Change in Control Employment Agreement - HealthAxis Ltd. and Charles S. Ramsburg
CHANGE IN CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between Healthaxis, Ltd., a Texas limited partnership
(the "Company") and an indirect wholly owned subsidiary of HealthAxis Inc., a
Pennsylvania corporation (the "Parent"), and Charles S. Ramsburg (the
"Executive"), dated as of the 8th day of March, 2004.
The Board of Managers of Healthaxis Managing Partner, LLC, the general
partner of the Company (the "Managers"), has determined that it is in the best
interests of the Company and its partners to assure that the Company will have
the continued dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined below). The Managers
believe it is imperative to diminish the inevitable distraction of the Executive
by virtue of the personal uncertainties and risks created by a pending or
threatened Change in Control and to encourage the Executive's full attention and
dedication to the Company currently and in the event of any threatened or
pending Change in Control, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Managers, at the direction and with the
approval of the Board of Directors of the Parent, have caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during
the Change in Control Period (as defined in Section
1(b)) on which a Change in Control (as defined in
Section 1(d)) occurs. Anything in this Agreement to
the contrary notwithstanding, the "Effective Date"
shall mean the date immediately prior to the date of
the Executive's termination of employment, if such
termination occurs either (i) within six (6) months
prior to a Change in Control; or (ii) prior to a
Change in Control and reasonably demonstrated by the
Executive to be at the request of a third party who
has taken steps reasonably calculated to effect a
Change in Control or otherwise arising in connection
with or anticipation of a Change in Control.
(b) The "Change in Control Period" shall mean the period
commencing on the date hereof and ending on the third
anniversary of the date hereof, provided, however,
that commencing January 1, 2005, and on January 1 of
each year thereafter (such date and each January 1st
thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the
Change in Control Period shall be automatically
extended so as to terminate three years from such
Renewal Date, unless at least 60
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 1
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days prior to the Renewal Date the Company shall give
notice to the Executive that the Change in Control
Period shall not be so extended.
(c) "Subsidiary" shall mean any corporation or other
entity taxable as a corporation under Section
7701(a)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") that is a member of the
"affiliated group" as defined in Section 1504(a) of
the Code of which the Parent is a common parent
corporation; provided, however, that in each case the
subsidiary corporation or other entity must be
consolidated in the Parent's financial statements.
(d) "Change in Control" shall mean (i) a merger or
consolidation of the Parent or the Company with or
into another corporation in which the Parent or the
Company shall not be the surviving corporation (for
purposes of this clause (i), a merger or
consolidation in which the Parent or the Company
becomes a subsidiary of another entity shall not be
deemed a transaction in which the Parent or the
Company is the surviving corporation); (ii) a
dissolution of the Parent or the Company, provided,
however, that a dissolution of the Company which is a
direct result of the Company's default on the
outstanding Series A Convertible Preferred Stock
shall not be treated as triggering a Change in
Control under this Section 1(d); (iii) a transfer of
all or substantially all of the assets of the Parent
or the Company in one transaction or a series of
related transactions to one or more other persons or
entities; (iv) any "person" or "group" (as those
terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended from time
to time (the "1934 Act"), other than Excluded Persons
(as defined below), becomes the "beneficial owner"
(as defined in Rule 13d-3 of the 1934 Act), directly
or indirectly, of securities of the Parent or the
Company representing 50% or more of the combined
voting power of the Parent's or the Company's then
outstanding securities; (v) after January 1, 2002,
individuals who at the beginning of the period
constituted the Board of Directors of the Parent (the
"Board") (together with any new directors whose
election by such Board or whose nomination for
election by the stockholders of the Parent was
approved by a majority of the directors then still in
office who were either directors at the beginning of
such period or whose election or nomination for
election was previously so approved) cease for any
reason to constitute at least a majority of the Board
of Directors then in office; or (vii) a significant
reorganization of the Parent or the Company occurs,
such as a spin-off, sale of assets of a business or
other restructuring, and as a result, the duties and
responsibilities of the Executive are materially
reduced. The term "Excluded Persons" means a trustee
or other fiduciary holding securities under an
employee benefit plan of the Parent or the Company.
For purposes hereof, a person will be deemed to be
the beneficial owner of any voting securities of the
Parent which it would be considered to beneficially
own under Securities and Exchange Commission Rule
13d-3 (or any similar or superseding statute or rule
from time to time in effect).
