Document:

Exhibit 10.22

 

Confidential

 

October 27, 2016

 

Via Hand Delivery

 

Thomas Kloster

[ADDRESS]

[ADDRESS]

 

Re:          Executive Separation Agreement and Release (the “Agreement”)

 

Dear Tom,

 

This confirms that your Chief Financial Officer Position (“CFO”) with Inovalon, Inc. and Inovalon Holdings, Inc. (collectively, the “Company”) will terminate effective October 31, 2016.  If you agree to the terms and conditions in this Agreement, you will remain an employee of the Company through December 2, 2016 (the “Termination Date”).  You will receive regular pay through that date.

 

The Company is prepared to enter into this Agreement with you, which provides you certain benefits to which you otherwise are not entitled, provided that you agree to all the terms set forth below.

 

1.             Severance.  In addition to regular pay through December 2, 2016, the Company is prepared to make an additional payment to you, subject to the terms and conditions in this Agreement. Specifically, the Company will pay you $268,753.85, representing (i) an amount equivalent to 36(1) weeks of regular pay ($256,153.85) (the “Regular Pay”) and (ii) an additional payment of $12,600 (the “Additional Pay”) (the Regular Pay and the Additional Pay, collectively the “Severance Amount”), less applicable taxes and withholding.  Provided that you have executed the Agreement, fulfilled the obligations described below, and the revocation period described in paragraph 15 below has already expired, the Regular Pay will be paid out over the course of 36 weeks in accordance with Company’s regular payroll schedule, and the Additional Pay will be paid out in equal increments beginning January 1, 2017 through July 31, 2017 in accordance with the Company’s regular payroll schedule.

 

(1)  It is acknowledged that you requested an extension to your termination date of November 11, 2016 to December 2, receiving 3 additional weeks of regular pay, in lieu of 3 weeks of severance pay.

 

 

Through October 31, you agree that you have fulfilled your current responsibilities to the Company as CFO, including, without limitation, approving the third quarter Form 10-Q and signing the related third quarter financial statements and audit documents as appropriate, and participating in the Audit Committee call on October 31.  Although you will not be required to come into the office after October 31, you also agree that you will be available through the Termination Date to assist with any transitional matters, and that after the Termination Date, you will cooperate with the Company, as reasonably requested, with respect to questions and outstanding matters that were part of your responsibilities while in the CFO role. The Company will reimburse you for any out-of-pocket expenses you may incur in connection with providing this assistance. Please know that Inovalon views you with respect and appreciation and understands that you will handle this process professionally.

 

During the time period that you are receiving payments against the Severance Amount, if you are rehired by the Company, your severance pay will cease and you will not be paid the remaining portion of the Severance Amount. The Company will issue a Form W2 to you covering any payment of the Severance Amount.

 

2.             Unemployment Compensation.   The Company agrees not to contest any claim you may make for unemployment compensation benefits based upon the fact of your termination.  However, the Company reserves the right to make truthful statements to correct any inaccuracies.

 

3.             Benefit Continuation.  If you currently participate in any Company health benefits plans, your current coverage will continue until the end of the month in which your employment terminates.  You may elect to continue at your own expense your current group medical and/or dental insurance coverage for up to 18 months following the Termination Date, provided that you or your eligible dependents remain eligible for such coverage under the federal law known as the Consolidated Omnibus Reconciliation Act (COBRA).  Except as provided herein, your right to any and all Company benefits will terminate on the Termination Date.

 

4.             Full and Complete Compensation.  The payments and benefits described above satisfy and are in lieu of: (a) all obligations which the Company and/or any of the Inovalon Parties (defined in paragraph 6 below) may have owed to you or which may be owed to you; (b) all compensation, vacation pay, and benefits which may be owing to you; and (c) all claims which you may have against any of the Inovalon Parties (defined in paragraph 6 below) based on any act, conduct, policy, practice, or omission occurring prior to the date that you execute this Agreement.  You agree you have received all payments (other than the benefits described in this Agreement) owed to you by the Company and the full benefit of, any policy of the Company or any agreement between you and any of the Inovalon Parties (defined below).

