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EXHIBIT 10.38
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the 11th day
of May, 1998 by and between United American Healthcare Corporation, a Michigan
corporation (the "Company) and Xxxxxxx Xxxxx, an individual ("Employee").
RECITALS:
WHEREAS, the Company desires to hire Employee as its President and Chief
Operating Officer, and
WHEREAS, Employee desires to be employed by the Company in such capacity,
and
WHEREAS, the Company and Employee wish to set forth in this Agreement all
of the terms and conditions of such employment relationship,
NOW, THEREFORE, in consideration of the mutual covenants and consideration
set forth below, the sufficiency of which is hereby acknowledged, the parties
agree as follows:
I. EMPLOYMENT AND TERM
Employee's employment by Company shall commence on May 11, 1998 (the
"Effective Date") and shall continue until May 11, 2001 unless and until
earlier terminated by either party as provided below.
II. DUTIES
Employee shall have the title and perform the duties of President and
Chief Operating Officer of the Company and shall hold such additional titles
and perform such additional duties as the Board of Directors may prescribe from
time to time. Not later than August 6, 1998 Employee shall be designated by
the Board of Directors as Chief Executive officer of the Company and shall
perform the duties of such office. As President and Chief Operating Officer,
Employee shall (a) report to the Chairman of the Board of the Company (the
"Chairman") and the Office of the Chairman and the Board of Directors of the
Company, and (b) have authority to hire and terminate, in his sole discretion
subject to the established policies of the Company, any and all employees of
the Company. Employee shall devote all of his skill, knowledge, energies and
business time exclusively to the business and affairs of the Company and its
subsidiaries and affiliates, including Michigan Health Maintenance Organization
Plans, Inc. d/b/a OmniCare Health Plan ("OmniCare-Michigan"), and shall not
accept other employment nor maintain any other business interests except with
the prior written approval of the Chairman or the Board of Directors of the
Company. Additionally, Employee shall maintain no personal interest which
interferes with the performance of his duties hereunder.
III. COMPENSATION
As total compensation for Employee's services rendered hereunder, Company
shall pay or provide to Employee the following:
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(a) Base Salary
A base annual salary in the gross amount of Two Hundred Twenty Five
Thousand and no/100 Dollars ($225,000.00), payable in installments throughout
the year in accordance with the Company's regular payroll practice. Employee's
salary and performance shall be reviewed annually by the Board of Directors of
the Company. The Company may, in its sole discretion, increase such salary
from time to time, but in no event shall such salary be reduced below Two
Hundred Twenty Five Thousand and no/100 Dollars ($225,00.00) without the
written consent of Employee.
(b) Annual Bonus
An annual performance bonus expressed as a percentage of Employee's annual
base salary defined in subparagraph (a) above (which percentage may be less
than or greater than 100%) and determined with reference to reasonable
performance criteria selected in the discretion of the Board of Directors of
the Company. Such annual performance bonus shall be paid in March of each year
for the prior year. Notwithstanding the foregoing, Employee's first bonus
period shall be from the date of this Agreement through December 31, 1998 and
the amount of Employee's bonus for such period shall be One Hundred Thousand
Dollars ($100,000), based upon the achievement of reasonable performance
criteria mutually agreed upon by the Board of Directors of the Company and
Employee.
(c) Fringe Benefits
Those fringe benefits provided from time to time by the Company to its
other senior executives, except as otherwise set forth on Attachment A. The
Company shall have the right to modify or eliminate any or all of such
benefits, provided that such modification or elimination applies generally to
other senior executives of the Company. The fringe benefits presently
applicable to Employee are described in and made a part of this Agreement as
Attachment A.
(d) Stock Options
The Company hereby grants Employee the option to purchase up to one
hundred thousand (100,000) shares of common stock of the Company on the terms
and conditions set forth in Attachment B.
(e) Payment of Accrued Compensation on Termination
Except as provided in Section V, upon termination of the employment of
Employee from the Company for any reason, he shall receive payment of his
compensation described in this Section III (including salary, bonus and fringe
benefits) accrued to the date of such termination. The amount of Employee's
annual bonus which shall be deemed to be accrued in the event of such
termination shall be the amount computed as if the Employee had remained
employed for an entire year, prorated to the date of termination.
