1
Exhibit 10.12
May 12, 1997
Xx. Xxxxxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Dear Xx. Xxxxxx,
This letter, when accepted by you in a manner hereinafter provided, will
evidence the agreement among Xx. Xxxxxxxxx X. Xxxxxx (the "Employee") and
Complete Wellness Independent Physician Association, Inc. (the "Company"), a
subsidiary of Complete Wellness Centers, Inc., a Delaware corporation ("CWC")
for the provision of certain services to be rendered by Employee to the Company
(the "Agreement"), all under the following terms and conditions to wit:
1. EMPLOYMENT DUTIES
The Company shall employ Employee as Vice President for Operations. Employee
shall report to the President and Chief Operating Officer, subject in all events
to the control and supervision of the Board of Directors.
Employee shall devote his time and best efforts on a substantially full time
basis to the business and affairs of the Company.
2. EMPLOYMENT TERM
This Agreement shall commence on June 1, 1997, and shall end on May 31, 2000
(the "Employment Term") unless extended by the Company and Employee in writing
or unless sooner terminated in accordance with the provisions of this Agreement.
3. COMPENSATION, EXPENSES, ETC.
In consideration of performance of the services and activities hereby, the
Company shall pay Employee compensation as follows:
A. An initial base salary of forty-five thousand dollars ($65,000)
per annum until such time as the Company is operational. At such
time as the Company is operational, Employee's base salary shall
increase to eighty thousand dollars ($90,000.00) per annum,
payable semi-monthly in arrears. For the purposes of this
Agreement, the Company shall be deemed to be "operational" at
such a time as the Company executes a binding agreement(s) with
a managed care organization(s) covering at least two thousand
five hundred (2,500) lives.
2
B. Employee shall receive an additional performance bonus (the
"Bonus") equal to twenty percent (20%) of the Company's
management bonus pool ("Management Bonus Pool"). The management
Bonus Pool shall be equal to ten percent (10%) of the Company's
annual pre-tax income, determined in accordance with generally
accepted accounting principles ("GAAP"). However, in no case
shall the Management Bonus Pool exceed five million dollars
($5,000,000.00) annually. In the event Employee terminates his
employment agreement with the Company, his Bonus will be
reallocated by the Board.
In the event the Company is obligated in fiscal year 1998 to
fund shortfall in its capital reserves to meet managed care
contracting requirements, the Company shall defer payment of the
Bonus due employee in fiscal year 1998 until fiscal year 1999
and such deferred Bonus shall not be included as part of the
five million dollar ($5,000,000.00) cap on the Management Bonus
Pool for that year.
In the event this Agreement is terminated by the Company in
accordance with section 5 herein, unless such termination is for
Cause, Employee shall receive a pro rata portion of the Bonus.
C. Three (3) weeks of compensated vacation which shall vest ratably
throughout the year. Vacation accrued but unused at the end of
the calendar year may be carried over into the following year
and used in accordance with Company policy.
D. The Company shall make available such health benefits and any
other benefits as it makes available to its executive employees.
E. Upon termination of this Agreement by mutual written agreement,
death, or disability of the Employee, or change of control
(where change of control shall mean (i) any transaction that has
the result that stockholders of the Company immediately before
such transaction cease to own at least fifty-one percent (51%)
of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a
merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive; or (iii) a
sale, lease exchange or other disposition of all or
substantially all the property and assets of the Company), the
Employee shall receive a severance package equal to fifty
percent (50%) of Employee's annual base salary at the time of
termination, payable in six (6) equal monthly installments,
beginning in the second calendar month following the month in
which termination occurs.
Employee shall be entitled to all holidays that are prescribed
by the Company's policies and practices. The Employee shall be
entitled to five (5) days paid sick leave per year. Unused sick
leave days may not be carried over to the following calendar
year or years.
2
3
F. The Company shall provide Employee with an office and
secretarial services comparable to those of its other executive
employees.
G. The Company shall deduct the usual withholding taxes from
Employee's compensation consistent with standard practices and
applicable federal and state laws.
H. The Company shall reimburse Employee for any documented out of
pocket expenses incurred in connection with the duties and
responsibilities described herein, subject to the Company's
policies. Upon termination of this Agreement, all accrued but
unpaid compensation to Employee shall be payable in full.
