exv10w31



 






EXECUTIVE EMPLOYMENT AGREEMENT




BETWEEN




QUOVADX, INC.




AND




THOMAS ZAJAC




APRIL 1, 2005





 









 








EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (the “Agreement”) by and between Quovadx, Inc. (the
“Company”), and Thomas Zajac (“You” or “Your”) (collectively, the
“Parties”), is entered into and effective as of the 1st of April, 2005 (the
“Effective Date”).



     For good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:



     1. Employment and Duties




          A. Position. The Company shall employ You as President — CareScience Division.




          B. Reporting. You shall report directly to the Company’s Chief Executive Officer
(“CEO”).




          C. Duties. You agree to perform all duties that are consistent with Your position and
that may otherwise be assigned to You by the CEO from time to time. You further agree to abide by
all Company policies, procedures, and practices of general applicability to Company executive
officers.




          D. Devotion of Time. You agree to devote Your best efforts to promote the business
and/or interests of the Company and to perform Your obligations under this Agreement. You may (i)
engage in community, charitable, and educational activities, and (ii) manage personal investments,
provided that such activities do not materially conflict or interfere with the performance of Your
obligations under this Agreement.




     2. Term. The term of this Agreement shall commence on the Effective Date and end on
December 31, 2006 (the “Employment Period”). Upon expiration of the Employment Period,
this Agreement will automatically renew for a one-year period (a “Renewal Period”), unless
either Party notifies the other Party in writing at least ninety (90) days prior to the end of the
Employment Period or the Renewal Period that the Agreement will not be renewed. Notwithstanding
the foregoing provisions of this paragraph, in the event of a Change of Control, the term of this
Agreement will extend through the one-year anniversary of such Change of Control. Additionally, on
the anniversary of such Change of Control and each annual anniversary of the Change of Control
thereafter, this Agreement automatically will renew for an additional term of one year unless at
least ninety (90) days prior to such anniversary, Executive or the Company gives the other party
written notice that the Agreement will not be renewed and any such extension will be considered a
“Renewal Period.” If this Agreement is renewed in accordance with this Section 2, each
Renewal Period shall be included in the definition of “Employment Period” for purposes of this
Agreement. Following the termination of the Employment Period (whether as a result of non-renewal
or termination of Your employment for any reason), You agree to resign from any positions You hold
with the Company or any of its parent or subsidiary companies.



     3. Compensation.



          A. Base Salary. During the Employment Period, the Company will pay You an annual base
salary (“Base Salary”) of $231,750.00 in accordance with the Company’s normal payroll
practices. The
Compensation Committee of the Company’s Board of Directors (the “Committee”) will
review Your Base Salary at least annually, and adjustments will be made in accordance with the
Committee’s standard practices.




 









 








          B. Bonus. During the Employment Period, You will be eligible to receive an annual
bonus with a target payment of 40% of Your then current Base Salary (“Target Bonus”) if You
performance meets certain criteria agreed to by the Committee as recommended by the CEO (the
“Committee Performance Criteria”). The actual bonus paid may be higher or lower than the
Target Bonus for over- or under-achievement of the Committee Performance Criteria, as determined by
the Committee. Bonuses, if any, will accrue and become payable in accordance with the Committee’s
standard practices for paying executive incentive compensation; provided, however, that Your bonus,
if any, for any particular fiscal year will be paid no later than thirty (30) days following the
Committee’s receipt of audited financial statements for such fiscal year.




          C. Equity Awards. Executive will be eligible to receive options to purchase the
Company’s common stock and other equity incentive awards pursuant to any equity incentive plans or
arrangements it may have in effect from time to time. The Committee will determine in its
discretion whether Executive will be granted any such award or awards and the terms of any such
award or awards in accordance with the terms of any applicable equity incentive plan or arrangement
that may be in effect from time to time.




          D. Benefits Plans. During the Employment Period, You will be eligible to participate
in all benefit plans in effect for executive officers and employees of the Company (including the
Company’s vacation policy), as such plans may exist from time to time and subject to the terms and
conditions of such plans.




          E. Business Expenses. During the Employment Period, the Company will reimburse You
for all ordinary and reasonable business expenses You incur in the performance of Your duties in
accordance with the policies and procedures of the Company as in effect from time to time.




