Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of May 31, 1996, by and among NOVA
HOLDINGS, INC., a Delaware corporation (the "Company"), NOVA FACTOR, INC., a
Tennessee corporation ("NFI"), and XXXXX X. XXXXXXX (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive for the period
provided in this Agreement, and the Executive is willing to accept such
employment with the Company on a full-time basis, all in accordance with the
terms and conditions set forth below;
NOW, THEREFORE, for and in consideration of the premises hereof and the
mutual covenants contained herein, the parties hereto hereby covenant and agree
as follows:
1. Employment.
(a) The Company hereby employs the Executive, and the Executive hereby
accepts such employment with the Company, for the period set forth in Section 2
hereof, all upon the terms and conditions hereinafter set forth.
(b) The Executive affirms and represents that he is under no obligation
to any former employer or other party which is in any way inconsistent with, or
which imposes any restriction upon, the Executive's acceptance of employment
hereunder with the Company, the employment of the Executive by the Company or
NFI, or the Executive's undertakings under this Agreement.
2. Term of Employment. Unless earlier terminated as hereinafter
provided, the term of the Executive's employment under this Agreement shall
initially be for a period beginning on the date hereof and ending on May 31,
1999; provided that on May 31, 1998 and on each May 31 thereafter, the term of
the Executive's employment hereunder shall automatically be extended for an
additional one-year period unless, prior to such May 31, the Company shall have
given the Executive, or the Executive shall have given the Company, written
notice that the Employment Term shall not be so extended. The period commencing
on the date hereof and ending on the earlier of (i) the termination of
Executive's employment hereunder, and (ii) the later of May 31, 1999 or the
expiration of all one-year extensions described in the preceding sentence, is
referred to herein as the Employment Term.
If the Executive continues in the full-time employ of the Company after
the end of the Employment Term (it being expressly understood and agreed that
the Company does not now, nor hereafter shall have, any obligation to continue
the Executive in its employ whether or not on a full-time basis, after said
Employment Term ends), then, unless otherwise expressly agreed to by the
Executive and the Company in writing, the Executive's continued employment by
the Company after the Employment Term shall, notwithstanding anything to the
contrary expressed or implied herein, be terminable by the Company at will, with
or without cause and with or without notice, but shall in all other respects be
subject to the terms and conditions of this Agreement.
3. Duties. The Executive shall be employed as Chairman and Chief
Executive Officer of the Company, shall, subject to the direction of the Board
of Directors of the Company (the "Board"), faithfully and competently perform
such duties as inhere in such position and shall also perform and discharge such
other executive employment duties and responsibilities consistent with his
position as Chairman and Chief Executive Officer as the Board may from time to
time reasonably prescribe, including serving as Chairman and Chief Executive
Officer of one or more of the Company's subsidiaries or affiliates (including
without limitation NFI). It is the intention of the parties that during the
Employment Term the Executive shall also serve on the Board without additional
compensation. The Executive shall report directly to the Board. The Executive's
primary workplace will be located in Memphis, Tennessee. Except as may otherwise
be approved in advance by the Board, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or other
disability, personal affairs or non-profit public service activities, the
Executive shall devote his full time during normal business hours throughout the
Employment Term to the services required of him hereunder. The Executive shall
render his business services exclusively to the Companies (as defined in Section
6(a)) during the Employment Term and shall use his best efforts, judgment and
energy to improve and advance the business and interests of the Companies in a
manner consistent with the duties of his position.
4. Salary and Bonus.
(a) Salary. As compensation for the performance by the Executive of the
services to be performed by the Executive hereunder during the Employment Term,
the Company shall pay the Executive a base salary at the annual rate of two
hundred forty thousand dollars ($240,000) (said amount being hereinafter
referred to as "Salary"). Any Salary payable hereunder shall be paid in regular
intervals (but in no event less frequently than monthly) in accordance with the
Company's payroll practices from time to time in effect. The Salary payable to
the Executive
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pursuant to this Section 4(a) shall be increased annually, as of September 1,
1997 and each September 1 thereafter for the twelve-month period then
commencing, by an amount equal to (i) the annual percentage increase in the
Consumer Price Index for Urban Consumers, All Items, Memphis, Tennessee Area,
for the most recent twelve-month period for which such figures are then
available as reported in the Monthly Labor Review published by the Bureau of
Labor Statistics of the U.S. Department of Labor or (ii) such higher amount as
may be determined from time to time by the Board in its sole discretion.
