EXHIBIT 10.8
EMPLOYMENT AGREEMENT
BY AND BETWEEN
UNITED PAYORS & UNITED PROVIDERS, INC., XXXXXX X. XXXXX,
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
OF UNITED PAYORS & UNITED PROVIDERS, INC., AND XXXXXX X. XXXXXX
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This Employment Agreement, dated as of January 31, 1997, by and between United
Payors & United Providers, Inc., a Delaware Corporation ("UP&UP" or the
"Company"), Xxxxxx X. Xxxxx, Chairman of the Board ("Chairman") and Chief
Executive Officer ("CEO") of UP&UP ("Xxxxx") and Xxxxxx X. Xxxxxx (the
"Employee").
UP&UP desires to employ Xxxxxx X. Xxxxxx, as President of the Company, for the
period provided in this Agreement, and the Employee is willing to accept such
employment with UP&UP, all in accordance with the terms and conditions set forth
below.
The terms and conditions of this Agreement have been agreed to and approved
by Xxxxx, as CEO and Chairman, Xxxxx as an Individual, and by a majority of the
Board of Directors of UP&UP (constituting Xxxxxx X. Xxxxx, Xxxxxx X. Xxxx, Xxxxx
X. Xxxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxxxxx X. Xxxxxx), and the Compensation
Committee of the Board of Directors of UP&UP.
For and in consideration of the premises hereof and the mutual covenants
contained herein, the parties hereto covenant and agree as follows:
1. The Employee will serve as the President of UP&UP and will report to
the Chairman and CEO of UP&UP. The Employee will be responsible for the
operations of UP&UP currently owned or subsequently acquired. These
operations consist of Finance, Marketing, Information Technology,
Legal, Operating Units and Networks.
2. The Employee will be recommended to the Board of Directors of UP&UP
(the "Board") for election as a member of the Board not later than the
annual meeting of stockholders in 1997. Xxxxx will vote the shares of
common stock he controls for the election of the Employee to the Board
of UP&UP.
3. Within one year of the date of this Agreement, the Employee will be
granted the additional title of Chief Operating Officer ("COO").
4. The term of the Employee's employment under the Agreement (the "Term")
shall be for a five-year period commencing on April 1, 1997, or an
earlier date, or the date the Employee and Xxxxx mutually agree upon
but not later than July 1, 1997.
5. As compensation for the performance by the Employee of the services to
be performed by
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the Employee hereunder, UP&UP shall pay the Employee a base salary,
("Salary"), in regular intervals, of $350,000 per year. The Salary is
guaranteed (as that term is hereafter defined) by UP&UP and Xxxxx for
the Term of this Agreement and the Salary will be subject to periodic
increases as the CEO may recommend to the Compensation Committee of the
Board. The term guaranteed shall mean that the Employee will receive
his Salary for the remaining term of the agreement if:
(a) The Employee is terminated without cause (as that term is
hereafter defined);
(b) UP&UP is subject to a change in control (as that term is
hereafter defined); or,
(c) The Employee is unable to fulfill the term of this Agreement
because of death or disability.
6. The Employee will be entitled to an Incentive and Bonus Payment in
addition to the Employee's Salary. The Incentive and Bonus Payment will
be computed on an annual basis commencing in 1997 and such Incentive
and Bonus Payment will be no less than 1% of UP&UP's net income for
each annual period.
7. The Employee may receive amounts in excess of 1% of UP&UP's net income
as a Bonus and Incentive Payment based upon a recommendation of the CEO
of UP&UP, using standards the CEO normally applies to determine
discretionary Bonus and Incentive awards and payments.
8. UP&UP will pay the Employee on the first day of the Term of the
Agreement $1,785,000 (the "Advance Benefit Payment"). This Advance
Benefit Payment is intended to provide a supplemental benefit to the
Employee over the five-year term of this Agreement. Accordingly, if
the Employee voluntarily terminates employment with UP&UP prior to the
Term of this Agreement, the Employee will pay to UP&UP an amount equal
to the remaining Term of the Agreement computed on a monthly pro-rated
basis where the numerator is the remaining month's under the Term of
the Agreement and the denominator is 60 months (the "Pro-Rated
Amount"). The refund of the Advance Benefit Payment will recognize the
tax benefit derived by UP&UP in deducting the Advance Benefit Payment
and the cost to the Employee in treating the Advance Benefit Payment as
income. In no event shall the Employee be required to refund to UP&UP a
Pro-Rated amount in excess of the after-tax proceeds that the Employee
received. The Employee will have unrestricted use of the Advance
Benefit Payment as it is earned on a Pro-Rated basis during the Term
of this Agreement.
9. The Employee will not be required to refund any of the Advance Benefit
Payment if:
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(a) The Employee is terminated without cause (as that term is
hereafter defined);
(b) UP&UP is subject to a change in control (as that term is
hereafter defined);
(c) The Employee's position as President and COO and his related
responsibilities are reduced, or
(d) The Employee is unable to fulfill the Term of this Agreement
because of death or disability.
