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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement entered into this 1st day of September, 2000,
by and between American Healthways, Inc., a Delaware corporation with its
principal place of business at 0000 Xxxxx Xxxxx Xxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxx 00000 ("Company"), and Xxx X. Xxxxxx ("Officer").
W I T N E S S E T H:
1. Employment. In consideration of the mutual promises and agreements
contained herein and, as additional compensation for entering into this
Employment Agreement, the grant by the Company, simultaneously with this
Employment Agreement, to the Officer of an option to purchase 20,000 shares of
American Healthways, Inc.'s common stock, the Company employs Officer and
Officer hereby accepts employment under the terms and conditions hereinafter set
forth.
2. Duties. Officer is engaged as Executive Vice President and Chief
Operating Officer, Health Plan Group. His powers and duties in that capacity
shall be those normally associated with the position. During the terms of this
Agreement, Officer shall also serve without additional compensation in such
other offices of the Company or its subsidiaries or affiliates to which he may
be elected or appointed by the Board of Directors or by the Chief Executive
Officer of the Company. A significant change in the title or duties of Officer
or a change in the location in which such duties are to be performed to a
location outside of the Metropolitan Nashville Statistical Area without the
written consent of Officer shall be considered, at Officer's option, termination
without just cause and in such event Officer shall receive the payments and
benefits set forth in Section 8 hereof, with the date of termination for
purposes of Section 8 hereof being the date Officer delivers written notice of
his exercise of this option. Officer may exercise this option by delivering
written notice to the Company at any time within a 30-day period following
receipt of notice of such change.
3. Term. Subject to the terms and conditions set forth herein, Officer
shall be employed hereunder for a term beginning on September 1, 2000, and
terminating on August 31, 2003 (the "Expiration Date") unless sooner terminated
or further extended as hereinafter set forth. The Expiration Date shall be
automatically extended for one additional year beginning on August 31, 2001 and
on each August 31 thereafter (so that on each August 31 anniversary date the
term of this Agreement shall be extended automatically to be three years and no
more), unless the Company notifies Officer in writing (the "Termination Notice")
on or before sixty (60) days prior to August 31 of the then current contract
year that this automatic extension provision is canceled and is of no further
force and effect. Notwithstanding the automatic extension of the Expiration Date
or any other provisions herein, this Agreement shall expire on the date that
Officer becomes 65 years of age.
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4. Compensation. For all duties rendered by Officer, the Company shall
pay Officer a minimum salary of $225,000 per year ("Minimum Salary"), payable in
equal monthly installments at the end of each month. In addition thereto,
commencing September 1, 2001, the Minimum Salary shall be increased and adjusted
upward, based upon any increase in the Consumer Price Index for Urban Wage
Earners and Clerical Workers, U.S. All City Average Report, of the U.S. Bureau
of Labor Statistics (the "Consumer Price Index") or such index fulfilling the
same or similar purpose in the event the Consumer Price Index is no longer
maintained. For purposes of determining the increase in the Minimum Salary, the
base month used in the Consumer Price Index shall be August, 2000. Such increase
shall not be made retroactive for the first year, but commencing September 1,
2001, such increase shall be made, no more frequently than annually, based upon
any such increase in the Consumer Price Index. In determining the amount of the
annual increase based on any increase in the Consumer Price Index, the
percentage of increase in the Consumer Price Index shall be multiplied times the
Minimum Salary plus all other salary increases previously granted by the Board
of Directors to officer and plus all previous adjustments based upon increases
in the Consumer Price Index ("Base Salary"). In addition thereto, each year
beginning September 1, 2001, Officer's compensation will be reviewed by the
Chief Executive Officer of the Company and, after taking into consideration
performance, the Chief Executive Officer of the Company may increase Officer's
Base Salary. Officer shall participate in the Company's performance bonus plan
and any bonuses paid under such plan shall be in addition to the Base Salary
provided for in this Agreement but shall not be included as part of Base Salary
for the purpose of determining the increase or adjustment based upon the
Consumer Price Index. All compensation payable hereunder shall be subject to
withholding for federal income taxes, FICA and all other applicable federal,
state and local withholding requirements.
5. Extent of Service. Officer shall devote substantially all of his
working time, attention and energies to the business of the Company and shall
not during the term of this Agreement take directly or indirectly an active role
in any other business activity without the prior written consent of the Chief
Executive Officer of the Company; but this Section shall not prevent Officer
from making real estate or other investments of a passive nature or from
participating without compensation in the activities of a nonprofit charitable
organization where such participation does not require a substantial amount of
time and does not adversely affect his ability to perform his duties under this
Agreement. Officer shall not serve on the board of directors of an entity
outside the Company and its affiliates without prior approval of the Chief
Executive Officer of the Company.