 

5.             Confidentiality.  You will keep the terms of this Agreement confidential, except that you may disclose this Agreement to: (1) your spouse and your parents, provided they agree

 

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to keep the terms of this Agreement confidential; (2) your accountant or attorney, in which case, you agree not to waive any applicable privilege regarding that discussion; and (3) any other person to whom disclosure is necessary in order to comply with a legal duty, such as a duty that may arise under the Internal Revenue Service or Social Security regulations or statutes. You agree that if you (or anyone to whom you permissibly disclose the terms of this Agreement) disclose the terms, manner, amount, conditions and/or substance of this Agreement, you will be liable to the Company for liquidated damages in the amount of $5,000 for each disclosure, up to a maximum of $20,000.  You agree that these liquidated damages in the amount above represent compensation, not a penalty, and although the Company’s damages for your breach of this paragraph are incapable of being accurately measured at this time, this liquidated damage amount is a reasonable estimation of damage to the Company in the event of such breach.

 

During your employment with Company you have had access to confidential Company and employee-related information.  This Agreement, as well as the Employment Agreement that you executed on or about March 24, 2014 and fully incorporated herein, prohibits you from disclosing or using, either directly or indirectly, any confidential information of Company or its employees or retaining or removing any confidential information of Company or its employees. Additionally, you must return all confidential and proprietary information obtained during your employment with Company. Please be advised that your obligation not to disclose any proprietary and/or confidential information of Company continues after the Termination Date and you must not either directly or indirectly disclose any confidential or proprietary information of Company or its employees.  Notwithstanding anything to the contrary in this Agreement, you are not prohibited from reporting possible violations or participating in an investigation of U.S. federal law or regulation to any U.S. governmental agency or entity, including but not limited to the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, and any U.S. agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of U.S. federal law or regulation.  Accordingly, you do not need the prior authorization of the Company to make any such reports or disclosures and is not required to notify the Company that you have made any such reports or disclosures.

 

6.             General Release.  You release, relinquish, and give up any and all claims, suits and causes of action, known or unknown, which you may have or hold against any of the Inovalon Parties in any way arising out of, relating to, or resulting from: (a) your employment with any of the Inovalon Parties or the termination thereof; (b) any fact, statement, or conduct made or occurring prior to the execution of this Agreement by you; (c) any employment or business custom, practice, or policy of any of the Inovalon Parties; or (d) any conduct or decision of any of the Inovalon Parties which in any way affected you, or discussions leading up to and/or culminating in this Agreement, or your rights, if any, to any benefit due you under any pension plan based upon your service with the Company through the Termination Date.

 

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This is a general release of all claims and you knowingly and voluntarily release and forever discharge Company, and its affiliates, subsidiaries, divisions, and related companies, and its and their present, former, and future successors and assignees, and all of its and their current, former, and future owners, officers, stockholders, employees, officers, attorneys, accountants, directors, assigns, and agents thereof, both individually and in their representative capacities, and insurers, Company employee benefit plans, programs, arrangements and their administrators, functionaries and fiduciaries (collectively, the “Inovalon Parties”), of any and from any and all claims, known and unknown, asserted and unasserted, foreseeable and unforeseeable which against the Inovalon Parties, you, your heirs, executors, administrators, successors, and assigns have or may have as of the date of the execution of this Agreement by you, including but not limited to, any alleged violation of: the National Labor Relations Act, as amended; Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991, as amended; the Americans with Disabilities Act of 1990, as amended; the Family and Medical Leave Act, as amended; the Age Discrimination in Employment Act, as amended; the Occupational Safety and Health Act of 1990, as amended; the Sarbanes-Oxley Act of 2002; the Maryland Occupational Safety and Health Laws, as amended; the Maryland Equal Pay Law, as amended; the Maryland Human Rights Act, as amended; and any other federal, state or local civil or human rights law or any other federal, state or local law, regulation or ordinance; any public policy, contract, tort, or common law; or any allegations for compensation, damages, costs, fees, or other expenses, including attorneys’ fees incurred in these matters.