IV. EXPENSES
The Company will pay or reimburse Employee for all travel, lodging, and
meal expenses incurred in connection with performance of his duties, subject to
evidence of the occurrence and the purpose of each such expense being deemed
reasonable by the Company.
V. TERMINATION PROVISIONS
The Company may terminate this Agreement at any time with or without
cause, upon written notice to Employee. Employee may terminate this Agreement
with or without cause upon three (3) months advance written notice to Company.
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The term "for cause", as applied to the Company's termination of this
Agreement, shall mean and be limited to the following events:
(1) Employee's willful and continued failure to perform his duties in
accordance with this Agreement; or
(2) Employee's conviction of any crime or offense involving money or other
property of the Company, or any other crime (whether or not involving the
Company) that constitutes a felony in the jurisdiction involved; or
(3) Except as otherwise provided by applicable law, Employee's inability
for any reason (other than an act or omission by the Company) to perform the
essential functions of his duties in accordance with this Agreement; or
(4) Employee's willful violation of any specific material direction from
the Chairman of the Board or the Board of Directors of the Company where such
direction is reasonably consistent with this Agreement.
For purposes of the preceding provisions, no act, or failure to act, on
Employee's part will be deemed "willful" unless done, or omitted to be done, by
Employee not in good faith and without reasonable belief that Employee's act,
or failure to act, was in the best interest of the Company. Notwithstanding
the foregoing, "cause" will not exist unless and until the Company has
delivered to Employee a resolution duly adopted by the affirmative vote of a
majority of the Board of Directors of the Company then in office finding that
one or more of the events set forth in any of the immediately foregoing four
numbered subparagraphs has occurred.
The term "for cause" as applied to Employee's termination of this
Agreement shall mean and be limited to the following events:
(1) The Company shall make any material change in the duties of Employee
without his consent; or
(2) The Company shall relocate its principal office more than 45 miles
from its present location; or
(3) The consummation of a Sale (as hereinafter defined). A "Sale" shall
have occurred: (1) if the Company or OmniCare shall sell all or substantially
all of its respective assets to a third party; (2) if the Company or OmniCare
shall merge or consolidate into or with another corporation and the Company or
OmniCare, as the case may be shall not be the surviving corporation; or (3) if
the Company or person owning voting securities of the Company shall issue or
sell voting securities of the Company to a third party or parties in a
transaction or series of related transactions which result in such third party
or parties owning a majority of the voting securities of the Company (or such
amount of the voting securities of the Company which permits such party or
parties to control the Company).
(a) Termination by Company Without Cause
In the event the Company elects to terminate this Agreement without cause:
(i) the Company shall continue to pay Employee his base salary in installments
in accordance with the Company's regular payroll practice for a period of
eighteen (18) months from the effective date of such termination ("Termination
Date"); (ii) the Company shall pay Employee his bonus under Section III(b),
prorated to the Termination Date in accordance with Section III(e); and (iii)
until the earlier of (a) eighteen (18) months from the Termination Date or (b)
the date Employee shall have commenced new employment or received an offer of
employment comparable to Employee's employment under this Agreement which
Employee does not accept, the Company shall continue to provide the fringe
benefits under Section III(c).
(b) Termination by Company for Cause
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In the event Company terminates Employee's performance for cause, Employee
shall be entitled to no payment or benefit of any nature from the Company other
than the payment of Employee's base salary as provided under Section III(e).
(c) Termination by Employee
In the event Employee terminates Employee's performance without cause,
Employee shall be entitled to no payment or benefit of any nature from the
Company other than the payment of Employee's base salary as provided under
Section III(e). In the event Employee terminates Employee's performance for
cause: (i) the Company shall continue to pay Employee his base salary in
installments in accordance with the Company's regular payroll practice for a
period of eighteen (18) months from the effective date of such termination;
(ii) the Company shall pay Employee his bonus under Section III(b), prorated to
the effective date of such termination in accordance with Section III(e); and
(iii) until the earlier of (a) eighteen months from the Termination Date or (b)
the date Employee shall have commenced new employment or received an offer of
employment comparable to Employee's employment under this Agreement which
Employee does not accept, the Company shall continue to provide the fringe
benefits under Section III(c).