6. Disability. During any period in which Officer fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Officer shall continue to receive his Base Salary until his employment is
terminated hereunder. In the case of incapacity due to physical or mental
illness resulting in Officer being absent from his duties hereunder on a full
time basis for more than ninety (90) consecutive days or for more than one
hundred and twenty (120) days in any consecutive six (6) month period or in the
case of a determination by the Board of Directors that Officer is permanently
and totally disabled from performing his duties hereunder, the Company may
terminate Officer's employment hereunder by the delivery of written notice of
termination. In the event the Company so terminates Officer under this
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Section, such termination shall be considered termination without just cause and
the Company shall pay Officer such amounts and provide such benefits as are
required by Section 8 hereof, reduced by the benefits payable to Officer under
the Company's disability insurance policies.
For purposes of this Section, the determination of whether Officer is
incapacitated due to physician or mental illness and, therefore, disabled shall
be made by the Chief Executive Officer of the Company upon advice of a licensed
physician.
In the event of Officer's incapacity due to physical or mental illness.
Officer shall be entitled to participate in the Company's health insurance and
life insurance programs so long as is permitted under the provisions of these
coverages. If Officer is no longer eligible for coverage in the Company's health
insurance plan, the Company shall pay the difference between the cost of COBRA
medical insurance coverage (available after active eligibility has ended) and
Officer's contribution to the plan immediately preceding the disability but in
no event shall the Company pay this difference for any period beyond the
unexpired term of this Agreement or beyond the period of Officer's eligibility
to participate in COBRA health insurance benefits. Following Officer's
termination for disability, Officer's benefits for past participation in the
Company's bonus, capital accumulation and stock option plans shall be determined
in accordance with the provisions of those plans and Officer shall not be
eligible for further participation in these plans beyond the date of
termination.
7. Termination for Just Cause. For purposes of this Agreement, the
Company shall have the right to terminate Officer for "just cause" if, in the
good faith opinion of the Chief Executive Officer of the Company, Officer is
guilty of (i) intoxication while on duty, (ii) theft or dishonesty in the
conduct of the Company's business, (iii) conviction of a crime involving moral
turpitude, or (iv) willful and continued neglect or gross negligence by Officer
in the performance of his duties as an officer. For purposes of this Section 7,
"willful" shall be determined by the Chief Executive Officer of the Company. In
making such determination, the Chief Executive Officer of the Company shall not
act unreasonably or arbitrarily.
8. Termination Without Just Cause. Officer's employment under this
Agreement may be terminated (i) by the Company at any time "without just cause"
by providing Officer with written notice, (ii) by Officer at any time within
twelve (12) months following the occurrence of a Change in Control (as defined
in Section 19 herein) for Good Reason (as defined in Section 19) and (iii) by
Officer for Any Reason (as defined in Section 19 herein). Officer's termination
date shall be deemed the date Officer receives his written notice of termination
from the Company or the date the Company receives notice from the Officer of his
termination in accordance with Section 8 (ii) or 8 (iii) herein. In the event of
such termination:
(a) If Officer has been terminated by the Company pursuant to 8
(i) above prior to a Change of Control and subject to
compliance by Officer with the provisions of Section 11
herein, the Company shall pay Officer from the termination
date, for a total of two (2) years or the remaining term of
this Agreement, whichever is greater, monthly during his
lifetime, an amount equal to his monthly Base Salary on the
termination date. If Officer has been terminated by the
Company pursuant to 8 (i) above after a Change of
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Control has occurred or the Officer terminates his
employment pursuant to 8 (ii) above, the Company shall pay
to Officer in one lump sum, within 30 days of the Officer's
termination date, an amount equal to 24 months of Officer's
Base Salary or Base Salary for the remaining months left in
the term of this contract, whichever is greater, calculated
using the Officer's monthly Base Salary on the termination
date. If employment is terminated pursuant to 8 (iii) above,
the Company shall pay to officer in one lump sum within 30
days of the Officer's termination date, an amount equal to
the greater of 12 months salary or an amount equal to the
salary for one half of the remaining months under the
unexpired term of this Agreement all calculated using the
Officer's monthly Base Salary on the termination date.
