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EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
October 19, 1999 between HEALTHCARE RECOVERIES, INC. (the "Company"), a Delaware
corporation") and XXXXXXX X. XXXXXX ("Employee"), a resident of the State of
Illinois.
I. STATEMENT OF BACKGROUND INFORMATION
The Company provides recovery services for healthcare payors and assists
healthcare payors in recovering the cost or reasonable value of healthcare
benefits provided to persons who are injured under circumstances where a third
party is ultimately responsible for such healthcare benefits (the "Business");
The Company desires to employ Employee in an executive position, and
Employee desires to accept such employment.
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 parties
hereto hereby agree as follows:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts such employment upon the terms and conditions set forth in this
Agreement. 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 salary under Section 5(a) of this Agreement, whether or not the
Employee is currently performing services for the Company at the time of such
payment. For all other purposes under this Agreement, "employment" shall have
its customary meaning.
2. Duties of Employee. Employee agrees to perform and discharge the duties
which may be assigned to Employee from time to time by the Company to the
reasonable satisfaction of the Company. Employee also agrees to comply with all
of the Company's policies, standards and regulations and to follow the
reasonable instructions and directives of Employee's superiors within the
Company, as promulgated by the Officers of the Company. Employee will devote
substantially all of Employee's time, attention and energies to the Business and
Employee will not, during the term of this Agreement, be engaged (whether or not
during normal business hours) in any other business or professional activity,
whether or not such activity is pursued for gain, profit or other pecuniary
advantage, other than business and professional activities which do not violate
Sections 7 and 8 of this Agreement and involve a time commitment by Employee
which is reasonably acceptable to the Company. Employee's principal place of
employment shall be the Company's headquarters in Louisville, Kentucky, and the
Company agrees that Employee's principal place of employment will not be
relocated outside of 50 miles of its current site.
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 Employee in the
operation or affairs if the companies in which such investments are made and in
which Employee's participation is solely that of 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, any class of any such
corporation engaged in a business competitive with that of the Company; or (c)
participating in conferences, preparing and publishing papers or books or
teaching, so long as the Chief Executive Officer of the Company give prior
approval to such participation, preparation and publication or teaching.
3. Term. The term of this Agreement will begin on the date hereof and
expire on the first anniversary hereof, unless within that period there shall
occur a Change in Control Event (as defined), in which case the term of this
Agreement shall expire on the first anniversary of the closing date of the
Change in Control Event;
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subject, in any case, subject to earlier termination as provided for in Section
4 below. For purposes of this Section 3, "Change in Control" means any of the
events described as Change in Control Events in Section 13.1 of the Healthcare
Recoveries, Inc. 1997 Stock Option Plan for Eligible Participants, or the
occurrence of the following: any individual, entity, group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and the
rules under that act), or other person acquires in a single transaction or a
series of transactions more than 30% of the outstanding shares of the Company's
common stock or common stock equivalents.
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 10 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 in bad faith materially
detrimental to the business or reputation of the Company;
(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 Employee's duties under this
Agreement. Without limiting the generality of the foregoing, Employee's
inability adequately to perform services under this Agreement for a period
of 60 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 60-day period shall be extended to a 120-day period.
(b) Termination by Company Without Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate Employee's
employment pursuant to this Agreement without cause upon at least 30 days' prior
written notice to Employee. Subject to the provisions of Clause (ii) of Section
1 hereof, in the event Employee's employment with the Company is terminated by
the Company without cause, the Company shall remain subject to its obligations
hereunder as if Employee remained employed hereunder for the balance of the term
hereof, as provided in Section 3.
(c) No Duty to Mitigate. If the Company terminates Employee's employment
under this Agreement for any reason other than those specified in Section 4(a),
Employee shall not be required to mitigate the amount of any payment
contemplated by this Agreement (whether seeking new employment or in any other
manner), and the Company's obligations under Section 4(b) shall not be reduced
because of any employment of Employee after termination of employment under this
Agreement.
(d) Moving and Relocation Expense. The Company will reimburse Employee for
the costs incurred: (1) in moving all personal possessions to Louisville,
Kentucky; (2) in the sale of his personal residence; and (3) by him and his wife
in making up to 3 house-hunting trips to Louisville, Kentucky. Moreover, the
Company will pay to Employee a "Gross-up Payment" (as defined) in respect of any
income tax liability incurred by Employee in connection with the relocation
reimbursements described above. "Gross-up Payment" means an additional payment
made by the Company to Employee such that the amount received by Employee (i.e.,
all reimbursements under this Section 4(d), plus the Gross-up Payment) net of
all federal, state and local income taxes, equals his actual costs under Clauses
(1), (2) and (3) above.
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5. Compensation and Benefits.
(a) Annual Salary. For all services rendered by Employee under this
Agreement, the Company will pay Employee a base salary of One Hundred Fifty
Thousand Dollars ($150,000.00) per annum in equal bi-weekly installments. Such
annual salary will be subject to annual percentage increases for inflation
equivalent to those increases given the normal course of business to employees
of the Company, pursuant to the Company's present policy or, as the case may be,
a future policy approved by the Board to apply substantially on a Company-wide
basis.
