CIO Employment Agreement - Ronald O. Lynn

EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into this 1st day of July, 1997, to be effective on July 1, 1997 (the "Effective Date"), by and between MiliRisk, Inc., a Texas corporation ("Employer"), and Ronald O. Lynn, a resident of Texas ("Employee").


W I T N E S S E T H:


WHEREAS, Employer is a corporation engaged in business in the State of Texas and throughout the United States;


WHEREAS, Employer desires to employ Employee in the capacity of Executive Vice President and Chief Information Officer, upon the terms and conditions hereinafter set forth; and


WHEREAS, Employee is willing to enter into this Agreement with respect to his employment and services upon the terms and conditions hereinafter set forth.


NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, Employer hereby employs Employee and Employee hereby accepts such employment upon the terms and conditions hereinafter set forth:


1. Term of Employment. The term of employment under this Agreement shall be for a period of three (3) years, commencing on the Effective Date and terminating on June 30, 2000, unless such employment is terminated or extended prior to the expiration of said period as hereinafter provided.


2. Duties of Employee. Employee agrees that during the term of this Agreement, he will devote his full professional and business-related time, skills and best efforts to the businesses of Employer in the capacity of Executive Vice President and Chief Information Officer, or such other capacity as Employer and Employee may agree upon. If there are major significant changes in the duties or responsibilities of Employee from those listed as Prohibited Activities on Exhibit A attached hereto, that are not mutually agreed upon, Employee may terminate his employment within sixty (60) days of any such change. In addition, Employee shall devote all necessary time and his best efforts in the performance of any other duties as may be assigned to him from time to time by the Board of Directors of Employer including, but not limited to, serving on Employer's Board of Directors if elected. Employee shall devote his full professional and business skills to Employer as his primary responsibility. Employee may engage in personal, passive investment activities provided such activities do not interfere with the performance of his duties hereunder and violate the noncompetition and nondisclosure provisions set forth herein. 2
3. Compensation.


(a) Base Salary. Employer shall pay Employee an annual
base salary of one hundred fifteen thousand dollars ($115,000) per
annum (or fraction for portions of a year). Such base salary will be
adjusted from time to time in accordance with then current standard
salary administration guidelines of Employer. Employee's salary shall
be subject to all appropriate federal and state withholding taxes and
shall be payable in accordance with the normal payroll procedures of
Employer.


(b) Annual Bonus. In addition to the salary set forth in
Section 3(a) hereof, Employee shall receive a bonus each year during
the term of this Agreement in an amount equal to a percentage of a
certain net income target set for each year as established annually in
an annual planning session. If 100% or more of such annual target is
achieved in any year, Employee shall receive in such year a bonus of
50% of his base salary (the "Maximum Bonus"). If less than 100% of
such target is achieved in any year, Employee shall receive in such
year a bonus of a certain percentage of the Maximum Bonus as
determined in accordance with Schedule 3(b) attached hereto.


(c) Stock Options. Employee shall be granted stock
options for shares of common stock of Employer pursuant to the terms
of a Stock Option Agreement granted under the MiliRisk, Inc. 1997
Stock Option Plan, as amended, a copy of which has been provided to
Employee. The number of shares of common stock, exercise price and
date of grant for such options is set forth on Schedule 3(c) attached
hereto.


(d) Automobile Allowance. During the term of this
Agreement, Employer shall provide Employee with a monthly automobile
allowance of six hundred and fifty dollars ($650.00). Such allowance
shall be paid by Employer to Employee on the first workday of each
month or on such other day during the month as Employer and Employee
shall mutually determine.


(e) Phone Allowance. During the term of this Agreement,
Employer shall provide Employee with a monthly phone allowance of
fifty dollars ($50.00). Such allowance shall be paid by Employer to
Employee on the first workday of each month or on such other day
during the month as Employer and Employee shall mutually determine.


4. Fringe Benefits. The terms of this Agreement shall not foreclose Employee from participating with other employees of Employer in such fringe benefit or incentive compensation plans as may be authorized and adopted from time to time by Employer; provided, however, that Employee must meet any and all eligibility provisions required under said fringe benefit or incentive compensation plans. Employee may be granted such other fringe benefits or perquisites as Employee and Employer may from time to time agree upon.


5. Vacations. Employee shall be entitled to the number of paid vacation days in each calendar year as shall be determined by the Board of Directors of Employer from time to time. In no event, however, shall Employee be entitled to less than four weeks paid vacation during each calendar year. 3
6. Reimbursement of Expenses. Employer recognizes that Employee will incur legitimate business expenses in the course of rendering services to Employer hereunder. Accordingly, Employer shall reimburse Employee, upon presentation of receipts or other adequate documentation, for all necessary and reasonable business expenses incurred by Employee in the course of rendering services to Employer under this Agreement.