(b) Officer shall cease as of the termination date his further
participation in the Company's stock option plans, capital
accumulation plans, bonus plans, monthly automobile
allowance and any other benefit or compensation plan in
which Officer participated or was eligible to participate
except as set forth in Section 8(c) below. The Officer's
termination date shall be utilized for any vesting
provisions of the plans listed above in this subparagraph
(b).
(c) Following termination by the Company without just cause,
Officer shall be eligible to obtain COBRA health insurance
coverage under the Company's health insurance plan for a
period of time generally available to other participants
eligible for such coverage. If the Officer elects this COBRA
health insurance coverage, Officer's contribution to such
coverage will continue at rates contributed by the Company's
other officers as may be in effect from time to time while
the Officer's COBRA health insurance coverage is in place.
While life and disability insurance coverage cannot be
provided following the Officer's termination under the terms
of these group insurance plans, the Company will pay to
officer the equivalent amount of the Company's contribution
to the premiums for these coverages for the remaining
payment term of this contract in an amount equal to the
amount contributed by the Company for these coverages for
other officers of the Company in effect while Officer's
coverage following termination is in place. If Officer
maintains COBRA health coverage with the company upon new
employment following termination from the Company, the full
cost of the COBRA health insurance coverage shall be the
responsibility of the Officer. In addition, upon new
employment following termination from the Company, the
Company's reimbursement of life and disability insurance
premium contributions will also terminate.
(d) No payments of Base Salary or of any other type or character
shall be made to Officer after Officer becomes sixty five
(65) years of age.
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(e) The Company shall be entitled to offset and reduce any
payments due to Officer hereunder if the Company has
terminated the Officer's employment pursuant to 8 (i) above
prior to a Change of Control by the amount earned by Officer
in any active employment that he may receive during the
remaining unexpired payment term of this Agreement from any
other source whatsoever, except said funds shall not include
income from dividends, investments or passive income. As a
condition for Officer receiving payments from the Company
pursuant to termination pursuant to 8 (i) above prior to a
Change of Control, he agrees to furnish Company annually
with full information regarding such other employment, to
permit inspection of his records regarding any such
employment and to provide a copy of his federal income tax
returns for such periods on a timely basis.
(f) The Company shall be entitled to offset and reduce any
payments due to Officer hereunder by the amounts of
unemployment insurance, social security insurance or like
benefits received by Officer if employment has been
terminated pursuant to 8 (i) above prior to a Change of
Control.
(g) All payments hereunder will cease upon the death of Officer.
9. Termination by Officer. Officer may terminate his employment
hereunder at any time upon sixty (60) days written notice. Upon such termination
by Officer, other than termination in accordance with Section 8 (ii) or 8 (iii)
herein, the Company shall pay the Officer his Base Salary due through the date
on which his employment is terminated at the rate in effect at the time of
notice of termination. The Company shall than have no further obligation to
Officer under this Agreement.
10. Termination Upon Death. If Officer dies during the term of this
Agreement, the Company shall pay his Base Salary due through the date of his
death at the rate in effect at the time of his death. The company shall then
have no further obligations to Officer or any representative of his estate or
his heirs except that Officer's estate or beneficiaries as the case may be shall
be paid such amounts as may be payable under the Company's life insurance
policies and other plans as they relate to benefits following death then in
effect for the benefit of Officer.
11. Restrictive Covenants.
(a) Confidential Information. In the course of Officer's
employment, Officer will have access to trade secrets and
confidential information of the Company and its clients.
Accordingly, Officer agrees not to disclose, either during
the time he is employed by the Company or following
termination of his employment hereunder, to any person other
than a person to whom disclosure is necessary in connection
with the performance of his duties or to any person
specifically authorized by the Chief Executive Officer of
the Company any material confidential information concerning
the Company, its customers and its employees,
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including, but not limited to identities of customers and
prospective customers, identities of individual contacts at
customers, information about Company colleagues, models and
strategies, contract formats, business plans and related
operation methodologies, financial information or measures,
data bases, computer programs, treatment protocols,
operating procedures and organization structures. Officer
will return to the Company all property and confidential
information in the Officer's possession and agrees not to
copy or otherwise record in anyway such information.