(d) Death of Employee
This Agreement and the Company's obligations to pay any consideration to
Employee shall terminate immediately upon Employee's death. In such event, the
net salary and any other payments owed to Employee for work performed through
to the date of his death shall be paid by the Company to Employee's estate in
accordance with applicable law.
(b) Prerequisite Release
Anything to the contrary herein notwithstanding, Employee, as a
precondition to receiving any severance benefit described in this Agreement,
must execute in a form reasonably satisfactory to the Company, a full release
and covenant not to xxx relating to the Company and its related entities (as
well as each's officers, directors, employees and agents for any acts or
omissions occurring prior to the date of termination of Employee).
VI. CONFIDENTIALITY
Beginning on the date hereof and at all times hereafter Employee shall
treat as confidential any and all information (irrespective of the form of such
information) deemed by the Company (or any entity related thereto) to be
proprietary, confidential, or secret, including but not limited to, information
relating to the Company's organizational structure, operations, business plans,
research data, research results, inventions, customer lists, or other work
product ("confidential information"), whether developed by or for the Company
(or any entity related thereto) and whether developed on the premises of the
Company or elsewhere. Beginning on the date hereof and at any time hereafter,
Employee shall not, without the prior written consent of the Company, disclose
to any third party or otherwise make use of in any manner or in any form any
confidential information, except to the extent necessary to perform the
services required of him under this Agreement.
Additionally, Employee acknowledges that all confidential information is
the sole and exclusive property of the Company. Upon request by the Company
and/or on termination of this Agreement, Employee shall immediately return to
Company all Company records, information, documents (including any and all
copies thereof), and other property of the Company in the possession and/or
control of Employee. If requested by the Company, Employee shall certify in
writing at the time of his termination of employment that he has complied in
all respects with the confidentiality requirements of this Agreement.
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VII. NON-COMPETITION
For a period of one (1) year from termination of this Agreement, Employee
will not anywhere in any metropolitan area in the United States in which the
Company (or any entity related thereto) conducts business:
(a) Solicit or otherwise contact, either directly or indirectly, for
purposes of selling or otherwise promoting any product or service competitive
with any product or service sold or actively in development by the Company at
the time of the termination of the Agreement, or sell any such product or
service to, any person, firm, association, corporation or other entity:
(1) to which the Company sold any product or service during the
twenty-four (24) months immediately preceding the termination of this
Agreement; or
(2) which Employee solicited, contacted or otherwise dealt with on
behalf of the Company during the twenty-four (24) months immediately
preceding the termination of this Agreement;
(b) make or facilitate any such sale either for the benefit of him or for
the benefit of any other person, firm, association, or corporation;
(c) in any manner, directly or indirectly, assist any person, firm,
association, or corporation to make any such contact, solicitation, or sale;
(d) participate, engage, or have an interest in, directly or indirectly,
whether as director, officer, employee, advisor, consultant, stock broker,
partner, joint venturer, owner, agent, or in any other capacity, in any
business, in whole or in part, in the nature of or competitive with the
business of the Company in any geographic territory served by the Company at
the time of termination of this Agreement; or
(e) directly or indirectly, employ or solicit for employment (by any
person, firm, association, or corporation other than the Company), or engage in
any manner any employee of the Company or consultant to the Company, without
the prior written consent of the Company.
VIII. ENFORCEMENT
The parties agree that upon violation of any provision of Article VI
and/or VII above, monetary damages would be inadequate and difficult to
ascertain, and would result in irreparable injury to the Company. The parties
therefore agree that upon the existence of any such violation, the Company
would be entitled to the issuance by a court of competent jurisdiction of a
temporary restraining order, preliminary injunction, or any other form of
equitable relief prohibiting Employee from committing or continuing any such
violation. Employee further agrees not to contest or object to the Company's
entitlement to such injunction, restraining order or other equitable relief
restraining any such violation or threatened violation of any of the terms of
this Agreement. Any right to obtain an injunction, restraining order, or other
equitable relief hereunder will not be deemed a waiver of any right to assert
any other remedy the Company may have under this Agreement or otherwise at law
or in equity.