     4. Termination. This Agreement may be terminated by any of the following events:



          A. Expiration of the Employment Period as a result of non-renewal; or




          B. Your resignation without Good Reason; or




          C. Your death; or




          D. Your Disability (as defined in the Company’s long-term disability plan); or




          E. For Cause; (“Cause” shall mean a termination by the Company because of
any one of the following events: (i) Your breach of this Agreement that results in material injury
to the Company which, if capable of cure, has not been cured by You within thirty (30) days after
receipt by You of written notice from the CEO of such breach; (ii) Your misconduct, fraud,
dishonesty, or malfeasance that results in material injury to the Company; (iii) Your willful or
intentional failure to (a) perform Your duties under this Agreement, (b) follow the reasonable and
legal direction of the CEO, or (c) follow the policies, procedures, and rules of the Company. For
any such failure listed in this sub-section (iii), the CEO shall first give You written notice
setting forth with specificity the reasons that the CEO believes You are failing, and thirty (30)
days to cure such failure; or (iv) Your conviction of, or plea of nolo contendre to, a felony.




               For purposes of this Agreement, Your failure to achieve certain results, such as those set
forth in a business plan of the Company, that is not the result of Your demonstrating willful and
deliberate dereliction of duty shall not constitute Cause); or



 









 





          F. Your resignation for Good Reason; (“Good Reason” shall mean the occurrence of any
of the following: (i) the Company, without Your written consent, (a) takes any action which results
in the reduction of, Your then current title, duties, or responsibilities, other than a reduction
or change required by applicable law or listing requirements, (b) reduces Your then current Base
Salary or Target Bonus other than a one-time reduction of not more than 10% that also is applied to
substantially all executive officers of the Company, (c) reduces the benefits to which You are
entitled on the Effective Date, unless a similar reduction is made for substantially all other
executive officers, or (d) relocates You to a facility or a location more than 75 miles from Your
then present location, (ii) a successor to the Company fails to assume this Agreement in writing
upon becoming a successor or assignee of the Company, or (iii) the Company breaches this Agreement
and such breach results in material injury to You; provided, however, that if the event that
potentially constitutes Good Reason is capable of cure, Good Reason only shall exist if the Company
has not cured such event within thirty (30) days after receipt by the CEO of written notice from
You describing why You believe Good Reason exists.); or




          G. Without Cause (meaning a termination by the Company without Cause. For purposes of
clarification, the Company’s providing notice to You as provided in Section 2 to not renew this
Agreement for an additional period will not be considered a termination without Cause).



Upon any such termination, the Employment Period automatically will terminate (but in no event will
this affect the survival of Your and the Company’s post-termination obligations pursuant to Section
16).




     5. Company’s Post-Termination Obligations



          A. Accrued Compensation. If Your employment terminates for any reason, then the
Company will pay You all accrued but unpaid vacation, expense reimbursements, wages, and other
benefits due to You under any Company-provided plans, policies, and arrangements.




          B. Termination by Company Without Cause. In addition to the payments and benefits
provided under Section 5A, if Your employment is terminated by the Company without Cause during the
Employment Period, then, subject to Your compliance with the provisions of Section 8 and You
executing and not revoking a separation agreement and general release of claims in a form
satisfactory to the Company, the Company will (i) continue to pay You Your Base Salary through the
period of six months following Your termination date (the “Restricted Period” in the event
You are entitled to benefits under this Section 5B), (ii) pay You a lump sum payment equal to a
pro-rated amount of Your Target Bonus for the year in which the termination occurs, to be paid on
the date bonuses are paid to other executive officers of the Company, but in no event more than one
year following Your termination date, and (iii) reimburse You for COBRA continuation coverage
premiums to continue medical benefits for You and Your eligible dependents for the Restricted
Period (but, if further limited by applicable law, the maximum permissible period) or, if earlier,
until You become eligible for substantially similar benefits from another employer, provided You
validly elect to continue Your medical benefits in accordance with applicable law.




          C. Non-Renewal of Employment or Renewal Period by Company. In addition to the
payments and benefits provided under Section 5A, in the event the Company chooses not to extend the
Employment Period by providing notice to You as provided in Section 2 (whether before or after a
Change of
Control), then, subject to Your compliance with the provisions of Section 8 and You executing
and not revoking a separation agreement and general release of claims in a form satisfactory to the
Company, the Company will (i) continue to pay You Your Base Salary through the period of three (3)
months following Your termination date (the “Restricted Period” in the event You are
entitled to benefits under this Section 5C), and (ii) reimburse You for COBRA continuation coverage
premiums to continue medical benefits for You and Your eligible dependents for the Restricted
Period (but, if further limited by
applicable law, the maximum permissible period) or, if earlier,
until You become eligible for substantially similar benefits from another employer, provided You
validly elect to continue Your medical benefits in accordance with applicable law.