(b) Bonus. The Executive will be entitled to receive bonus compensation
from the Company in respect of each fiscal year (or portion thereof) occurring
during the Employment Term, the amount of such bonus compensation to be based on
the extent to which the Company's planned EBT established by the Board for the
corresponding period (the "Plan EBT") has been achieved, as follows:
Percent of Plan EBT Achieved Bonus
---------------------------- -----
Less than 80% None
Between 80% and 100% 1.5 % of Salary for each
1% of Plan EBT achieved
in excess of 80%
Between 100% and 125% 30% of Salary plus 0.8%
of Salary for each 1% of
Plan EBT achieved in
excess of 100%
125% or more 50% of Salary
"EBT" shall mean, with respect to any fiscal year (i) the net income (determined
in accordance with generally accepted accounting principles applied consistently
with the Company's audited financial statements, but excluding the effect of any
extraordinary or other material non-recurring gain (but not loss) outside the
ordinary course of business) of the Company and its consolidated subsidiaries,
determined on a consolidated basis for such period ("Consolidated Net Income")
plus (ii) to the extent deducted in determining Consolidated Net Income for such
period, the amount of the provision for income taxes for such period. Plan EBT
for the Company's fiscal year ending June 30, 1997 shall be $9,600,000. Plan EBT
for subsequent fiscal years shall be as determined by the Board. Any bonus to
which the Executive is entitled shall be paid as promptly as practicable after
the audited financial statements for the fiscal year in question have been
approved by the Board and shall be calculated on a linear basis to the nearest
$100.
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(c) Withholding, Etc. The payment of any Salary and bonus hereunder
shall be subject to applicable withholding and payroll taxes, and such other
deductions as may be required by law or the Company's employee benefit plans.
5. Other Benefits. During the Employment Term, the Executive shall:
(i) be eligible to participate in employee fringe benefits and
pension and/or profit sharing plans that may be provided by the Company
for its senior executive employees in accordance with the provisions of
any such plans, as the same may be in effect from time to time;
(ii) be eligible to participate in any medical and health plans or
other employee welfare benefit plans that may be provided by the
Company for its senior executive employees in accordance with the
provisions of any such plans, as the same may be in effect from time to
time;
(iii) be entitled to the number of paid vacation days in each
calendar year determined by the Company from time to time for its
senior executive officers, as well as all paid holidays given by the
Company to its senior executive officers;
(iv) be entitled to sick leave, sick pay and disability benefits in
accordance with any Company policy that may be applicable to senior
executive employees from time to time; and
(v) be entitled to reimbursement for all reasonable and
necessary out-of-pocket business expenses incurred by the Executive in
the performance of his duties hereunder in accordance with the
Company's policies applicable thereto.
For purposes of determining eligibility, vesting and benefit accrual under each
of the benefit plans and arrangements referred to in this Section 5, the
Executive shall be credited with service for all years and partial years of
service with NFI, Southern Health Systems, Inc. ("SHS"), Le Bonheur Health
Systems, Inc., or any of their affiliates prior to the date hereof. In addition,
from the date hereof until the expiration of the Employment Term, the Company
shall maintain term insurance coverage on the life of the Executive (including
any such coverage provided for pursuant to the foregoing provisions of this
Section 5) in the aggregate amount of $500,000, payable to that Executive's
named beneficiaries in accordance with standard policy terms and conditions.