(b) Incentive Compensation. During Employee's employment with the Company,
Employee shall be entitled to incentive compensation payments in accordance with
Schedule 1 to this Agreement. If Employee is terminated by the Company without
cause, Employee shall be entitled to a pro rata share of incentive compensation
payments.
(c) Stock Option Awards. Subject to the terms and conditions of the
Healthcare Recoveries, Inc. 1997 Stock Option Plan for Eligible Participants, as
amended from time to time, (the "Plan") and the approval of the Committee, as
defined in the Plan, Employee shall be entitled to purchase Fifty Thousand
(50,000) shares of the Company's common stock under the Plan at an option price
for each such share of stock which is fair market value on the date hereof.
(d) 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.
(e) Business Expenses. Employee will be reimbursed for all reasonable
expenses incurred in the discharge of Employee's duties under this Agreement
pursuant to the Company's standard reimbursement policies.
(f) 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 Confidential Information. Employee recognizes and
acknowledges that the trade secrets and confidential information of the Company
and its affiliates and all physical embodiments thereof (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 non-technical 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 which: (1) has value to the Company or its
affiliates; (2) is not generally known by their competitors or the public; and
(3) is treated as confidential by the Company or its affiliates. The provisions
of this Section 6 will apply during Employee's employment by the Company and
thereafter for a 2-year period with respect to confidential information, and
during Employee's employment by the Company and at any and all
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times 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(a) Non-Competition Covenant. During Employee's employment by the Company
and for a period of 1 year following a termination of Employee's employment
under Section 4(b), and 2 years following a termination of Employee's employment
under Section 4(a), 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 one percent (1%) of the outstanding stock of any class of any such
corporation) in providing or marketing Business products or services. For
purposes of this Agreement, the term "Geographical Area" means those areas in
the United States and in foreign countries in which Employee or any member of
his staff is or has engaged in providing or marketing Business products or
services while Employee is employed by the Company under this Agreement.
(b) Non-Interference. During Employee's employment by the Company and for
a period of 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, or client of 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, or client.
(c) Non-Solicitation of Clients Covenant. Employee agrees that during
Employee's employment by the Company under this Agreement and for a period of 1
year following a termination of Employee's employment under Section 4(b), and 2
years following a termination of Employee's employment under Section 4(a),
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 any individual
or entity (i) who is a client of the Company or its affiliates at any time
during the six (6)-month period prior to Employee's termination with the Company
("Client"), 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 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) That received Business products or services from Employee, or with
which Employee otherwise had material contact while employed by the
Company; or
(ii) That 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. The parties hereto agree that any judicial authority
construing all or any portion of this Section 7 or Section 8 below will be
empowered to sever any portion of the Geographical Area, client
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base, prospective relationship or prospect list or any prohibited business
activity from the coverage of such Section and to apply the provisions of such
Section to the remaining portion of the Geographical Area, the client base or
the prospective relationship or prospect list, or the remaining business
activities not so severed by such judicial authority. In addition, it is the
intent of the parties that the judicial authority replace each such severed
provision with a provision as similar in terms to such severed provision as may
be possible and be legal, valid and enforceable. It is the intent of the parties
that Sections 7 and 8 be enforced to the maximum extent permitted by law. 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.
8. Non-Solicitation of Employees Covenant. Employee further agrees and
represents that during Employee's employment by the Company and for a period of
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.
In order to assure compliance with this provision with respect to claims
that may, from time to time, be made by Employee's former employer, the Company
and Employee agree that he will not have responsibility for the sales and
marketing activities supporting the Company's hospital xxxx auditing and related
services during the term of the applicable provisions of the Employee Invention,
Confidentiality, and Noncompetition Agreement dated August 31, 1998 between
Concentra Preferred Payment Systems, Inc. and Employee (the "CPS Agreement").
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
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 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.
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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,
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 A.
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. Indemnity. The Company agrees to indemnify Employee for, and hold him
harmless against, all losses, liabilities, damages and claims, including
reasonable legal fees and expenses, arising from any actual or threatened
litigation against Employee by his former employer in connection with this
Agreement, provided that (a) Employee gives the Company prompt written notice of
the institution of, and all material developments in, any such actual or
threatened litigation and cooperates with the Company's reasonable requests; and
(b) without knowledge of the Company, Employee violates material provisions of
the CPS Agreement.
14. 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. Xxxxxxx X. Xxxxxx
1400 Xxxxxxxxx Tower 00X000 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000 Xx. Xxxxxxx, Xxxxxxxx 00000
15. 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.
16. Survival. Sections 6, 7, 8, 9, 10, 11, 12, 13 and this Section of this
Agreement shall survive termination of this Agreement.
17. 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.
18. Binding Effect. This Agreement will be binding upon the parties and
their respective heirs, representatives, successors, transferrees and permitted
assigns.
19. 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.
20. Governing Law. This Agreement is entered into and will be interpreted
and enforced pursuant to the laws of the Commonwealth of Kentucky. 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
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court in the Commonwealth of Kentucky, 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HEALTHCARE RECOVERIES, INC. XXXXXXX X. XXXXXX
By: /s/ XXXXXXX X. XXXXXXXX /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. XxXxxxxx
Chairman & Chief Executive Officer
