**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 herebyacknowledged, 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 andthat may otherwise be assigned to You by the CEO from time to time. You further agree to abide byall Company policies, procedures, and practices of general applicability to Company executiveofficers.          D. Devotion of Time. You agree to devote Your best efforts to promote the businessand/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 Yourobligations under this Agreement.     2. Term. The term of this Agreement shall commence on the Effective Date and end onDecember 31, 2006 (the “Employment Period”). Upon expiration of the Employment Period,this Agreement will automatically renew for a one-year period (a “Renewal Period”), unlesseither Party notifies the other Party in writing at least ninety (90) days prior to the end of theEmployment Period or the Renewal Period that the Agreement will not be renewed. Notwithstandingthe foregoing provisions of this paragraph, in the event of a Change of Control, the term of thisAgreement will extend through the one-year anniversary of such Change of Control. Additionally, onthe anniversary of such Change of Control and each annual anniversary of the Change of Controlthereafter, this Agreement automatically will renew for an additional term of one year unless atleast ninety (90) days prior to such anniversary, Executive or the Company gives the other partywritten 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, eachRenewal Period shall be included in the definition of “Employment Period” for purposes of thisAgreement. Following the termination of the Employment Period (whether as a result of non-renewalor termination of Your employment for any reason), You agree to resign from any positions You holdwith 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 basesalary (“Base Salary”) of $231,750.00 in accordance with the Company’s normal payrollpractices. TheCompensation Committee of the Company’s Board of Directors (the “Committee”) willreview Your Base Salary at least annually, and adjustments will be made in accordance with theCommittee’s standard practices.
 

 
          B. Bonus. During the Employment Period, You will be eligible to receive an annualbonus with a target payment of 40% of Your then current Base Salary (“Target Bonus”) if Youperformance 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 theTarget Bonus for over- or under-achievement of the Committee Performance Criteria, as determined bythe Committee. Bonuses, if any, will accrue and become payable in accordance with the Committee’sstandard 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 theCommittee’s receipt of audited financial statements for such fiscal year.          C. Equity Awards. Executive will be eligible to receive options to purchase theCompany’s common stock and other equity incentive awards pursuant to any equity incentive plans orarrangements it may have in effect from time to time. The Committee will determine in itsdiscretion whether Executive will be granted any such award or awards and the terms of any suchaward or awards in accordance with the terms of any applicable equity incentive plan or arrangementthat may be in effect from time to time.          D. Benefits Plans. During the Employment Period, You will be eligible to participatein all benefit plans in effect for executive officers and employees of the Company (including theCompany’s vacation policy), as such plans may exist from time to time and subject to the terms andconditions of such plans.          E. Business Expenses. During the Employment Period, the Company will reimburse Youfor all ordinary and reasonable business expenses You incur in the performance of Your duties inaccordance 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 ofany one of the following events: (i) Your breach of this Agreement that results in material injuryto the Company which, if capable of cure, has not been cured by You within thirty (30) days afterreceipt 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 orintentional failure to (a) perform Your duties under this Agreement, (b) follow the reasonable andlegal direction of the CEO, or (c) follow the policies, procedures, and rules of the Company. Forany such failure listed in this sub-section (iii), the CEO shall first give You written noticesetting 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 setforth in a business plan of the Company, that is not the result of Your demonstrating willful anddeliberate dereliction of duty shall not constitute Cause); or
 

 