7. Working Facilities. Employee shall be furnished an office, personal secretary and such other facilities and services suitable to his position and adequate for the performance of his duties, which shall be consistent with the policies of Employer.


8. Termination. The employment relationship between Employee and Employer created hereunder shall terminate before the expiration of the stated term of this Agreement upon the occurrence of any one of the following events:


(a) Death or Permanent Disability. The death or
permanent disability of Employee. For the purpose of this Agreement,
the "permanent disability" of Employee shall mean Employee's
inability, because of his injury, illness, or other incapacity
(physical or mental), to perform the essential functions of the
position contemplated herein, with or without reasonable accommodation
to Employee with respect to such injury, illness or other incapacity,
for a continuous period of 150 days or for 180 days out of a
continuous period of 360 days. Such permanent disability shall be
deemed to have occurred on the 15th consecutive day or on the 180th
day within the specified period, whichever is applicable.


(b) Termination for Cause. The following events, which
for purposes of this Agreement shall constitute "cause" for
termination:


(1) The willful breach by Employee of any
provision of Sections 2, 11, 12, or 13 hereof (including but
not limited to a refusal to follow lawful directives of the
Board of Directors of Employer) after notice to Employee of
the particular details thereof and a period of 10 days
thereafter within which to cure such breach and the failure of
Employee to cure such breach within such 10 day period;


(2) Any act of fraud, misappropriation or
embezzlement by Employee with respect to any aspect of
Employer's business;


(3) The illegal use of drugs by Employee during
the term of this Agreement that, in the determination of the
Board of Directors of Employer, substantially interferes with
Employee's performance of his duties hereunder;


3 4
(4) Substantial failure of performance by
Employee that is repeated or continued after 30 day written
notice to Employee of such failure and that is reasonably
determined by the Board of Directors of Employer to be
materially injurious to the business or interests of Employer
and which failure is not cured by Employee within such 30 day
period; or


(5) Conviction of Employee by a court of
competent jurisdiction of a felony or of a crime involving
moral turpitude.


Any notice of discharge shall describe with reasonable
specificity the cause or causes for the termination of Employee's
employment, as well as the effective date of the termination (which
effective date may be the date of such notice). If Employer
terminates Employee's employment for any of the reasons set forth
above, Employer shall have no further obligations hereunder from and
after the effective date of termination (other than as set forth
below) and shall have all other rights and remedies available under
this or any other agreement and at law or in equity.


(c) Termination by Employee with Notice. Employee may
terminate this Agreement without liability to Employer arising from
the resignation of Employee upon one (1) year written notice to
Employer. Employer retains the right after proper notice of
Employee's voluntary termination to require Employee to cease
employment immediately; provided, however, in such event, Employer
shall remain obligated to pay Employee his salary during the one (1)
year notice period or the remaining term of this Agreement, whichever
is less. During such one (1) year notice period, Employee shall
provide such consulting services to Employer as Employer may
reasonably request and shall assist Employer in training his successor
and generally preparing for an orderly transition.


(d) Termination by Employer with Notice. Employer may
terminate this Agreement at any time upon one (1) year written notice
to Employee; provided, however, upon such notice Employee shall not be
required to perform any services for Employer other than during the
period of three (3) months immediately following the receipt of such
notice of termination in which Employee shall assist Employer in
training his successor and generally preparing for an orderly
transition.


9. Compensation Upon Termination.


(a) General. Upon the termination of Employee's
employment under this Agreement before the expiration of the stated
term hereof for any reason, Employee shall be entitled to (i) the
salary earned by him before the effective date of termination, as
provided in Section 3(a) hereof, prorated on the basis of the number
of full days of service rendered by Employee during the year to the
effective date of termination, (ii) any accrued, but unpaid, vacation
or sick leave benefits, (iii) any authorized but unreimbursed business
expenses, and (iv) any accrued, but unpaid annual bonus.


(b) Termination For Other Than Cause. If such
termination is the result of the discharge of Employee by Employer for
any reason other than (i) his death or permanent disability, (ii) by
Employer or Employee with notice pursuant to Section 8(d) or 8(c),


4 5 respectively, or (iii) for cause (as defined in Section 8(b) hereof), then Employee shall be entitled to receive as a severance payment an amount equal to the salary (excluding bonuses) that Employee would have received for the remainder of the term of this Agreement in accordance with the regular payroll periods during the remainder of the term of this Agreement. If Employee's employment hereunder terminates because of the death of Employee, all amounts that may be due to him under the terms of this Agreement shall be paid to his administrators, personal representatives, heirs and legatees, as may be appropriate.


(c) Termination For Cause. If the employment
relationship hereunder is terminated by Employer for cause (as defined
in Section 8(b) hereof), Employee shall not be entitled to any
severance compensation, except as provided in Section 9(a) above.


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