Executive Employment Agreement - Medix Resources Inc. and Gary L. Smith
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, dated as of December 11, 2000, (the
"Agreement") by and between Medix Resources, Inc., a Colorado corporation
with its principal offices located at Suite 301, 7100 E. Belleview Ave,
Greenwood Village, Colorado. ("the Company") and Gary L. Smith (the
"Executive").
NOW THEREFORE, in consideration of the foregoing premises and mutual
covenants herein contained, the parties hereto agree as follows:
1. Employment. The Company agrees to employ the Executive and the
Executive agrees to serve the Company as its Executive Vice President and CFO.
2. Responsibilities and Supervision. The Executive shall devote
all of his business time and attention to the affairs of the Company and its
affiliated companies. The Executive shall be responsible for the overall
financial administration of the company in each case subject to the general
direction, approval and supervision of the Company's Chief Executive Officer
and Board of Directors, and to the restrictions, limitations and guidelines
set forth by the Board of Directors in resolutions adopted in the minutes of
the Board of Directors meetings, copies of which shall be provided to the
Executive from time to time. In the performance of his duties, the Executive
shall maintain an office at 305 Madison Avenue New York, NY 10165. The terms
"affiliate of" a company or "affiliated company" as used herein means any
company directly or indirectly controlling, controlled by or under common
control with the other company. A presumption of control shall exist for any
person owning or controlling 10% or more of the outstanding voting securities
of a company, and any officer, director or general partner of a company.
3. Term of Employment. The period of the Executive's
employment under
this Agreement shall begin on December 11, 2000 and be for a 2-year period
ending December 11, 2002, subject to the termination provisions set forth in
Paragraphs 10, 11, and 12 hereunder.
4. Duties. During the period of his employment hereunder and except
for illness, specified vacation periods and reasonable leaves of absence, the
Executive shall devote his best efforts and all his business time, attention
and skill to the business and affairs of the Company and its affiliated
companies, as such business and affairs now exist and as they may be
hereinafter changed or added to, provided, however, that, with approval of
the Board of Directors of the Company, the Executive may serve, on the board
of directors of, or hold any other offices or positions in, companies or
organizations which, in such Board's judgment, will not present any conflict
of interest with the Company or any of its subsidiaries or affiliates or
divisions, or materially affect the performance of Executive's duties
pursuant to this Agreement; and further provided that the outside business is
not a "Business Opportunity" of the Company, as defined herein. A Business
Opportunity of the Company shall be a product, service, investment, venture
or other opportunity, which is either:
(a) Directly related to or within the scope of the existing
business of the Company; or
(b) Within the logical scope of the business of the Company, as
such scope may be expanded or altered from time-to-time by the Board of
Directors.
5. Compensation. The Company shall pay to the Executive as compensation
for his services, the base salary of $200,000 per year or such higher salary
as from time-to-time may be approved by the Board of Directors, payable
bi-monthly in accordance with the Company's normal payroll procedures. The
Executive also is eligible to participate in an annual bonus plan, the terms
and provisions of which will be decided by the Board of Directors.
As additional compensation hereunder, upon the execution of this
Agreement, the Company will grant to the Executive 250,000 options to
purchase common stock of the Company under the Company's 1999 Stock Option
Plan, at an exercise price that is the closing price of the Company's stock
on the Executive's start date, December 11, 2000. Such options are intended
to be classified as incentive stock options for tax purposes, and shall vest
and expire as provided on Exhibit A attached hereto. Terms of the Stock
Option grant will be set forth in a Stock Option Agreement in the form used
pursuant to such Plan.
6. Expense Reimbursement. The Company will reimburse the Executive
for all reasonable and necessary expenses incurred by him in carrying out his
duties under this Agreement, including entertainment, travel and lodging
costs. The Executive shall present to the Chief Executive Officer each month
an itemized account of such expenses in such form as is required by the
Company's accounting policies.
7. Medical Coverage and Other Employee Benefits. The Executive will
be eligible to participate in the Company's current standard benefits
package, which provides health insurance with limited Company payments, long
term disability, limited sick time accrual, paid holidays, 401(k) Plan
participation when eligible and term life insurance at Executive's cost, on
the same basis as other Executives of the Company.
8. Vacation Time. The Executive shall be entitled
to take four (4) weeks
paid vacation per calendar year, which, however shall vest at the rate of one
(1) week per full calendar quarter worked hereunder. Such vacation may not
be taken in any greater than consecutive two (2) week increments. Vacation
time not used by the Executive during the calendar year will be forfeited.
Compensation for annual vacation time vested but not taken by Executive shall
be paid to the Executive at the date of termination.
9. Obligations of Executive During and After Employment.
(a) The Executive agrees that during the terms of his
employment under this Agreement or while receiving compensation under this
Agreement, he will engage in no other business activities directly or
indirectly, which are or may be competitive with or which might place him in
a competing position to that of the Company, or any affiliated company.
(b) The Executive realizes that during the course of his
employment, Executive will have produced and/or have access to confidential
business plans, information, business opportunity records, notebooks, data,
formula, specifications, trade secrets, customer lists, account lists and
secret inventions and processes of the Company and its affiliated companies.
