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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 25th day of January, 1999, by and between HEALTHCARE RECOVERIES, INC., a
Delaware corporation (the "Company") and XXXXX X. X'XXXXXXX, a resident of the
State of Wisconsin (the "Employee").
I. STATEMENT OF BACKGROUND INFORMATION
The Company provides subrogation and related recovery services for
healthcare payors, a full range of cost management services to third party
payors and providers in recovering the cost or reasonable value of healthcare
benefits provided to insureds who are injured under circumstances where a third
party is ultimately responsible for such healthcare benefits and cost management
services to third party payors and other parties within the healthcare industry,
including, but not limited to hospital xxxx audit, credit balance recovery, cost
management and other consulting services (the "Business");
Subro-Audit, Inc., a Wisconsin corporation ("SAI") and X'Xxxxxxx
Leasing Co., LLP, a Wisconsin limited liability Partnership ("ODL"), (SAI and
ODL shall collectively be referred to as "SAI Division") operate a subrogation
and related recovery services business which provides, among other things,
subrogation and related recovery services for healthcare payors (the "Sellers'
Business");
The Company is a party to an Asset Purchase Agreement, dated as of
January 3, 1999 (the "Asset Purchase Agreement"), by and among the Company, SAI,
ODL, Employee and Xxxx Xxxxxxx ("Xxxxxxx" and together with Employee,
hereinafter referred to as "Shareholders"), pursuant to which the Sellers (as
defined in the Asset Purchase Agreement) propose to sell to the Company and the
Company proposes to purchase from Sellers substantially all of the assets of the
Sellers' Business for the Purchase Price (as defined in the Asset Purchase
Agreement) and assume certain obligations of the Sellers' Business (the
"Transaction");
Upon the Closing Date (as defined in the Asset Purchase Agreement) of
the Transaction, the Company desires to employ Employee upon the terms and
conditions set forth in this Agreement and Employee desires to accept such
employment;
Employee's execution and delivery of this Agreement (including, without
limitation, the covenants set forth in Sections 6, 7, and 8) is a material
inducement to the Company to effect the Transaction, and a condition precedent
to the Company's obligations to consummate the Transaction.
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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
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts such employment to serve as Executive Vice President of the
Company and President of the SAI Division of the Company, upon the
terms and conditions set forth in this Agreement. Employee shall report
directly to the Chairman and Chief Executive Officer of the Company.
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 compensation described herein, whether or not
the Employee is currently performing services for the Company at the
time of such payment. Notwithstanding anything in this Agreement to the
contrary, in the event the Company is paying the Employee compensation
described herein after termination of Employee's employment with the
Company, such payments will cease immediately if Employee obtains any
other employment in any capacity.
2. Duties of Employee.
(a) Sales and Marketing. Employee agrees to use Employee's reasonable
best efforts to acquire new customers and expand the relationships with
SAI Division's existing customers under terms and conditions similar to
those normally negotiated by the Company. Employee also agrees to use
Employee's reasonable best efforts to obtain executed service contracts
with each of SAI Division's existing customers containing as many of
the Company's usual terms and conditions as are feasible under the
circumstances. Employee shall collaborate with the Company's Senior
Vice President of Sales and Marketing to design a program (the
"Conversion") to convert SAI Division's customers over to new fee
schedules so as to materially increase historical levels of recoveries.
With respect to Provident and Blue Cross/Blue Shield of Georgia,
Employee will have sole discretion to determine how, when and if the
Conversion will be introduced. Employee and the Chief Executive Officer
of the Company will work together to determine how, when and if the
Conversion will be introduced to SAI Division's other customers.
Employee agrees to use Employee's reasonable best efforts to introduce
any claims recovery products developed by the Company to SAI Division's
customers. Such products may include, but are not limited to: COB
recoveries, fraud and abuse direction and recoveries, recoveries for
overpayments arising from a variety of circumstances and claim auditing
services.
(b) General Duties. It is understood between the Company and Employee
that Employee shall not receive a salary for his services and,
accordingly, Employee shall not be required to follow a fixed schedule
or to work a certain number of hours per week.
