AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT dated as of December 16, 1998 to the Employment Agreement dated
June ___, 1995 (the "Original Agreement") between Q-Med, Inc., a Delaware
corporation (the "Company") and Xxxxxxx X. Xxx ("Employee").
WHEREAS, the Original Agreement expires on June 30, 2000; and
WHEREAS, the Company's Board of Directors deems it in the best interests of
the Company to assure that the services of the Employee are available to it for
a period of time beyond the initial term of the Original Agreement.
NOW THEREFORE, in consideration of the agreements set forth in the
Amendment (defined below) and those contained in the Original Agreement, the
parties agree as follows:
A. CERTAIN DEFINITIONS.
(a) Except as otherwise provided in this agreement, all words and terms
defined in the Original Agreement, have the same meanings in this agreement as
such defined words and terms are given in the Original Agreement.
(b) "Agreement" means the Original Agreement dated June ___, 1995, as
supplemented and amended by this agreement and as from time to time further
supplemented and amended.
(c) "Amendment" means this agreement dated as of December 16, 1998.
B. EXTENSION OF TERM.
Section 3 of the Original Agreement is amended to read as follows:
"3. TERM OF EMPLOYMENT.
Unless earlier terminated pursuant to Section 8 hereof, the term of
employment under this Agreement shall be for a period commencing July 1,
1998 (the "Effective Date") and ending November 30, 2000 (the "Expiration
Date"). This Agreement shall be automatically renewed for successive two
(2) year periods, unless either party shall notify the other in writing of
its intention not to renew this Agreement, which notice shall be given at
least 120 days prior to the end of the then current term. The period from
the Commencement Date to the Expiration Date, including the Renewal Term,
if any, is referred to herein as the "Term."
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C. ADJUSTMENT OF COMPENSATION.
Section 5 of the original Agreement is amended to read as follows:
"5. COMPENSATION.
5.1 Salary.
(a) Company shall pay Employee a base salary ("Base Salary") of
$140,000 per year during the Term.
(b) The Employee's Base Salary shall be increased to the
following annual rates in the event the Company has contracts with
managed care organizations relating to the management of the specified
number of lives utilizing the Company's disease management system:
Annual Rate
Number of Lives of Base Salary
--------------- --------------
400,000 $180,000
500,000 $200,000
640,000 $250,000
Such rate shall take effect in the first regular pay period of the
month following the month in which revenue is received from the
managed care organization for the requisite number of lives. The last
increase shall not take effect until the month following the month in
which the Company has positive cash flow.
(c) Once increased, such increased amount shall constitute the
Employee's Base Salary and shall not be reduced. Base Salary shall be
payable in accordance with the ordinary payroll practices of the
Company.
5.2 Contingent Compensation.
(a) In addition to Base Salary, beginning with the Company's
fiscal year ending November 30, 1999, the Company shall pay Employee
contingent compensation as follows:
(i) $50,000 if the Company's Adjusted Net Earnings (defined
below) equals or exceeds $1.0 million; plus
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(ii) 3% of the Company's Adjusted Net Earnings in excess of
$1.0 million to a maximum aggregate bonus equal to
twice the Employees rate of annual Base Salary during
the last month of the relevant fiscal year.
(b) In order to be eligible for the contingent compensation set
forth in paragraph 5.2 (a) above for any fiscal year, Employee must be
employed by the Company throughout that entire fiscal year; provided,
however, that if Employee's employment terminates during a fiscal year
for any reason other than that set forth in Section 8.4 of the
Agreement, then the Employee (or his estate) shall be eligible for a
pro-rated amount of such contingent compensation.
(c) The adjusted consolidated net earnings ("Adjusted Net
Earnings") of the Company and its subsidiaries, for the purpose of
computing the Employees' contingent compensation under the provisions
of paragraph 5.2(a) above, shall be determined, in accordance with
generally accepted accounting principles, within ninety (90) days
after the end of each fiscal year by the independent accounting firm
employed by the Company as its auditors. The computation by such
accounting firm of the Net Earnings and of the Employees contingent
compensation, made in the manner herein provided, shall be in all
respects final and binding upon the Company, upon the Employee, and
upon all others, and the Company shall pay such compensation to the
Employee within 120 days of the end of the fiscal year in question.
For the purpose of computing the Employee contingent
compensation, the Adjusted Net Earnings of the Company and its
subsidiaries for the above mentioned period shall be the consolidated
net earnings of the Company and its subsidiaries for such period, as
audited and reported upon, for the purposes of the Company's annual
report to stockholders for such period, by the Company's independent
auditors, plus all amounts charged against such consolidated net
earnings in respect of the following:
(i) Taxes of the United States and foreign governments
(including, but without limitation, excess profits
taxes) based upon or measured, in whole or in part, by
income of the Company or its subsidiaries but exclusive
of sate and territorial taxes and taxes imposed by
political subdivisions thereof;
(ii) Contingent compensation, if any, which may be payable
by the Company under any plan or agreement, including
this Agreement, other than a profit-sharing plan
qualified under
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Section 401 of the Internal Revenue Code or any
statutory provision that may hereafter be enacted to
replace such section;
(iii) All items of non-recurring loss or other extraordinary
charge which, by reason of size, character, or other
factors did not, in the sole and uncontrolled judgment
of the Board of Directors, arise in the ordinary and
usual course of the business of the Company and its
subsidiaries, including expenses properly attributable
to such loss or charge;
less, however, all amounts included in such consolidated net earnings
in respect of items of capital gain, non-recurring profit, or other
extraordinary credit which, by reason of size, character, or other
factors did not, in the sole and uncontrolled judgment of the Board of
Directors, arise in the ordinary and usual course of business of the
Company and its subsidiaries, after deducting expenses properly
attributable to such gain, profit, or credit, except and to the extent
that the Board of Directors, in its sole and uncontrolled judgment,
shall find that the Employee was responsible for such gain, profit, or
credit and shall direct the inclusion, in whole or in part, of such
gain, profit, or credit in the computation of consolidated net
earnings.
5.3 Stock Options.
The Company will grant Employee an aggregate of 240,000 stock
options from its 1997 Equity Incentive Plan (the "Plan"). Such options
shall be "incentive stock options" to the extent permissible under
rules and regulations of the Internal Revenue Service or Non-Qualified
Option and shall vest 50% upon the signing of this Amendment; 25% upon
the first anniversary of the grant of the option and 25% upon the
second anniversary of the grant of the option, provided the Employee's
employment has not been terminated under Section 8.4 of this Agreement
prior to the date of such vesting."
D. EFFECT OF ORIGINAL AGREEMENT.
Except as supplemented and amended by this Amendment and such conforming
changes as necessary to reflect the modification herein, all of the provisions
of the Original Agreement shall remain in full force and effect from and after
the effective date of this Amendment.
[SIGNATURE PAGE FOLLOWS]
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This Amendment has been duly authorized and approved by all required
corporate action by the Company and does not violate the certificate of
incorporation or by-laws of the Company.
Q-MED, INC.
[CORPORATE SEAL]
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx, Vice President
ATTEST:
/s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
Secretary
EMPLOYEE:
/s/ Xxxxxxx X. Xxx
------------------------------
Xxxxxxx X. Xxx
Annual Report 1998 - Page 1
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