 









 









          D. No Duty to Mitigate. In no event shall You be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to You under this Agreement,
and such amount shall not be reduced, regardless of whether You obtain other employment or become
self-employed (except for the termination of Company-paid COBRA premiums as provided in Sections
5B, 5C and 6). Notwithstanding the foregoing, amounts provided under Section 5B, 5C and Section 6
will be reduced by amounts You are entitled to receive due to Your eligibility to receive severance
under any other Company plan, policy, or arrangement.




     6. Change of Control.



          A. Severance. If, within three (3) months preceding and twelve (12) months following
a Change of Control (the “Protection Period”) and during the Employment Period, the Company
or the successor entity to the Company terminates Your employment without Cause or You resign for
Good Reason, then, subject to Your compliance with the provisions of Section 8 and You executing
and not revoking a separation agreement and general release of claims in a form satisfactory to the
Company, You shall receive (in addition to the payments and benefits provided under Section 5A) the
following separation payments and/or benefits: (i) continued Base Salary for a period of one year
following Your termination date (the “Restricted Period” in the event You are entitled to
benefits under this Section 6A), (ii) pay You a lump sum payment equal to a pro-rated amount of
Your Target Bonus for the year in which the termination occurs, to be paid on the date bonuses are
paid to other executive officers of the Company, but in no event more than one year following Your
termination date, (iii) reimbursement for COBRA continuation coverage premiums to continue medical
benefits for You and Your eligible dependents for the Restricted Period (but, if further limited by
applicable law, the maximum permissible period) or, if earlier, until You become eligible for
substantially similar benefits from another employer, provided You validly elect to continue Your
medical benefits in accordance with applicable law, and (iv) all equity incentive awards granted on
or after the Effective Date will vest in full such that stock options, stock appreciation rights
and similar awards will vest and become exercisable as to 100% of the shares subject to such
awards, all restrictions on restricted stock and similar awards will lapse, and, with respect to
performance shares, performance units and similar awards, all performance goals or other vesting
criteria will be deemed achieved at target levels and all other terms and conditions met. The
payments and benefits set forth in this Section 6A shall be provided to You in lieu of any payments
and benefits to which You may be entitled to receive under Section 5B above.




          B. Definition of Change of Control. For purposes of this Agreement, “Change of
Control” means the occurrence of any of the following:





	 	(i)	 	Any “person” (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner”
(as defined in Rule 13d-3 of said Act), directly or indirectly, of securities of
the Company
representing fifty percent (50%) or more of the total voting power
represented by the Company’s then outstanding voting securities; or
	 
	 	(ii)	 	The consummation of the sale or disposition by the Company of all
or substantially all of the Company’s assets;




 









 






	 	(iii)	 	The consummation of a merger or consolidation of the Company,
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of the Company, or such surviving entity or its parent outstanding
immediately after such merger or consolidation; or
	 
	 	(iv)	 	A change in the composition of the Company’s Board of Directors
(the “Board”), as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either (a)
are directors of the Company, as applicable, as of the date hereof, or (b) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of those directors whose election or nomination was not in
connection with any transaction described in subsections (i), (ii), or (iii) or
in connection with an actual or threatened proxy contest relating to the
election of directors of the Company.





          D. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to You (i) constitute “parachute
payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”) and (ii) but for this Section 6D, would be subject to the excise tax imposed by
Section 4999 of the Code, then Your severance and other benefits will be either: (i) delivered in
full, or (ii) delivered as to such lesser extent which would result in no portion of such severance
and other benefits being subject to excise tax under Section 4999 of the Code, whichever of the
foregoing amounts, taking into account the applicable federal, state and local income taxes and the
excise tax imposed by Section 4999, results in the receipt by You on an after-tax basis, of the
greatest amount of severance and other benefits, notwithstanding that all or some portion of such
severance and other benefits may be taxable under Section 4999 of the Code. Unless the Company and
You otherwise agree in writing, any determination required under this Section 6D will be made in
writing by the Company’s independent public accountants immediately prior to Change of Control (the
“Accountants”), whose determination will be conclusive and binding upon You and the Company
for all purposes. For purposes of making the calculations required by this Section 6D, the
Accountants may make reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of Sections 280G and
4999 of the Code. The Company and You will furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a determination under this
Section. The Company will bear all costs the Accountants may reasonably incur in connection with
any calculations contemplated by this Section 6D. In the event the Accountants determine that this
Section 6D requires a reduction in Your severance or other benefits, You will be provided the
reasonable opportunity to determine the order in which severance and other benefits will be
reduced. If You fail to make an appropriate reduction election within the reasonable time period
determined by the Committee, in its sole discretion, the order of reduction will be determined by
the Committee.