 

7.             Claims Not Subject to Waiver.  This general release may not be construed to waive any right that is not subject to waiver by private agreement, including without limitation, any claims arising under state unemployment insurance or workers compensation laws.  Nothing in this Agreement may be construed to prohibit you from filing a charge or with participating in any investigation or proceeding conducted by the U.S. Securities and Exchange Commission, National Labor Relations Board, Equal Employment Opportunity Commission, or comparable state or local agency.  You agree, however, to waive your right to recover monetary damages in any charge, complaint or lawsuit filed by you or anyone on your behalf.

 

8.             No Current Filings.  You affirm that you have not filed, caused to be filed, or presently are a party to any claim, complaint, or action against the Company in any forum or form.  You further affirm that you have been paid and/or have received all leave (paid and unpaid), compensation, wages, bonuses, and/or benefits that are due to you, except as provided in this Agreement.  You furthermore affirm that you have no known workplace injuries and have been provided and/or have not been denied any leave requested under the Family and Medical Leave Act.  You have not been retaliated against for reporting any allegations of wrongdoing by the Company or its officers, including any allegations of corporate fraud.

 

9.             No Violations of Code of Conduct. You affirm that you are not aware of any violations or suspected violations of the Inovalon Code of Business Conduct and Ethics as

 

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contained within the Inovalon Employee Handbook and that if you are aware of any such violations, you have reported that information to the Company Chief Legal Officer, or to any of the available reporting avenues set up by the Company.

 

10.          Non-Admission.  The foregoing payments and agreements are made without any admission as to fault, liability, wrongdoing or the validity of any other party’s position by you or any of the Inovalon Parties, all of who expressly deny any and all fault, liability or wrongdoing.

 

11.          Non-Disparagement.  You agree not to make or authorize the making of any disparaging remarks, comments, or statements about the Company, including its present or former agents, employees, officers, or directors.  The Company agrees not to make any disparaging remarks, comments, or statements about you and, as appropriate, will advise selected personnel to avoid disparaging comments about you. Before the Termination Date, nothing in this Agreement precludes you from discussing terms and conditions of employment or exercising rights protected under federal labor law.

 

12.          Return of Company Property.  By signing this Agreement, you agree and acknowledge that you will return to the Company prior to your Termination Date all originals and copies of Company documents and all Company property, including without limitation, computer files, diskettes, database information, client information, sales documents, financial statements, budgets and forecasts, computers, keys, and corporate credit cards.

 

13.          Agreement Void Upon Rehire.  By signing this Agreement, you agree and acknowledge that if you accept employment with the Company or any other employer prior to your Termination Date, this Agreement will become null and void.

 

14.          Entire Agreement.  This Agreement contains the entire agreement between us concerning the subject matter hereof and supersedes (except as set forth in paragraph 6) all prior oral and written communications and agreements between the parties concerning such subject matter.  Neither this Agreement, nor any of its terms, may be waived, added to, changed or altered except in a writing signed by you and an authorized representative of Company.

 

15.          Specific Release of ADEA Claims.  In further consideration of the payments and benefits provided to you in this Agreement, you hereby irrevocably and unconditionally fully and forever waive, release and discharge the Company from any and all claims, whether known or unknown, from the beginning of time to the date of your execution of this Agreement arising under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, and its implementing regulations. By signing this Agreement, you hereby acknowledge and confirm that: (i) you have read this Agreement in its entirety and understand all of its terms; (ii) you have been provided with information, attached hereto, as to the ages and job titles of individuals selected for the program in the decisional unit and the ages of individuals in the same job classification not selected for participation under the program; (iii) you have been advised of and

 

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have availed yourself of your right to consult with your attorney prior to executing this Agreement; (iv) you knowingly, freely and voluntarily assent to all of the terms and conditions set out in this Agreement including, without limitation, the waiver, release and covenants contained herein; (v) you are executing this Agreement, including the waiver and release, in exchange for good and valuable consideration in addition to anything of value to which you are otherwise entitled; (vi) you were given at least twenty-one (21) days to consider the terms of this Agreement and consult with an attorney of your choice, although you may sign it sooner if desired; (vii) you understand that you have seven (7) days from the date you sign this Agreement to revoke the release in this paragraph by delivering written notice of revocation to Patty Donnelly, Vice President, Human Resources, at the address of the Company, 4321 Collington Road, Bowie, Maryland 20716; and (viii) you understand that the release contained in this paragraph does not apply to rights and claims under the ADEA or the Older Workers Benefits Protection Act that may arise after the date on which you sign this Agreement.

