Exhibit 99.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by
and between Xxxxxx X. Xxxxxxxx, an individual ("Employee"), and Magellan Health
Services, Inc., on behalf of itself and its subsidiaries and affiliates
(collectively referred to herein as "Employer").
WHEREAS, Employer desires to obtain the services of Employee and
Employee desires to render services to Employer; and
WHEREAS, Employer and Employee desire to set forth the terms and
conditions of Employee's employment with Employer under this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and agreements contained in this Agreement, the parties agree
as follows:
STATEMENT OF AGREEMENT
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1. EMPLOYMENT. Employer agrees to employ Employee, and Employee
accepts such employment in accordance with the terms of this Agreement, for a
term commencing on January 24, 2005 and, unless terminated earlier in accordance
with the terms of this Agreement, ending on December 31, 2005. Thereafter, this
Agreement shall automatically renew for twelve (12) month periods, unless sooner
terminated as provided herein. If either party desires not to renew the
Agreement, they must provide the other party with written notice of their intent
not to renew the Agreement at least six (6) months prior to the next renewal
date. Employer's notice of intent not to renew the Agreement shall be deemed to
be a termination without cause and the provisions of Section 6(c) shall apply.
2. POSITION AND DUTIES OF EMPLOYEE; LOCATION OF EMPLOYMENT.
(a) Employee will serve as Executive Vice President,
General Counsel and Secretary of the Company. Employee shall (i) report directly
to the Chief Executive Officer and (ii) have such duties and responsibilities
typical of, and consistent with, the positions of Chief Legal Counsel and
General Counsel and Secretary in a public company the size and nature of the
Company. Employee agrees to serve in such position until the expiration of the
term or such time as Employee's employment with Employer is terminated pursuant
to this Agreement.
(b) The Employee shall perform his duties at the Company's
principal executive offices currently located in Farmington, Connecticut and to
be located in Avon, Connecticut (the "Offices").
3. TIME DEVOTED. Employee will devote his full business time and
energy to the business affairs and interests of Employer, and will use his best
efforts and abilities to promote Employer's interests. Employee agrees that he
will diligently endeavor to perform services contemplated by this Agreement in a
manner consistent with his position and in accordance with the policies
established by the Employer.
4. COMPENSATION.
(a) Base Salary. Employer will pay Employee a base salary
in the amount of Hundred Twenty-Five Thousand Dollars ($325,000) per year, which
amount will be paid in semi-monthly intervals less appropriate withholdings for
federal and state taxes and other deductions authorized by Employee. Such salary
will be subject to review for increase by Employer not less than annually,
subject to review by the Board or a duly authorized committee thereof.
(b) Bonus. Employee shall be entitled to an annual target
bonus opportunity of at least 50% of Base Salary ("Target Bonus") under the
Company's Short-Term Incentive Plan (or successor annual incentive plan
applicable to similarly situated executive officers).
(c) Benefit and Compensation Plans. Employee will be
eligible to participate in Employer's benefit and compensation plans
commensurate with other similarly situated executive officers of the Employer
(for purposes of this Agreement, "similarly situated executive officers" shall
mean direct reports of the CEO and other key officers such as the CIO and CMO
but not including the COO or CFO). Employee will receive separate information
detailing the terms of such benefit and compensation plans and the terms of
those plans will control. During the term of this Agreement, Employee will be
entitled to such other benefits of employment with Employer as are now or may
later be in effect for salaried employees of Employer, and also will be eligible
to participate in other benefits adopted for similarly situated executive
officers.
(d) Sign-on Stock Option Grant. On January 24, 2005,
Employer shall grant to Employee options to purchase 50,000 shares of Employer's
Common Stock with an exercise price equal to the closing price of the Employer's
Common Stock on NASDAQ on January 24, 2005. Such options will be issued pursuant
to Employer's currently existing stock option plan and will vest in three (3)
equal annual installments on each annual anniversary date of the grant.
5. EXPENSES. During the term of this Agreement, Employer will
reimburse Employee promptly for all reasonable travel, entertainment, parking,
business meetings and similar expenditures in pursuance and furtherance of
Employer's business and all licensing and professional organization dues and
fees and expenses relating to Employee's continuing legal education, upon
receipt of reasonably supporting documentation as required by Employer's
policies applicable to its employees generally.
6. TERMINATION.
(a) Termination Due to Resignation. Employee may resign his
employment at any time by giving thirty (30) days written notice of resignation
to Employer. Except as otherwise set forth in this Agreement, Employee's
employment, and Employee's right to receive compensation and benefits from
Employer, will terminate upon the effective date of Employee's termination.