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 2
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2. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status,
offices, titles and reporting requirements),
authority, duties and responsibilities shall
be at least commensurate in all material
respects with the most significant of those
held, exercised and assigned at any time
during the 120-day period immediately
preceding the Effective Date and (B) the
Executive's services shall be performed at
the location where the Executive was
employed immediately preceding the Effective
Date or any office or location less than 35
miles from such location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to
which the Executive is entitled, the
Executive agrees to devote reasonable
attention and time during normal business
hours to the business and affairs of the
Company and, to the extent necessary to
discharge the responsibilities assigned to
the Executive hereunder, to use the
Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment
Period it shall not be a violation of this
Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or
committees, and (B) manage personal
investments, so long as such activities do
not significantly interfere with the
performance of the Executive's
responsibilities as an employee of the
Company in accordance with this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period,
the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall
be paid at a monthly rate, at least equal to
twelve times the highest monthly base salary
paid or payable, including any base salary
which has been earned but deferred, to the
Executive by the Company and its affiliated
companies in respect of the twelve-month
period immediately preceding the month in
which the Effective Date occurs. During the
Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months
after the last salary increase awarded to
the Executive prior to the Effective Date
and thereafter at least annually. Any
increase in Annual Base Salary shall not
serve to limit or reduce any other
obligation to the Executive under this
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 3
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Agreement. Annual Base Salary shall not be
reduced after any such increase and the term
Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement,
the term "affiliated companies" shall
include the Parent, the Subsidiaries, and
any other company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for
each fiscal year ending during the
Employment Period, an annual bonus (the
"Annual Bonus") in cash at least equal to
the Executive's highest comparable bonus
under any predecessor or successor plan, for
the last three full fiscal years prior to
the Effective Date (annualized in the event
that the Executive was not employed by the
Company for the whole of such fiscal year).
Each such Annual Bonus shall be paid no
later than the end of the third month of the
fiscal year next following the fiscal year
for which the Annual Bonus is awarded,
unless the Executive shall elect to defer
the receipt of such Annual Bonus. For
purposes of this Section, (A) the
Executive's initial signing bonus shall be
included as the first year bonus when making
the determination of the Annual Bonus
amount, and (B) the Executive's incentive
(sales) compensation shall not be included
when making the determination of the Annual
Bonus amount.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive
shall be entitled to participate in all
incentive, savings and retirement plans,
practices, policies and programs applicable
generally to other peer executives of the
Company and its affiliated companies, but in
no event shall such plans, practices,
policies and programs provide the Executive
with incentive opportunities (measured with
respect to both regular and special
incentive opportunities, to the extent, if
any, that such distinction is applicable),
savings opportunities and retirement benefit
opportunities, in each case, less favorable,
in the aggregate, than the most favorable of
those provided by the Company and its
affiliated companies for the Executive under
such plans, practices, policies and programs
as in effect at any time during the 120-day
period immediately preceding the Effective
Date or if more favorable to the Executive,
those provided generally at any time after
the Effective Date to other peer executives
of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's
family, as the case may be, shall be
eligible for participation in and shall
receive all benefits under welfare benefit
plans, practices, policies and programs
provided by the Company and its affiliated
companies (including, without
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 4
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limitation, medical, prescription, dental,
disability, employee life, group life,
accidental death and travel accident
insurance plans and programs) to the extent
applicable generally to other peer
executives of the Company and its affiliated
companies, but in no event shall such plans,
practices, policies and programs provide the
Executive with benefits which are less
favorable, in the aggregate, than the most
favorable of such plans, practices, policies
and programs in effect for the Executive at
any time during the 120-day period
immediately preceding the Effective Date or,
if more favorable to the Executive, those
provided generally at any time after the
Effective Date to other peer executives of
the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive
prompt reimbursement for all reasonable
expenses incurred by the Executive in
accordance with the most favorable policies,
practices and procedures of the Company and
its affiliated companies in effect for the
Executive at any time during the 120-day
period immediately preceding the Effective
Date or, if more favorable to the Executive,
as in effect generally at any time
thereafter with respect to other peer
executives of the Company and its affiliated
companies.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate upon the Executive's death during the
Employment Period. If the Company determines in good
faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to
the definition of Disability set forth below), it may
give to the Executive written notice in accordance
with Section 11(b) of this Agreement of its intention
to terminate the Executive's employment. In such
event, the Executive's employment with the Company
shall terminate effective on the 30th day after
receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within
30 days after such receipt, the Executive shall not
have returned to full-time performance of the
Executive's duties. For purposes of this Agreement,
"Disability" shall have the meaning set forth in the
long-term disability plan providing benefits to
disabled executives of the Company and its affiliated
companies at the Disability Effective Date or, if
more favorable to the Executive, as in effect during
the 120-day period immediately preceding the
Effective Date. If there is no long term disability
plan in effect for executives at the Effective Date,
"Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a
full-time basis for 180 consecutive business days as
a result of incapacity due to mental or physical
illness which is determined to be total and permanent
by a physician selected by the Company or its
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 5
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insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause.
