EXHIBIT 10.12
EMPLOYMENT AGREEMENT
FOR
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D.
This EMPLOYMENT AGREEMENT (the "Agreement") is dated as of _______,
1999, by and between OPTICARE HEALTH SYSTEMS, INC., a Delaware corporation (the
"Employer"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, M.D., of Middlebury, Connecticut (the
"Employee").
WHEREAS, the Employer desires to employ the Employee as its Chairman of
the Board, Chief Executive Officer and President, and the Employee desires to
render such services, each on the terms and conditions set forth below;
WHEREAS, the Employer considers the establishment, maintenance and
continuity of qualified management to be essential to protecting and enhancing
its best interests and the best interests of its shareholders;
WHEREAS, the Employer has determined that it is in its best interest to
enter into employment agreements with key management and executive personnel to
enable the Employer to attract and retain qualified management;
WHEREAS, the Employer believes that when a change in control is
perceived as imminent, or is occurring, it should be able to receive and rely on
disinterested advice from management regarding the best interests of the
Employer without concern that members of management might be distracted or
concerned by the personal uncertainties and risks created by the perception of
an imminent or occurring change in control, and the Employer also recognizes
that the possibility of such a change in control could result in the departure
or distraction of key management personnel to the detriment of the Employer;
WHEREAS, the Employer has determined that it would be in its best
interest to reinforce and encourage the continued attention and dedication of
key members of the management of the Employer to their duties without financial
or employment concerns arising from the possibility of a change in control and
to enable such key employees to consider only the best interests of all
shareholders and employees in negotiating with respect to any such change in
control; and
WHEREAS, in furtherance of the above stated objectives, the parties
desire to enter into this Agreement to set forth the terms and conditions for
the employment relationships of the Employee with the Employer.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee and the
Employee hereby accepts employment upon the terms and conditions set forth
below.
2. SCOPE OF EMPLOYMENT
(a) The Employee is hereby employed as Chairman of the Board,
Chief Executive Officer and President of the Employer, which such employment
shall commence as of _________, 1999 (the "Commencement Date") and which shall
continue through the term of this Agreement. In that capacity, the Employee
shall render executive, policy and other management services to the Employer of
the type customarily performed by persons serving in the capacity of a chief
executive. The Employee shall also perform such other executive duties as the
Board of Directors of the Employer may from time to time reasonably direct.
(b) During the term of employment hereunder, the Employee
shall devote his full professional time and his best efforts to the business and
affairs of the Employer, except as may otherwise be agreed to by the Board of
Directors of the Employer. The Employee may, with the approval of the Board of
Directors, serve in a part-time paid advisory capacity to another entity which
does not compete with the Employer, the professional corporation affiliated with
the Employer (the "P.C.") or an affiliate or subsidiary of the Employer.
(c) During the term of this Agreement, there shall be no
material increase or decrease in the duties and responsibilities of the
Employee, unless the parties otherwise agree in writing.
3. COMPENSATION.
(a) Base Salary. The Employer agrees to pay the Employee,
during the term of this Agreement, a base salary at an annual rate of $250,000
(including the increases in this Paragraph 3(a), the "Base Salary"). The Base
Salary shall not be decreased at any time during the term of this Agreement from
the amount then in effect, unless the Employee otherwise agrees in writing. The
Board of Directors of the Employer shall consider (but shall not be required to
implement) additional increases in the Employee's Base Salary. Participation in
deferred compensation, discretionary bonus, retirement, and other employee
benefit plans and in fringe benefits (including those described below) shall not
reduce the Base Salary payable to the Employee. The Base Salary shall be payable
not less frequently than monthly.
(b) Bonuses. During the term of this Agreement, the Employee
shall be entitled to a monthly guaranteed bonus of $13,334. In addition, the
Employee shall be entitled to such bonuses as may be authorized, declared and
paid by the Employer, which such bonuses shall be targeted to provide an annual
cash bonus of 50% of his Base Salary plus guaranteed bonus, subject to the
achievement of target goals which will be provided in a plan established for
each calendar year by the Board of Directors or a designated subcommittee
thereof. The Employee shall also be eligible to receive an additional cash
bonus, which may, in the aggregate and when combined with the 50% bonus
described above, produce up to 100% of his Base Salary plus guaranteed bonus,
upon achievement of specified additional goals, which will be provided in the
plan established by the Board of Directors as described above.