IX. NOTICES
All notices which either party hereto is required or permitted to give to
the other will be given in writing and delivered personally or by certified
mail, addressed to the address referred to below:
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If to the Company, to it at: United American Healthcare Corporation
0000 Xxxxxxx Xxxx Xxxxxxxxx, Xxx. 000
Xxxxxxx, XX 00000-0000
Attention: Chairman of the Board;
If to Employee, to him at: Xxxxxxx Xxxxx
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000
The certified date of receipt of any such notice will be deemed to be the
date of delivery thereof.
X. WAIVERS
No waiver by either party of any breach of non-performance of any
provision or obligation of this Agreement shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision of this
Agreement.
XI. ENTIRE AGREEMENT
This Agreement and its Exhibits constitute the entire Agreement between
the parties and there are no representations, warranties, covenants, or
obligations except as set forth herein. This Agreement supersedes all prior
and contemporaneous contracts, agreements, understandings, negotiations, and
discussions, whether written or oral, between Company (and any entity related
to Company) and Employee, relating in any way to Employee's employment,
termination of employment and/or to any other transaction contemplated by the
Agreement, and may only be changed in writing signed by both Company and
Employee.
XII. NON-ASSIGNABILITY
This Agreement and the benefits hereunder are personal to Employee and are
not assignable or transferrable by Employee to any person, firm, or
corporation.
XIII. SEVERABILITY
If any portion or provision of this Agreement shall for any reason be held
invalid or unenforceable by any court, governmental agency, or arbitrator of
competent jurisdiction, such invalidity or unenforceability shall be construed
as if such invalid or unenforceable provision had never been contained herein.
Such invalidity of any provision shall not effect any other provision of this
Agreement.
XIV. GOVERNING LAW
The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the state of Michigan.
XV. ARBITRATION
Except as to injunctive relief for the Company, all disputes arising under
this Agreement shall be submitted to binding arbitration in Detroit, Michigan
to a single arbitrator chosen in accordance with the rules of the American
Arbitration Association. Such arbitrator's decision shall be final and binding
upon the parties, and shall be entitled to enforcement in any court of
competent jurisdiction. The costs and expenses of the arbitrator shall be
shared equally by the parties.
IN WITNESS WHEREOF, the parties have read and fully understand the
contents of this Agreement and have duly executed this Agreement as of the day
and year first written above.
UNITED AMERICAN HEALTHCARE
CORPORATION
_______________________________ By:_______________________________
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Xxxxxxx Xxxxx Xxxxxxx X. Xxxxxx
TITLE: Chairman of the Board
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DESCRIPTION OF FRINGE BENEFITS
PROVIDED TO SENIOR EXECUTIVES
OF UAHCC AS OF MAY 1, 1998
Attachment A
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ATTACHMENT B
STOCK OPTION
The option to purchase 100,000 shares of common stock of the Company (the
"Shares") granted to Employee pursuant to Section III(d) of the Employment
Agreement (the "Employment Agreement") dated as of May 11, 1998 between United
American Healthcare Corporation and Xxxxxxx Xxxxx (the "Option") shall be
subject to the following terms and conditions:
1. Capitalized terms not otherwise defined herein have the meanings given to
them in the Employment Agreement.
2. The exercise price shall be $1.38 per Share.(1)
3. The Option may not be transferred or assigned by Employee other than by will
or the laws of descent and distribution and, during Employee's lifetime, the
Option is exercisable only by him.
4. Employee may exercise the Option in accordance with the following schedule:
(a) Commencing May 11, 1999, up to 77,000 Shares
may be purchased;
(b) Commencing May 11, 2000, up to an additional
23,000 Shares may be purchased.
5. The Option shall expire (to the extent not previously exercised) on the
earlier of (a) May 11, 2003 or (b) the date the Company terminates the
Employment Agreement pursuant to Section V(b) thereof.
