EXHIBIT 10.36
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"), is
made as of this 29th day of September, 1998, by and among XXXXXXX X. XXXXXXX,
M.D., an individual residing at 0000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000
(hereinafter referred to as "Xx. Xxxxxxx"); CAREADVANTAGE HEALTH SYSTEMS, INC.,
a Delaware corporation with its principal place of business at 000-X Xxxxx 0
Xxxxx, Xxxxxx, Xxx Xxxxxx 00000 (hereinafter referred to as "CAHS"); and
CAREADVANTAGE, INC. a Delaware corporation and the parent and sole shareholder
of CAHS with its principal place of business at 000-X Xxxxx 0 Xxxxx, Xxxxxx, Xxx
Xxxxxx 00000 (hereinafter referred to as "CAI").
W I T N E S S E T H:
WHEREAS, Xx. Xxxxxxx and CAHS had entered into an employment
agreement dated May 26, 1995 (the "Original Employment Agreement") whereby CAHS
had employed Xx. Xxxxxxx as a Senior Vice President according to the terms and
conditions set forth therein;
WHEREAS, the Original Employment Agreement between CAHS and Xx.
Xxxxxxx was amended by two (2) addenda dated May 5, 1995 and June 28, 1996,
respectively, by a Second Addendum dated August 28, 1995, a Third Addendum dated
September 26, 1997 and a Fourth Addendum dated December 15, 1997 (collectively,
such Addenda, together with the Original Employment Agreement, are hereinafter
referred to, collectively, as the "Employment Agreement"); and
WHEREAS, each of CAHS, CAI and Xx. Xxxxxxx wish to amend and restate
the Employment Agreement in order to provide for Xx. Xxxxxxx'x continued
employment and to appoint Xx. Xxxxxxx as President and Chief Operating Officer
of CAI and CAHS, according to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual premises set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CAI, CAHS and Xx. Xxxxxxx agree as
follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 "Affiliate" shall mean a corporation which, directly or indirectly,
controls, is controlled by or is under common control with either CAI or CAHS,
and for purposes hereof, "control" shall mean the ownership of 20% or more of
the Voting Stock of either CAI or CAHS.
1.2 "Basic Salary" shall have the meaning assigned to it in Section 5
of this Agreement.
1.3 "Board" shall mean the Board of Directors of CAI as duly
constituted from time-to-time.
1.4 "The Business" shall mean the business to be conducted by any of
CAI, CAHS, any Affiliate or any Subsidiary, directly or indirectly, including,
but not limited to, Care Management Business as defined in Section 12.3.
1.5 "Cause" shall mean:
(a) Xx. Xxxxxxx'x license to practice medicine in the State of
Maryland, or any other state, his Board Certification or his federal DEA
registration, is suspended, revoked, restricted or otherwise limited or
terminated as a result of any disciplinary action, conviction of a crime
or finding of incompetency.
(b) Xx. Xxxxxxx is expelled, suspended or is subject to other
disciplinary action by a professional organization on grounds other than
for non-payment of fees or resignation by Xx. Xxxxxxx from any such
professional organization under threat of disciplinary action on such
grounds;
(c) Xx. Xxxxxxx is adjudicated incompetent, dies, is unable to
perform substantially all of the duties set forth hereunder due to any
physical or mental illness, injury or impairment for one hundred eighty
(180) continuous days;
(d) The continuing willful failure of Xx. Xxxxxxx to perform his
duties to CAI, CAHS, an Affiliate or a Subsidiary (other than any such
failure resulting from Xx. Xxxxxxx'x incapacity due to physical or mental
illness) after written notice thereof (specifying the particulars thereof
in reasonable detail) from CAI and a reasonable opportunity to be heard
and to cure such failure are given to Xx. Xxxxxxx by the Board;
(e) The conviction of Xx. Xxxxxxx of a felony or any serious crimes
(including any drug-related offenses) or the willful commission by Xx.
Xxxxxxx of any intentional wrongdoing ouside the scope of his duties under
this Agreement;
(f) The commission by Xx. Xxxxxxx of an act of fraud in the
performance of his duties;
(g) The order of a federal or state regulatory agency or a court of
competent jurisdiction requiring the termination of Xx. Xxxxxxx'x
employment due to intentional misfeasance or malfeasance by Xx. Xxxxxxx;
(h) The failure of Xx. Xxxxxxx to maintain the standards set forth
in Section 11 of this Agreement; or
(i) Xx. Xxxxxxx becomes ineligible for professional liability
insurance pursuant to Section 6.1(xiv).
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For purposes of this subsection, no act, or failure to act, on Xx.
Xxxxxxx'x part shall be considered "willful" unless done, or omitted to be done,
by him not in good faith without reasonable belief that his action or omission
was in the best interests of CAI, CAHS, an Affiliate or a Subsidiary.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules, regulations and interpretations issued thereunder.
1.7 "Commencement Date" shall be October 30th, 1998.
1.8 "Confidential Information" shall include, without limitation by
reason of specification, any information, including, without limitation, trade
secrets, vendor and customer lists, pricing policies, operational methods,
methods of doing business, technical processes, formulae, designs and design
projects, inventions, research projects, strategic plans, product information,
production know-how and other business affairs of CAI, CAHS or its Affiliates,
which (i) is or are designed to be used in or are or may be useful in connection
with the business of CAI, CAHS, any Subsidiary or any Affiliate of any thereof,
or which, in the case of any of these entities, results from any of the research
or development activities of any such entity, and which (ii) is private or
confidential in that it is not generally known or available to the public,
except as the result of unauthorized disclosure by or information supplied by
Xx. Xxxxxxx, and (iii) which gives CAI, CAHS or a Subsidiary or any Affiliate an
opportunity or the possibility of obtaining an advantage over competitors who
may not know or use such information or who are not lawfully permitted to use
the same.
