EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered as of this 8th day of January, 1999
("Effective Date"), by and between Mid Atlantic Medical Services, Inc., a
Delaware corporation with its principal executive offices at 0 Xxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxx 00000 ("Company"), and Xxxxxx X. Xxxxxxx, "Executive") and
supercedes and replaces the employment agreement between the parties dated
December 4, 1998;
WHEREAS, the Company wishes to assure itself of the services of
Executive for the period provided in this Agreement, and Executive is willing to
serve in the employ of the Company on a full-time basis for said period;
WHEREAS, the Company and Executive desire to set forth the amounts
payable and benefits to be provided by the Company to Executive in the event of
a termination of Executive's employment with the Company under the circumstances
set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto hereby agree as follows:
1. Employment. The Company agrees to continue Executive in its employ, and
Executive agrees to remain in the full time employ of the Company, for the
period stated in Section 3 hereof and upon the other terms and conditions herein
provided.
2. Position and Responsibilities. The Company employs Executive, and
Executive agrees to serve, as interim President and Chief Executive Officer of
the Company on the conditions hereinafter set forth. Executive agrees to perform
such services consistent with his position as shall from time to time be
assigned to him by the Company's Board of Directors ("Board"), or another
executive designated by the Board. Such duties may include the appointment of
Executive as an officer and/or director of any present or future subsidiary or
affiliate of the Company without any additional remuneration under this
Agreement. Executive shall devote all of his business time, attention, skill,
and efforts to the faithful performance of the duties hereunder.
3. Term. The period of Executive's employment under this Agreement with
the Company (i) shall commence as of the Effective Date and remain in effect for
one year after the date of the approval by the Board of Directors of a permanent
Chairman of the Board and a permanent Chief Executive Officer and President,
whichever date is later. In the event Executive is approved as the permanent
President and Chief Executive Officer, the parties agree to terminate this
agreement and enter into a new employment agreement.
4. Compensation and Reimbursement of Expenses. For all services
rendered by Executive in any capacity during employment under this Agreement
(including, without limitation, services as an executive, officer, or director
of the Company, or any subsidiary or affiliate of the Company, or as a member of
any committee of the Board of Directors of the Company or any subsidiary or
affiliate of the Company), the Company shall pay Executive as compensation (A)
an annual salary ("Base Salary"); (B) such bonus for such period, if any, as may
be awarded to Executive from time to time pursuant to any Bonus Plan adopted by
the Company for its senior management or otherwise awarded by the Board or by a
committee designated by the Board; and (C) stock options at the discretion of
the Board or the appropriate Committee of the Board. By action of the Board on
February 25, 1999, the Company will grant Executive 85,000 shares of MAMSI stock
options as of that date. Such options will vest on the date of the February 2000
Board meeting on the following prorata basis over a period to be determined by
the percentage increase of 1999 earnings per share over 1998 earnings per share
as adjusted for one time items and as determined by the Board at its February
2000 meeting at which 1999 audited earnings are announced:
1999 EPS % Increase Vesting Dates of Vesting
up to 0-16% 5 years 1/5 in 2/2000; 1/5 in
$0.51 2/2001; 1/5 in 2/2002;
1/5 in 2/2003;
1/5 in 2/2004
$0.54 23% 4 years 1/4 in 2/2000; 1/4 in
2001; 1/4 in 2/2002;
1/4 in 2/2003
$0.57 30% 3 years 1/3 in 2/2000; 1/3 in
2/2001; 1/3 in 2002
$0.60 36% 2 years 1/2 in 2/2000; 1/2 in
2/2001
0.63 43% 1 year All in 2/2000
or more
For the purposes of the above calculation, the 1998 earnings per share is
established at $.44 per share. Base Salary shall be not less than the rate at
which Executive is compensated on the Effective Date which is $475,000. The
Company shall also reimburse Executive, in accordance with such policies and
procedures as the Board may establish from time to time, for all reasonable
travel and other expenses incurred by Executive in the performance of his
obligations under this Agreement. Executive shall also be entitled to
participate in any benefit plans established by the Company for which Company
executives are or shall become eligible.
5. Termination of Employment. Executive's employment under this
Agreement may be terminated by the Company or Executive as follows:
(a) Disability. (i) If Executive fails to perform his duties
under this Agreement on account of Disability (as hereinafter defined),
the Company may give notice to Executive to terminate this Agreement on
a date not less than thirty (30) days thereafter ("Notice Period") and,
if Executive has not resumed full performance of his duties under this
Agreement within such Notice Period, then Executive's employment under
this Agreement will terminate on the date provided in the notice
("Disability Termination Date").
(ii) During any period of Disability, the Company shall
maintain and pay for health and other insurance benefits for Executive
at least equal to those he had at the commencement of such Disability.
