CMG HEALTH, INC.
00 Xxxxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
CONFIDENTIAL
July 14, 1997
Xxxxxxxx X. Xxx, M.D.
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Dear Xxxx:
This letter agreement (the "Letter Agreement") confirms and sets forth the terms
and conditions by which your employment as Senior Vice President of Quality
Assurance with CMG Health, Inc. and/or any of its corporate parents,
subsidiaries, divisions or affiliates (collectively referred to herein as the
"Company") is terminating.
This Letter Agreement shall become effective only upon consummation of the
merger (the "Merger") contemplated by that certain Agreement and Plan of Merger
dated as of July 14, 1997 (the "Merger Agreement") by and among Merit Behavioral
Care Corporation, Merit Merger Corp. and CMG Health, Inc.; provided, that if the
Merger is not consummated prior to August 31, 1997, you will have the right to
terminate this Letter Agreement upon providing written notice to the Company. In
the event that the Merger is not consummated as contemplated by the Merger
Agreement or you revoke this Agreement as provided above, this Letter Agreement
will be of no force or effect and neither you nor the Company will be bound by
any obligations set forth herein.
Subject to your revocation right above, the effective date of this Letter
Agreement (the "Effective Date") shall be the later of (i) seven (7) days after
the date upon which you sign this Letter Agreement, indicating your approval and
assent or (ii) the Effective Time (as defined in the Merger Agreement).
If you agree to the terms set forth in this Letter Agreement, the Company will
pay you Three Hundred Ninety-Four Thousand Dollars ($394,000), less any
applicable withholding and deductions (the "Settlement Amount"), which
Settlement Amount is equal to two years' compensation at your current base
salary. This Settlement Amount will be paid to you in accordance with the
Company's regular payroll processing procedures over a period of two years
commencing on the Effective Date without set-off or counterclaim, and shall
constitute full satisfaction of any and all obligations that the Company may
have, financial or otherwise, to you with respect to your employment, and
termination of your employment, with the Company.
By countersigning below, you acknowledge and agree (i) that payment to you of
the Settlement Amount will extinguish any and all claims that you may have
against the Company with respect to your employment with the Company and
termination of your employment with the Company, (ii) that you hereby waive,
release and relinquish any and all rights under than certain Employment
Agreement dated January 1, 1994 between you and CMG Health, Inc. (the "Existing
Employment Agreement") other than the right to receive the Settlement Amount as
unpaid salary, and (iii) that the Existing Employment Agreement is terminated as
of the Effective Date. Without limiting the generality of the foregoing, you
further acknowledge and agree that you are not and shall not be entitled to
receive any liquidated damages pursuant to Section 7.D (including Section
7.D(iv) or 7.E) of the Existing Employment Agreement.
You hereby fully and forever release, waive, and discharge any claim or claims
(whether known or unknown, anticipated or unanticipated) you may have against
the Company and the directors, officers, agents, shareholders, attorneys,
insurance carriers and representatives of the Company (the "Released Parties").
You represent and warrant that, as of the Effective Date, you have not brought
any claim, or instituted any legal or administrative proceeding, against the
Released Parties, or any of them. You also agree not to sue or otherwise
institute or participate or voluntarily assist in the prosecution of any legal
or administrative proceedings against the Released Parties, or any of them, with
respect to any matter of any kind arising out of your employment or position
with the Company or the termination of your position or employment with the
Company, including without limitation any matter whatsoever relating to the
Existing Employment Agreement.
The Company hereby fully and forever releases, waives and discharges any claim
or claims (whether known or unknown, anticipated or unanticipated) the Company
may have against you. The Company represents and warrants that, as of the
Effective Date, it has not brought any claim, or instituted any legal or
administrative proceeding, against you. The Company also agrees not to sue or
otherwise initiate or participate or voluntarily assist in the prosecution of
any legal or administrative proceedings against you with respect to any matter
of any kind arising out of your employment or position with the Company or the
termination of your position or employment with the Company, including without
limitation any matter whatsoever relating to the Existing Employment Agreement.
