EXHIBIT 10.6
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
(▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇)
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is
made as of August 2, 1999 (the "Effective Date"), by and among APPLIED VOICE
RECOGNITION, INC., a Delaware corporation doing business as ▇-▇▇▇▇.▇▇▇
("Employer"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual residing in ▇▇▇▇▇▇ County,
Texas ("Employee").
W I T N E S S E T H:
WHEREAS, Employer, as successor by merger of Applied Voice
Recognition, Inc., a Utah corporation, and Employee executed that certain
Employment Agreement dated effective as of July 1, 1997 (the "Agreement");
WHEREAS, Employer and Employee now desire to amend the
Agreement pursuant to the terms and provisions set forth herein;
NOW, THEREFORE, for in consideration of the premises and the mutual
covenants contained herein and in the Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound hereby, the parties hereby covenant and agree to
modify the Agreement as follows (all capitalized terms herein and not otherwise
defined herein shall have the meaning assigned to them in the Agreement):
1. TERM OF EMPLOYMENT. From and after the Effective Date, all
references in the Agreement to the "Expiration Date" as defined in Section 2 of
the Agreement, shall refer to December 31, 2001. Furthermore, the following
sentence will be added after the second (2nd) sentence of Section 2:
"If Employer achieves its budgeted gross revenues and EBITDA for
the year 2001, this Agreement will be automatically renewed for a one year
period expiring December 31, 2002."
2. COMPENSATION AND OTHER BENEFITS. Subsection (f) of Section 3 of
the Agreement is hereby deleted in its entirety and the following is hereby
inserted in its place:
"f. Commencing August 1, 1999, Employee shall be entitled to
receive four weeks of paid vacation for each year during the Term and
shall be entitled to receive paid holidays as enjoyed by all other
employees of Employer."
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3. COMPENSATION AND OTHER BENEFITS. Subsection (g) of Section 3 of
the Agreement is hereby amended by inserting the following at the end of the
second sentence:
", except when related to travel to other cities on behalf of
Employer."
4. COMPENSATION AND BENEFITS. Section 3 of the
Agreement is hereby amended by the deletion in its entirety of
Subsection (b).
5. COMPENSATION AND BENEFITS. Subsection (c) of Section 3 of the
Agreement is hereby deleted and replaced in its entirety with the following:
"In addition to receiving the Base Salary provided for in Section
3(a), for calendar year 1999, Employee shall be entitled to a bonus of up
to One Hundred Twenty Five Thousand Dollars ($125,000.00). Seventy Five
Thousand Dollars ($75,000) of the 1999 bonus shall be earned and paid upon
execution of this Amendment, and the remaining $50,000 shall be earned if
the performance criteria set forth on ATTACHMENT I hereto are achieved by
December 31, 1999 and paid by January 31, 2000. For each year thereafter,
Employee shall be entitled to a bonus of up to fifty percent (50%) of
Employee's Base Salary; provided, however, Employee shall be entitled to
such bonus if, and only if, Employee has met the performance criteria set
by the Compensation Committee of the Board of Directors of Employer (the
"Compensation Committee") for the applicable period. Criteria set by the
Compensation Committee shall be set on a quarterly basis for the quarters
ending March 31, June 30, September 30, December 31, and bonuses earned
pursuant hereto shall be on a quarterly basis. Employer agrees that
performance criteria for Employee's bonus to be earned commencing January
1of each year shall be set on or before January 1 of such year. Employee
shall have the opportunity to meet with and discuss such criteria with the
Compensation Committee prior to the finalization of such criteria. Upon
completion of the criteria for the applicable year, such criteria shall be
communicated to Employee in writing. If Employee successfully meets the
performance criteria established by Employer (in the discretion of
Employer), Employer shall pay to Employee the bonus within thirty (30) days
of the end of the applicable quarterly period. Notwithstanding the
foregoing, if the Compensation Committee and Employee fail to agree on
Performance Criteria for any bonus period, then Employee's bonus shall be
deemed to be earned if Employer's Chief Executive Officer has earned his
performance bonus for such period under his Employment Agreement with
Employer."