 

16.          Consultation with an Attorney.  You have been advised to consult with your attorney before signing this Agreement.  You agree, however, that Company shall not be required to pay any of your attorneys’ fees in this or any related matter and that the severance monies received pursuant to paragraph 1 are in full and complete settlement of all matters between you and the Company, including, but not limited to, attorneys’ fees and costs.

 

17.          Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without regard to conflicts of laws or other principles which would seek to apply the laws of any other jurisdiction.

 

18.          At-Will Employment.  By signing this Agreement, you acknowledge that you have been, at all times, an “at will” employee of the Company.

 

19.          Knowing and Voluntary.  By signing this Agreement, you acknowledge that you have carefully read and fully understand all its provisions, and that you are signing it voluntarily.  You also acknowledge that you are not relying on any representations by any representative of the Company concerning the meaning of any aspect of this Agreement.

 

20.          Severability.          Any provision of this Agreement which is held to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of prohibition or unenforceability, without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

[Signature Page Follows]

 

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Inovalon, Inc.   and Inovalon Holdings, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Thomas Kloster
    	
 
    	
By:   
    	
/s/   Shauna L. Vernal
    
	
 
    	
Thomas Kloster
    	
 
    	
Shauna   L. Vernal
    
	
 
    	
 
    	
 
    	
Chief   Legal Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:   November 4, 2016
    	
Date:   November 4, 2016
    
						

 

7Exhibit 10.23

 

October 26, 2016

 

Personal and Confidential

 

By Hand Delivery

 

Christopher E. Greiner

[ADDRESS]

[ADDRESS]

 

RE: Promotion to the joint position of Chief Financial Officer & Chief Operating Officer

 

Dear Chris:

 

On behalf of Inovalon, Inc. (“Inovalon” or the “Company”), I am pleased to provide to you this formal letter to confirm and memorialize your promotion from the combined position of Chief Products and Operations Officer to the combined position of Chief Operating Officer (COO) and Chief Financial Officer (CFO), effective November 1, 2016.  In this capacity, your CFO responsibilities will report directly to me as CEO of the Company, and your COO responsibilities will continue to report directly to Inovalon’s President Bob Wychulis. For your benefit and clarity, an outline of the Employee Services for your position is provided on the attached Schedule A. Effective November 1, this amended Schedule A replaces the Schedule A attached to your Employment Agreement with Inovalon.

 

This promotion is based upon your clear, consistent, and meaningful contribution to the Company during your time as Chief Products and Operations Officer. In that role, you demonstrated the ability to develop and maintain an expert level of knowledge regarding Employer’s products, services, infrastructure, and operations to achieve significant insight into its products, services, capabilities, support, and functionality requirements, as well as providing strong support to our clients and facilitating these relationships. Further, you have contributed greatly to the Company’s expanded insight and transparency into operating metrics and related revenue and financial performance forecasting. Further still, you have brought a welcomed level of attention to goal setting and alignment of product teams towards the Company’s operating and financial goals. On top of these factors, you have demonstrated yourself to be both near-term and long-term minded with an appreciation of day-to-day tactics as well as the Company’s overall threats and opportunities. We look forward to you bringing these skills, along with your product ownership and leadership skills, to your new role.

 

Effective with this promotion, your annual compensation will be increased by $65,000 to $465,000 per year.  You will also continue to be eligible for our expanded benefits package as outlined in your Employment Agreement. A summary of your compensation and benefits is set forth in the attached Schedule B. Effective November 1, this amended Schedule B replaces the Schedule B attached to your Employment Agreement.