You acknowledge and agree that you will not disclose or use at any time, for a
period of three years after the Effective Date, any Confidential Information (as
defined below) of which you are or become aware, whether or not such information
is developed by you, except to the extent that such disclosure or use is
assigned to you by the Board, or such Confidential Information becomes public
other than through your actions or is compelled by legal process. As used in
this Letter Agreement, the term "Confidential Information" means information
that is not generally known to the public and that is used, developed or
obtained by the Company or any Affiliate in connection with its business,
including, but not limited to: (i) products or services, (ii) fees, costs and
pricing structures, (iii) designs, (iv) computer software, including operating
systems, applications and program listings, (v) flow charts, manuals and
documentation, (vi) data bases, (vii) accounting and business methods, (viii)
inventions, devices, new developments, methods and processes, whether patentable
or unpatentable and whether or not reduced to practice, (ix) customers, clients
and providers, and customer, client and provider lists, (x) other copyrightable
works, (xi) all technology and trade secrets, and (xii) all similar and related
information in whatever form. Confidential Information will not include any
information that is generally available to the public prior to the date you
propose to disclose or use such information. You agree to perform all actions
reasonably requested by the Company (whether during or after the Non-Competition
Period (as defined below)) to establish and confirm the ownership by the Company
of any Confidential Information at the Company's expense (including, without
limitation, assignments, consents, powers of attorney and other instruments).
You acknowledge and agree that all Developments (as defined below) that were at
any time made, conceived or suggested by you, whether acting alone or in
conjunction with others, as a result of your engagement by the Company or any
Affiliate, shall be the sole and absolute property of the Company, free of any
reserved or other rights of any kind on your part. You shall promptly make full
disclosure of any such Developments to the Company and, at the Company's cost
and expense, do all acts and things (including, among others, the execution and
delivery under oath of patent and copyright applications and instruments of
assignment) deemed by the Company to be necessary or desirable at any time in
order to effect the full assignment to the Company of your right and title, if
any, to such Developments. For purposes of this Letter Agreement, the term
"Developments" shall mean all data, discoveries, findings, reports, designs,
inventions, improvements, methods, practices, techniques, developments,
programs, concepts and ideas, whether or not patentable, relating to the present
or planned activities, or future activities of which you are aware, or the
products and services of the Company or any Affiliate.
You agree that you shall not (as an individual, principal, agent, employee,
consultant or otherwise), directly or indirectly, during the period commencing
on the Effective Date and ending on the second anniversary of the Effective Date
(the "Non-Competition Period"), absent the Company's prior written approval,
engage in activities for, or on behalf of, or render services to, or have any
equity, ownership or profit participation interest in (other than as a 5% or
less holder of the equity securities of a public company), any firm or business
engaged or about to become engaged in the behavioral health managed care or the
behavioral health treatment delivery business conducted by the Company as of the
Effective Date (the "Company Business").
Until the end of the Non-Competition Period, you agree that you shall not,
directly or indirectly, (i) solicit or contact for business purposes any
existing customer, provider or patient, or prospective customer, provider or
patient, of the Company or any Affiliate for or on behalf of any firm or
business engaged in the Company Business, (ii) induce, or attempt to induce, any
employees, agents, consultants or providers of or to the Company or any
Affiliate to do anything from which you are restricted by reason of this Letter
Agreement, (iii) interfere with existing or proposed contracts, business
agreements or other arrangements, or knowingly interfere with future contracts,
business agreements or other arrangements, between the Company or any Affiliate
and any individual, firm or enterprise including, but not limited to, third
party payors, through disrupting or diverting or attempting to divert such
contracts, business agreements or other arrangements to any other individual,
firm or enterprise engaged in the Company Business, or (iv) solicit, induce or
attempt to induce anyone who is an employee of or consultant to the Company to
leave the employment of, or its or his consultancy with, the Company, and to
accept employment with or enter into a consulting relationship with any other
firm or business.