6. Confidential Information. The Executive hereby covenants,
agrees and acknowledges as follows:
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(a) The Executive has and will have access to and will
participate in the development of or be acquainted with confidential or
proprietary information and trade secrets related to the business of
the Company, SHS and NFI, and any other present or future subsidiaries
or affiliates of the Company (collectively, with the Company, the
"Companies"), including but not limited to (i) customer and physician
lists; patient histories, patient identities and related records and
compilations of information; the identity, lists or descriptions of any
new customers or physicians, referral sources or organizations;
financial statements; cost reports or other financial information;
contract proposals or bidding information; business plans; training and
operations methods and manuals; personnel records; software programs;
reports and correspondence; premium structures; and management systems,
policies or procedures, including related forms and manuals; (ii)
information pertaining to future developments such as future marketing
or acquisition plans or ideas, and potential new business locations and
new suppliers and (iii) all other tangible and intangible property,
which are used in the business and operations of the Companies but not
made public. The information and trade secrets relating to the business
of the Companies described hereinabove in this paragraph (a) are
hereinafter referred to collectively as the "Confidential Information",
provided that the term Confidential Information shall not include any
information (x) that is or becomes generally publicly available (other
than as a result of violation of this Agreement by the Executive) or
(y) that the Executive receives on a nonconfidential basis from a
source (other than the Companies or their representatives) that is not
known by him to be bound by an obligation of secrecy or confidentiality
to any of the Companies.
(b) The Executive shall not disclose, use or make known for
his or another's benefit any Confidential Information or use such
Confidential Information in any way except as is in the best interests
of the Companies in the performance of the Executive's duties under
this Agreement. The Executive may disclose Confidential Information
when required by a third party and applicable law or judicial process,
but only after providing (i) notice to the Company of any third party's
request for such information, which notice shall include the
Executive's intent with respect to such request, and (ii) sufficient
opportunity for the Company to challenge or limit the scope of the
disclosure on behalf of the Companies, the Executive or both.
(c) The Executive acknowledges and agrees that a remedy at law
for any breach or threatened breach of the provisions of this Section 6
would be inadequate and, therefore, agrees that the Companies shall be
entitled to injunc-
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tive relief in addition to any other available rights and remedies in
case of any such breach or threatened breach; provided, however, that
nothing contained herein shall be construed as prohibiting the
Companies from pursuing any other rights and remedies available for any
such breach or threatened breach.
(d) The Executive agrees that upon termination of his
employment with the Company for any reason, the Executive shall
forthwith return to the Company all Confidential Information in
whatever form maintained (including, without limitation, computer discs
and other electronic media).
(e) The obligations of the Executive under this Section 6
shall, except as otherwise provided herein, survive the termination of
the Employment Term and the expiration or termination of this
Agreement.
(f) Without limiting the generality of Section 10 hereof, the
Executive hereby expressly agrees that the foregoing provisions of this
Section 6 shall be binding upon the Executive's heirs, successors and
legal representatives.
7. Termination.
(a) The Executive's employment hereunder shall be terminated upon the
occurrence of any of the following:
(i) death of the Executive;
(ii) the Executive's inability to perform his duties on account of
disability or incapacity for a period of one hundred eighty (180) or
more days, whether or not consecutive, within any period of twelve (12)
consecutive months;
(iii) the Company giving written notice, at any time, to the
Executive that the Executive's employment is being terminated "for
cause" (as defined below);
(iv) the Company giving written notice, at any time, to the
Executive that the Executive's employment is being terminated other
than pursuant to clause (i), (ii) or (iii) above; or
(v) the Executive giving written notice, at any time, to the
Company that the Executive is terminating his employment for "good
reason" (as defined below).