For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the
Executive's duties with the Company or one
of its affiliates to the extent, degree and
level of performance as provided in Section
3(a)(ii) (other than any such failure
resulting from incapacity due to physical or
mental illness), after a written demand for
substantial performance is delivered to the
Executive by the Board or the Chief
Executive Officer of the Company which
specifically identifies the manner in which
the Board or Chief Executive Officer
believes that the Executive has not
substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be
considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or
omission was in the best interests of the Company.
Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based
upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after
reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive
is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars
thereof in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment of the Executive to a
position in which the Executive's authority,
duties or responsibilities are materially
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 6
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diminished from the authority, duties or
responsibilities as contemplated by Section
3(a) of this Agreement, or any other action
by the Company or its affiliated companies
which results in a material 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
Executive;
(ii) any failure by the Company or its affiliated
companies to comply with any of the
provisions of Section 3(b) 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 Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than
as provided in Section 3(a)(i)(B) hereof or
the Company's requiring the Executive to
travel on Company business to a
substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with
and satisfy Section 10(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive
shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall
be communicated by Notice of Termination to the other
party hereto given in accordance with Section 11(b)
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) to the extent
applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for
termination of the Executive'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 30 days after
the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 7
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contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the
Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as
the case may be, (ii) if the Executive'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 Executive of such
termination, and (iii) if the Executive's employment
is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the
case may be.
5. Obligations of the Company upon Termination.
(a) Good Reason, Other Than for Cause, Death or
Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the
Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's
Annual Base Salary through the Date
of Termination to the extent not
theretofore paid, (2) the product
of (x) the Annual Bonus which would
have been paid for the year in
which the Executive's Date of
Termination occurs, and (y) a
fraction, the numerator of which is
the number of days in the current
fiscal year through the Date of
Termination, and the denominator of
which is 365 and (3) any
compensation previously deferred by
the Executive (together with any
accrued interest or earnings
thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the
amounts described in clauses (1),
(2), and (3) shall be hereinafter
referred to as the "Accrued
Obligations"); and
B. the amount equal to the sum of (x)
the Executive's Annual Base Salary
and (y) the Executive's Annual
Bonus.
(ii) all stock options or restricted stock
awarded to the Executive by either the
Parent or a successor by merger,
consolidation or otherwise, including, but
not limited to, all awards under the
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 8
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HealthAxis Inc. 2000 Stock Option Plan, the
Healthaxis.com, Inc. 1998 Amended and
Restated Stock Plan, and the Insurdata
Incorporated 1999 Stock Option Plan, shall
become 100% vested and, the stock options
shall be exercisable for a period equal to
thirty-six (36) months after the Executive's
Date of Termination; provided, however, that
if the Executive terminates his employment
for "Good Reason" and the basis for such
"Good Reason" is voluntary resignation
during the 30 day period immediately
following the first anniversary of a Change
in Control (as provided in the final
paragraph of Section 4(c)), then (a) the
vesting provisions of the Executive's
restricted stock (if any) and stock options
shall remain unchanged, and (b) the
Executive's stock options shall be
exercisable during the exercise period
provided in his stock option award agreement
and/or under the applicable option plan's
terms;
(iii) all commissions under the Executive's
incentive (sales) compensation plan shall
become 100% vested and such commissions
shall continue to be paid out per the plan
following the Date of Termination for the
remaining period that such commissions would
have otherwise been paid; provided, however,
that if the Executive terminates his
employment for "Good Reason" and the basis
for such "Good Reason" is voluntary
resignation during the 30 day period
immediately following the first anniversary
of a Change in Control (as provided in the
final paragraph of Section 4(c)), then the
Executive's commissions will not vest, and
no commissions that are based on Company
receipts following the Date of Termination
will be payable;
(iv) for twelve (12) months after the Executive's
Date of Termination, or such longer period
as may be provided by the terms of the
appropriate plan, program, practice or
policy, the Company shall continue benefits
to the Executive and/or the Executive'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(b)(iv) of
this Agreement if the Executive's employment
had not been terminated or, if more
favorable to the Executive, as in effect
generally at any time thereafter with
respect to other peer executives of the
Company and its affiliated companies and
their families, provided, however, that if
the Executive becomes re-employed with
another employer and is eligible to receive
equivalent medical or other welfare benefits
under another employer provided plan, the
medical and other welfare benefits described
herein shall be secondary to those provided
under such other plan during such applicable
period of eligibility.