(b) Non-Competition. During the term of employment provided
hereunder and continuing during the period while any amounts
are being paid to Officer pursuant to the terms of the
Agreement, and prior to change of control, or after a change
of control if officer terminates "For Any Reason", for a
period of one (1) year thereafter, Officer will not (a)
directly or indirectly own, manage, operate, control or
participate in the ownership, management, operation or
control of, or be connected as an officer, employee,
partner, director or otherwise with, or any have financial
interest in, or aid or assist anyone else in the conduct of,
any business which is in competition with any business
conducted by the Company or which Officer knew or had reason
to know the Company was actively evaluating for possible
entry, provided that ownership of five (5) percent or less
of the voting stock of any public corporation shall not
constitute a violation hereof.
(c) Non-Solicitation. During the term of employment provided for
hereunder and continuing during the period while any amounts
are being paid to Officer pursuant to the terms of this
Agreement, and for a period of one (1) year thereafter,
Officer will not (a) directly or indirectly solicit business
which could reasonably be expected to conflict with the
Company's interest from any entity, organization or person
which has contracted with the Company, which has been doing
business with the Company, from which the Company was
soliciting business at the time of the termination of
employment or from which Officer knew or had reason to know
that Company was going to solicit business at the time of
termination of employment, or (b) employ, solicit for
employment, or advise or recommend to any other persons that
they employ or solicit for employment, any employee of the
Company.
(d) Consultation. Officer shall, at the Company's written
request, during the period he is receiving any payment from
the Company hereunder, cooperate with the Company in
concluding any matters in which Officer was involved during
the term of his employment and will make himself available
for consultation with the Company on other matters otherwise
of interest to the Company. The Company agrees that such
requests shall be
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reasonable in number and will consider Officer's time
required for other employment and/or employment search.
(e) Enforcement. Officer and the Company acknowledge and agree
that any of the covenants contained in this Section 11 may
be specifically enforced through injunctive relief but such
right to injunctive relief shall not preclude the Company
from other remedies which may be available to it.
(f) Continuing Obligation. Notwithstanding any provision to the
contrary or otherwise contained in this Agreement, the
Agreement and covenants contained in this Section 11 shall
not terminate upon Officer's termination of his employment
with the Company or upon the termination of this Agreement
under any other provision of this Agreement.
12. Vacation. During each year of this Agreement, Officer shall be
entitled to vacation in accordance with Company policy in effect from time to
time.
13. Benefits. In addition to the benefits specifically provided for
herein, Officer shall be entitled to participate while employed by the Company
in all benefit plans maintained by the Company for officers generally according
to the terms of such plans.
14. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail to his residence in the case of Officer, or to its principal office in the
case of the Company and the date of mailing shall be deemed the date which such
notice has been provided.
15. Waiver of Breach. The waiver by either party of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach by the other party.
16. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. The Officer acknowledges that the services to be
rendered by him are unique and personal, and Officer may not assign any of his
rights or delegate any of his duties or obligations under this Agreement.
17. Entire Agreement. This instrument contains the entire agreement of
the parties and supersedes all other prior agreements, employment contracts and
understandings, both written and oral, express or implied with respect to the
subject matter of this Agreement and may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change modification, extension or discharge is sought. This Agreement shall be
governed by the laws of the State of Tennessee.
18. Headings. The sections, subjects and headings of this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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19. Definitions. For purposes of this Agreement, the following
definitions shall apply:
(a) A "Change of Control" shall be deemed to mean:
(i) a transaction or series of transactions (occurring
within 24 months of each other) in which all or any
substantial (defined as more than fifty percent (50%)
of the assets of American Healthways, Inc. have been
acquired through a merger, business combination,
purchase or similar transaction by any entity or
person, other than an entity controlled by American
Healthways, Inc. or
(ii) a transfer or series of transfers (occurring within 24
months of each other) in which securities representing
control of American Healthways, Inc. ("control" being
defined as greater than fifty percent (50%) of the
outstanding voting power of the outstanding securities
of American Healthways, Inc.) are acquired by or
otherwise are beneficially owned, directly or
indirectly, by any corporation, person or "group" (as
such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934).
(b) A "Good Reason" shall exist if after the occurrence of a
Change of Control:
(i) there is a significant change in the nature or scope of
the Officer's authority and responsibilities;
(ii) there is a reduction in Officer's rate of Base Salary
or (for reasons other than Company performance) overall
compensation; or
(iii) the Company changes the principal location in which
Officer is required to perform services outside a
fifteen mile radius of the present location without
Officer's consent.
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(c) "For Any Reason" shall mean, after a Change of Control at
the sole discretion of Officer.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written.
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Xxx X. Xxxxxx
AMERICAN HEALTHWAYS, INC.
By:
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Title: President & Chief Executive Officer