          F. Your resignation for Good Reason; (“Good Reason” shall mean the occurrence of anyof the following: (i) the Company, without Your written consent, (a) takes any action which resultsin the reduction of, Your then current title, duties, or responsibilities, other than a reductionor change required by applicable law or listing requirements, (b) reduces Your then current BaseSalary or Target Bonus other than a one-time reduction of not more than 10% that also is applied tosubstantially all executive officers of the Company, (c) reduces the benefits to which You areentitled on the Effective Date, unless a similar reduction is made for substantially all otherexecutive officers, or (d) relocates You to a facility or a location more than 75 miles from Yourthen present location, (ii) a successor to the Company fails to assume this Agreement in writingupon becoming a successor or assignee of the Company, or (iii) the Company breaches this Agreementand such breach results in material injury to You; provided, however, that if the event thatpotentially constitutes Good Reason is capable of cure, Good Reason only shall exist if the Companyhas not cured such event within thirty (30) days after receipt by the CEO of written notice fromYou describing why You believe Good Reason exists.); or          G. Without Cause (meaning a termination by the Company without Cause. For purposes ofclarification, the Company’s providing notice to You as provided in Section 2 to not renew thisAgreement 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 willthis affect the survival of Your and the Company’s post-termination obligations pursuant to Section16).     5. Company’s Post-Termination Obligations          A. Accrued Compensation. If Your employment terminates for any reason, then theCompany will pay You all accrued but unpaid vacation, expense reimbursements, wages, and otherbenefits due to You under any Company-provided plans, policies, and arrangements.          B. Termination by Company Without Cause. In addition to the payments and benefitsprovided under Section 5A, if Your employment is terminated by the Company without Cause during theEmployment Period, then, subject to Your compliance with the provisions of Section 8 and Youexecuting and not revoking a separation agreement and general release of claims in a formsatisfactory to the Company, the Company will (i) continue to pay You Your Base Salary through theperiod of six months following Your termination date (the “Restricted Period” in the eventYou are entitled to benefits under this Section 5B), (ii) pay You a lump sum payment equal to apro-rated amount of Your Target Bonus for the year in which the termination occurs, to be paid onthe date bonuses are paid to other executive officers of the Company, but in no event more than oneyear following Your termination date, and (iii) reimburse You for COBRA continuation coveragepremiums to continue medical benefits for You and Your eligible dependents for the RestrictedPeriod (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 Youvalidly elect to continue Your medical benefits in accordance with applicable law.          C. Non-Renewal of Employment or Renewal Period by Company. In addition to thepayments and benefits provided under Section 5A, in the event the Company chooses not to extend theEmployment Period by providing notice to You as provided in Section 2 (whether before or after aChange ofControl), then, subject to Your compliance with the provisions of Section 8 and You executingand not revoking a separation agreement and general release of claims in a form satisfactory to theCompany, 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 areentitled to benefits under this Section 5C), and (ii) reimburse You for COBRA continuation coveragepremiums to continue medical benefits for You and Your eligible dependents for the RestrictedPeriod (but, if further limited byapplicable law, the maximum permissible period) or, if earlier,until You become eligible for substantially similar benefits from another employer, provided Youvalidly 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 employmentor 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 becomeself-employed (except for the termination of Company-paid COBRA premiums as provided in Sections5B, 5C and 6). Notwithstanding the foregoing, amounts provided under Section 5B, 5C and Section 6will be reduced by amounts You are entitled to receive due to Your eligibility to receive severanceunder any other Company plan, policy, or arrangement.     6. Change of Control.          A. Severance. If, within three (3) months preceding and twelve (12) months followinga Change of Control (the “Protection Period”) and during the Employment Period, the Companyor the successor entity to the Company terminates Your employment without Cause or You resign forGood Reason, then, subject to Your compliance with the provisions of Section 8 and You executingand not revoking a separation agreement and general release of claims in a form satisfactory to theCompany, You shall receive (in addition to the payments and benefits provided under Section 5A) thefollowing separation payments and/or benefits: (i) continued Base Salary for a period of one yearfollowing Your termination date (the “Restricted Period” in the event You are entitled tobenefits under this Section 6A), (ii) pay You a lump sum payment equal to a pro-rated amount ofYour Target Bonus for the year in which the termination occurs, to be paid on the date bonuses arepaid to other executive officers of the Company, but in no event more than one year following Yourtermination date, (iii) reimbursement for COBRA continuation coverage premiums to continue medicalbenefits for You and Your eligible dependents for the Restricted Period (but, if further limited byapplicable law, the maximum permissible period) or, if earlier, until You become eligible forsubstantially similar benefits from another employer, provided You validly elect to continue Yourmedical benefits in