(iii) As used in this Agreement, the term "Disability" shall
mean the inability of Executive to perform his duties under this
Agreement by reason of his medical disability, as determined by an
independent physician selected with the approval of the Board and
Executive.
(b) Death. If Executive dies while employed under this Agreement, his
employment under this Agreement will terminate as of the date of his death
("Date of Death"). Within thirty (30) days after the Date of Death, the
Company shall pay to Executive's legal representative Executive's Base
Salary as then in effect that has accrued to the last day of the month in
which the Date of Death occurs. If the Executive dies while receiving
payments pursuant to Section 5(c) below, said payment shall continue for
the period remaining and shall be paid to the estate of the Executive.
(c) Certain Other Events of Termination. In the event that (i) the
Company terminates Executive's employment for any reason (other than
because of death, Disability, or "just cause" (as hereinafter defined),
(ii) Executive terminates his or her employment with the Company because of
the Company's material breach of this Agreement, (iii) Executive terminates
his employment with the Company because the Company requires Executive to
be based anywhere other than Executive's current location or within
seventy-five (75) miles round trip of the Company's principal executive
offices (except for required travel on the Company's business), or (iv)
Executive terminates his employment with the Company because of a
substantial reassignment of duties and responsibilities, then the Company
shall pay Executive an amount equal to 12 months Base Salary paid in equal
bi-weekly payments over a period of one year commencing on the Executive
Termination Date and in accordance with the regular payroll practices of
the Company. The Company shall also pay Executive any pro-rata bonus that
the Executive would have been entitled to had he been employed until the
end of the year. Such bonus payment shall occur when bonuses are normally
paid by the Company. In addition, all stock options which Executive has
been granted shall immediately vest and become exercisable under the terms
of the applicable plan. For the purposes of the time period available for
exercising such stock options, Executive shall be considered an employee of
the Company unless terminated pursuant to subsection (e) below. Payment
made pursuant to this paragraph shall be the exclusive remedy provided to
Executive and Executive shall not be entitled to any other severance
benefit that the Company may provide or adopt unless approved by the Board
of the Directors of the Company.
(d) Retirement. Executive shall be entitled to terminate his
employment with the Company on, or at any date after, a date on which he is
at least sixty-five (65) years old. Any date on which Executive elects to
retire shall be referred to as the "Retirement Termination Date." The
Company shall pay to Executive his Base Salary as then in effect that has
accrued to the last day of the month in which the Retirement Termination
Date occurs.
(e) Termination by the Company for Just Cause.
(i) The Company may terminate Executive's employment for "just
cause" at any time by giving written notice thereof to Executive.
(Except as provided below, the date of such notice is the "Just Cause
Termination Date" unless otherwise provided in the notice). Within
thirty (30) days after the Just Cause Termination Date, the Company
shall pay to Executive his Base Salary as then in effect that has
accrued to the Just Cause Termination Date. For the purposes of this
subparagraph, "just cause" shall mean termination because of
Executive's personal dishonesty, willful misconduct, breach of
fiduciary duty, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations
or similar offenses), or material breach of any provision of this
Agreement. Unless otherwise determined by the Board, Executive shall
have no right to receive compensation or other benefits under this
Agreement after a termination for just cause.
(ii) Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for just cause pursuant to this Section 5(e)
unless and until he shall have received a copy of a resolution duly
adopted by the affirmative vote of a majority of the Board, at a
meeting held for that purpose, declaring that in the good faith opinion
of the Board one or more of the conditions set forth in clause (i) of
this Section 5(e) has occurred and specifying the particulars thereof.
(f) Termination by Executive Without Cause. Executive may terminate
this Agreement without cause upon the provision of two weeks' prior
written notice to the Company. Upon such a termination, the following
payments will be made by the Company to the Executive:
1. If Executive elects such a termination between the
Effective Date of this Agreement and the first date of work
of either the permanent Chairman of the Board, the permanent
Chief Executive or the permanent President, the Executive
would receive no benefits under this Agreement.
2. If the Executive elects such a termination after the
first date of work of either the permanent Chairman,
permanent Chief Executive Officer or the permanent
President, the Executive would receive the same payment as a
termination pursuant to Section 5(c) above.