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Employee shall devote that amount of professional and business time,
skill and attention which he deems necessary to maximize the amount of
the First Earn-Out Payment and Second Earn-Out Payment specified in the
Asset Purchase Agreement. Nothing in this Agreement shall prevent
Employee from engaging in other business or professional activities so
long as they do not violate any of the covenants set forth in Sections
6, 7 and 8 of this Agreement. Consistent with the foregoing, Employee
shall manage the SAI Division's human resources dedicated to customer
relations and shall comply with all of the Company's policies,
standards and regulations and shall follow the reasonable instructions
and directives of Employee's superiors within the Company, as
promulgated by the officers of the Company. This Section will not be
construed to prevent Employee from (a) investing personal assets in
businesses which do not compete with the Company in such form or manner
that will not require any services on the part of the Employee in the
operation or the affairs of the companies in which such investments are
made and in which Employee's participation is solely that of an
investor, (b) purchasing securities in any corporation whose securities
are listed on a national securities exchange or regularly traded in the
over-the-counter market, provided that Employee at no time owns,
directly or indirectly, in excess of two and one half percent (2 1/2%)
of the outstanding stock of any class of any such corporation engaged
in a business competitive with that of the Company, or (c) engaging in
the practice of law on Employee's own time provided such practice of
law does not interfere or conflict with Employee's performance of the
duties contained in this Agreement or violate any of the covenants set
forth in Sections 6, 7, and 8 of this Agreement.
3. Term. The term of this Agreement will commence on the date hereof and
expire on the Second Additional Closing Date, as defined in the Asset
Purchase Agreement, subject to earlier termination as provided for in
Section 4.
4. Termination.
(a) Termination by Company for Cause. 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 occur:
(i) Employee materially breaches any of the terms or
conditions set forth in this Agreement and fails to
cure such breach within thirty (30) days after
Employee's receipt from the Company of written notice
of such breach, which notice shall describe in
reasonable detail the Company's belief that Employee
is in breach hereof (notwithstanding the foregoing,
no cure period shall be applicable to breaches by
Employee of Sections 6, 7 or 8 of this Agreement);
(ii) Employee commits any other act materially detrimental
to the business or reputation of the Company;
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(iii) Employee intentionally engages in dishonest or
illegal activities or commits or is convicted of any
crime involving fraud, deceit or moral turpitude; or
(iv) Employee dies or becomes mentally or physically
incapacitated or disabled so as to be unable to
perform the essential functions of Employee's job
even with reasonable accommodation. Without limiting
the generality of the foregoing, Employee's inability
to perform the essential functions of Employee's job
even with reasonable accommodation for a period of
one hundred twenty (120) consecutive days will be
conclusive evidence of such mental or physical
incapacity or disability, unless such inability
adequately to perform services under this Agreement
is pursuant to a mental or physical incapacity or
disability covered by the Family Medical Leave Act,
in which case such one hundred twenty (120)-day
period shall be extended to a one hundred and fifty
(150)-day period.
5. Compensation and Benefits.
(a) Sales Commission. The Company will pay Employee a sales
commission (the "Commission") of one dollar ($ 1.00) for New
Lives, as defined in the Asset Purchase Agreement, in excess
of 2,000,000 ("Additional New Lives"). For the purposes of
calculating the sales commission under this section, the
number of Additional New Lives shall not include any New Lives
used in calculating the First Year New Lives Amount (as
defined in the Asset Purchase Agreement) or the Second Year
New Lives Amount (as defined in the Asset Purchase Agreement).
Any Commission shall be payable within forty-five (45) days
after the end of the quarter in which it is earned.
(b) Stock Option Awards. Employee shall be granted options to
purchase fifty thousand (50,000) shares of the Company's
common stock under the Healthcare Recoveries, Inc. 1997 Stock
Option Plan for Eligible Participants, a copy of which is
attached hereto as Exhibit A. The terms and conditions of the
option will be as set forth in Exhibit B attached hereto.