(v) the Company shall, at its sole expense as
incurred, provide the Executive with
outplacement services for a period of twelve
(12)
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months, the provider of which shall be
selected by the Executive in his sole
discretion; and
(vi) to the extent not theretofore paid or
provided, the Company shall timely pay or
provide to the Executive any other amounts
or benefits required to be paid or provided
or which the Executive is eligible to
receive under any plan, program, policy or
practice or contract or agreement of the
Company and its affiliated companies (such
other amounts and benefits shall be
hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment
Period, this Agreement shall terminate without
further obligations to the Executive's legal
representatives under this Agreement, other than for
payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability
during the Employment Period, this Agreement shall
terminate without further obligations to the
Executive, other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits
as utilized in this Section 5(c) shall include, and
the Executive shall be entitled after the Disability
Effective Date to receive, disability and other
benefits at least equal to the most favorable of
those generally provided by the Company and its
affiliated companies to disabled executives and/or
their families in accordance with such plans,
programs, practices and policies relating to
disability, if any, as in effect generally with
respect to other peer executives and their families
at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in
effect at any time thereafter generally with respect
to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause, Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate
without further obligations to the Executive other
than the obligation to pay to the Executive (x) his
Annual Base Salary through the Date of Termination,
(y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in
each case to the extent theretofore unpaid. If the
Executive voluntarily terminates employment during
the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without
further obligations
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to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall
be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company or any of its
affiliated companies may have against the Executive or others. In no event shall
the Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, except to the extent provided in Section
5(a)(ii) hereof, such amounts shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or any of its affiliated companies, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code.
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the
event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard
to any additional payments required under this
Section 8) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by the Executive
of all taxes (including any interest or penalties
imposed with respect to such taxes), including,
without limitation, any income taxes (and any
interest
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and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section
8, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such
determination, shall be made by Ernst & Young or such
other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations
both to the Company and the Executive within 15
business days of the receipt of notice from the
Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or
group effecting the Change in Control, the Executive
shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid
by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a
result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have
been made by the Company should have been made
("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section
8(c) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of
the Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company
of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten
(10) business days after the Executive is informed in
writing of such claim and shall apprise the Company
of the nature of such claim and the date on which
such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of
the 30-day period following the date on which it
gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes
with respect to such claim is due). If the Company
notifies the Executive in writing prior to the
expiration of such period that it desires to contest
such claim, the Executive shall:
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 12
<PAGE>
(i) give the Company any information reasonably
requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and
pay directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a
result of such representation and payment of costs
and expenses. Without limitation of the foregoing
provisions of this Section 8(c), the Company shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that
if the Company directs the Executive to pay such
claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income
with respect to such advance; and further provided
that any extension of the statute of limitations
relating to payment of taxes for the taxable year of
the Executive with respect to which such contested
amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the
Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 13
<PAGE>
to the Company's complying with the requirements of
Section 8(c)) promptly pay to the Company the amount
of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be
entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing
of its intent to contest such denial of refund prior
to the expiration of 30 days after such
determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Non-Compete, Confidential Information and Release.
(a) Covenant Not to Compete.
(i) Compliance with the provisions of this
Section 9 are an express condition of the
Executive's right to receive payments,
vesting, and benefits hereunder. The
Executive acknowledges and recognizes the
confidential information and records
provided by the Company, the Parent, and its
subsidiaries, affiliates, successors, and
assigns (collectively, the "Employer"), the
benefits provided hereunder, and the
professional training and experience he will
receive from and the contacts he will be
provided by the Employer, as well as the
highly competitive nature of the Employer's
business, and in consideration of all of the
above, agrees that during the period
beginning on the effective date of the
Executive's termination of employment with
the Employer (the "Date of Termination") and
ending twelve (12) months thereafter (the
"Covered Time"), the Executive will not
compete with the business of the Employer.