Therefore, during his employment by the Company or by an affiliated company
or while receiving compensation under this Agreement, the Executive agrees to
hold in confidence and not to directly or indirectly disclose or use or copy
or make lists of any such information, except to the extent authorized by the
Chief Executive Officer of the Company in writing. All records, files,
business plans, documents, equipment and the like, or copies thereof,
including copies on Company computers, relating to Company's business, or the
business of an affiliated company, which Executive shall prepare, or use, or
come into contact with, shall remain the sole property of the Company, or of
an affiliated company, and shall not be removed from the Company's or the
affiliated company's premises without the written consent of the Chief
Executive Officer, and shall be promptly returned to the Company upon
termination of employment with the Company and its affiliated companies. The
Executive further agrees that after the term of his employment, he will not
disclose or make use of any proprietary information owned by the Company or
necessary in the operation of the Company's products or products under
development.
(c) Because of his employment by the Company, Executive will
have access to trade secrets and confidential information about the Company,
its business plan, its business opportunities, and its expansion plans into
other geographical areas and its methods of doing business. Executive agrees
that for a period of one (1) year after termination of his employment, he
will not, directly or indirectly compete with the Company in a business that
is a "Business Opportunity" of the Company or defined in Section 4 above.
(d) In the event a court of competent jurisdiction finds any provision of
this Section 9 to be so over broad as to be unenforceable, then such
provision shall be reduced in scope by the court, but only to the extent
deemed necessary by the court to render the provision reasonable and
enforceable, it being the Executive's intention to provide the Company with
the broadest protection possible against harmful competition.
(e) Irreparable harm should be presumed if any provision of this Section 9
is breached in any way. Damages would be difficult if not impossible to
ascertain, and the faithful observance of all terms of such Section is an
essential condition of employment with the Company. In light of these
considerations, Executive acknowledges that a court of competent jurisdiction
should immediately enjoin any breach of this Agreement by Executive, upon the
Company's request and the Company is released from the requirement of posting
any bond in connection with temporary or interlocutory injunctive relief, to
the extent permitted by law. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedy available to the Company for such
breach or threatened breach including, but not limited to, the recovery of
damages from the Executive.
10. Termination by the Company.
(a) Termination for Cause by the Company. During the first year of
the term of this Agreement, there can be no termination of the Executive by
the Company except for "Termination for Cause" as outlined below:
Notwithstanding anything herein to the contrary, the
Company may, without liability, terminate the Executive's employment
hereunder for cause upon five days written notice, and there after the
Company's obligations hereunder shall cease and terminate.
Grounds for termination "for cause" shall be one or more of
the following:
(1) A willful breach of duty by the Executive during the course of his
employment;
(2) The conviction of the Executive of a felony;
(3) Habitual neglect of duty by the Executive;
The Executive's material failure to perform or meet objective and
measurable standards set by the President and Chief
Executive Officer and agreed upon by the Executive in
advance.
(b) Termination Without Cause by the Company. After the completion
of the initial year of employment hereunder, the Company may terminate the
employment of the Executive upon thirty (30) days written notice without
cause. In the event of termination without cause, the Company will pay the
Executive six (6) months salary as compensation. In addition, at least three
months prior to the expiration of this contract, the Company will either
notify the Executive in writing that the contract will not be renewed or will
commence good faith negotiation to enter into a new or modified contract.
However, failure to renew the Executive's contract shall not be deemed to be
"termination without cause" hereunder.
11. Termination by the Executive. The Executive, with or without cause,
may terminate this Agreement upon 90 days' written notice to the Company. In
such event, the Executive shall be required to render the services required
under this Agreement during such 90-day period, unless otherwise directed by
the Board of Directors. Executive will be compensated only through the final
day of his employment.
12. Termination Upon Death of Executive. In addition to any other
provision relating to termination, this Agreement shall terminate
upon the Executive's death. Upon Executive's death, the Company shall pay in
a lump sum, within 45 days of the Executive's death, to such person as the
Executive shall have designated to the Company as his beneficiary, or, if
no such person is designated, to the Executive's estate, an amount
equal to all of the Executive's accrued but unpaid base salary, the value
on the Company's books of any vested but unused vacation time and accrued sick
time, and all unpaid expense reimbursements at the time of Executive's death.
13. Lump Sum Compensation. In the event of the occurrence of a
"Triggering
Event," which shall be defined to include (i) change in ownership of 50% or
more of the outstanding shares of the Company, or (ii) the merger,
consolidation, reorganization or liquidation of the Company that results in a
change in ownership of 50% or more in the direct or indirect ownership of the
Company before the merger, consolidation, reorganization or liquidation, the
Executive shall receive a lump sum compensation equal to his annual salary
and incentive or bonus payments, if any, as would have been paid to the
Executive during the Company's then current fiscal year (as if the Executive
had been employed for the full fiscal year), within 30 days of the Triggering
Event. All of Executive's granted but unvested options shall immediately
vest upon the occurrence of a Triggering Event, and all of the shares
underlying all the options held by him shall be registered on a Form S-8 (or
any successor form) in a timely manner (no more than 45 days after such
Triggering Event), to be sold to his by the Company or its successor as
unrestricted and freely tradable shares. If the total amount of the change of
control compensation were to exceed three times the Executive's base salary
(the average annual taxable compensation of the Executive for the five years
preceding the year in which the change of control occurs), the Company and
the Executive may agree to reduce the lump sum compensation to be received by
Executive in order to avoid the imposition of the golden parachute tax as
provided in the Tax Reform Act of 1984, as amended by the Tax Reform Act of
1986.