     7. Section 409A. Any amounts to be paid pursuant to Sections 5B, 5C or 6A will not be
paid during the six-month period following the termination of Your employment entitling you to
payments thereunder, unless the Company determines (in good faith) that paying You such amounts
immediately following Your termination of employment would not be in violation of Section 409A of
the Code (“Section 409A”), in which case such amounts will be paid to You as provided in
such Sections. If no amounts are paid to You as a result of the previous sentence, on the first
day following such six-month period (or such other time as may be necessary to avoid imposition of
any excise tax or income recognition prior to actual payment to You under Section 409A and any
temporary or final Treasury Regulations and guidance promulgated thereunder), the Company will pay
You a lump-sum amount equal
to the cumulative amounts that would have otherwise been paid to You
under such Sections. Thereafter, You will receive amounts to which You would otherwise be entitled
pursuant to such Sections in accordance therewith.



 









 





     8. Your Other Obligations.



          A. Return of Materials. Upon the termination of Your employment for any reason, You
will return to the Company all of the Company’s property, including, but not limited to, keys,
passcards, credit cards, customer lists, rolodexes, tapes, software, computer files, marketing and
sales materials, and any other property, record, document or piece of equipment belonging to the
Company.




          B. Restrictive Covenants. You acknowledge that the restrictions contained in this
Section 8B are reasonable and necessary to protect the legitimate business interests of the
Company, and will not impair or infringe upon Your right to work or earn a living after Your
employment with the Company ends.




               (i) Trade Secrets and Confidential Information. You represent and warrant that: (a)
You are not subject to any legal or contractual duty or agreement that would prevent or prohibit
You from performing the duties contemplated by this Agreement or otherwise complying with this
Agreement, and (b) You are not in breach of any legal or contractual duty or agreement, including
any agreement concerning trade secrets or confidential information owned by any other party. You
agree to execute the Company’s standard form of Employee Non-Disclosure and Assignment of
Inventions Agreement (the “Confidential Information Agreement”), if You have not already done so,
and You further agree to continue to comply with the terms of the Confidential Information
Agreement following the termination of Your employment in accordance with such agreement.



               (ii) Noncompetition. In the event of the termination of Your employment that entitles
You to severance under Sections 5B, 5C or 6, then for the Restricted Period, You agree not to,
without the prior consent of the CEO or the Board, directly or indirectly provide services to
(whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate
officer, director, or otherwise) or have or obtain any ownership interest in or participate in the
financing, operation, management, or control of, any person, firm, corporation, or business that
competes with the Company or is a customer of the Company. For these purposes, a person, firm,
corporation or business will be considered to compete with the Company if it engages in the
business of developing, designing, marketing, licensing and/or distributing products and technology
relating to software for healthcare companies. Your having solely an ownership interest as a
passive investor of less than 1% of any corporation shall not be a violation of this Section
8B(ii). In the event You violate this Section 8B(ii), Your right to receive any continuing
payments and benefits under this Agreement immediately will terminate.



               (iii) Nonsolicitation. In the event of the termination of Your employment that
entitles You to severance under Sections 5B, 5C or 6, then for the Restricted Period, You agree
that You, directly or indirectly, whether as an employee, owner, sole proprietor, partner,
director, member, consultant, agent, founder, co-venturer, or otherwise, will (i) not solicit,
induce, or influence any person to modify his or her employment or consulting relationship with the
Company, and (ii) not solicit business from any of the Company’s substantial customers or users.
In the event You violate this Section 8B(iii), Your right to receive any continuing payments and
benefits under this Agreement immediately will terminate.



               (iv) Nondisparagement. In the event of the termination of Your employment that
entitles You to severance under Sections 5B, 5C or 6, then for the Restricted Period, (a) You will
not disparage, criticize, defame, or slander the Company, its directors, or its employees and (b)
the Board and the Company’s then current officers will not disparage, criticize, defame, or slander
You. The foregoing restrictions will not apply to any statements that are made truthfully in
response to a subpoena or other compulsory legal process.




