EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is effective as of December
1, 1996 (the "Effective Date"), by and between Advance ParadigM, Inc. (the
"Company"), and Xxxxxx X. Xxxxxxxxxxx (the "Employee").
WHEREAS, Employee is a senior manager of the Company and is expected to
make significant contributions to the profitability, growth and financial
strength of the Company;
WHEREAS, the Company desire to assure both the present and future
continuity of management of the Company and desire to establish certain
minimum compensation rights of the Employee; and
WHEREAS, the Company and Employee desire to enter into this Agreement
pursuant to which the Company will employ Employee in the capacity, for the
period and on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties hereto hereby agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby employs Employee and
Employee hereby accepts such employment in the capacity of Senior Vice
President of the Company, the Company's wholly-owned subsidiary, to act in
accordance with the terms and conditions hereinafter set forth. During the
term of this Agreement, Employee agrees that this position will be his
full-time employment, that he will devote his best efforts and all of his
business time, attention and skills to the business of the Company and that
he will perform such duties, functions, responsibilities and authority in
connection with the foregoing as are from time to time delegated to Employee
by the Board of Directors of the Company.
2. TERM. The employment of Employee shall commence on the date hereof
and shall end on the second anniversary hereof (the "Term").
3. COMPENSATION. In consideration of the services to be rendered by
Employee to the Company hereunder, the Company hereby agrees to pay or
otherwise provide Employee the following compensation and benefits, it being
understood that the Company shall have the right to deduct therefrom all
taxes which may be required to be deducted or withheld therefrom under any
provision of applicable law (including but not limited to Social Security
payments, income tax withholding and other required deductions now in effect
or which may become effective by law any time during the Term):
(a) SALARY. Employee shall receive an annual salary of One
Hundred Forty-Five Thousand Dollars ($145,000), with such increases therein
as may be determined by the Board from time to time in its sole discretion
("Base Salary"), to be paid in equal installments not less frequently than
monthly in accordance with the Company's salary payment practices in effect
from time to time for senior managers of the Company. The Base Salary may be
reviewed by the Board from time to determine any increases to the Base
Salary; provided that the annual increase shall be, at a minimum $5,000.
(b) BONUS PAYMENTS. In addition to the Base Salary, Employee
shall be entitled to receive, and the Company shall pay, bonuses to the
Employee under the Company's executive incentive compensation plan as
approved by the Board of Directors.
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(c) BENEFIT PLANS. Employee shall be entitled to participate in
any health, accident, disability and life insurance programs, and any other
fringe benefit program (including a 401(k) savings plan), which the Company
has adopted or may adopt and implement for the benefit of the Company's
employees. Notwithstanding the foregoing, however, nothing contained herein
shall be construed as an obligation of the Company to implement any such
program, or, if implemented, to maintain any such program for any period of
time for any employee.
(d) FRINGE BENEFITS. The Company shall provide Employee with an
automobile allowance of $525 per month and shall provide a country club
membership at a country club that is mutually acceptable to the Employee and
the Company.
(e) EXPENSES. Employee shall be entitled to receive reimbursement
for all reasonable expenses incurred by him in connection with the
fulfillment of his duties hereunder; PROVIDED, HOWEVER, that Employee has
complied with all policies and procedures relating to the reimbursement of
such expenses as shall, from time to time, be established by the Company.
(f) VACATION AND SICK LEAVE. During the Term of employment,
Employee shall be permitted to take vacations with such frequency and of such
duration as are consistent with the executive vacation policies of the
Company in effect on the date of this Agreement so long as the absence of
Employee does not interfere in any material respect with the performance by
Employee of Employee's duties hereunder. In any event, Employee shall be
entitled to not less than 20 business days of vacation during each of the
fiscal years ending during the Term of employment. Employee shall also be
entitled to sick leave according to the sick leave policy which the Company
may adopt from time to time.
(g) QUALIFIED STOCK OPTION TO EMPLOYEE. As further consideration
for Employee's continuing employment by the Company under the terms of this
Agreement, subject to the terms and conditions of the Company's 1993
Incentive Stock Option Plan ("ISOP"), the Company has granted to Employee an
options set forth below:
(i) On October 7, 1996, Employee was granted an incentive option
to purchase 12,500 shares of the Common Stock of the Company with an exercise
price of $9.00 per share. The option is subject to and granted under the
ISOP. The option shall vest and become exercisable as to twenty percent
(20%) of the total shares on each of the first five anniversaries of the date
of grant; provided, however, that immediately prior to the consummation of
any sale to or merger with an outside entity gaining 50% or greater ownership
of the Company, the options shall become, without further act or deed,
exercisable as to 100% of the shares.