For purposes hereof, "competition" shall
mean any engaging, directly or indirectly,
in the "Covered Business" (as hereinafter
defined) in any state of the United States
of America or any nation in which the
Employer is conducting business as of the
Date of Termination (the "Covered Area").
For purposes of this Agreement, "Covered
Business" shall mean providing any services
similar in scope or nature to the services
provided by the Executive immediately prior
to his Date of Termination. For purposes of
this Section 9, the phrase "engaging,
directly or indirectly" shall mean engaging
directly or having an interest, directly or
indirectly, as owner, partner, shareholder,
agent, representative, employee, officer,
director, independent contractor, capital
investor, lender, renderer of consultation
services or advice or otherwise (other than
as the holder of less than 2% of the
outstanding stock of a publicly-traded
corporation), either alone or in association
with others, in the operation of any aspect
of any type of business or enterprise
engaged in any aspect of the Covered
Business.
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 14
<PAGE>
(ii) The Executive agrees that during the term of
this Agreement (including any extensions
thereof) and for the twenty-four (24) months
thereafter, he shall not (i) directly or
indirectly solicit or attempt to solicit any
of the employees, agents, consultants, or
representatives of the Employer or
affiliates of the Employer to leave any of
such entities; or (ii) directly or
indirectly solicit or attempt to solicit any
of the employees, agents, consultants or
representatives of the Employer or
affiliates of the Employer to become
employees, agents, representatives or
consultants of any other person or entity.
(iii) The Executive understands that the
provisions of Sections 9(a)(i) and (ii) may
limit his ability to earn a livelihood in a
business similar to the business of the
Employer but nevertheless agrees and hereby
acknowledges that the restrictions and
limitations thereof are reasonable in scope,
area, and duration, are reasonably necessary
to protect the goodwill and business
interests of the Employer, and that the
consideration provided under this Agreement
is sufficient to justify the restrictions
contained in such provisions. Accordingly,
in consideration thereof and in light of the
Executive's education, skills and abilities,
the Executive agrees that he will not assert
that, and it should not be considered that,
such provisions are either unreasonable in
scope, area, or duration, or will prevent
him from earning a living, or otherwise are
void, voidable, or unenforceable or should
be voided or held unenforceable.
(b) Enforcement.
(i) The parties hereto agree and acknowledge
that the covenants and agreements contained
herein are reasonable in scope, area, and
duration and necessary to protect the
reasonable competitive business interests of
the Employer, including, without limitation,
the value of the proprietary information and
goodwill of the Employer.
(ii) The Executive agrees that the covenants and
undertakings contained in Section 9 of this
Agreement relate to matters which are of a
special, unique and extraordinary character
and that the Employer cannot be reasonably
or adequately compensated in damages in an
action at law in the event the Executive
breaches any of these covenants or
undertakings. Therefore, the Executive
agrees that the Employer shall be entitled,
as a matter of course, without the need to
prove irreparable injury, to an injunction,
restraining order or other equitable relief
from any court of competent jurisdiction,
restraining any violation or threatened
violation of any of such terms by the
Executive and such other persons as the
court shall order. The Executive agrees to
pay costs and legal fees incurred by the
Employer in obtaining such injunction.
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 15
<PAGE>
(iii) Rights and remedies provided for in this
Section 9(b) are cumulative and shall be in
addition to rights and remedies otherwise
available to the parties under any other
agreement or applicable law.
(iv) In the event that any provision of this
Agreement shall to any extent be held
invalid, unreasonable or unenforceable in
any circumstances, the parties hereto agree
that the remainder of this Agreement and the
application of such provision of this
Agreement to other circumstances shall be
valid and enforceable to the fullest extent
permitted by law. If any provision of this
Agreement, or any part thereof, is held to
be unenforceable because of the scope or
duration of or the area covered by such
provision, the parties hereto agree that the
court or arbitrator making such
determination shall reduce the scope,
duration and/or area of such provision (and
shall substitute appropriate provisions for
any such unenforceable provisions) in order
to make such provision enforceable to the
fullest extent permitted by law, and/or
shall delete specific words and phrases, and
such modified provision shall then be
enforceable and shall be enforced. The
parties hereto recognize that if, in any
judicial proceeding, a court shall refuse to
enforce any of the separate covenants
contained in this Agreement, then that
unenforceable covenant contained in this
Agreement shall be deemed eliminated from
these provisions to the extent necessary to
permit the remaining separate covenants to
be enforced. In the event that any court or
arbitrator determines that the time period
or the area, or both, are unreasonable and
that any of the covenants is to that extent
unenforceable, the parties hereto agree that
such covenants will remain in full force and
effect, first, for the greatest time period,
and second, in the greatest geographical
area that would not render them
unenforceable.