 

In recognition of your past and expected future contributions to Inovalon’s success, we will recommend to the Inovalon Board of Directors that you be granted an equity award of restricted

 

	
www.inovalon.com
    	
 
    
	
 
    	
 
    
	
Tel:   (800) 390-3180
    	
4321 Collington Road
    
	
 
    	
 
    
	
Fax:   (301) 809-8060
    	
Bowie, Maryland 20716    USA
    

 

 

stock at the next quarterly Board meeting currently scheduled to occur on November 10, 2016. Your promotion equity award will be recommended with a value on the date of the grant of $1,500,000. The number of restricted shares you will receive will be based on the closing price on the date of grant ($1,500,000 / closing price on the grant date). This is in addition to and not in place of any previous equity grants that you may have received from Inovalon. Please note that restricted shares vest in 20% increments each year over five years and are subject to forfeiture if you are not continuously employed with Inovalon through the applicable vesting date.

 

Also, please note that the Compensation Committee of the Inovalon Board of Directors considered and approved this promotion, along with your salary increase. The Committee further determined that this promotion would be made effective as of November 1, rather than during the Company’s annual merit increases early next year.  However, this adjustment is reflective of any merit increase to salary that otherwise would have occurred during the annual review period. Your 2016 bonus will still be considered during the Company’s annual review cycle.

 

As I hope you know, Chris, I and we believe that you and your work bring important contributions to Inovalon. We are very pleased to provide you with this promotion and are confident that you will continue to expand your abilities and demonstrate yourself as a highly valuable part of the Inovalon team.

 

Please consider this letter to be confidential information protected from disclosure in accordance with Inovalon’s confidentiality policies.

 

	
Sincerely,
    	
 
    
	
 
    	
 
    
	
/s/   Keith Dunleavy, M.D.
    	
 
    
	
 
    	
 
    
	
Keith   Dunleavy, M.D.
    	
 
    
	
Chief   Executive Officer & Chairman of the Board
    	
 
    
	
Inovalon, Inc.
    	
 
    

 

Please indicate your acknowledgement and acceptance of this letter agreement and the associated adjustments to your title and reporting alignment by signing below and returning this to Shauna Vernal by October 31, 2016. By doing so, the attached Schedule A and B will amend and replace the Schedule A and B applicable to your previous position, with an effective date of November 1, 2016.

 

	
ACKNOWLEDGED AND ACCEPTED
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accepted:   
    	
/s/   Christopher E. Greiner
    	
 
    	
Dated:   
    	
11-11-16
    
	
 
    	
Christopher E. Greiner
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

Enclosure/Attachment

cc:                                File (w/attachment)

 

CONFIDENTIAL

 

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SCHEDULE A

 

Employee Services / Job Description

 

This Schedule A outlines the Employee Services (certain responsibilities and duties) in connection with your employment with Employer.  Defined terms used, but not otherwise defined in this Schedule A, have the meanings assigned to those terms in the Agreement.

 

	
Position:   Chief Financial Officer &   Chief Operating Officer
    	
FLSA status:   Exempt
    

 

Responsibilities: The responsibilities and duties of this position include:

 

1)             Develop and maintain an expert level of knowledge regarding vision, industry, markets, products, services, infrastructure, regulatory requirements, and operations of the Company to achieve optimal insight into the Company’s projections, goals, opportunities, threats, product development, operation, capabilities, support, and functionality requirements;

 

2)             Manage, maintain, and ultimately be responsible for all activities, responsibilities, and reporting of Employer’s operations department and function, to include (without limitation):

 

a)             Manage, maintain, and be ultimately responsible for all operations pertaining to the Company’s delivery of products and services through internal and/or third-party vendor relationships, fulfilling such in a manner as to maximize the Company’s overall success, fulfillment of its contractual obligations, adherence with regulatory requirements, achievement of its corporate mission, and achievement of its fiscal goals;