 









 






     9. Injunctive Relief. You agree that if You breach Section 8 of this Agreement: (i)
the Company may suffer irreparable harm; (ii) it would be difficult to determine damages, and money
damages alone would be an inadequate remedy for the injuries suffered by the Company, and (iii) if
the Company seeks injunctive relief to enforce this Agreement, You will waive and will not (a)
assert any defense that the Company has an adequate remedy at law with respect to the breach, (b)
require that the Company submit proof of the economic value of any trade secret or confidential
information, or (c) require the Company to post a bond or any other security. Nothing contained in
this Agreement shall limit the Company’s right to any other remedies at law or in equity.



     10. Arbitration. You and the Company agree that any and all disputes arising out of
the terms of this Agreement, their interpretation, and any of the matters herein released, shall be
subject to binding arbitration in Englewood, Colorado before the American Arbitration Association
under its National Rules for the Resolution of Employment Disputes, supplemented by the Colorado
Rules of Civil Procedure. You and the Company agree that the prevailing Party in any arbitration
shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the
arbitration award. You and the Company hereby agree to waive their right to have any dispute
between them resolved in a court of law by a judge or jury. This Section will not prevent either
Party from seeking injunctive relief (or any other provisional remedy) from any court having
jurisdiction over the Parties and the subject matter of their dispute. You and the Company will
each pay one-half of the costs and expenses of such arbitration, and each party will pay its own
counsel fees and expenses.



     11. Indemnification. You will be covered under the Company’s insurance policies and,
subject to applicable law, will be provided indemnification to the maximum extent permitted by the
Company’s bylaws and Certificate of Incorporation, with such insurance coverage to be in accordance
with the Company’s standard practices for senior executive officers but on terms no less favorable
than provided to any other Company senior executive officer or director.



     12. Severability. The provisions of this Agreement are severable. If any provision is
determined to be invalid, illegal, or unenforceable, in whole or in part, the remaining provisions
and any partially enforceable provisions shall remain in full force and effect.



     13. Waiver. Either Party’s failure to enforce any provision of this Agreement shall
not act as a waiver of that or any other provision. Either Party’s waiver of any breach of this
Agreement shall not act as a waiver of any other breach.



     14. Tax Withholding. All payments and benefits made or provided pursuant to this
Agreement will be subject to withholding of applicable taxes.



     15. Entire Agreement. This Agreement, Your outstanding stock option agreements, and
the Confidential Information Agreement constitute the entire agreement between the Parties
concerning the subject matter of this Agreement. This Agreement supersedes any prior
communications, agreements or understandings, whether oral or written, between the Parties relating
to the subject matter of this Agreement.



     16. Survival. The Confidential Information Agreement and Sections 5 through 11 will
survive the termination of this Agreement.



 









 





     17. Amendments. This Agreement may not be amended or modified except in writing
signed by both Parties.



     18. Successors and Assigns. Neither Party shall have the right to assign or otherwise
transfer this Agreement or the rights or obligations hereunder (whether by assignment, transfer by
operation of law or otherwise), without the prior written consent of the other party; provided,
however, that Your consent automatically will be deemed given in the event of a Change of Control
approved by the Board.



     19. Governing Law. The laws of the State of Colorado shall govern this Agreement
(with the exception of its conflict of laws provisions).



     20. No Strict Construction. If there is a dispute about the language of this
Agreement, the fact that one Party drafted the Agreement shall not be used in its interpretation.



     21. Notice. Whenever any notice is required, it shall be given in writing addressed
as follows:



	 	 	 	 	 
	 

	 	To the Company:
	 	Attn: Chief Executive Officer
	 

	 	 	 	6400 S. Fiddler’s Green Cir., Suite 1000
	 

	 	 	 	Englewood, CO 80111
	 
	 	 	 	 
	 	 	To Executive:   at the last residential address known by the Company






          Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail
of a writing addressed as above and sent first class mail, certified, return receipt requested, or
when actually received. Either Party may change the address to which notices shall be delivered or
mailed by notifying the other Party of such change in accordance with this Section.




     22. AFFIRMATION. YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS AGREEMENT, YOU
KNOW AND FULLY UNDERSTAND ITS TERMS AND CONDITIONS, AND YOU HAVE HAD THE OPPORTUNITY TO CONSULT AN
ATTORNEY OF YOUR CHOOSING AND ASK THE COMPANY ANY QUESTIONS YOU MAY HAVE HAD PRIOR TO SIGNING THIS
AGREEMENT.



o O o




 









 





     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year
first above written.



	 	 	 	 	 	 	 
	 	 	QUOVADX, INC.:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Harvey A. Wagner	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Harvey A. Wagner	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Thomas Zajac:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Thomas Zajac