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If Employee resigns pursuant to this Section
6(a), Employer's only remaining financial obligation to Employee under this
Agreement will be to pay: (i) any earned but unpaid Base Salary and accrued Paid
Time Off through the effective date of Employee's termination; (ii)
reimbursement of expenses incurred by Employee through the effective date of
termination which are reimbursable pursuant to this Agreement; and (iii) the
Employee's vested portion of any Magellan deferred compensation or other benefit
plan.
(b) Termination with Cause. Except as otherwise set forth
in this Agreement, Employee's employment, and Employee's right to receive
compensation and benefits from Employer, will be terminated for cause at the
discretion of Employer under the following circumstances:
(i) Employee's commission of an act of
fraud or dishonesty involving his or
her duties on behalf of Employer;
(ii) Employee's willful failure or
refusal to faithfully and diligently
perform duties assigned to Employee
or other willful breach of any
material term under this Agreement;
(iii) Employee's willful failure or
refusal to abide by Employer's
policies, rules, procedures or
directives; or
(iv) Employee's conviction of a felony or
a misdemeanor involving moral
turpitude.
If Employee is terminated pursuant to this
Section 6(b), Employer's only remaining financial obligation to Employee under
this Agreement will be to pay: (i) any earned but unpaid Base Salary and accrued
Paid Time Off through the date of Employee's termination; (ii) reimbursement of
expenses incurred by Employee through the date of termination which are
reimbursable pursuant to this Agreement; and (iii) the Employee's vested portion
of any Magellan deferred compensation or other benefit plan.
For the events described in Sections 6(b)(ii) and
(iii), Employer will give Employee written notice of such deficiency and a
reasonable opportunity to cure such situation, but in no event more than thirty
(30) days.
(c) Termination Without Cause By the Company or With Good
Reason By Employee. Employer may terminate this Agreement and Employee's
employment without Cause at any time. If Employer terminates this Agreement
without Cause, or if Employee terminates this Agreement and Employee's
employment with Good Reason, Employee shall (unless Section 6(d) is applicable)
receive:
(i) Base salary through the date of
termination;
(ii) if termination occurs after June 30
of any year, pro-rata Target Bonus
for the year in which termination
occurs, provided that Company
targets are met and similarly
situated executive officers are
eligible for Target Bonus payout in
such year and provided that the CEO
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determines that individual
performance would warrant Target
Bonus payout under the incentive
plan; such amount to be paid at the
same time that payments are made to
other similarly situated officers
with respect to such year;
(iii) the sum of (a) Employee's then
annual base salary plus (b) Target
Bonus, payable in a single cash
installment immediately after
termination;
(iv) if Employee elects to continue
health, dental and vision insurance
coverage under COBRA, Employee will
pay only the employee contribution
rate for the health insurance
portion of the COBRA coverage during
the twelve months following
termination. (as there is no
Employer contribution for dental and
vision coverage, Employee pays the
full COBRA rate for dental and
vision coverage).
(v) any other amounts earned, accrued or
owing to Employee but not yet paid;
(vi) other payments, entitlements or
benefits, if any, that are payable
in accordance with applicable plans,
programs, arrangements or other
agreements of the Company.
For purposes of this Agreement, "Good Reason" shall mean termination by Employee
of his employment after written notice to the Company following the occurrence
of any of the following events without his consent:
(i) a reduction in Employee's then
current Base Salary, or the Target
Bonus opportunity (i.e., 50% of Base
Salary) ;
(ii) a material diminution in Employee's
position, duties or authorities,
including without limitation, any
removal of Employee from the
position of Chief Legal Officer and
General Counsel or if Employee does
not continue as Chief Legal Officer
and General Counsel to the ultimate
parent entity which reports to the
Securities Exchange Commission;
(iii) the assignment to Employee of duties
which are materially inconsistent
with his duties or which materially
impair Employee's ability to
function as Chief Legal Officer and
General Counsel of the Company;
(iv) the relocation of the Offices to a
location that is more than thirty
(30) miles from Avon, Connecticut
and more than 30 additional miles
from Trumbull, Connecticut;
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(v) a change in the reporting structure
so that Employee reports to someone
other than the Chief Executive
Officer (or an interim chief
executive officer) or, in the
absence of employment of a Chief
Executive Officer, to the President
or to the Board; or
(vi) a breach by the Company of any
material provision of this
Agreement.
provided that such event continues uncured for fifteen (15) days after Employee
gives the Company notice thereof.