(ii) On December 23, 1996, Employee was granted an incentive option
to purchase 10,000 shares of the Common Stock of the Company with an exercise
price of $12.75 per share. The option is subject to and granted under the
ISOP. The option shall vest and become exercisable as to 33-1/3% of the
total shares represented thereby on each of the first three anniversaries of
the date of grant; provided however that immediately prior to the
consummation of any sale to or merger with an outside entity gaining 50% or
greater ownership of the Company, the option shall become without further act
or deed exercisable as to 100% of the shares.
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4. TERMINATION
(a) DEATH OR DISABILITY. This Agreement shall terminate
automatically upon the Employee's death. If the Company determines in good
faith that the Disability of the Employee has occurred (pursuant to the
definition of "Disability" set forth below), it may give to the Employee
written notice of its intention to terminate the Employee's employment. In
such event, the Employee's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" means
disability which, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Employee or the Employee's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) CAUSE. The Company may terminate the Employee's employment for
"Cause." For purposes of this Agreement, "Cause" means:
(i) an act or acts of personal dishonesty taken by the Employee at
the expense of the Company,
(ii) a material violation or repeated violations by the Employee of
the Employee's obligations under Section 1 of this Agreement which are
demonstrably willful or deliberate on the Employee's part and which are not
remedied in a reasonable period of time after receipt of written notice
from the Company, or
(iii) the conviction of the Employee of a felony.
(c) GOOD REASON. The Employee's employment may be terminated by the
Employee for Good Reason. For purposes of this Agreement, "Good Reason"
means:
(i) the assignment to the Employee of any duties inconsistent in any
respect with the Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 1 of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Employee;
(ii) any material failure by the Company to comply with any of the
provisions of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given
by the Employee;
(iii) the Company's requiring the Employee's services to be
performed at any office or location more than thirty-five (35) miles from
the location where the Employee was employed immediately preceding the
Effective Date, except for travel reasonably required in the performance of
the Employee's responsibilities;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause or
by the Employee for Good Reason shall be communicated by Notice of
Termination to the other
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party hereto given in accordance with Section 10 of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which
(i) indicates the specific termination provision in this Agreement
relied upon,
(ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment
under the provision so indicated, and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which
date shall be not more than fifteen (15) days after the giving of such
notice).
(e) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as
the case may be; PROVIDED, HOWEVER, that
(i) if the Employee's employment is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be the date on
which the Company notifies the Employee is such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION
(a) DEATH. If the Employee's employment is terminated by reason
of the Employee's death, this Agreement shall terminate without further
obligations to the Employee's legal representatives under this Agreement,
other than those obligations accrued or earned and vested (if applicable) by
the Employee as of the Date of Termination, including, for this purpose
(i) the Employee's full Base Salary through the Date of
Termination at the rate in effect on the Date of Termination or, if
higher, at the highest rate in effect at any time from the 90-day
period preceding the Date of Termination (the "Highest Base Salary"),
(ii) the product of the Annual Bonus paid to the Employee for the
last full fiscal year and a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denomination of which is 365, and
(iii) any compensation previously deferred by the Employee
(together with any accrued interest thereon) and not yet paid by the
Company and any accrued vacation pay not yet paid by the Company (such
amounts specified in clauses (i), (ii) and (iii) are hereinafter
referred to as "Accrued Obligations").
All such Accrued Obligations shall be paid to the Employee's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding,
the Employee's family shall be entitled to receive benefits at least equal to
the most favorable benefits provided by the Company to surviving families of
employees of the Company under such plans, programs, practices
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and policies relating to family death benefits, if any, in effect at the time
of Employee's death.
(b) DISABILITY. If the Employee's employment is terminated by reason
of the Employee's Disability, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or earned
and vested (if applicable) by the Employee as of the Date of Termination,
including for this purpose, all Accrued Obligations. All such Accrued
Obligations shall be paid to the Employee in lump sum in cash within 30 days
of the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, the Employee shall be entitled after the Disability
Effective Date to receive disability and other benefits at least equal to the
most favorable of those provided by the Company to disabled employees or
their families in accordance with such plans, programs, practices and
policies of the Company in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Employee and the Employee's family, as in effect at any time thereafter with
respect to other key employees of the Company and their families.
