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 Xxxx X. Xxxxxx, "Executive");
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 Chairman of the Board 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
Chairman of the Board, 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 greater
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 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 not related to a
change in control as defined herein, 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.
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 Chairman of the Board. If the Board of Directors
elects a permanent Chairman of the Board 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:
0 Xxxx Xxxxx
Xxx Xxxxxxxx Medical Service, Inc.
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.
ATTEST: MID ATLANTIC MEDICAL SERVICES, INC.
By:/s/Xxxxxx X. Xxxxxxx
(Corporate Seal) Name:Xxxxxx X. Xxxxxxx
Title:President and CEO
WITNESS EXECUTIVE:
/s/ Xxxx Xxxxxx
Address: 0 Xxxx Xx.
Xxxxxxxxx, XX 00000