(v) In the event of the Executive's breach of
this Section 9, in addition to all other
rights the Employer may have hereunder or in
law or in equity, all payments and benefits
hereunder shall cease; all options, stock,
and other securities granted by the
Employer, including stock obtained through
prior exercise of options, shall be
immediately forfeited (whether or not
vested), and the original purchase price, if
any, shall be returned to the Executive; and
all profits received through exercise of
options or sale of stock, and all previous
payments and benefits made or provided
hereunder shall be promptly returned and
repaid to the Company.
(c) Confidential Information. The Executive shall hold in
a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or
data relating to the Company or any of its affiliated
companies, and their respective businesses, which
shall have been obtained by the Executive during the
Executive's employment by the
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 16
<PAGE>
Company or any of its affiliated companies and which
shall not be or become public knowledge (other than
by acts by the Executive or representatives of the
Executive in violation of this Agreement). After
termination of the Executive's employment with the
Company, the Executive shall not, without the prior
written consent of the Company or as may otherwise be
required by law or legal process, communicate or
divulge any such information, knowledge or data to
anyone other than the Company and those designated by
it. In no event shall an asserted violation of the
provisions of this Section 9(c) constitute a basis
for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
(d) Release. The Executive's execution of a complete and
general release of any and all of his potential
claims (other than for vested benefits described in
this Agreement or any other vested benefits with the
Company and/or its affiliates) against the Company,
any of its affiliated companies, and their respective
successors and any officers, employees, agents,
directors, attorneys, insurers, underwriters, and
assigns of the Company, its affiliates and/or
successors, is an express condition of the
Executive's right to receive payments, vesting, and
benefits hereunder. The Executive shall be required
to execute a Waiver and Release Agreement which
documents the release required under this Section
9(d), the form of which shall be provided to the
Executive by Company.
10. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company
shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and
assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company
and/or the Parent to assume expressly and agree to
perform this Agreement in the same manner and to the
same extent that the Company would be required to
perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes
and agrees to perform this Agreement by operation of
law, or otherwise.
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 17
<PAGE>
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas,
without reference to principles of conflict of laws.
The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified
otherwise than by a written agreement executed by the
parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to
the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed
as follows:
IF TO THE EXECUTIVE:
CHARLES S. RAMSBURG
3818 Bay Road
Street, MD 21154
IF TO THE COMPANY:
HEALTHAXIS, LTD.
5215 N. O'Connor Blvd., Suite 800
Irving, Texas 75039
Attention: President
WITH COPY TO:
HEALTHAXIS, LTD.
5215 N. O'Connor Blvd., Suite 800
Irving, Texas 75039
Attention: General Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or
foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this
Agreement or the failure to assert any right the
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 18
<PAGE>
Executive or the Company may have hereunder,
including, without limitation, the right of the
Executive to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision
or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other
written agreement between the Executive and the
Company, the employment of the Executive by the
Company is "at will" and, subject to Section 1(a)
hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by
either the Executive or the Company at any time prior
to the Effective Date, in which case the Executive
shall have no further rights under this Agreement.
From and after the Effective Date, this Agreement
shall supersede any other agreement between the
parties with respect to the subject matter hereof
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 19
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Managers, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
EXECUTIVE:
-----------------------------------------
Charles S. Ramsburg
HEALTHAXIS, LTD.
By its General Partner,
HEALTHAXIS MANAGING PARTNER, LLC
By:
--------------------------------------
Its:
-------------------------------------
The Board of Directors of HEALTHAXIS, INC. (the Parent) has authorized
the undersigned officer to execute the foregoing Change in Control Employment
Agreement in order to indicate its approval of such Agreement.
HEALTHAXIS, INC.
By:
--------------------------------------
CHANGE IN CONTROL EMPLOYMENT AGREEMENT - Page 20