(c) Automobile. During the term of this Agreement, the
Employee will be entitled to select a car to be provided to him by the Employer
at a cost to the Employer not to exceed $1,200 per month. The Employer will
reimburse the Employee for the ordinary and necessary
expenses of said car incurred by the Employee in the course of performing his
duties for the Employer hereunder.
(d) Participation in Stock Incentive Plan. The Board of
Directors may grant Employee certain stock option shares of Employer's Common
Stock, in accordance with the Employer's 1999 Omnibus Plan, as amended from time
to time. Such options shall vest in the event the Employee's employment is
terminated for any reason other than for cause (as defined in paragraph
7(a)(2)), including death, disability and termination by the Employer other than
for cause.
4. BENEFITS. The Employer shall provide the Employee with the benefit
of its health insurance plans, vacation and sick leave and such other benefits
as are approved by the Board of Directors and are suitable for a Chairman of the
Board, Chief Executive Officer and President of a similar corporation.
5. DISABILITY PAYMENTS. The Employer shall pay or reimburse (grossed up
to account for federal and state income taxes) Employee for long-term disability
insurance covering total disability as defined in such long-term disability
policy or policies, providing a combined maximum benefit of up to 65% of the
Base Salary plus guaranteed bonus and any additional bonus earned as of the date
of total disability, subject to a 180 day elimination period, an inflation or
cost of living benefit rider, and the longest available benefit period. In the
event that the Employee shall become partially or totally disabled (as defined
in such long term disability policy) for a period of not more than 180 days,
then, during the period of such partial or total disability, Employee shall be
paid the compensation set forth in Paragraph 3 for such 180 day period. If
available, the Employee may purchase additional coverage enhancements or riders
at his own expense.
6. TERM. The term of employment under this Agreement shall commence on
the Commencement Date and shall continue for an initial period of three years.
Thereafter, the term of employment shall be extended automatically for
subsequent one year terms on the same terms and conditions unless either party
gives contrary written notice to the other party on or before the "Applicable
Notice Date." The "Applicable Notice Date" shall be the date that is six months
prior to the next expiration date. References herein to the term of this
Agreement shall refer to both such initial term and any additional or extended
terms.
7. TERMINATION OF EMPLOYMENT BY EMPLOYER.
(a) Termination By the Employer for Cause.
(1) The Employer may at any time terminate the Employee's
employment with the Employer for cause. The Employee shall have no right to
receive compensation or other benefits for any period after termination for
cause.
(2) The term "termination for cause" shall mean termination
because of the Employee's dishonesty or willful misconduct involving the
affirmative act of the Employee
(and not the acts of others attributed to the Employee) as to which the Employee
has actual knowledge that such act constitutes a felony, or a breach of
fiduciary duty involving personal profit.
(3) In determining whether a "termination for cause" has occurred,
it shall be the Employer's burden to prove the alleged acts. Any decision by the
Employer to terminate the Employee's employment for cause shall require the
decision of the Employer by vote of at least seventy-five percent of the members
of the Board of Directors other than the Employee.
(b) Termination on Account of Disability. The Employee's
employment shall terminate automatically upon "Disability." For purposes of this
Agreement, Disability shall mean the incapacity of the Employee by illness or
any other cause as determined under the long-term disability insurance policy
covering the Employee at the time in question, or if no such plan is in effect,
then the incapacity of the Employee as prevents the Employee from performing the
essential functions of his position with or without reasonable accommodation for
a period in excess of 240 days (whether or not consecutive) or 180 days
consecutively, as the case may be, during any 12-month period. In the event of
any such termination of the Employee's employment on account of Disability, the
Employer shall make the payments provided in Paragraph 8(b) and the Employee
shall be entitled to accelerated vesting of any stock options granted to the
Employee as provided in Paragraph 3(d).
(c) Termination Other Than For Cause or on Account of Disability.
The Employer may at any time terminate upon three (3) months' prior written
notice the Employee's employment other than for cause or on account of
Disability; provided, however, that in the event of any such termination of
employment other than for cause or on account of Disability, the Employer shall
make the payments provided in Paragraph 8(b). The Employer's failure to renew
the term of this Agreement shall be deemed termination without cause.
8. PAYMENTS IN THE EVENT OF DEATH OR SEPARATION FROM SERVICE PRIOR TO
CHANGE OF CONTROL.