accordance with applicable law, and (iv) all equity incentive awards granted onor after the Effective Date will vest in full such that stock options, stock appreciation rightsand similar awards will vest and become exercisable as to 100% of the shares subject to suchawards, all restrictions on restricted stock and similar awards will lapse, and, with respect toperformance shares, performance units and similar awards, all performance goals or other vestingcriteria will be deemed achieved at target levels and all other terms and conditions met. Thepayments and benefits set forth in this Section 6A shall be provided to You in lieu of any paymentsand 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 ofControl” means the occurrence of any of the following: (i) Any “person” (as such term is used in Sections 13(d) and 14(d) ofthe 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 ofthe Companyrepresenting fifty percent (50%) or more of the total voting powerrepresented by the Company’s then outstanding voting securities; or  (ii) The consummation of the sale or disposition by the Company of allor 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 wouldresult in the voting securities of the Company outstanding immediately priorthereto continuing to represent (either by remaining outstanding or by beingconverted into voting securities of the surviving entity or its parent) at leastfifty percent (50%) of the total voting power represented by the votingsecurities of the Company, or such surviving entity or its parent outstandingimmediately 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 areIncumbent Directors. “Incumbent Directors” shall mean directors who either (a)are directors of the Company, as applicable, as of the date hereof, or (b) areelected, or nominated for election, to the Board with the affirmative votes ofat least a majority of those directors whose election or nomination was not inconnection with any transaction described in subsections (i), (ii), or (iii) orin connection with an actual or threatened proxy contest relating to theelection of directors of the Company.          D. Limitation on Payments. In the event that the severance and otherbenefits provided for in this Agreement or otherwise payable to You (i) constitute “parachutepayments” 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 bySection 4999 of the Code, then Your severance and other benefits will be either: (i) delivered infull, or (ii) delivered as to such lesser extent which would result in no portion of such severanceand other benefits being subject to excise tax under Section 4999 of the Code, whichever of theforegoing amounts, taking into account the applicable federal, state and local income taxes and theexcise tax imposed by Section 4999, results in the receipt by You on an after-tax basis, of thegreatest amount of severance and other benefits, notwithstanding that all or some portion of suchseverance and other benefits may be taxable under Section 4999 of the Code. Unless the Company andYou otherwise agree in writing, any determination required under this Section 6D will be made inwriting 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 Companyfor all purposes. For purposes of making the calculations required by this Section 6D, theAccountants may make reasonable assumptions and approximations concerning applicable taxes and mayrely on reasonable, good faith interpretations concerning the application of Sections 280G and4999 of the Code. The Company and You will furnish to the Accountants such information anddocuments as the Accountants may reasonably request in order to make a determination under thisSection. The Company will bear all costs the Accountants may reasonably incur in connection withany calculations contemplated by this Section 6D. In the event the Accountants determine that thisSection 6D requires a reduction in Your severance or other benefits, You will be provided thereasonable opportunity to determine the order in which severance and other benefits will bereduced. If You fail to make an appropriate reduction election within the reasonable time perioddetermined by the Committee, in its sole discretion, the order of reduction will be determined bythe Committee.     7. Section 409A. Any amounts to be paid pursuant to Sections 5B, 5C or 6A will not bepaid during the six-month period following the termination of Your employment entitling you topayments thereunder, unless the Company determines (in good faith) that paying You such amountsimmediately following Your termination of employment would not be in violation of Section 409A ofthe Code (“Section 409A”), in which case such amounts will be paid to You as provided insuch Sections. If no amounts are paid to You as a result of the previous sentence, on the firstday following such six-month period (or such other time as may be necessary to avoid imposition ofany excise tax or income recognition prior to actual payment to You under Section 409A and anytemporary or final Treasury Regulations and guidance promulgated thereunder), the Company will payYou a lump-sum amount equalto the cumulative amounts that would have otherwise been paid to Youunder such Sections. Thereafter, You will receive amounts to which You would otherwise be entitledpursuant to such Sections in accordance therewith.