10. Upon the execution and effective date of this Agreement, the Employee
will be granted an option to purchase 750,000 shares of common stock
(adjusted for stock splits and reverse stock splits) of UP&UP based
upon the following exercise prices (the "Option Plan"):
(a) 250,000 shares at an exercise price that is $6.00 per share
below UP&UP's per share market value on the grant date, as
determined based upon a reasonable time period of trading
activity on the NASDAQ.
(b) 250,000 shares at an exercise price that is equal to 100% of
UP&UP's per share market value on the grant date, as
determined based upon a reasonable time period of trading
activity on the NASDAQ.
(c) 250,000 shares at an exercise price that is $6.00 per share
higher than UP&UP's per share market value on the grant date,
as determined based upon a reasonable time period of trading
activity on the NASDAQ.
11. UP&UP and Xxxxx will use its best efforts to ensure that the number of
shares of common stock reserved for issuance under the Option Plan is
sufficient to enable the exercise of the options granted to the
Employee under this Agreement. If, however, the number of shares
available for issuance upon any attempted exercise of such options is
insufficient, UP&UP will pay the Employee in cash, in the form of
stock appreciation rights as provided in the Option Plan, an amount
equal to the difference between the option price per share and the
fair market value per share on the date of attempted exercise, to the
extent of such insufficiency.
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12. The options to purchase 750,000 shares, at the exercise prices
described in Paragraph 10, (the Option Plan Shares) will vest ratably
over an 8-year period at 12.5% per year. The vesting of such options
will accelerate based upon:
(a) The termination of the Employee without cause (as that term is
hereafter defined) -- 100% acceleration of all unvested
options; or
(b) UP&UP being the subject of a change in control (as that term
is hereafter defined) -- 100% acceleration of all unvested
options; or
(c) The CEO agrees that the Employee has achieved certain
qualitative and quantitative criteria that has enhanced
UP&UP's operating performance and/or shareholder value --
acceleration of unvested options based upon the discretion of
the CEO and/or Board of Directors.
13. The options to purchase 750,000 shares at the exercise prices described
in Paragraph 10 (the Option Plan Shares) will be exercisable over a
12-year period and, as previously noted in Paragraph 12, will be vested
100% based upon a change in control. At the Employee's option, the
options to purchase the 750,000 shares of common stock will have
corresponding stock appreciation rights that will exist at the change
in control date and which will be settled in cash based upon an amount
equal to the excess, if any, of the Change in Control Price or Market
Value over the Exercise Price of the option.
14. UP&UP shall pay or reimburse the Employee for all reasonable travel or
other expenses incurred in connection with the performance of the
Employee's duties under this Agreement in accordance with such
procedures as UP&UP may from time to time establish.
15. The Employee shall have any additional benefits for which the Employee,
without action by the Board of Directors of UP&UP or any committee
thereof, may be or become eligible under any group health, life
insurance, disability, stock purchase, retirement income or other form
of employee benefit plan or program of UP&UP now existing or that may
hereafter be adopted by UP&UP.
16. In lieu of UP&UP paying the Employee for any relocation benefit, UP&UP
agrees to provide the Employee with a Company-owned automobile or, a
monthly perquisite representing the cash equivalent of leasing a
Company-owned automobile. Further, the Employee shall be entitled to
the number of paid vacation days in each calendar year determined by
the Company from time to time for its senior executive officers, but
not less than three weeks in any calendar year (prorated in any
calendar year during which the Employee is employed hereunder for less
than the entire such year in accordance with the number of days in
such calendar year during which he is so employed). The Employee
also shall be entitled to all paid holidays given by the Company to
its senior executive
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officers.
17. Employee agrees to comply with UP&UP's policies regarding the conduct
of the businesses of UP&UP and its affiliates, as long as such policies
do not violate federal or state laws.
18. (a) This Agreement may be terminated by UP&UP for cause by notice
to the Employee, specifying the event relied upon for such
termination within thirty days of such event. The term
"cause" shall mean activity involving willful misconduct,
gross negligence, failure of the Employee to devote his full
business time and attention to his duties hereunder, or
breach of one or more express obligations under this
Agreement. The termination by UP&UP of the Employee's
employment for any reason other than those specified in the
preceding sentence shall be deemed to be a termination of his
employment without cause, following which UP&UP will pay the
Employee the cash amounts that would otherwise become payable
to the Employee based upon the provisions of Paragraphs 5
through 9, inclusive and Paragraph 12 of this Agreement
recognizing the remaining Term of this Agreement.
(b) The Employee may terminate this Agreement in the event of,
without the Employee's prior written consent, any material
adverse change or reduction by UP&UP of the Employee's
functions, duties or responsibilities, or other material
breach of this Agreement by UP&UP, by written notice to UP&UP
specifying the event relied upon for such termination within
thirty days after such event. Such termination will have the
same effect as a termination without cause by UP&UP as set
forth in the last sentence of Paragraph 18(a).