In the event the Executive is required to hire counsel to
negotiate on his behalf in connection with his termination or resignation
from the Company upon the occurrence of a Triggering Event, or in order to
enforce his rights and the obligations of the Company as provided in this
Paragraph, the Company shall reimburse to the Executive all reasonable
attorney's fees which may be expended by the Executive in seeking to enforce
the terms hereof. Such reimbursement shall be paid every 30 days after the
Executive provides copies of invoices from the Executive's counsel to the
Company.
14. Indemnification. The Company shall indemnify and hold
harmless Executive to the fullest extent and in the manner permitted by the
provisions of the Colorado Business Corporation Act, as it may be amended
from time to time. To the extent that any of the Company's officers or
directors are covered by or benefit from one or more director's and officer's
liability insurance policies, the Executive shall also be covered by or
benefit from such policy or policies.
15. Arbitration. Any controversy, dispute or claim arising out
of, or relating to this Agreement and/or its interpretation shall, unless
resolved by agreement of the parties, be settled by binding arbitration in
Denver, Colorado in accordance with the Rules of the American Arbitration
Association for employment disputes then existing. This Agreement to
arbitrate shall be specifically enforceable under the prevailing arbitration
laws of the State of Colorado. The award rendered by the arbitrators shall
be final and judgment may be entered upon the award in any court of the State
of Colorado having jurisdiction of the matter. If any legal proceeding
and/or arbitration is brought to enforce or interpret the terms of this
Agreement, each party shall bear its own attorney's fees, costs, and
necessary disbursements in such legal proceeding and/or arbitration except as
otherwise provided herein.
16. General Provisions.
(a) The Executive's rights and obligations under this Agreement
shall not be transferable by assignment or otherwise, nor shall Executive's
rights be subject to encumbrance or to the claims of the Company's
creditors. Nothing in this Agreement shall prevent the consolidation of the
Company, with or its merger into, any other corporation, or the sale by the
Company of all or substantially all of its property or assets. However, the
rights of the Executive hereunder shall be enforceable against any successor
to the Company, and the rights of the Company hereunder shall benefit any
successor to the Company.
(b) This Agreement and the rights of Executive with respect to
the obligations and benefits of employment recited in this Agreement,
constitute the entire Agreement between the parties hereto in respect of the
employment of the Executive by the Company and supersede any and all other
agreements either oral or in writing between the parties hereto with respect
to the employment of the Executive.
(c) The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part there of are declared
invalid or unenforceable by a court of competent jurisdiction, the validity
and enforceability of the remainder of such provisions or parts there of and
the applicability there of shall not be affected there by.
(d) This Agreement may not be amended or modified except by a
written instrument executed by Company and Executive.
(e) This Agreement and the rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the State
of Colorado, excluding however, the provisions governing conflicts of laws.
17. Construction. Throughout this Agreement, the singular
shall include the plural, and the plural shall include the singular, and the
masculine and neuter shall include the feminine, wherever the context so
requires.
18. Text to Control. The headings of paragraphs and sections
are included solely for convenience of reference. If any conflict between
any heading and the text of this Agreement exists, the text shall control.
19. Authority. The officer executing this Agreement on behalf
of the Company has been empowered and directed to do so by the Board of
Directors of the Company.
IN WITNESS WHEREOF, the Company and the Executive hereby execute this
Agreement, as of the date first above written, with the full intention to be
mutually bound by the terms hereof.
FOR THE COMPANY:
MEDIX RESOURCES, INC.
By: /s/John R. Prufeta
John R. Prufeta
President and Chief Executive Officer
THE EXECUTIVE:
By: /s/ Gary L. Smith
Gary L. Smith
EXHIBIT A
VESTING SCHEDULE FOR OPTIONS
Options covering 250,000 shares of the Company common stock shall be granted
to Executive upon the execution of this Employment Agreement, which shall
vest as follows: options covering 50,000 shares will vest immediately and
options covering 25,000 shares shall vest on the same date of each third
month from the prior vesting date, until all options have vested (which date
shall be 21 months from the date of this Agreement), so long as Executive is
still employed by the Company on each of those vesting dates. However, in
order to qualify for the exemption provided by Rule 16b-3, in no case shall
Executive transfer or dispose of any option (other than by exercise) or the
underlying common stock granted hereunder for a period of six months plus one
day from the date of this Agreement. The expiration date of all of the
options granted hereunder shall be the earlier of five years from the date of
this Agreement or 90 days after the Executive leaves the employment of the
Company.