You acknowledge that a breach of the covenants contained in the eighth through
eleventh paragraphs hereof may cause irreparable damage to the Company or one or
more of its Affiliates, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, you agree that, in addition to any other remedy which may be
available at law or in equity, the Company and any such Affiliate shall be
entitled to specific performance and injunctive relief to prevent any actual,
intended or likely breach. The parties acknowledge that the time, scope,
geographic area and other provisions of the eighth through eleventh paragraphs
hereof have been specifically negotiated by sophisticated commercial parties and
agree that all such provisions are reasonable under the circumstances of the
transactions contemplated by this Letter Agreement, including the compensation
to you described herein. In the event that the agreements in the eighth through
eleventh paragraphs hereof or any other provision contained in this Letter
Agreement shall be determined by any court of competent jurisdiction to be
unenforceable by reason of their extending for too great a period of time or
over too great a geographical area or by reason of their being too extensive in
any other respect, such agreements or provisions shall be interpreted to extend
only over the maximum period of time for which they may be enforceable and/or
over the maximum geographical area as to which they may be enforceable and/or to
the maximum extent in all other respects as to which they may be enforceable,
all as determined by such court in such action so as to be enforceable to the
extent consistent with then applicable law. The existence of any claim or cause
of action which you may have against the Company or any such Affiliate, as the
case may be, shall not constitute a defense or bar to the enforcement of any of
the provisions of the eighth through eleventh paragraphs hereof and shall be
pursued through separate court action by you.
You acknowledge agree that the provisions of the eighth through eleventh
paragraphs hereof shall survive the termination of this Letter Agreement.
In consideration of the terms set forth herein, you hereby release and forever
discharge the Released Parties, and each of them, from any and all claims,
actions and causes of action that you may have under the Federal Age
Discrimination in Employment Act of 1967, as amended, and the applicable rules
and regulations promulgated thereunder ("ADEA"). By signing this Letter
Agreement, you hereby acknowledge and confirm the following: (i) you were
advised by the Company in connection with your termination to consult an
attorney of your choice prior to signing this Letter Agreement and to have such
attorney explain to you the terms of this Letter Agreement, including, without
limitation, the terms relating to your release of claims under ADEA; (ii) you
were given a period of not fewer than twenty-one (21) days to consider the terms
of this Letter Agreement and to consult with an attorney of your choosing with
respect thereto; and (iii) you are providing the release and discharge set forth
in this paragraph only in exchange for consideration in addition to anything of
value to which you are already entitled.
Each party hereto acknowledges and agrees that the release of claims set forth
in this Letter Agreement extends to any claim even though such claim may be
unknown to such party at this time. Each party hereby acknowledges and waives
the protection of any applicable state of federal law or decision that may
exist, limiting the scope of a general release to known claims.
You are encouraged to consult with legal counsel in connection with the
negotiation of the Settlement Amount and the terms of this Letter Agreement.
Accordingly, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Letter Agreement. You acknowledge that you have read and
understand this Letter Agreement and that you affix your signature hereto
voluntarily and without coercion.
This Letter Agreement supersedes any and all prior communications, both written
and verbal, concerning your employment with the Company and the termination of
your employment with the Company. You agree that the subject matter of this
Letter Agreement and the specific terms hereof are confidential; and, you
acknowledge and agree (i) that confidential treatment of this Letter Agreement
by both you and the Company is considered to be partial consideration for
executing this Letter Agreement and (ii) that breach of this section shall be
deemed a material breach of this Letter Agreement, giving rise to possible
liability for consequential damages. You agree, however, that the Company shall
be permitted to disclose this Letter Agreement and the terms hereof as required
under the federal securities laws, and each party acknowledges that, upon such
disclosure, this Letter Agreement and the terms hereof shall no longer be
confidential.
This Letter Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but both of which together shall constitute one and
the same instrument. Both you and the Company agree to execute further documents
or take further acts as may be necessary to carry out the provisions and intent
of this Letter Agreement.
If you agree to the terms and conditions stated in this Letter Agreement, please
indicate your approval and assent by countersigning three copies of this Letter
Agreement and returning two copies to me.
Sincerely,
CMG HEALTH, INC.
/s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
By: Xxxx X. Xxxxxxxxxx, Ph.D.
President and Chief Executive Officer
AGREED TO, ACCEPTED AND CONFIRMED BY:
/s/ Xxxxxxxx X. Xxx, M.D.
__________________________ Sworn and subscribed to before me,
Xxxxxxxx X. Xxx, M.D. this 14th day of July, 1997
July 14, 1997
/s/ Xxxx Xxxxx
_____________________________
, Notary Public
My Commission expires _____________
THIS IS A LEGAL AGREEMENT, RELEASE AND COVENANT
NOT TO SUE. READ CAREFULLY BEFORE SIGNING.