The following actions, failures and events by or affecting the
Executive shall constitute "cause" for termination within the meaning of clause
(iii) above: (A) an indictment for or conviction of the Executive of, or the
entering of a plea of
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nolo contendere by the Executive with respect to, having committed a felony, (B)
acts of dishonesty or moral turpitude by the Executive that are detrimental to
one or more of the Companies, (C) acts or omissions by the Executive that the
Executive knew were likely to damage the business of one or more of the
Companies, (D) negligence by the Executive in the performance of, or disregard
by the Executive of, his obligations hereunder or otherwise relating to his
employment, or (E) failure by the Executive to obey the reasonable and lawful
policies or orders of the Board that are consistent with the provisions of this
Agreement. For purposes of this Agreement, the Executive shall not be deemed to
have been terminated for cause unless and until there shall have been delivered
to the Executive a copy of a resolution, duly adopted by the Board, stating
that, in the good faith opinion of the Board, the Executive is guilty of an
action or omission that constitutes cause and specifying the particulars thereof
in reasonable detail. Before adopting any such resolution, the Board shall offer
the Executive, upon reasonable written notice (which need not exceed two days),
an opportunity for him, together with his counsel, to be heard by the Board.
The following circumstances shall constitute "good reason" for
termination within the meaning of clause (v) above: (I) the assignment to the
Executive of duties that are materially inconsistent with the Executive's
position or with his authority, duties or responsibilities as contemplated by
Section 3 of this Agreement, or any other action by the Company, NFI or their
successors which results in a material diminution or material adverse change in
the Executive's position, authority, duties or responsibilities, (II) any
material breach by the Company, NFI or their successors of any provision of this
Agreement, (III) a relocation of the Executive's primary workplace without his
written consent to any location other than the one described in Section 3
hereof, or (IV) a "Change of Control," as hereinafter defined.
For purposes of the foregoing, the term "Change of Control" means the
acquisition of (a) beneficial ownership of more than 50% of the voting equity
securities of the Company or any successor to the Company (by merger or
otherwise) or (b) all or substantially all the assets of the Company, by any
person or entity (including, without limitation, any group within the meaning of
Section 13(d)(3) of the Securities Exchange Act, as amended) other than Welsh,
Carson, Xxxxxxxx & Xxxxx VII, L.P. and WCAS Healthcare Partners, L.P., or their
respective affiliates.
(b) In the event that the Executive's employment is terminated pursuant
to clause (iv) or (v) of Section 7(a) above, whether during the Employment Term
or during any continuation of employment pursuant to Section 2 above, the
Company shall pay to the Executive, as severance pay or liquidated damages or
both, bi-monthly payments at the rate per annum of his Salary at the
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time of such termination for a period from the date of such termination to the
first anniversary of such termination. The Executive shall continue to
participate in the benefit plans and arrangements of the Company (to the extent
permitted by the terms thereof) as provided in Section 5 until the earlier of
(x) the first anniversary of such termination or (y) the date the Executive
commences other full-time employment; provided, however, that in the event
coverage for any pre-existing condition is not available under the health and
medical plans of Executive's successor employer, the Company shall provide
continuing coverage with respect to such pre-existing condition until the first
anniversary of termination of employment.
(c) Notwithstanding anything to the contrary expressed or implied
herein, except as required by applicable law and except as set forth in Section
7(b) above, the Company (and its affiliates) shall not be obligated to make any
payments to the Executive or on his behalf of whatever kind or nature by reason
of the Executive's cessation of employment (including, without limitation, by
reason of termination of the Executive's employment by the Company for "cause"),
other than (i) such amounts, if any, of his Salary as shall have accrued and
remained unpaid as of the date of said cessation, (ii) such other amounts, if
any, which may be then otherwise payable to the Executive pursuant to the terms
of the Company's benefit plans or pursuant to clause (v) of Section 5 above, and
(iii) any amounts owed or obligations to the Executive pursuant to the terms of
any option or other stock-based award granted to him by the Company.
(d) No interest shall accrue on or be paid with respect to any portion
of any payments timely made hereunder.