6. COMPENSATION AND OTHER BENEFITS. Section 3 of the Agreement is
hereby amended by the insertion of the following as Subsection (h) of such
Section 3.
"h. Employee shall be entitled to a disability policy at the expense of
Employer that provides for payments in the amount of one-half of
Employee's Base Salary during such period as Employee is disabled, as set
forth in and subject to the limitations contained in such policy."
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7. DUTIES. Subsection (a) of Section 4 of the Agreement is hereby
deleted and replaced in its entirety with the following:
"a. Employee is employed to act as Chairman of the Board of Employer
and Chairman of the Strategic and Compensation Committees of Employer.
Employee shall be available to consult with the Chief Executive Officer of
Employer on an as needed basis as reasonably determined by Employer's
Board of Director."
8. TERMINATION OF EMPLOYMENT. Subsection (c)(5) of Section 5 of the
Agreement is hereby amended by the replacement of the reference in such
subsection to "thirty days" with "ninety (90) days."
9. TERMINATION OF EMPLOYMENT. Section 5 of the Agreement is hereby
amended by the deletion of each of Subsection (e) and the last paragraph of such
Section 5.
10. STOCK OPTION PLAN. The following provision is hereby inserted as
Section 20 of the Agreement:
"On the date, if ever, that Employer completes a spin-off of any
of its wholly-owned subsidiaries in an initial public offering (the
"Spin-Off IPO"), Employee shall be granted stock options entitling Employee
to purchase two percent (2%) of the shares of the spun off subsidiary
outstanding after the completion of the Spin-Off IPO (the "Options").
Employer agrees to take all reasonable steps to make such Options available
in conjunction with the Spin-Off IPO. The granting instrument for the
Options will provide, in addition to other terms set forth therein, that
(i) the purchase price for the Options shall be the lowest price of any
options granted to employees of Employer or such spun off subsidiary in
connection with the Spin-Off IPO, and (ii) the Options will vest monthly
over the greater of (A) 12 months after the grant or (B) the remaining term
of this Agreement. "
11. CHANGE OF CONTROL. The following provision is hereby inserted as
Section 21 of the Agreement:
"21. CHANGE OF CONTROL. A "Change in Control" shall be deemed to
have occurred if (i) in the context of a single event or series of related
events, more than 50% of the voting power of Employer's outstanding
securities entitled to vote in elections of directors shall be acquired by
any person (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) other than by any person which
includes Employee, or (ii) as the result of a tender offer, merger,
consolidation, sale of assets or contested election, or any combination of
such transactions, the persons who were directors of Employer immediately
before the transaction shall cease to constitute a majority of the Board of
Directors of Employer or any successor to Employer. In the event of a
Change in Control and any Change in Control Qualifying
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Event (as herein defined) shall occur, Employee shall be permitted to
terminate his employment within six (6) months of such Change in Control
Qualifying Event and notwithstanding such termination, Employee shall be
entitled to receive his Base Salary for the remaining Term of this
Agreement. In addition, any stock options granted to Employee pursuant to
this Agreement shall immediately vest as of such termination date; however,
Employee shall not be eligible to receive any bonus earned pursuant to
Section 3(c) of this Agreement for any quarter beyond the quarter in which
Employee's employment is terminated. For purposes hereof, a Change in
Control Qualifying Event shall include (i) a significant diminution,
without mutual agreement of the parties, in the nature and scope of
Employee's authority, power, functions or duties, (ii) Employer assigns to
Employee, without mutual agreement of the parties, substantial additional
duties or responsibilities which are inconsistent with the duties of
Employee under this Agreement, or (iii) Employer transfers Employee from
the principal office of Employer. Employer and Employee agree that if
sEmployee does a spin-off initial public offering of e-DOCS Health Care
Information Services, Inc., and none of the circumstances described in
subsections (i), (ii) or (iii) above apply, such transaction will not be a
Change of Control for purposes of this Section 20. Employer and Employee
further agree that notwithstanding the foregoing provisions of this Section
21, there will be no Change of Control Qualifying Event if Employee and/or
his controlled entities in their capacities as shareholders of Employer
vote in favor of such transaction that results in a Change of Control if
such transaction is an all cash transaction."