4. STOCK OPTIONS
A. Time Options - Employee shall be granted on June 1, 1997 under the Company's
stock option plan non-qualified options ("Time Options') to purchase two hundred
(200) shares of the Company's Common Stock at an exercise price of one dollar
($1.00) per share which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a re-capitalization,
stock split, rights offering, stock dividend). Sale of the shares of Common
Stock issued to Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall vest with respect to thirty-three and one-third percent (33 1/3%)
on June 1, 1998; thirty-three and one-third percent (33 1/3%) on June 1, 1999;
and thirty-three and one-third percent (33 1/3%) on May 31, 2000. The Time
Options shall be exercisable for a period of five (5) years from June 1, 1997.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Time Options
shall be exercisable for a period of three (3) months from the date of such
termination or resignation.
B. Performance Options - Employee shall be granted on June 1, 1997 under the
Company's stock option plan, non-qualified performance options ("Performance
Options') to purchase two hundred (200) shares of the Company's Common Stock at
an exercise price of one dollar ($1.00) per share which shall be evidenced by a
stock option agreement (such Performance Options shall be subject to adjustment
in the event of a re-capitalization, stock split, rights offering, stock
dividend). Sale of the shares of Common Stock issued to Employee upon the
exercise of the Performance Options may be subject to limitations pursuant to
Rule 144 under the Securities Act of 1933. The Performance Options shall vest at
the rate of twenty (20) Performance Options for every one million dollars
($1,000,000.00) of after tax net income determined in accordance with GAAP,
generated by the Company in fiscal year 1999, which ends December 31, 1999.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Performance
Options shall be exercisable for a period of three (3) months from the date of
such termination or resignation.
C. Additional Options - In the event of an initial public offering ("IPO') by
the Company, the Company shall, in addition to the Time Options and the
Performance Options, create a management stock option plan ("Management Option
Plan") representing not less than five percent (5%) of the fully issued and
outstanding shares of the Company at that time, before the
3
4
issuance of the shares in the IPO, and employee shall be granted twenty percent
(20%) of the Management Option Plan.
5. TERMINATION
This Agreement may be terminated prior to the end of the Employment Term,
(i) by the written agreement between Company and Employee;
(ii) by the death of Employee or her disability for a period of one
hundred and twenty (120) consecutive days or the adjudicated
mental incompetency of Employee; or
(iii) by the Company for cause, where "cause" shall mean for purpose
of this Agreement:
(a) a violation by Employee of any material provision of
this Agreement, a breach of fiduciary duty or conduct
involving moral turpitude, where such violation,
activity, or conduct is not remedied by Employee
within thirty, (30) days of written notice from the
Company
(b) employee's conviction of a felony
6. COVENANT NOT TO COMPETE; NOT TO SOLICIT
A. During the Employment Term and for a period of six (6) months
thereafter, the Employee will not without the prior written
permission of the Company in each instance directly or indirectly
carry on or participate in a business the same as or similar to or in
competition with that conducted or engaged in by the Company or any
of its subsidiaries or affiliates. In the event this Agreement is
terminated in accordance with Section 5 herein, the terms of this
Section 6(a) shall be applicable for a period of six (6) months
beyond such termination.
B. The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by the Company or any
of its subsidiaries or affiliates" shall include the Employee,
directly or indirectly, doing any of the following listed
acts, other than carrying on or engaging in activities
expressly permitted under this Agreement:
(i) carrying on or engaging in any such business as a
principal, or solely or jointly with others as a director,
officer, agent, employee, consultant or partner, or
stockholder or limited partner owning more than five
percent (5%) of the stock or equity interests in or
securities convertible into more than five percent (5%) of
the stock of or equity interests in any corporation,
association or limited partnership; or
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition
or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing or
operating any such business; or
(iv) giving advice to any other person, firm, association,
corporation or other entity engaging in any such business,
provided such other person, firm, association, corporation
or other entity is not a member of Employee's immediate
family; or
(v) lending or allowing his name or reputation to be used in any
such business; or
C. In the event of a breach or threatened breach by the Employee of the
provisions of this Section 6, the Company shall be entitled to
injunctive relief against the Employee.
4
5
Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Employer for such breach
or threatened breach, including without limitation the recovery of
damages from the Employee.
D. During the Employment Term and for six (6) months thereafter, the
Employee will not without the prior written permission of the Company
in each instance will not solicit, or attempt to solicit and employ
any employee of the Company or any of its subsidiaries or affiliates,
or commit an act the primary purpose of which is to induce employee
of the Company or any of its subsidiaries or affiliates to leave such
employment or significantly interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or
otherwise, relating to the business activities between the Company or
any of its subsidiaries or affiliates and their respective prospects.