During the term of this Agreement, Employee will be subject to
Employer's standing policies for employees and outside
directors regarding transactions in Employer's stock
(including the exercise of stock options), a copy of which is
attached hereto as Exhibit C. To the extent Employee is in
possession of material nonpublic information regarding
Employer at the time this Agreement is terminated, he shall
continue to be subject to Employer's policies until such
information has been made public.
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(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, 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.
(d) Business Expenses. Employee will be reimbursed for all
expenses incurred in the discharge of Employee's duties under
this Agreement pursuant to the Company's standard
reimbursement policies.
(e) 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 of Proprietary Information. Employee recognizes and
acknowledges that any trade secrets or confidential information of the
Company and its affiliates and all physical embodiments of same (as
they may exist from time-to-time, collectively, the "Proprietary
Information"), 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 and its affiliates'
businesses 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 or its
affiliates). For purposes of this Agreement, the term "trade secrets"
means the whole or any portion of any scientific or technical or other
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
data and information relating to the Business, other than trade secrets
which (1) have value to the Company or its affiliates; (2) are not
generally known by their competitors or the public; and (3) are treated
as confidential by the Company or its affiliates. Provided there is no
uncured breach by the Company of this Agreement, the provisions of this
Section 6 will apply during Employee's employment by the Company and
thereafter for a two (2) year period with respect to confidential
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information, and during Employee's employment by the Company and for a
ten (10) year period thereafter with respect to trade secrets. 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 its affiliates; 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.
7. Restrictive Covenants.
(a) Non-Competition Covenant. During Employee's employment by the
Company and for a period of two (2) years following any
termination of Employee's employment 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, compete with the Company or its
affiliates 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 two and
one half percent (2 1/2%) of the outstanding stock of any
class of any such corporation) in providing or marketing
Business products or services. In addition, the term "compete"
shall mean to (i) conduct lectures, seminars or publish
material relating to the methods or legal theories utilized to
defeat subrogation claims; or (ii) serve as an expert witness
in litigation or a contested matter on behalf of a party or
parties seeking to defeat subrogation claims; or (iii) own,
operate, or be employed by or consult with a law firm, law
department, or law practice which specializes in or for which
the principal focus of the practice is the analysis, selection
and processing of subrogation claims; provided however,
nothing herein shall preclude Employee from conducting the
practice of law so long as such practice of law does not
specialize in or focus principally upon the analysis,
selection and/or processing of subrogation claims as a
business or the sale or marketing of such subrogation services
as a business. For purposes of this Agreement, the term
"Geographical Area" means the territory located within a fifty
mile radius around: (i) each client of the Sellers' Business
as of the date of this Agreement; (ii) each client of the
Business during Employee's employment with the Company with
whom Employee had contact during Employee's employment with
the Company; and (iii) the offices of the Business.
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(b) Non-Interference. During Employee's employment by the Company
and for a period of two (2) years following any termination of
Employee's employment 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,
interfere with, disrupt, or attempt to disrupt the past,
present or prospective relationships, contractual or
otherwise, between the Company or its affiliates and any
supplier, consultant client or vendor of or to the Company or
its affiliates with whom Employee had material contact during
Employee's employment by the Company under this Agreement. The
term "prospective relationship" is defined as any relationship
where the Company or its affiliates have actively sought an
individual or entity as a prospective supplier, consultant,
client or vendor.
(c) Non-Solicitation of Clients Covenant. Employee agrees that
during Employee's employment by the Company under this
Agreement and for a period of two (2) years following any
termination of Employee's employment 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, solicit or attempt to solicit
for the purpose of providing Business services for any
individual or entity (i) who is client of the Company or its
affiliates at any time during the six (6)-month period prior
to Employee's termination with the Company, or was actively
sought by the Company or its affiliates as a prospective
client during such period, and (ii) with whom Employee had
material contact while employed by the Company. Employee
further agrees that during Employee's employment by the
Company and for a period of two (2) years following the
termination of Employee's employment for whatever reason,
Employee will not, directly or indirectly, as an employee,
independent contractor, agent or in any other capacity, be
employed by any client:
(i) which received Business products or services from
Employee, or with which Employee otherwise had
material contact while employed by the Company; or
(ii) which received Business products or services from any
office or employee of the Company or its affiliates
over which Employee had direct management
responsibility;
in either case to provide, directly or indirectly, Business
products or services.