6. The Option shall be exercised by Employee giving a written notice of
exercise to the Chief Financial Officer of the Company or other person
designated by the Company. Such notice shall specify the number of Shares to
be purchased and shall be accompanied by payment in full of the exercise price
for such Shares. Such notice shall be effective only upon the actual receipt
of such written notice and of the option price, and no rights or privileges of
a shareholder of the Company in respect of any of the Shares issuable upon the
exercise of any part of the Option shall inure to Employee, or any other person
entitled to exercise the Option, unless and until certificates representing
such Shares shall have been issued, and prior to such issuance no adjustment
shall be made for dividends, distributions or other rights in respect of such
Shares, except as provided in Sections 8 and 9 below.
7. If upon exercise of the Option there shall be payable by the Company any
amount for income tax withholding, then, in the sole discretion of the
Company's Board of Directors, either Employee shall pay such amount to the
Company or the number of Shares delivered by the Company to Employee shall be
appropriately reduced, to reimburse the Company for such payment. The
Company's Board of Directors, in its sole discretion, may permit Employee to
satisfy such withholding obligations, in whole or in part, by electing (a) to
have the number of Shares delivered or deliverable by the Company upon exercise
of the Option appropriately reduced or (b) to tender Shares back to the Company
subsequent to exercise of the Option, to reimburse the Company for such income
tax withholding. The Company's Board of Directors may make such other
arrangements with respect to income tax withholding as it shall determine.
8. In case the Company (i) consolidates with or merges into any other
corporation or entity and is not the continuing or surviving entity of such
consolidation or merger, or (ii) permits any other corporation or other
entity to consolidate with or merge into the Company and the Company is the
continuing or surviving entity but, in connection with such consolidation or
merger, the common stock of the Company ("Common Stock") is changed into or
exchanged for stock or other securities of any other corporation or other
entity or cash or any other assets, or (iii) transfers all or substantially all
of its properties and assets to any other corporation or other person or
entity, or (iv) dissolves or liquidates, or (v) effects a capital
reorganization or reclassification in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or other assets with
respect to or in exchange for the Common Stock, then, and in each such case,
proper provision shall be made so that Employee upon the exercise of the Option
at any time after the consummation of such consolidation, merger, transfer,
dissolution, liquidation, reorganization or reclassification (each transaction,
for purposes of this Section 8, being herein called a "Transaction"), shall be
entitled to receive (at the aggregate exercise price in effect for all shares
of Common Stock issuable upon such exercise immediately prior to such
consummation and as adjusted to the time of such Transaction), in lieu of
shares of Common Stock issuable upon such exercise prior to such consummation,
the stock and other securities, cash and assets to which Employee would have
been entitled upon such consummation if he had so exercised the Option in full
immediately prior thereto (subject to adjustments subsequent to such
Transaction provided for in Section 9 below).
Notwithstanding anything to the contrary herein, in connection with any
Transaction and effective as of a date selected by the Board of Directors of
the Company or any committee appointed by the Board of Directors to administer
the Option (being herein called, whether the Board of Directors or such
committee, the "Committee"), which date shall, in the Committee's judgment, be
far enough in advance of the Transaction to permit Employee to exercise the
Option and participate in the Transaction as a holder of Common Stock, the
Committee, acting in its sole discretion without the consent of Employee, may
effect one or more of the following alternatives with respect to the Option
(which alternatives may be made conditional on the occurrence of the applicable
Transaction): (a) accelerate the time at which the Option may be exercised so
that the Option may be exercised in full for a limited period of time on or
before a specified date fixed by the Committee after which specified date the
unexercised Option and all rights of Employee thereunder shall terminate; (b)
accelerate the time at which the Option may be exercised so that the Option may
be exercised in full for its then remaining term; or (c) require the mandatory
surrender to the Company of the Option (irrespective of whether the Option is
then exercisable) as of a date, before, or not later than 60 days after, such
Transaction, specified by the
1 (The closing price of the common stock on the New York Stock Exchange on
Friday, May 8, 1998 rounded to the next xxxxx)