8. Non-Assignability.
(a) Neither this Agreement nor any right or interest hereunder shall be
assignable by the Executive or his beneficiaries or legal representatives
without the Company's prior written consent; provided, however, that nothing in
this Section 8(a) shall preclude the Executive from designating a beneficiary to
receive any benefit payable hereunder upon his death or incapacity. Neither this
Agreement nor any right or interest hereunder shall be assignable by the Company
or NFI; provided, however, that notwithstanding the foregoing, this Agreement
and the Company's rights and interests hereunder may be assigned by the Company
pursuant to a merger or consolidation in which the Company is not the continuing
entity, or the sale or liquidation of all or substantially all of the assets of
the Company, provided that (i) the assignee or transferee is the successor to
all or substantially all of the assets of the Company and (ii) such assignee or
transferee assumes the liabilities, obligations and duties of the Company, as
contained in this Agreement, either contractually or as a matter of law.
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(b) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or to assignment by operation of law, and
any attempt, voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
9. Restrictive Covenants.
(a) Competition. During the Employment Term, during any continuation of
employment pursuant to Section 2 above and during the twelve (12) month period
following termination of the Executive's employment with the Company for any
reason, provided that payments, if any, required pursuant to Section 7(b) hereof
are made in full and in a timely fashion, the Executive will not directly or
indirectly (as a director, officer, executive employee, manager, consultant,
independent contractor, advisor or otherwise) engage in competition with, or own
any interest in, perform any services for, participate in or be connected with
any business or organization which engages in competition with any of the
Companies within the meaning of Section 9(d), provided, however, that the
provisions of this Section 9(a) shall not be deemed to prohibit the Executive's
ownership of not more than two percent (2%) of the total shares of all classes
of stock outstanding of any publicly held company, or ownership, whether through
direct or indirect stock holdings or otherwise, of one percent (1%) or more of
any other business.
(b) Non-Solicitation. During the Employment Term, during any
continuation of employment pursuant to Section 2 above and during the twelve
(12) month period following termination of the Executive's employment with the
Company for any reason, provided that payments, if any, required pursuant to
Section 7(b) hereof are made in full and in a timely fashion, the Executive will
not knowingly directly or indirectly induce or attempt to induce any employee of
any of the Companies to leave the employ of any of the Companies or of their
subsidiaries or affiliates, or in any way interfere with the relationship
between any of the Companies and any employee thereof.
(c) Non-Interference. During the twelve (12) month period following
termination of the Executive's employment with the Company for any reason,
provided that payments, if any, required pursuant to Section 7(b) hereof are
made in full and in a timely fashion, the Executive will not directly or
indirectly hire, engage, send any work to, place orders with, or in any manner
be associated with any business entity which, during the period of twelve months
preceding or following such termination of employment, was among the five
largest suppliers of NFI by dollar volume.
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(d) Certain Definitions.
(i) For purposes of this Section 9, a person or entity
(including, without limitation, the Executive) shall be deemed to be a
competitor of one or more of the Companies, or a person or entity
(including, without limitation, the Executive) shall be deemed to be
engaging in competition with one or more of the Companies, if, at the
time of determination, such person or entity (A) engages in any
business engaged in or proposed to be engaged in by any of the
Companies, or (B) in any way conducts, operates, carries out or engages
in the business of managing any entity engaged in any business
described in clause (A), in each case, in any state of the United
States of America, excluding, however, during any period following the
termination of the Executive's employment with the Company, (x) any
business or any state in which none of the Companies was engaged or had
proposed to be engaged at the time of termination of the Executive's
employment with the Company, and (y) after termination of the
Executive's employment, any business which was not, prior to such
termination, directly or indirectly supervised by the Executive.
(ii) For purposes of this Section 9, no corporation or entity that
may be deemed to be an affiliate of the Companies solely by reason of
its being controlled by, or under common control with, Welsh, Carson,
Xxxxxxxx & Xxxxx VII, L.P. or any of its affiliates other than the
Companies, will be deemed to be an affiliate of the Companies.