(a) Death. Upon the death of the Employee, the Employee's Base
Salary, prorated to the date of his death, and such bonuses allocable to the
period prior to the date of death, when and in such amounts as declared by the
Board of Directors of the Employer, and other compensation payable hereunder
shall be paid to his named beneficiary, or if there be none then living, to the
Employee's estate. In addition, (i) for a period of eighteen months after the
death of the Employee, the Employer shall to the extent legally permissible
provide the family of the Employee without cost with the same health insurance
plan provided the executives of the Employer and (ii) the Employer shall, during
the term of this Agreement, purchase insurance on the life of the Employee in
the amount of $1,500,000, with the proceeds payable to a beneficiary selected by
the Employee.
(b) Compensation and Benefits Upon Termination. In the event
before a Change in Control of the Employer or after the three year period
following a Change in Control of the Employer (A) the Employee's employment is
terminated on account of Disability or by the
Employer without cause or (B) this Agreement is not renewed by the Employer, the
Employee shall be paid, as severance pay, a lump sum in an amount equal to three
times his total compensation set forth in Paragraph 3 for the year prior to such
termination and the benefits he was receiving prior to termination for a period
of three years after termination. The continuation of the Employee's health care
coverage as provided herein shall satisfy the Employer's obligation under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").
9. TERMINATION OF EMPLOYMENT BY EMPLOYEE. The Employee may terminate
his employment for any reason upon the giving of six month's prior written
notice to that effect delivered to the Employer. The Employee agrees that if he
terminates his employment with the Employer under this Paragraph 9 or if he
elects not to renew the term of this Agreement pursuant to Paragraph 6 above, he
shall devote his full professional time and best efforts to the business and
affairs of the Employer during such six-month period; and the Employer agrees to
continue to pay the Employee his Base Salary and any declared bonuses until the
end of such period; provided, however, that if the Employee fails to devote his
full professional time and best efforts to the business and affairs of the
Employer during such six month period, the Employer shall not be obligated to
make any further payments under any provision of this Agreement other than to
make payments to the Employee of Base Salary accrued prior to the Employee's
breach of his commitment under this Paragraph 9 and such bonuses allocable to
the annual period prior to the date of such breach, when and in such amounts as
are declared by the Board of Directors of the Employer. In the event of such
breach, the Employer shall have the right to pursue all other remedies available
at law or equity. Notwithstanding anything to the contrary in the foregoing,
nothing in this Paragraph 9 is intended to modify the Employee's obligations
pursuant to Paragraphs 12, 13 or 14 of this Agreement.
10. PAYMENTS UPON CHANGE IN CONTROL.
(a)(i) If during the three year period following a Change in
Control of the Employer (as defined in subparagraph 10(b) below), (i) the
Employee's duties and responsibilities are materially diminished or (ii) the
Employee's place of principal employment by the Employer is moved more than
fifty miles from such place of principal employment immediately prior to the
Change in Control, or (iii) the Employee's employment is terminated on account
of Disability or by the Employer without cause or by non-renewal of this
Agreement, or
(ii) If during the one year period following a Change in
Control of the Employer, the Employee gives notice of termination of the
Employee's employment with the Employer in accordance with the provisions of
Paragraph 9 (applied without regard to any notice period otherwise required
thereby);
(iii) Then in either event the Employee shall be entitled to
receive from the Employer, as a severance payment for services previously
rendered to the Employer, a lump sum cash payment as provided for in
subparagraph 10(a) (iv) below (subject to subparagraph 10(c) below) (the
"Severance Payment"). For purposes of this Paragraph 10(a), termination of the
Employee's employment (1) following a material reduction in his duties or
responsibilities, or (2)
as a result of a decision by Employer not to renew the term of this Agreement
shall be treated as a termination by the Employer without cause.
(iv) Subject to subparagraph 10(c) below, the amount of the
Severance Payment provided shall equal three times his total compensation for
the year ended prior to the Change in Control of the Employer. Payment of the
Severance Payment shall be in lieu of any amount owed to the Employee as a
result of termination on account of Disability or by the Employer with or
without cause. The Severance Payment shall not be reduced by any compensation
which the Employee may receive from other employment with another employer after
termination of the Employee's employment with the Employer.