12. GROSS-UP PROVISION. The following provision is hereby inserted as
Section 22 of the Agreement:
"22. GROSS-UP PROVISION. If any portion of any payments received by
Employee from Employer shall be subject to tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended or any successor statutory
provision, Employer shall pay to Employee such additional amounts as are
necessary so that, after taking into account any tax imposed by Section
4999 (or any successor statutory provision), and any federal and state
income taxes payable on any such tax, the Employee is in the same after-tax
position that he would have been if such Section 4999 or any successor
statutory provision did not apply and no payments were made pursuant to
this Section 22."
13. OFF-SITE OFFICE. The following provision is hereby inserted as
Section 23 of the Agreement:
"23. OFF-SITE OFFICE. During the term of this Agreement, Employer
shall bear the cost of an office for Employee and Employee's executive
assistant at a location mutually acceptable to Employer and Employee,
including rent, telephone, computer, internet access, cellular phone,
office supplies and entertainment expenses, all according to budgets
established from time to time by the mutual agreement of Employer and
Employee."
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14. ATTORNEYS FEES IN CONNECTION WITH AMENDMENT. Employer agrees to
reimburse Employee for Employee's reasonable attorneys fees incurred in
connection with this Amendment up to a maximum of $5000.
15. MCDONALD LITIGATION. Employer agrees to assume responsibility for
the defense and resolution of and indemnify Employee for any loss, damages,
claims or expenses in connection with the pending litigation styled ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇. AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ LIFE INSURANCE TRUST II VS. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ET AL, CASE ▇▇. ▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, 113TH
JUDICIAL DISTRICT (the "McDonald Litigation"). Employee agrees to cause
Employee's affiliate Applied Voice Recognition, L.P. to distribute up to 180,000
shares of common stock of Employer to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and/or the ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ Life Insurance Trust II as part of the resolution of the McDonald
Litigation upon notice from Employer. Employer will promptly assume
responsibility for the defense of the McDonald Litigation and will have full
power and authority to settle such matter on terms acceptable to Employer so
long as the sole and maximum liability of Employee and/or Applied Voice
Recognition, L.P is for the 180,000 shares of stock of Employer referenced above
in this Section 15.
16. MISCELLANEOUS. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted pursuant to the terms of the Agreement. Except as amended hereby, the
Agreement is presently in full force and effect in accordance with its original
terms, except as previously and herein amended. If any part of this Amendment
shall be held invalid, illegal or unenforceable, then such provision shall be
deleted from this Amendment and the remainder of this Amendment shall not be
affected thereby.
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IN WITNESS WHEREOF, the parties have executed this Amendment on this
2nd day of August, 1999, effective as of the Effective Date.
EMPLOYER:
APPLIED VOICE RECOGNITION, INC., a
Delaware corporation doing business
as ▇-▇▇▇▇.▇▇▇
By:______________________________________
▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
and President
EMPLOYEE:
______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Signature Page to
First Amendment to Employment Agreement
(▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇)
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ATTACHMENT I
1999 BONUS PERFORMANCE CRITERIA
Employer will have achieved BOTH (i) a Revenue Run Rate based on the
average accrual basis gross revenues from medical transcription services and
sales of products (but not extraordinary consulting services) for November and
December, 1999 of no less than $898,000 per month, and (ii) average EBITDA for
November and December, 1999 of no less than -$227,000 per month.
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