(d) Effect of Termination. Except as otherwise provided for
in this Section 6, upon termination of this Agreement, all rights and
obligations under this Agreement will cease except for the rights and
obligations under the last sentence of Section 1, this Section 6 and Sections 7,
8, and 9; and all procedural and remedial provisions of this Agreement described
in Section 11.
(e) No Mitigation; No Offset. In the event of a termination
of employment (including non-renewal of the term by the Company), Employee shall
be under no obligation to seek other employment, and there shall be no offset
against any amounts due him under the Agreement on account of any remuneration
attributable to any subsequent employer or claims asserted by the Company or any
affiliate, but the Company shall not be obligated to provide medical, dental or
hospitalization insurance following Employee's commencement of other employment
if such employment provides comparable coverage determined on a
benefit-by-benefit basis.
(f) Automatic Termination. This Agreement will terminate
automatically upon the death or permanent disability of Employee. Employee will
be deemed to be "Disabled" or to suffer from a "Disability" within the meaning
of this Agreement if, because of a physical or mental impairment, Employee has
been unable to perform the essential functions of his position, with or without
reasonable accommodation, for a period of 180 consecutive days, or if Employee
can reasonably be expected to be unable to perform the essential functions of
his position for such period. If Employee is terminated pursuant to this Section
6(f), Employee will receive (i) any earned but unpaid Base Salary and accrued
Paid Time Off through the date of Employee's termination; (ii) reimbursement of
expenses incurred by Employee through the date of termination which are
reimbursable pursuant to this Agreement; and (iii) the Employee's vested portion
of any Magellan Health Services retirement, deferred compensation or other
benefit plan, including but not limited to, any stock option or restricted stock
grant plans, in accordance with the terms of those plans. If Employee
participates in any bonus plan(s), including but not limited to, any long term
bonus plan(s), Employer may pay Employee, on a pro-rata basis, the amount of
such plan(s) as Employee would have earned if Employee had been employed for the
full calendar year. The pro-ration will be determined by the fraction of the
number of months in the calendar year in which the Employee worked (rounded to
the nearest whole month) divided by 12 months. In determining whether a pro-rata
bonus shall be paid to Employee, the Employer may consider factors that include
but are not limited to (i) the Employee's target bonus (percentage of base
salary); (ii) the Company's financial performance; and (iii) the Employee's
achievement of his specific performance objectives. At the time of termination,
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Employer shall determine the Employee's bonus amount, if any. Notwithstanding
the foregoing, any payout of such bonus amount shall be contingent upon the
Company satisfying the financial targets established by the Company's Board of
Directors. Payment of any bonus shall be made at the time of the annual bonus
payout for all employees.
7. PROTECTION OF CONFIDENTIAL
INFORMATION/NON-COMPETITION/NON-SOLICITATION.
Employee covenants and agrees as follows:
(a)(i) Confidential Information. During Employer's
employment of Employee and for a period of one year following the termination of
Employee's employment for any reason, Employee will not use or disclose,
directly or indirectly, for any reason whatsoever or in any way, other than at
the direction of Employer during the course of Employee's employment or after
receipt of the prior written consent of Employer, any confidential information
of Employer or its controlled subsidiaries or affiliates, that comes into his
knowledge during his employment by Employer (the "Confidential Information" as
hereinafter defined). The obligation not to use or disclose any Confidential
Information will not apply to any Confidential Information that is or becomes
public knowledge through no fault of Employee, and that may be utilized by the
public without any direct or indirect obligation to Employer, but the
termination of the obligation for non-use or nondisclosure by reason of such
information becoming public will extend only from the date such information
becomes public knowledge. The above will be without prejudice to any additional
rights or remedies of Employer under any state or federal law protecting trade
secrets or other information.
(a)(ii) Trade Secrets. Employee shall hold in confidence
all Trade Secrets of Employer, its direct and indirect subsidiaries, and/or its
customers that came into his knowledge during his employment by Employer and
shall not disclose, publish or make use of at any time after the date hereof
such Trade Secrets, other than at the direction of Employer, for as long as the
information remains a Trade Secret.
(a)(iii) For purposes of this Agreement, the following
definitions apply:
"Confidential Information" means any data or information, other than Trade
Secrets, that is valuable to Employer and not generally known to the public or
to competitors of Employer. It is understood that the term "Confidential
Information" does not mean and shall not include information which:
(a) is or subsequently becomes publicly available
without the breach of any obligation owed to the
Employer;
(b) is disclosed with the prior written approval of
the Employer; or
(c) is obligated to be produced under order of a
court of competent jurisdiction or a valid
administrative, congressional, or other subpoena,
civil investigative demand or similar process;
PROVIDED, HOWEVER, that upon issuance of any such
order, subpoena, demand or other process, the
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Employee shall promptly notify the Employer and
shall provide the Employer with an opportunity
(if then available) to contest, at the Employer's
expense, the propriety of such order or subpoena
(or to arrange for appropriate safeguards against
any further disclosure by the court or
administrative or congressional body seeking to
compel disclosure of such Confidential
Information).