(b) A "Change in Control of the Employer," for purposes of this
Agreement, shall be deemed to have taken place, subject to the limitation of
Paragraph 10(b)(iv) if:
(i) any person becomes the beneficial owner of fifty-one
percent or more of the total number of voting shares of the Employer; or
(ii) any person has entered into an agreement or received an
option to acquire beneficial ownership of fifty-one percent or more of the total
number of voting shares of the Employer; or
(iii) less than two-thirds of the total membership of the
Board of Directors of the Employer shall be Continuing Directors. For purposes
of this Paragraph 10(b), a Continuing Director shall mean (A) any member of the
Board of Directors of the Employer who was a member of a Board as of the date
hereof, and (B) any successor of a Continuing Director while such successor is a
member of the Board who (I) is not a person described in Paragraph 10(b)(I) or
(ii) or (II) an Affiliate or Associate of such a person or of any such Affiliate
or Associate and (III) is recommended or elected to succeed the Continuing
Director by a majority of the Continuing Directors. As used herein, "Affiliate"
and "Associates" shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect of the date hereof (the "Exchange Act"). For purposes
of this Paragraph 10(b), a "person" includes an individual, corporation,
partnership, trust or group acting in concert. A person for these purposes shall
be deemed to be a beneficial owner as that term is used in Rule 13d-3 under the
Exchange Act.
(c) In the event it shall be determined that any payment or
distribution by the Employer to or for the benefit of the Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) (a "Payment") would subject the Employee to tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
the Employer shall make an additional lump sum payment to the Employee within
thirty days of such determination in an amount equal to the sum of such tax plus
the amount of Federal and state income taxes and taxes under Section 4999 of the
Code which will be imposed on the Employee as a result of the receipt of such
lump sum payment (the "Gross-up Amount"). All determinations required to be made
under this Paragraph 10(c) shall be made by the Employer's regular accounting
firm, or such other accounting firm agreed to by the Employee
and the Employer (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Employer and the Employee within 15 business days of
the date of the Employee's termination of employment, or such earlier time as is
requested by the Employer. Except as set forth below, any such determination by
the Accounting Firm shall be binding upon the Employer and the Employee. 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 additional Gross-up Amounts which will not have been made by the
Employer should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Accounting
Firm, based upon the assertion of a deficiency by the Internal Revenue Service
against the Employee which the Accounting Firm believes has a high probability
of success determines that an Underpayment has been made, any such Underpayment
shall be promptly paid by the Employer to or for the benefit of the Employee
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
11. CONSENT TO INSURANCE PROCEDURES. The Employee agrees that the
Employer may from time to time apply for and take out in its own name and at its
own expense such life, health, accident or other insurance upon the Employee as
the Employer may deem necessary or advisable to protect its interests hereunder.
The Employee agrees to submit to any medical or other examination necessary for
such purpose and to assist and cooperate with the Employer in procuring such
insurance. The Employee agrees that Employee shall have no right, title or
interest in and to such insurance whether presently existing or hereafter
procured.
12. NONDISCLOSURE. The Employee shall not, during the term of this
Agreement, or thereafter, without the express written permission of the
Employer: (a) disclose to any person, or permit any person to have access to,
any information or knowledge whatsoever relating to the Employer, or to any
successor entity thereto or their affiliates, business or affairs, obtained by
the Employee while in the employ of the Employer, whether prepared by the
Employee or others, to the extent such information or knowledge constitutes
Confidential Information as defined below: (b) use any such Confidential
Information except for the Employer's benefit, or (c) copy any papers, medical
charts, or other records or remove them from the Employer's property, except as
may be necessary in the performance of the Employee's duties hereunder. For
purposes of this Agreement, the term "Confidential Information" shall include
all patient information and charts, information regarding referring physicians
and optometrists, hospital arrangements, suppliers and supplies, vendors, and
other companies and individuals with whom the Employer has business
relationships, and all other information and knowledge, rules, regulations and
policies of the Employer or the P.C., unless such information (1) was already
known to the Employee at the time of Employee's receipt thereof and the Employee
can demonstrate such knowledge by Employee's written records; (2) is or becomes
publicly known through no act of the Employee; or (3) is approved for release by
written authorization of the Employer.
13. COVENANTS NOT TO COMPETE.
(a) In partial consideration of the payments to be made to the
Employee pursuant to this Agreement, the Employee hereby covenants that he will
not, at any time during the term of this Agreement and during a period of
eighteen months after the date of the termination of
(such period to be extended to include any period of violation or period of time
required for litigation to enforce this covenant) the Employee's employment with
the Employer, whether such termination is during or after the expiration of the
term of this Agreement, engage in the practice of any branch of ophthalmology or
ophthalmic surgery, alone or with others as principal, partner or employee, in
any manner or capacity within the State of Connecticut or in that portion of any
other state where the Employer actively conduct business.