E. The parties hereto consider the restrictions contained in this
Section 6 to be reasonable. If, however, such restrictions are found
by any court having jurisdiction to be unreasonable because they are
(or any of them is) too broad, then such restrictions shall
nevertheless remain effective, but shall be considered amended as to
protection of business, time or geographic area in whatever manner is
considered reasonable by that court and, as so amended, shall be
enforced.
F. The provisions of this Section 6 shall survive the expiration or
termination, for any reason, or this Agreement and shall be
separately enforceable.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. The Employee agrees that she will not, during the Employment Term
or thereafter, make use of, divulge or otherwise disclose, directly
or indirectly, any trade or business secret (including, without
limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or
policies of the Company or any of its subsidiaries or affiliates
which she may have learned as a result of her employment during the
Employment Term or prior thereto as shareholder, employee, officer
and/or director or the Company except to the extent such use or
disclosure is necessary to the performance of this Agreement and in
furtherance of the Company's best interest. The provisions of this
Section 7 shall survive the expiration or termination, for any
reason, of this Agreement.
B. The Employee shall not during the Employment Term or for six (6)
months thereafter make use of, divulge or otherwise disclose,
directly or indirectly, any confidential information concerning the
business or policies of the Company or any of its subsidiaries or
affiliates which she may have learned while a shareholder, employee,
officer and/or director of the Company.
C. In the event of a breach or reasonably threatened breach by the
Employee of the provisions of this Section 7, the Company shall be
entitled to an injunction restraining the Employee from disclosing,
in whole or in part, any such trade or business secret and/or any
such confidential information, or from rendering any services to any
person,
5
6
firm, corporation, association, or other entity to whom any such
trade or business secret and/or any such confidential information, in
whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for
such breach or threatened breach, including without limitation the
recovery of damages from the Employee.
D. The provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement and shall be
separately enforceable.
8. AMENDMENT
This Agreement may be amended only by the written agreement of the Company and
Employee.
9. SUCCESSORS AND ASSIGNS
The Company's rights and obligations under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company; and
the Company may delegate all or any part of its rights and obligations hereunder
to any affiliate or subsidiary of the Company.
The Employee acknowledges and agrees that this Agreement is personal to her and
her rights and interests hereunder may not be assigned, nor may her obligations
and duties hereunder be delegated with exception of the voting rights assigned
to Employee's spouse by Employee.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
11. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or written
heretofore made with respect to the subject matter hereof.
12. SEVERABILITY
Any provision of this Agreement which is found to be unenforceable in any
jurisdiction, shall, as to such jurisdiction only, be ineffective to the extent
of such unenforceability, without invalidating or otherwise affecting the
remaining provisions hereof. If any of the covenants against competition
contained in Section 6 are found by a court having jurisdiction to be
unreasonable in duration, geographical scope, or character of restriction, the
covenant shall not be rendered unenforceable thereby, but rather the duration,
geographical scope, or character of restriction of said covenant shall
respectively be reduced or modified to render the covenant reasonable and the
covenant shall be enforced as modified.
6
7
13. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of the parties reflected hereon as signatories.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to:
(i) Employee at the address shown above, or at such other address or
addresses as Employee shall designate to the Company in accordance
with this Section, or
(ii) Company at the address set forth on the above letterhead, or at
such other address as the Company shall designate to Employee in
accordance with this section.
15. PRONOUNS
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms and the singular
form of nouns and pronouns shall include the plural and vice versa.
16. MISCELLANEOUS
A. No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or Employee on
any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other
occasion.
B. The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or
substance of any of this Agreement.
17. EMPLOYEE REPRESENTATIONS
Employee represents and warrants that he has the full power and authority to
enter into this Agreement and perform the duties as contemplated hereunder.
Employee further represents and warrants that he is free to enter into this
Agreement and that there are no other employment contracts, agreements or
understandings, written or oral, restrictive covenants, agreements not to
compete, confidentiality agreements or other restrictions whether written or
oral, preventing the performance of his duties hereunder. To the extent of any
breach of these representations and warranties by Employee, Employee agrees to
indemnify Employer and hold Employer harmless from any claim, action, liability,
damage or loss threatened or incurred by Employer on account of such breach.
7
8
* * *
If the foregoing accurately sets out our agreement with regard to the above,
please indicate your acceptance by executing and returning two copies of this
letter to the undersigned.
Very truly yours,
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION, INC.
By:
-------------------------------
C. Xxxxxx XxXxxxxx
Chairman and CEO
Accepted and agreed to this ___ day of _________________, 1997.
----------------------------------
Xxxxxxxxx X. Xxxxxx
"Employee"
8