19. (a) In the event of any litigation or other proceeding between
UP&UP and the Employee with respect to this Agreement, UP&UP
will reimburse the Employee for all reasonable costs and
expenses relating to such litigation or other proceeding,
including reasonable attorneys' fees and expenses if such
litigation or proceeding results in a judgment or order in
favor of the Employee from which no appeal is or may be taken.
(b) In the event of any dispute between UP&UP and the Employee
with respect to this Agreement, the Employee or UP&UP may, in
his or its sole discretion by notice to the other, require
such dispute to be submitted to arbitration. The arbitrator
shall be selected by agreement of the parties or, if they
cannot agree on an arbitrator or arbitrators within thirty
days after the giving of such notice, the arbitrator shall be
selected by the American Arbitration Association. The
determination reached in such arbitration shall be final and
binding on both parties without any right of appeal.
Execution of the determination by such arbitrator may be
sought in any court having jurisdiction. Unless otherwise
agreed by the parties, any such
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arbitration shall take place in the State of Maryland and
shall be conducted in accordance with the rules of the
American Arbitration Association.
20. This Agreement contains provisions as follows:
(a) in Paragraph 5 for a guaranteed payment to the Employee of
his Salary for the Term of this Agreement;
(b) in Paragraph 6 for a guaranteed payment to the Employee of an
Incentive and Bonus payment;
(c) in Paragraphs 8 and 9 for a forgiveness of the Advance
Benefit Payment; and
(d) in Paragraph 12 for an acceleration of all unvested stock
options,
all such provisions relating to UP&UP being subject to a change in
control. For purposes of this Agreement, a "change in control of the
Company" shall be deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934) is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the company's then outstanding securities; or
(b) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the
Board cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by
the Company's shareholders, of each new director was approved
by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of the period;
or
(c) the stockholders of the Company approve a definitive agreement
(i) for the merger or other business combination of the
Company with or into another corporation pursuant to
which the Company will not survive or will survive
only as a subsidiary of another corporation;
(ii) for the sale or other disposition of all or
substantially all of the assets of the Company;
(iii) for the merger of another corporation into the
Company which survives if, as a result of such merger
less than fifty percent (50%) of the outstanding
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voting securities of the Company shall be owned in
the aggregate immediately after such merger by the
owners of the voting shares of the Company
outstanding immediately prior to such merger;
(iv) for the liquidation or dissolution of the Company;
or,
(v) any combination of the foregoing.
The date on which a "change in control of the Company" occurs is
referred to herein as a "Change in Control Date".
21. If Xxxxxx X. Xxxxx liquidates more than 50% of the common stock he owns
(directly or beneficially) in UP&UP prior to January 1, 1999, the
Employee will have the right to "put" his options to acquire 250,000
shares of UP&UP common stock at an exercise price that is $6.00 per
share higher than UP&UP's per share market value on the grant date to
Xxxxxx X. Xxxxx for $5,000,000.
22. Non-Assignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee or his beneficiaries or
legal representatives without the Company's prior written consent;
provided, however, that nothing in this Agreement shall preclude the
Employee from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity. The Company may assign this
Agreement to a subsidiary, affiliate or successor in interest to its
business, whether by merger, sale of assets or otherwise; however, the
assignment of this Agreement will not in any way change UP&UP's
responsibilities under the Agreement or in any way modify the Change in
Control provisions of this Agreement.
23. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors,
legal representatives and assigns.
24. Law Governing. This agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
25. A waiver by either party of any provision of this Agreement or of any
breach of such provision in any instance shall not be deemed or
construed to be a waiver of such provision for the future, or of any
subsequent breach of such provision.
26. This Agreement may be amended, modified or changed only by further
written agreement between UP&UP and the Employee duly executed by both
parties, referring specifically to the provision(s) of this Agreement
amended thereby, and effective no earlier than the date of such written
agreement unless by its express terms such written agreement is to be
effective on or as of some earlier or later date set forth in such
written agreement.
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27. Any and all notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been given when deposited in
the United States mail, certified or registered mail, postage prepaid.
Any notice to be given the Employee hereunder shall be addressed to
UP&UP to the attention of its Chairman and Chief Executive Officer at
its main offices. Any notice to be given the Employee shall be
addressed to the Employee at his residence address last provided by
Employee to UP&UP. Either party may change the address to which
notices are to be addressed by notice in writing given to the other in
accordance with the terms of this paragraph.
IN WITNESS WHEREOF, and intending to be legally bound, the parties have caused
this Agreement to be duly executed as of the day and year first above written.
/s/ XXXXXX X. XXXXXX /s/ XXXXXX X. XXXXX
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Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxx
As an Individual and Future Chairman and CO of UP&UP and as
President and COO of UP&UP an Individual Stockholder of UP&UP