6. Change in Control. Notwithstanding any other provision to the contrary, the
following provisions will govern in the event of a change in control as defined
herein.
a. A change in control shall be deemed to have occurred if, at
any time, (I) substantially all the assets of the Company shall have
been sold or transferred by sale, merger or otherwise, or if any
"person" (as such term is used in Sections 13(d) or 14(d) of the
Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 50% or more of
the combined voting power of the then-existing outstanding securities
of the Company; and (ii) the Executive is reassigned without his
concurrence to another position in the Company within 6 months of such
sale, merger or other event. No change in control shall be deemed to
have occurred if the reassignment is on a temporary basis and is
attributable to the Executive's illness or other physical, mental or
emotional disability or incapacity.
b. In the event of a change in control as defined in Section 6(a)
above, Executive shall be entitled to the compensation as set forth in
Section 5(c) above except for the provision regarding stock options
which will be compensated in accordance with subsection 6(c) below.
c. In the event of a change in control as defined in subsection
6(a), all stock options to which Executive has been granted shall
immediately vest and become exercisable. Such acceleration of the
vesting of stock options shall be in addition to, and shall have no
affect on, any payments accrued pursuant to subsection 6(b).
d. The value of all payments, benefits and other consideration
received pursuant to subsections 6(b) and 6(c) and contingent upon a
change in control, and any additional payments in the nature of
compensation described by Section 280G(b)(2) of the Internal Revenue
Code, shall not exceed an amount which is equal to three times the
average taxable compensation from the Company for the "base period" as
that term is defined in Section 280G(d)(2) of the Internal Revenue
Code. The parties agree to review the impact of the termination of the
Agreement pursuant to Section 6, and to negotiate modifications, if
mutually acceptable, in situations where the results to the Executive
and to the Company are not compatible.
7. Selection of Permanent Chief Executive Officer or President. If the
Board of Directors elects a permanent Chief Executive Officer or President other
than Executive during the term of this Agreement, Executive will become a Senior
Executive Vice President of the Company.
8. Confidential Information. Executive shall fully comply with and abide by
the provisions of the Company's Employee Manual and other announced policies in
effect from time to time, including those provisions relating to the protection
of the Company's confidential information. The Company and Executive agree that
the foregoing provision shall survive the termination of this Agreement for any
reason whatsoever.
9. Indemnification. Employee shall be entitled to indemnification to the
full extent allowed by the Company's Certificate of Incorporation and Bylaws for
third party claims and to advances for expenses in defending against such
claims.
10. General Provisions.
(a) Entire Agreement. This Agreement contains the entire understanding
between the parties hereto and supersedes any prior employment agreement between
the Company and Executive.
(b) No Duty to Mitigate. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor shall any amounts received from other employment or otherwise
by Executive offset in any manner the obligations of the Company hereunder.
(c) Nonassignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof is assignable by
Executive, his beneficiaries, or legal representatives without the Company's
prior written consent; provided, however, that nothing in this Section 11(d)
shall preclude (i) Executive from designating a beneficiary to receive any
benefit payable hereunder upon his death, or (ii) the executors, administrators,
or other legal representatives of Executive or his estate from assigning any
rights hereunder to the person or persons entitled thereto.
(d) Notices. All notices and other communications required or permitted to
be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by certified mail, return
receipt requested, first-class postage prepaid, to the parties to this Agreement
at the following addresses:
(i) if to the Company at:
Mid Atlantic MedicalService, Inc.
0 Xxxx Xxxxx Xxxxxxxxx, XX 00000
and
(ii) if to Executive at the address set forth on the
signature page.
or to such other address as either party to this Agreement shall have last
designated by notice to the other party. All such notices and communications
shall be deemed to have been received on the earlier of the date of receipt or
the third business day after the date of mailing thereof.
(e) Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended or shall be construed to give any person, other than the parties to
this Agreement or their respective successors or permitted assigns, any legal or
equitable right, remedy, or claim under or in respect of any agreement or any
provision contained herein.
(f) Waiver. No provision of this Agreement may be amended, waived,
discharged, or terminated except by an instrument in writing and executed by
each party. Any waiver of enforcement of any provision of this Agreement shall
not operate or be construed as a continuing waiver or a waiver of any other
provisions unless expressly stated in such instrument.
(g) Amendment. This Agreement may be terminated, amended, modified, or
supplemented only by a written instrument executed by Executive and the Company.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, regardless of the law that
might be applied under principles of conflict of laws.
(i) Severability. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall, to the full
extent consistent with law, continue in full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held so invalid, and the rest of such
provision, together with all other provisions of this Agreement, shall to the
full extent consistent with law continue in full force and effect.+
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and Executive has signed this Agreement, all as of the Effective Date.
Date.
ATTEST: MID ATLANTIC MEDICAL SERVICES, INC.
By:/s/Xxxxxx X. Xxxxxx
(Corporate Seal) Name:Xxxxxx X. Xxxxxx
Title:Exec VP and General Counsel
WITNESS EXECUTIVE:
Xxxxxx Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
Address: 0 Xxxx Xx.
Xxxxxxxxx, XX 00000