 

b)             Maintain comprehensive communication with Inovalon management and appropriate internal  personnel, vendors, and clients regarding timelines, readiness, needs, risks, cost implications, resource requirements, and all other material aspects related to the Company’s operations;

 

c)              Lead, appropriately scale, drive, and manage all personnel teams, tools, processes, policies, compliance, procedures, quality assurance,  and associated resources to achieve the Company’s goals as outlined above; notably including the areas of operations;

 

3)             Manage, maintain, and ultimately be responsible for all activities, responsibilities, and reporting of Employer’s finance department and function, to include (without limitation):

 

a)             the development and execution of financial procedures, policies, and controls, reporting, and maintenance of corporate accounting and financial records to provide accurate, reliable and timely financial data, safeguard assets and records, evaluate operational efficiency, and achieve adherence to prescribed policies and procedures;

 

b)             financial and administrative oversight to ensure that accounting, budgeting, and financial reporting systems meet the needs of Inovalon, senior management, outside auditors, corporate counsel, and other appropriate constituencies;

 

c)              the development, maintenance, presentation, and reporting of timely and accurate periodic (monthly/quarterly/annual) corporate and departmental projections, budgeting, and reconciliation of such;

 

d)             the provision of timely and accurate periodic (monthly/quarterly/annual) closings and account reconciliations;

 

e)              timely and accurate payroll policies, procedures, and execution;

 

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f)               timely and accurate client invoicing and accounts receivable collection policies, procedures, and execution;

 

g)              analyzing cash flow, cost controls, treasury, and expenses to pinpoint potential weak areas;

 

h)             assisting and advising Employer’s senior management with respect to financial and cash flow projections in support of achieving financial performance targets;

 

i)                 providing important input and checks and balances for salary and headcount strategies;

 

j)                facilitating the design, preparation, and delivery of customized management reports for senior management;

 

k)             ensuring that effective internal controls are in place and records are maintained in accordance with Generally Accepted Accounting Principles (GAAP);

 

l)                 supporting the strategic financial vision and all related analysis, preparation, and execution issues regarding the public listing, capitalization, and various additional strategic alternatives including, as applicable, the:

 

i)                 management of public company reporting, and provide oversight of, financial contribution to, and review of SEC reporting and internal controls, to ensure accurate and reliable reporting in compliance with all applicable laws and regulations; and

 

ii)              development, management, maintenance, and ultimate responsibility for all accounting policies, processes and practices, including SOX financial and accounting controls, and reporting to regulatory entities, shareholders, and other relevant parties, as appropriate.

 

m)         Coordinate and provide guidance to the Company and applicable senior management regarding tax-planning strategies to minimize tax liabilities and other corporate taxes issues, and ensure that Employer is in compliance with Federal, state, and local tax requirements;

 

n)             Serve as a key member of Employer’s corporate and strategic transaction team, responsible for all financial aspects of any such engagements, transactions or considerations of such, as well financial aspects of any post-transaction integrations;

 

o)             Serve as the primary liaison between Employer and its auditors and independent valuation providers in the coordination and oversight of audit and independent valuation processes to achieve a timely completion of audit and independent valuation activities;

 

p)             Serve as the primary executive responsible for selection, negotiation, and management of primary suppliers, vendors, real estate management, facilities management, and other third-party relationships with Employer;

 

q)             Assist senior management in liaising with Employer’s shareholders, potential investors, and lenders;

 

r)                Assist in the development and maintenance of banking relationships, and provide guidance and support with respect to appropriate sources of financing and cash management;

 

s)               Manage and coordinate staff required for the achievement of Employer’s financial initiatives, operations, and functionality, monitor performance and evaluate departmental effectiveness;

 

t)                Interact with senior management to provide consultative support to product and planning initiatives through financial and management information analyses, reports, and recommendations;

 

4)             Participate as part of Company executive leadership in the strategic development of initiatives to identify product, system, financial, and operations enhancements which may improve client appeal, process flow, business function, and valuation of the Company;

 

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5)             Fulfill those responsibilities and/or duties that may be reasonably requested by the Company for the purpose of achieving operational and financial success of the Company;

 

6)             Adhere to and support all confidentiality and HIPAA requirements as outlined within the Company’s Operating Policies and Procedures in all ways and at all times with respect to any aspect of the data handled or services rendered in the scope of work; and

 

7)             Maintain a high level of integrity and accountability commensurate with the title and position in the company.