(c) CAUSE; OTHER THAN FOR GOOD REASON. If the Employee's employment
shall be terminated for Cause, the Company's obligations to the Employee
shall terminate other than the obligation to pay to the Employee the Highest
Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Employee (together with accrued
interest thereon). If the Employee terminates employment other than for Good
Reason, the Company's obligations to the Employee shall terminate, other than
those obligations accrued or earned and vested (if applicable) by the
Employee through the Date of Termination, including for this purpose, all
Accrued Obligations. All such Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the
Term, the Company shall terminate the Employee's employment other than for
Cause, Disability, or death or if the Employee shall terminate his employment
for Good Reason, the Company shall continue in accordance with the Company's
normal payroll procedures to pay Employee his Highest Base Salary for a
period of one-year from the Date of Termination or for the remaining term of
this Agreement, whichever period is shorter (the "Severance Period"). Any
amounts payable to Employee under this Section 5(d) shall be reduced and
offset by the amount of any compensation received by Employee for other
employment during the Severance Period. During the Severance Period Employee
shall use his best efforts to find employment consistent with the covenants
of Employee in Sections 8 and 9 hereof. During the Severance Period, or such
longer period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Employee and the Employee's family at
least equal to those which would have been provided to them in accordance
with the plans, programs, practices and policies described in Section 3(c) of
this Agreement if the Employee's employment had not been terminated.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Employee's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices, provided by
the Company and for which the Employee may qualify, nor shall anything herein
limit or otherwise affect such rights as the Employee may have under any
stock option or other agreement with the Company. Amounts which are vested
benefits or which the Employee is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy,
practice or program.
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7. FULL SETTLEMENT. Except as provided in Section 5(d) hereof, the
Employee shall not be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Employee under any
of the provisions of this Agreement. The Company agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the employee may
reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof, plus in each case interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Internal Revenue Code of 1986,
as amended.
8. RESTRICTIVE COVENANTS. Employee and the Company agree that the
Company would suffer irreparable harm and incur substantial damage if
Employee were to enter into Competition (as defined herein) with the Company.
Therefore, in order for the Company to protect its legitimate business
interests, Employee agrees as follows:
(a) Without the prior written consent of the Company, Employee
shall not during the period of employment with the Company, directly or
indirectly, invest or engage in any business that is Competitive (as defined
herein) with the pharmacy benefit management business (including without
limitation clinical, formulary/rebate, mail order or claim processing
services), disease management, telephonic case management or demand
management or other business in which the Company has been actively engaged
during the Term of Employee's employment (the "Business") or accept
employment or render services to a Competitor (as defined herein) of the
Company as a director, officer, agent, employee, independent contractor or
consultant, or solicit or attempt to solicit or accept business that is
Competitive with the Business of the Company, except that Employee may own up
to one percent (1%) of any outstanding class of securities of any company
registered under Section 12 of the Securities and Exchange Act of 1934.
(b) Without the prior written consent of the Company, for a period
of two (2) years from the Date of Termination for Cause or for a period of
one (1) year from the Date of Termination for any reason other than Cause,
Employee shall not, either directly or indirectly, (i) invest or engage in
any business that is Competitive with the Business of the Company, except
that Employee may own up to one percent (1%) of any outstanding class of
securities of any company registered under Section 12 of the Securities and
Exchange Act of 1934, as amended, (ii) accept employment with or render
services to a Competitor of the Company as a director, officer, agent,
employee, independent contractor or consultant or (iii) solicit, attempt to
solicit or accept business competitive with the Business of the Company from
any of the customers of the Company at the time of his termination or within
twelve (12) months prior thereto or from any person or entity whose business
the Company was soliciting at such time. In the event the Company is
obligated to make payments to Employee during the Severance Period pursuant
to Section 5(d) hereof, on the day immediately following the termination of
the Company's obligation to make such payments, clauses (i) and (ii) of this
Section 8(b) shall be without further force and effect.
(c) Upon termination of his employment with the Company, and for a
period of twelve (12) months thereafter, Employee shall not, either directly
or indirectly, solicit business, directly or indirectly from any person or
entity to whom the Company has sold its services, nor shall the Employee
contact, communicate with, or solicit in any manner whatsoever the employment
of an employee of the Company.
(d) The Company and Employee agree that the consideration for
Employee's post-employment covenant not to compete is the overall
consideration provided for the benefit of Employee pursuant to this
Agreement, including but not limited to the continued employment of Employee.
The primary purpose of this covenant is the Company
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legitimate interest in protecting its economic welfare and business goodwill.
The Company and Employee further agree that this covenant shall in no way be
construed as a mere limitation on competition nor shall it be construed as a
restraint on Employee's right to engage in a common calling.