(b) In partial consideration of the payments to be made to the
Employee pursuant to this Agreement, during the period of, and for the twelve
month period immediately following the termination of (such period to be
extended to include any period of violation or period of time required for
litigation to enforce this covenant) his employment with the Employer, the
Employee shall not, without the prior written consent of the Employer, render
services directly or indirectly to any Conflicting Organization, except that
employment may be accepted with a Conflicting Organization whose business is
diversified and which, as to part of its business, is not a Conflicting
Organization; provided, that the Employer, prior to the acceptance of such
employment, shall receive from such Conflicting Organization and from the
Employee written assurances satisfactory to the Employer that the Employee will
not render services directly or indirectly in connection with any Conflicting
Product. The term "Conflicting Organization," as used herein, means any
individual or organization who or which is engaged in researching, developing,
marketing or selling a Conflicting Product. The term "Conflicting Product," as
used herein, means any eyewear or eyecare product, process or service of any
individual or organization or the management of an ophthalmic medical practice
which competes, or would compete, with a product, process or service of the
Employer.
(c) The provisions of this Paragraph 13 shall not apply if
Employee's employment hereunder is terminated by the Employer or if this
Agreement is not renewed by the Employer.
14. ASSIGNMENT OF INVENTIONS. The Employee hereby assigns, and will
promptly disclose and assign, to the Employer exclusively, all inventions,
discoveries, improvements, devices, tools, machines, apparatuses, appliances,
designs, practices, processes, methods, formulae, products, trade secrets and
the like (hereinafter collectively called "inventions"), whether or not
patentable, which are directly or indirectly useful in or related to either
Employer's business or to that of any of their affiliated or managing entities,
which the Employee shall make, originate, conceive or reduce to practice, either
solely or jointly with others, during the term of the Employee's employment by
the Employer or any of its affiliated or managing entities. The Employee further
agrees that during and after the term of this Agreement, without charge to the
Employer, the Employee will execute, acknowledge and deliver any and all papers
and take any other reasonable actions necessary or helpful for the Employer to
obtain patents for their own benefit on said inventions in any and all countries
or to otherwise protect and secure the Employer's interests in said inventions;
said patents, applications for patents and inventions to remain the property of
the Employer whether patented or not.
15. REMEDIES FOR BREACH. In the event of Employee's breach or
threatened breach of any provision of Paragraphs 12, 13 or 14 hereof, the
Employer shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either in law or in equity,
to obtain damages for breach of said paragraphs, or to enforce the specific
covenants therein, or to obtain an injunction restraining the Employee from the
continuation of such breach. Nothing herein shall be construed as prohibiting
the Employer from pursuing any other remedies available to it, including the
recovery of damages from the Employee.
16. AMENDMENTS OR ADDITIONS. No amendments or additions to this
Agreement shall be binding unless in writing and signed by all of the parties
hereto. The prior approval by the Board of Directors of the Employer shall be
required to authorize any amendments or additions to this Agreement, to give any
consents or waivers of provisions of this Agreement, or to take any other action
under this Agreement including any termination of employment with or without
cause.
17. CONTINUED ENFORCEABILITY AFTER CHANGE IN CONTROL; ENFORCEABILITY
AGAINST SUCCESSORS AND TRANSFEREES. The Parties intend that this Agreement shall
continue to be a legally valid, binding agreement, enforceable in accordance
with its terms, notwithstanding a Change in Control of the Employer. The parties
further agree that any transferee of all or substantially all of the assets of
the Employer shall be subject to the obligations of the Employer hereunder,
whether such transfer occurs by merger, operation of law, or otherwise. The
Employer agrees that before the consummation of any such transfer (other than a
transfer whereby such obligations are assumed by operation of law) it will
obtain the agreement of the transferee, enforceable by the Employee, to assume
such obligations. No such transfer shall release the Employer of its obligations
hereunder without the prior written consent of the Employee.
18. SECTION HEADINGS. The section headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this Agreement.
19. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. GOVERNING LAW. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
Connecticut, excluding the choice of law rules thereof.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, and together shall
constitute one and the same instrument.
22. PRIOR AGREEMENTS SUPERSEDED. Any prior agreement between the
parties relating to the employment by the Employer of the Employee, whether
written or oral, is hereby replaced and superseded by this Agreement and shall
be of no further force or effect after the date hereof.
OPTICARE HEALTH SYSTEMS, INC.
By:
Its:
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