 

General Expectations: The following constitute specific general expectations regarding Employee’s provision of services with Employer:

 

1.              Travel.  The position will require material travel to locations other than the primary office where Employee will be located, generally consisting of one to two days per week (on a quarterly average basis), in the provision of the Employee services.  Such travel is generally expected to be to customer, potential customer, other Employer office locations, as well as other general related (e.g. conferences, management related) travel.  Seasonality of specific product lines may lead to concentrations of travel during specific periods of the year.

 

2.              Location.  The primary office of Employee will be in Bowie, Maryland.  Daily onsite business operation presence is expected during all days during which Employer is open for business, except during business-related travel and vacation/personal days off.

 

3.              Performance Reviews/Merit Increases.  Inovalon’s annual performance review process is administered on a calendar year basis.  Associates who are actively employed as of September 30 of each year will be scheduled to receive a performance review, and they will be considered for participation in the annual merit program.  This review is based on individual and/or team performance, as appropriate, considering position and/or level of responsibility in the organization.  Associates who begin employment on or after October 1 will be eligible to participate in the next annual performance review process following their initial 12 months of service.

 

4.              Leadership.  The position outlined is expected to require significant energy, self-motivation, perseverance, and leadership to successfully execute.

 

5.              Beliefs and Core Values.   Inovalon is aligned around the seven core values of I.N.S.P.I.R.E.: Integrity, Nimbleness, Service, Passion, Innovation, Respect and Excellence.  Employees are expected to perform their regular duties in ways which adhere to and exemplify Employer’s Core Values.

 

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SCHEDULE B

 

Compensation and Benefits

 

This Schedule B outlines your compensation and benefits in connection with your employment with  Employer.  Defined terms used, but not otherwise defined in this Schedule B, have the meanings assigned to those terms in the Agreement.

 

1.              Salary.  Employee will be paid a gross base salary by Employer at the rate of $465,000 per year, less all tax and other withholdings and deductions required to be made by applicable law (the “Salary”).  The Salary will be paid by Employer to the Employee every two weeks, or in such other periodic payments as are in accordance with Employer’s then applicable payroll policies.

 

2.              Performance Incentive: Employee will be eligible annually, subject to annual approval by the compensation committee of the board of directors of Employer, for a performance incentive of cash and equity awards, generally targeting 250% of Employee’s Salary during the year for which the Performance Incentive is paid (the “Target Total”).  The Performance Incentive is subject to certain criteria (as further described below).  If your Promotion Date occurs after the first business day of the year, the Performance Incentive for that year will be prorated accordingly.  Employee will not be eligible for any Performance Incentive for any particular year unless continuously employed by Employer through the date the Performance Incentive for that year becomes payable.  The Performance Incentive consists of i) a cash bonus opportunity, ii) a Traditional Equity Incentive opportunity, and iii) a Long-Term Equity Incentive opportunity. The components of the Performance Incentive will generally be split 50%, 125%, and 75%, respectively, totaling to the aforementioned Target Total of 250%.  Payment of this Performance Incentive is dependent (a) first upon Employer performance (success, profitability, and other metrics) within the ranges approved by Employer’s board of directors; (b) second, performance of the departments and personnel you are responsible for supervising, in accordance with the budget, metrics and strategic objectives that may be established by Employer and/or the board of directors from time to time; and (c) third, upon your individual performance.  As with all executive compensation, Performance Incentives are subject to modification by the compensation committee of the board of directors as determined appropriate each year in connection with their duties to review executive compensation.  For the sake of clarity, Performance Incentives might not be paid in years where Employer does not achieve its performance goals within the parameters established by the board of directors.

