections 7 and 8
be enforced to the maximum extent permitted by law. In the event that
any provision of either such Section is determined not to be
specifically enforceable, the Company shall nevertheless be entitled to
bring an action to seek to recover monetary damages as a result of the
breach of such provision by Employee.
8. Non-Solicitation of Employees Covenant. Employee further agrees and
represents that during Employee's employment by the Company and for a
period of two years following any termination of this Agreement for
whatever reason, Employee will not, directly or indirectly, on Employee's
own behalf or in the service of, or on behalf of any other individual or
entity, divert or solicit, or attempt to divert or solicit, to or for any
individual or entity which is engaged in providing Business services, any
person employed by the Company (a) who was employed by the Company during
the two-year period ending on the date of the termination of this
Agreement and (b) with whom Employee was familiar, whether or not such
employee is a full-time employee or temporary employee of the Company,
whether or not such employee is employed pursuant to a written agreement
and whether or not such employee is employed for a determined period or
at-will, except as agreed to by the Company.
9. Existing Restrictive Covenants. Employee represents and warrants that
Employee's employment with the Company does not and will not breach any
agreement which Employee has with any individual or entity to keep in
confidence confidential information or not to compete with any such
individual or entity. Employee will not disclose to the Company or use on
either of their behalf any confidential information of any other party
required to be kept confidential by Employee.
10. Return of Confidential Information. Employee acknowledges that as a
result of Employee's employment with the Company, Employee may come into
the possession and control of Proprietary Information, such as
proprietary documents, drawings, specifications, manuals, notes, computer
programs, or other proprietary material. Employee acknowledges, warrants
and agrees that Employee will return to the Company all such items and
any copies or excerpts thereof, and any other properties, client lists,
client contracts, files or documents obtained as a result of Employee's
employment with the Company, immediately upon the termination of
Employee's employment with the Company.
11. Remedies. Employee agrees and acknowledges that the violation of any of
the covenants or agreements contained in Sections 6, 7, 8, 9 and 10 of
this Agreement
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would cause irreparable injury to the Company, that the remedy at law for
any such violation or threatened violation thereof would be inadequate,
and that the Company will be entitled, in addition to any other remedy,
to temporary and permanent injunctive or other equitable relief without
the necessity of proving actual damages including, without limitation,
the right to terminate all payments under this Agreement. Sections 4, 6,
7, 8, 9, 10, 11, 12, 13, 14, 15, 16, and 17 of this Agreement shall
survive termination of the Employee's employment under this Agreement.
12. Notices. Any notice or communication under this Agreement will be in
writing and sent by registered or certified mail addressed to the
respective parties as follows:
If to the Company: If to the Employee:
CompDent Corporation
000 Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
13. Severability. Subject to the application of Section 7(c) to the
interpretation of Sections 7 and 8, in case one or more of the provisions
contained in this Agreement is for any reason held to be invalid, illegal
or unenforceable in any respect, the same will not affect any other
provision in this Agreement, and this Agreement will be construed as if
such invalid or illegal or unenforceable provision had never been
contained therein. It is the intent of the parties that this Agreement be
enforced to the maximum extent permitted by law.
14. Entire Agreement. This Agreement embodies the entire agreement of the
parties relating to the subject matter hereof and supersedes all prior
agreements, oral or written, regarding such subject matter. Except as
otherwise provided in Section 7(a) of this Agreement, no amendment or
modification of this Agreement will be valid or binding upon the parties
unless made in writing and signed by the parties.
15. Binding Effect. This Agreement will be binding upon the parties and their
respective heirs, representatives, successors, transferees and permitted
assigns, as applicable.
16. Assignment. This Agreement is one for personal services and is not
assignable by Employee. The Company may assign this Agreement to any of
its affiliates; provided that the Company shall remain liable for the
obligations of its affiliates under this Agreement.
17. Governing Law. This Agreement is entered into and will be interpreted and
enforced pursuant to the laws of the State of Delaware. The parties
hereto hereby agree that the
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appropriate forum and venue for any disputes between any of the parties
hereto arising out of this Agreement shall be any federal court in the
State of Delaware and each of the parties hereto hereby submits to the
personal jurisdiction of any such court. The foregoing shall not limit
the rights of any party to obtain execution of judgment in any other
jurisdiction. The parties further agree, to the extent permitted by law,
that a final and unappealable judgment against either of them in any
action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the fact and amount of such judgment.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPDENT CORPORATION
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By: /s/ Xxxxxxx Xxxxx
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Title: President & Chief Operating Officer
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