"Trade Secret" means information including, but
not limited to, any technical or non-technical data, formula, pattern,
compilation, program, device, method, technique, drawing, process, financial
data, financial plan, product plan, list of actual or potential customers or
suppliers or other information similar to any of the foregoing, which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
derive economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
(a)(iv) Interpretation. The restrictions stated in
paragraphs 7(a)(i) and 7(a)(ii) are in addition to and not in lieu of
protections afforded to trade secrets and confidential information under
applicable state law. Nothing in this Agreement is intended to or shall be
interpreted as diminishing or otherwise limiting Employer's right under
applicable state law to protect its trade secrets and confidential information.
(b) Non-Competition.
(i) Employee covenants and agrees that
during the term of his employment
with Employer and for a period of
one year immediately following the
termination of said employment for
any reason, he will not, on his own
behalf or as a partner, officer,
director, employee, agent, or
consultant of any other person or
entity, directly or indirectly,
engage or attempt to engage in the
business of providing or selling
services in the United States that
are services offered by Employer at
the time of the termination of this
Agreement, unless waived in writing
by Employer in its sole discretion.
Employee recognizes that the above
restriction is reasonable and
necessary to protect the interest of
the Employer and its controlled
subsidiaries and affiliates.
(ii) During the one year period
immediately following Employee's
termination from his employment with
Employer, Employee may submit a
written request to Employer
outlining a proposed employment or
other employment opportunity that
Employee is considering. Employer
will review such request, and make a
determination within ten (10)
business days following receipt of
such request, in its sole
discretion, as to whether the
opportunity would constitute a
breach of the non-competition
covenant.
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(c) Non-Solicitation. To protect the goodwill of Employer
and its controlled subsidiaries and affiliates, or the customers of Employer and
its controlled subsidiaries and affiliates, Employee agrees that, for a period
of one year immediately following the termination of his employment with
Employer, he will not, without the prior written permission of Employer,
directly or indirectly, for himself or herself or on behalf of any other person
or entity, solicit, divert away, take away or attempt to solicit or take away
any Customer of Employer for purposes of providing or selling services that are
offered by Employer, if Employer, or the particular controlled subsidiary or
affiliate of Employer, is then still engaged in the sale or provision of such
services at the time of the solicitation. For purposes of this Section 7(c),
"Customer" means any individual or entity to whom Employer or its controlled
subsidiaries or affiliates has provided, or contracted to provide, services and
with whom Employee had, alone or in conjunction with others, contact with or
knowledge of, during the twelve months prior to the termination of his
employment. For purposes of this Section 7(c), Employee had contact with or
knowledge of a customer if (i) Employee had business dealings with the customer
on behalf of Employer or its controlled subsidiaries or affiliates; (ii)
Employee was responsible for supervising or coordinating the dealings between
the customer and Employer or its controlled subsidiaries or affiliates; or (iii)
Employee obtained or had access to trade secrets or confidential information
about the customer as a result of Employee's association with Employer or its
controlled subsidiaries or affiliates.
(d) Solicitation of Employees. During Employer's employment
of Employee and for a period of one year following the termination of Employee's
employment with Employer for any reason, Employee will not solicit for
employment, directly or indirectly, any employee of Employer or any of its
controlled subsidiaries or affiliates who was employed with Employer or its
controlled subsidiaries or affiliates within the one year period immediately
prior to Employee's termination.
8. WORK MADE FOR HIRE. Employee agrees that any written program
materials, protocols, research papers, other writings, as well as improvements,
inventions, new techniques, programs or products (the "Work") made or developed
by Employee within or after normal working hours relating to the business or
activities of Employer or any of its subsidiaries, shall be deemed to have been
made or developed by Employee solely for the benefit of Employer and will be
considered "work made for hire" within the meaning of the United States
Copyright Act, Title 17, United States Code, which vests all copyright interest
in and to the Work in the Employer. In the event, however, that any court of
competent jurisdiction finally declares that the Work is not or was not a work
made for hire as agreed, Employee agrees to assign, convey, and transfer to the
Employer all right, title and interest Employee may presently have or may have
or be deemed to have in and to any such Work and in the copyright of such work,
including but not limited to, all rights of reproduction, distribution,
publication, public performance, public display and preparation of derivative
works, and all rights of ownership and possession of the original fixation of
the Work and any and all copies. Additionally, Employee agrees to execute any
documents necessary for Employer to record and/or perfect its ownership of the
Work and the applicable copyright.