 

3.              Equity Incentives.  In recognition of your expected future contributions to Inovalon’s success, it is the desire of the board of directors to align your interests with those of Employer’s shareholders.  Accordingly, you will be granted a one-time award in association with your promotion to this position (the “Promotion Award”) of $1,500,000 at the next quarterly board meeting following your Promotion Date in the form of Restricted Stock. You will also be eligible for annual grants of Equity Incentives, as described in Section 2 of this Schedule B, as determined by and subject to the approval of the board of directors.  At the discretion of the board of directors, equity incentives/awards are granted to recognize contributions of Employer’s executives to the growth and success of Employer and may be in any form permitted by Employer’s 2015 Omnibus Incentive Plan (“Omnibus Plan”), as in effect at the time of the award.  Currently, under the Omnibus Plan, these awards may consist of Restricted Stock, Restricted Stock Units (“RSUs”), options to purchase shares of the common stock of Employer (the “Options”), or certain other forms providing similar incentive opportunities. The frequency, amount, timing, and vesting of any Equity Incentive will be as determined by the board of directors. Currently, Equity Incentives referred to as “Traditional Equity Incentives” vest equally over five years, with 20% vesting on each anniversary of the grant, and Equity Incentives referred to as “Long-Term Equity Incentives” vest 100% upon the fifth anniversary of the grant with 50% of such vesting being subject to the Company’s achievement of specific financial performance metrics. The date of annual Equity Incentive grants will be as determined by the Board.  The determination of the forms of Equity Incentives will be at the sole discretion of Employer.

 

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4.              Health Care Coverage.  Beginning with the first of the month following the Effective Date, you will continue to be eligible to participate in Employer’s health care insurance coverage, subject to the policy, co-pay, and specific benefits of Employer’s group plan or plan of materially similar benefits.  Partial Employee contribution toward premium is required for participation in health care coverage.

 

5.              Dental Care Coverage.  Beginning with the first of the month following the Effective Date, you will continue to be eligible to participate in Employer’s dental coverage, subject to the policy, co-pay, and specific benefits of Employer’s group plan or plan of materially similar benefits.  Partial Employee contribution toward premium is required for participation in dental coverage.

 

6.              Vision Care Coverage.  Beginning with the first of the month following the Effective Date, you will continue to be eligible to participate in Employer’s vision coverage, subject to the policy, co-pay, and specific benefits of Employer’s group plan or plan of materially similar benefits.

 

7.              Group Life Insurance.  Following the Effective Date, Employer will continue to pay the cost of the premium on your behalf for a life insurance policy carrying a benefit equal to your gross annual base Salary, up to a maximum of $250,000.  You will also have the option to purchase supplemental insurance coverage (for you, a spouse, a domestic partner, or children), subject to certain maximums and other terms and conditions of the insurance underwriter.

 

8.              Disability Insurance. Following the Effective Date, Employer will continue to pay the cost of the premium on your behalf for short-term & long-term disability coverage payable for lost income due to illness or injury.  You will also continue to be eligible to participate in an additional buy-up long-term disability plan, which would be 100% paid for by the employee.

 

9.              401(k) Plan Benefits.  Following the Effective Date, you will continue to be eligible to participate in Employer’s 401(k) Plan benefits.  Such participation may be matched by Employer up to such percentage of your Salary as may be determined from time to time, which is currently 4%, and subject to applicable annual limitations on your contributions.  The exact parameters of the 401(k) Retirement Savings Plan benefits may change from time to time as dictated by ERISA compliance and Employer’s Summary Plan Description.

 

10.       Personal Time Off (“PTO”).  You will continue to receive PTO (paid vacation / personal days / sick days) as provided for in Employer’s PTO policies or as may be modified thereafter.  Employer acknowledges that you may not always be able to predict with significant forewarning when you may need to take vacation or sick days.  Nevertheless, Employer respectfully requests as much forewarning (of at least four weeks if possible) as is reasonably possible prior to requested vacation periods for which the desired vacation periods are of duration of two or more consecutive business day (for example: a consecutive Thursday and Friday, or a Friday and following Monday).

 

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