(e) Employee acknowledges that the foregoing limitations are
reasonable and properly required for the adequate protection of the Business
of the Company and that in the event any such limitation is found to be
unreasonable by a court of competent jurisdiction, Employee agrees to the
reduction of such limitation to the extent it shall appear reasonable to such
court.
(f) For purposes of this Agreement, a business or activity is in
"Competition" or "Competitive" with the Business of the Company if it
involves, and a person or entity is a "Competitor," if that person or entity
is engaged in, or about to become engaged in, the same business as the
Business of the Company or any segments thereof in the continental United
States of America.
9. CONFIDENTIALITY. For purposes of this Agreement, "Confidential
Information and Trade Secrets" shall mean all information, ideas, know how,
trade secrets, processes, computer software or programs and related
documentation, methods, practices, fabricated techniques, technical plans,
customer lists, pricing techniques, marketing plans, financial information
and all other compilations of information which relate to the Business of,
and are owned by, the Company, which were not known generally to others
engaged in the Business of the Company and which the Company has taken
affirmative actions to protect from public disclosure or which do not exist
in the public domain. Employee acknowledges that, during his term of
employment with the Company, he shall have access to and become familiar with
Confidential Information and Trade Secrets that are owned by the Company.
Employee shall not use, in any way, or disclose any of the Confidential
Information and Trade Secrets, directly or indirectly, either during the term
of his employment or at anytime thereafter, except as required in the course
of his employment. All files, records, documents, information, data and
similar items and documentation relating to the Business of the Company,
whether prepared by Employee or otherwise, coming into Employee's possession,
shall remain the exclusive property of the Company unless owned by Employee.
The obligations of this Section 9 are continuous and shall survive the
termination of Employee's employment with the Company.
10. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and deemed to have been given when
delivered in person or when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by mail, registered or certified, return
receipt requested, postage prepaid, simultaneously dispatched) to the
addresses at the addresses specified below:
If to Employee: Xxxxxx X. Xxxxxxxxxxx
00000 Xxxxxxxxxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
With a copy to: Xxxxx X. Xxxxxxxxx
Xxxxxx, Xxxxx & Xxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Phone No.: 202/000-0000
Fax No.: 202/000-0000
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If to the Company: Advance ParadigM, Inc.
000 X. Xxxx Xxxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Phone No.: 972/000-0000
Fax No.: 972/000-0000
or to such other address or fax number as either party may from time to time
designate in writing to the other.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto relating to the subject matter hereof, and
supersedes all prior agreements and understandings, whether oral or written,
with respect to the same. No modification, alteration, amendment or recision
of or supplement to this Agreement shall be valid or effective unless the
same is in writing and signed by the parties hereto.
12. GOVERNING LAW. This Agreement and the rights and duties of the
parties hereunder shall be governed by, construed under and enforced in
accordance with the laws of the State of Maryland.
13. ASSIGNMENT. This Agreement shall inure to the benefit or and be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns. Subject to the prior
written consent of Employee, the rights, duties and obligations under this
Agreement are assignable by the Company to a successor of all or
substantially all of the business or assets of the Company. The rights,
duties and obligations of Employee under this Agreement shall not be
assignable.
14. SEVERABILITY. The parties hereto further agree that if at any time
it shall be determined that the restrictions contained in Section 8 or 9 are
unreasonable as to time or area, or both, by any court of competent
jurisdiction, the Company shall be entitled to enforce this Agreement for
such period of time and within such area as may be determined to be
reasonable by such court and the court shall have the authority to construe
reform and enforce the terms of this Agreement for the benefit of the Company
to a maximum extent possible. It is the intent of the parties hereto that
the provisions hereof be enforceable to the fullest extent permitted by
applicable law. This Agreement may be enforced by the Company or any of its
affiliates engaged in the Business.
15. SURVIVAL. No termination of Employee's employment by any of the
parties hereto shall reduce or terminate Employee's covenants and agreements
in Section 8 and 9 hereto.
16. REMEDIES. Employee and the Company recognize that the services to
be rendered under this Agreement by Employee are special, unique, and of
extraordinary character, and that in the event of a breach by Employee of the
terms and conditions of Sections 8 and 9 hereof, the Company shall be
entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either in law or in equity, to obtain
damages for any breach thereof or to enforce the specific performance thereof
by Employee, or to enjoin Employee from performing services for any other
person, firm, or corporation engaged in activities Competitive with the
Business of the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ADVANCE PARADIGM, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and CEO
EMPLOYEE
/s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxxxxxx
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