 

 
     8. Your Other Obligations.          A. Return of Materials. Upon the termination of Your employment for any reason, Youwill 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 andsales materials, and any other property, record, document or piece of equipment belonging to theCompany.          B. Restrictive Covenants. You acknowledge that the restrictions contained in thisSection 8B are reasonable and necessary to protect the legitimate business interests of theCompany, and will not impair or infringe upon Your right to work or earn a living after Youremployment 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 prohibitYou from performing the duties contemplated by this Agreement or otherwise complying with thisAgreement, and (b) You are not in breach of any legal or contractual duty or agreement, includingany agreement concerning trade secrets or confidential information owned by any other party. Youagree to execute the Company’s standard form of Employee Non-Disclosure and Assignment ofInventions 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 InformationAgreement following the termination of Your employment in accordance with such agreement.               (ii) Noncompetition. In the event of the termination of Your employment that entitlesYou 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, corporateofficer, director, or otherwise) or have or obtain any ownership interest in or participate in thefinancing, operation, management, or control of, any person, firm, corporation, or business thatcompetes 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 thebusiness of developing, designing, marketing, licensing and/or distributing products and technologyrelating to software for healthcare companies. Your having solely an ownership interest as apassive investor of less than 1% of any corporation shall not be a violation of this Section8B(ii). In the event You violate this Section 8B(ii), Your right to receive any continuingpayments and benefits under this Agreement immediately will terminate.               (iii) Nonsolicitation. In the event of the termination of Your employment thatentitles You to severance under Sections 5B, 5C or 6, then for the Restricted Period, You agreethat 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 theCompany, 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 andbenefits under this Agreement immediately will terminate.               (iv) Nondisparagement. In the event of the termination of Your employment thatentitles You to severance under Sections 5B, 5C or 6, then for the Restricted Period, (a) You willnot 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 slanderYou. The foregoing restrictions will not apply to any statements that are made truthfully inresponse 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 moneydamages alone would be an inadequate remedy for the injuries suffered by the Company, and (iii) ifthe 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 confidentialinformation, or (c) require the Company to post a bond or any other security. Nothing contained inthis 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 ofthe terms of this Agreement, their interpretation, and any of the matters herein released, shall besubject to binding arbitration in Englewood, Colorado before the American Arbitration Associationunder its National Rules for the Resolution of Employment Disputes, supplemented by the ColoradoRules of Civil Procedure. You and the Company agree that the prevailing Party in any arbitrationshall be entitled to injunctive relief in any court of competent jurisdiction to enforce thearbitration award. **You and the Company hereby agree to waive their right to have any disputebetween them resolved in a court of law by a judge or jury.**This Section will not prevent eitherParty from seeking injunctive relief (or any other provisional remedy) from any court havingjurisdiction over the Parties and the subject matter of their dispute. You and the Company willeach pay one-half of the costs and expenses of such arbitration, and each party will pay its owncounsel 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 theCompany’s bylaws and Certificate of Incorporation, with such insurance coverage to be in accordancewith the Company’s standard practices for senior executive officers but on terms no less favorablethan provided to any other Company senior executive officer or director.     12. Severability. The provisions of this Agreement are severable. If any provision isdetermined to be invalid, illegal, or unenforceable, in whole or in part, the remaining provisionsand any partially enforceable provisions shall remain in full force and effect.     13. Waiver. Either Party’s failure to enforce any provision of this Agreement shallnot act as a waiver of that or any other provision. Either Party’s waiver of any breach of thisAgreement shall not act as a waiver of any other breach.     14. Tax Withholding. All payments and benefits made or provided pursuant to thisAgreement will be subject to withholding of applicable taxes.     15. Entire Agreement. This Agreement, Your outstanding stock option agreements, andthe Confidential Information Agreement constitute the entire agreement between the Partiesconcerning the subject matter of this Agreement. This Agreement supersedes any priorcommunications, agreements or understandings, whether oral or written, between the Parties relatingto the subject matter of this Agreement.     16. Survival. The Confidential Information Agreement and Sections 5 through 11 willsurvive the termination of this Agreement.
 

 
     17. Amendments. This Agreement may not be amended or modified except in writingsigned by both Parties.     18. Successors and Assigns. Neither Party shall have the right to assign or otherwisetransfer this Agreement or the rights or obligations hereunder (whether by assignment, transfer byoperation 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 Controlapproved 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 thisAgreement, 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 addressedas 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. mailof a writing addressed as above and sent first class mail, certified, return receipt requested, orwhen actually received. Either Party may change the address to which notices shall be delivered ormailed by notifying the other Party of such change in accordance with this Section.     22. AFFIRMATION. YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS AGREEMENT, YOUKNOW AND FULLY UNDERSTAND ITS TERMS AND CONDITIONS, AND YOU HAVE HAD THE OPPORTUNITY TO CONSULT ANATTORNEY OF YOUR CHOOSING AND ASK THE COMPANY ANY QUESTIONS YOU MAY HAVE HAD PRIOR TO SIGNING THISAGREEMENT.o O o
 

 
     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and yearfirst above written.         **QUOVADX, INC.:**           By: /s/ Harvey A. Wagner             Harvey A. Wagner      President and Chief Executive Officer           **Thomas Zajac:**           /s/ Thomas Zajac