9. PROPERTY OF EMPLOYER. Employee agrees that, upon the termination
of Employee's employment with Employer, Employee will immediately surrender to
Employer all property, equipment, funds, lists, books, records and other
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materials of Employer or its controlled subsidiaries or affiliates in the
possession of or provided to Employee.
10. GOVERNING LAW. This Agreement and all issues relating to the
validity, interpretation, and performance will be governed by, interpreted, and
enforced under the laws of the State of Connecticut.
11. REMEDIES. An actual or threatened violation by Employee of the
covenants and obligations set forth in Sections 7, 8 and 9 will cause
irreparable harm to Employer or its controlled subsidiaries or affiliates and
that the remedy at law for any such violation will be inadequate. Employee
agrees, therefore, that Employer or its controlled subsidiaries or affiliates
will be entitled to appropriate equitable relief, including, but not limited to,
a temporary restraining order and a preliminary injunction, without the
necessity of posting a bond. Employee will also be entitled to seek equitable
relief against Employer in connection with enforcement of the covenants and
obligations set forth in Sections 7, 8 and 9. The provisions of Sections 4, 5,
6, 7, 8, 9 and 19 will survive the termination of this Agreement in accordance
with the terms set forth in each Section.
12. ARBITRATION. Except for an action for injunctive relief as
described in Section 11, any disputes or controversies arising under this
Agreement will be settled by arbitration in Columbia, Maryland in accordance
with the rules of the American Arbitration Association relating to the
arbitration of employment disputes. The determination and findings of such
arbitrators will be final and binding on all parties and may be enforced, if
necessary, in any court of competent jurisdiction. The costs and expenses of the
arbitration shall be paid for by Employer, but each party shall pay its own
attorney's fees and other litigation costs.
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Employee's
Initials
13. NOTICES. Any notice or request required or permitted to be given
to any party will be given in writing and, excepting personal delivery, will be
given at the address set forth below or at such other address as such party may
designate by written notice to the other party to this Agreement:
To Employee: Xxxxxx X. Xxxxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
(000) 000-0000
To Employer: Magellan Health Services, Inc.
00 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
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Each notice given in accordance with this Section will be
deemed to have been given, if personally delivered, on the date personally
delivered; if delivered by facsimile transmission, when sent and confirmation of
receipt is received; or, if mailed, on the third day following the day on which
it is deposited in the United States mail, certified or registered mail, return
receipt requested, with postage prepaid, to the address last given in accordance
with this Section.
14. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and should not be construed or
interpreted to restrict or modify any of the terms or provisions of this
Agreement.
15. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Agreement, such provision will be fully severable and this
Agreement and each separate provision will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement. In addition, in
lieu of such illegal, invalid or unenforceable provision, there will be added
automatically, as a part of this Agreement, a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable, to the extent such reformation is allowable under
applicable law.
16. BINDING EFFECT. This Agreement will be binding upon and shall
inure to the benefit of each party and each party's respective successors, heirs
and legal representatives. This Agreement may not be assigned by Employee to any
other person or entity but may be assigned by Employer to any subsidiary or
affiliate of Employer or to any successor to or transferee of all, or any part,
of the stock or assets of Employer.
17. EMPLOYER POLICIES, REGULATIONS, AND GUIDELINES FOR EMPLOYEES.
Employer may issue policies, rules, regulations, guidelines, procedures or other
material, whether in the form of handbooks, memoranda, or otherwise, relating to
its Employees. These materials are general guidelines for Employee's information
and will not be construed to alter, modify, or amend this Agreement for any
purpose whatsoever.
18. INDEMNIFICATION. The Company shall indemnify Employee to the same
extent as other executive officers of the Company.
19. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements and understandings, whether written or oral,
relating to its subject matter, unless expressly provided otherwise within this
Agreement. No amendment or modification of this Agreement, will be valid unless
made in writing and signed by each of the parties. No representations,
inducements, or agreements have been made to induce either Employee or Employer
to enter into this Agreement, which are not expressly set forth within this
Agreement. Employee and Employer acknowledge and agree that Employer's
controlled subsidiaries and affiliates are express third party beneficiaries of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the 17th day of January, 2005.
MAGELLAN HEALTH SERVICES, INC.
"Employee" "Employer"
/s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
---------------------------------- ---------------------------------
Xxxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxxxx
Title: Executive Vice President and
Chief Financial Officer
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