(d) Construction. 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.
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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 (2) years following any termination of Employee's
employment 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 or
its affiliates, whether or not such employee is a full-time employee or
temporary employee of the Company or its affiliates, whether or not
such employee is employed pursuant to 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 its
affiliates 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
related to the Business obtained as a result of Employee's employment
with the Company, immediately upon the termination of Employee's
employment with the Company.
11. Proprietary Rights. During the course of Employee's employment with the
Company under this Agreement, Employee may make, develop or conceive of
useful processes, machines, compositions of matter, computer software,
algorithms, works of authorship expressing such algorithm, or any other
discovery, idea, concept, document or improvement which substantially
related to or is useful to the Business (the "Inventions"), whether or
not subject to copyright or patent protection, and which may or may not
be considered Proprietary Information. Employee acknowledges that all
such Inventions will be "works made for hire" under United States
copyright law and will remain the sole and exclusive property of the
Company. Employee also hereby assigns and agrees to assign to the
Company, in perpetuity, all right, title and interest Employee may have
in and to such Inventions, including without limitation, all
copyrights, and the right to apply for any form of patent, utility
model, industrial design or similar proprietary right recognized by any
state, country or jurisdiction. Employee further agrees, at the
Company's request and expense, to do all things and sign all documents
or instruments necessary, in the opinion of the Company, to eliminate
any ambiguity as to the ownership
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of, and rights of the Company to, such Inventions, including filing
copyright and patent registrations and defending and enforcing in
litigation or otherwise all such rights.
Employee will not be obligated to assign to the Company any Invention
made by Employee while in the Company's employ which does not relate to
any business or activity in which the Company or its affiliates is or
may become engaged during the Employee's employment with the Company,
except that Employee is so obligated if the same relates to or is based
on Proprietary Information to which Employee will have had access
during and by virtue of Employee's employment or which arises out of
work assigned to Employee by the Company. Employee will not be
obligated to assign any Invention which may be wholly conceived by
Employee after termination of this Agreement, except that Employee is
so obligated if such Invention involves the utilization of Proprietary
Information obtained while in the employ of the Company. Employee is
not obligated to assign any Invention which relates to or would be
useful in any business or activities in which the Company or its
affiliates is engaged if such Invention was conceived and reduced to
practice by Employee prior to Employee's employment with the Company,
provided that all such Inventions are listed at the time of employment
on the attached Exhibit D.
12. Remedies. Employee agrees and acknowledges that the violation of any of
the covenants or agreements contained in Sections 6, 7, 8, 9, 10 and 11
of this Agreement 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.
13. 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:
Healthcare Recoveries, Inc. Xxxxx X. X'Xxxxxxx
1400 Xxxxxxxxx Tower 0000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000 Xxxxxxxxxx, Xxxxxxxxx 00000
14. Severability. Subject to the application of Section 7(d) 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 herein. It is the intent of the parties that
this Agreement be enforced to the maximum extent permitted by law.
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15. 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. No
amendment or modification of this Agreement will be valid or binding
upon the parties unless made in writing and signed by the parties.
16. Binding Effect. This Agreement will be binding upon the parties and
their respective heirs, representatives, successors, transferees and
permitted assigns.
17. 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.
18. Governing Law. This Agreement is entered into and will be interpreted
and enforced pursuant to the laws of the State of Wisconsin. The
parties hereto hereby agree that the 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 Wisconsin 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.
COMPANY: EMPLOYEE:
HEALTHCARE RECOVERIES, INC. XXXXX X. X'XXXXXXX
By: /s/ /s/ Xxxxx X. X'Xxxxxxx
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Title: Chairman, Pres. & CEO Xxxxx X. X'Xxxxxxx
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