(e) Certain Representations of the Executive. In connection with the
foregoing provisions of this Section 9, the Executive represents that his
experience, capabilities and circumstances are such that such provisions will
not prevent him from earning a livelihood. The Executive further agrees that the
limitations set forth in this Section 9 (including, without limitation, time and
territorial limitations) are reasonable and properly required for the adequate
protection of the current and future businesses of the Companies. It is
understood and agreed that the covenants made by the Executive in this Section 9
shall survive the expiration or termination of this Agreement.
(f) Injunctive Relief. The Executive acknowledges and agrees that a
remedy at law for any breach or threatened breach of the provisions of Section 9
hereof would be inadequate and, therefore, agrees that the Company and any of
its subsidiaries or affiliates shall be entitled to injunctive relief in
addition to any other available rights and remedies in cases of any such breach
or threatened breach; provided, however, that nothing contained herein shall be
construed as prohibiting the Company or any of its affiliates from pursuing any
other rights and remedies available for any such breach or threatened breach.
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10. Indemnity. To the maximum extent permitted by applicable law and
the charter and by-laws of the Company or NFI, the Company and NFI shall
indemnify the Executive and hold him harmless for any acts or decisions made by
him in good faith while performing services for the Company or NFI or any of
their subsidiaries of affiliates, and will use their reasonable best efforts to
obtain coverage for him under any insurance policy now in force or hereinafter
obtained during the term of this Agreement covering other officers and directors
of the Company or NFI and their subsidiaries or affiliates against lawsuits, and
the Company or NFI will, to the extent provided by their respective charters and
by-laws and applicable law, advance or pay all expenses, including attorney's
fees actually and necessarily incurred by the Executive in connection with the
defense of any such action, suit or proceeding and in connection with any appeal
thereon including the cost of court settlements.
11. No Mitigation. In the event of any termination of the Executive's
employment under Section 7(a)(iv) or (v), the Executive shall be under no
obligation to seek other employment and there shall be no offset against any
amounts due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that the Executive may obtain.
12. Binding Effect. Without limiting or diminishing the effect of
Section 8 hereof, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, successors, legal
representatives and assigns.
13. Notices. All notices which are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and (i) delivered personally, (ii) mailed by
certified or registered mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier or (iv) sent via
facsimile confirmed in writing to the recipient, if to the Company at the
Company's principal place of business, and if to the Executive, at his home
address most recently filed with the Company, or to such other address or
addresses as either party shall have designated in writing to the other party
hereto.
14. Enforcement. Any dispute arising under this Agreement shall, at the
election of either party, be resolved by final and binding arbitration to be
held in New York, N.Y. in accordance with the rules and procedures of the
American Arbitration Association. Judgment upon the award entered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
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15. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee.
16. Severability. The Executive agrees that in the event that any court
of competent jurisdiction shall finally hold that any provision of Section 6 or
9 hereof is void or constitutes an unreasonable restriction against the
Executive, the provisions of such Section 6 or 9 shall not be rendered void but
shall apply with respect to such extent as such court may judicially determine
constitutes a reasonable restriction under the circumstances. If any part of
this Agreement other than Section 6 or 9 is held by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be deemed
to be severed from the remainder of this Agreement for the purpose only of the
particular legal proceedings in question and all other covenants and provisions
of this Agreement shall in every other respect continue in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant
or provision.
17. Waiver. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
18. Entire Agreement; Modifications. This Agreement constitutes the
entire and final expression of the agreement of the parties with respect to the
subject matter hereof and supersedes all prior agreements, oral and written,
between the parties hereto with respect to the subject matter hereof. This
Agreement may be modified or amended only by an instrument in writing signed by
both parties hereto.
19. Termination of Certain Agreements. Concurrently with the execution
and delivery of this Agreement, the Employment Agreement dated December 31,
1992, by and between SHS and the Executive, as amended by Amendment One to
Employment Agreement dated November 20, 1995, shall terminate, without further
action by the parties thereto, and be of no further force or effect.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Executive have duly executed
and delivered this Agreement as of the day and year first above written.
NOVA HOLDINGS, INC.
By /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
Title: President
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