1.9 "Date of Termination" shall have the meaning assigned to it in
Section 7.6.
1.10 "Disability" shall mean the inability of Xx. Xxxxxxx to perform
his duties of employment for CAI and CAHS, pursuant to the terms of this
Agreement, because of the occurrence of an event that results in the physical or
mental disability, where such disability shall have existed for a period of more
than 90 consecutive days or an aggregate of 120 days in any 365 day period. Xx.
Xxxxxxx shall be entitled to receive long-term disability payments under the
long-term disability plan of CAI and CAHS or any Affiliate or Subsidiary that
employs Xx. Xxxxxxx. The fact of whether or not a disability exists hereunder
shall be determined by appropriate medical experts selected by the Board and
agreed to by Xx. Xxxxxxx'x physician. The existence of a Disability means that,
Xx. Xxxxxxx'x mental and/or physical condition substantially interferes with Xx.
Xxxxxxx'x performance of his duties for CAI and CAHS, and/or its Affiliates and
Subsidiaries as specified in this Agreement.
1.11 "Employment Year" shall mean each twelve (12) month period, or
part thereof, during which Xx. Xxxxxxx is employed hereunder, commencing on the
Commencement Date and on the same day of any subsequent calendar year, the first
such subsequent Employment Year being the twelve (12) month period which will
begin on the first anniversary of the Commencement Date.
1.12 "Notice of Termination" shall have the meaning assigned to that
term in Section 7.5.
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1.13 "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, limited liability company, limited liability
partnership, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether Federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.14 "Retirement" shall mean that Xx. Xxxxxxx shall have reached age 65
and shall voluntarily retire under CAI's, CAHS' or any Affiliate's or
Subsidiary's retirement plan (if any) applicable to him or any earlier actual
voluntary retirement by Xx. Xxxxxxx from his employment with CAI, CAHS and its
Affiliates or Subsidiaries.
1.15 "Restricted Period" shall have the meaning assigned to that term
in Section 12.2.
1.16 "Severance" shall have the meaning assigned to that term in
Section 7.7.
1.17 "Subsidiary" shall mean a corporation of which more than 50% of
the Voting Stock is owned, directly or indirectly, by either CAI or CAHS.
1.18 "Term" shall mean the term of employment of Xx. Xxxxxxx under the
Agreement.
1.19 "Voting Stock" shall mean capital stock of a corporation which
gives the holder the right to vote in the election of directors for such
corporation in the ordinary course of business and not as the result of, or
contingent upon, the happening of any event.
Wherever from the context it appears appropriate, each word or phrase
stated in either the singular or the plural shall include the singular and the
plural, and each pronoun stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
2. EMPLOYMENT AND DUTIES OF EMPLOYEE
2.1 Employment; Title; Duties. CAI and CAHS hereby employ Xx. Xxxxxxx,
and Xx. Xxxxxxx hereby accepts appointment as the President and Chief Operating
Officer of each of CAHS and CAI. The principal duties of Xx. Xxxxxxx shall be to
perform those services and have such responsibilities as are consistent with
such positions, and shall serve faithfully and to the best of his ability, under
the direction and supervision of the Board. Xx. Xxxxxxx shall devote all of his
business time and attention to his duties under this Agreement. Without further
compensation, Xx. Xxxxxxx agrees to serve (if requested to do so by the Board)
as a Board member and, to the extent it is reasonably practicable to do so, as
an officer and/or director of one or more additional Affiliates and
Subsidiaries.
2.2 Performance of Duties. Xx. Xxxxxxx'x primary working responsibility
shall be the performance of his duties as the President and Chief Operating
Officer for CAI and CAHS. During the Term, Xx. Xxxxxxx shall not engage in or
become employed, directly, or indirectly, in any business activities, nor shall
he act as a consultant to or provide any services to, whether on a remunerative
basis or otherwise, the commercial or professional business of any
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other Person which competes with the Business of CAI, CAHS and its Affiliates
and Subsidiaries.
3. TERM OF EMPLOYMENT
The employment of Xx. Xxxxxxx pursuant to this Agreement shall commence
as of the Commencement Date and end two (2) years thereafter, unless sooner
terminated pursuant to Section 7 of this Agreement. On the second anniversary of
the Commencement Date, and on each anniversary thereafter, the term of this
Agreement shall be extended for an additional one (1) year period unless within
sixty (60) days prior to such anniversary date, CAI shall have given written
notice to Xx. Xxxxxxx that the term shall not be so extended. The term of this
Agreement, including any extensions thereof, as provided herein, is hereinafter
referred to as the "Term".
4. COMPENSATION AND BENEFITS
CAI and/or CAHS and/or its Affiliates or Subsidiaries shall pay Xx.
Xxxxxxx as compensation for all of the services to be rendered by him hereunder
during the Term, and in consideration of the various restrictions imposed upon
Xx. Xxxxxxx during the Term, and otherwise under this Agreement, the Basic
Salary and other benefits as provided for and determined pursuant to Sections 5
and 6, inclusive, of this Agreement.
5. BASIC SALARY
5.1 CAI and/or CAHS shall pay Xx. Xxxxxxx, as compensation for all of
the services to be rendered by him hereunder during each Employment Year, a base
annual salary of $275,000 (the "Basic Salary"), payable in accordance with such
companies' payroll practices, less such deductions or amounts as are required to
be deducted or withheld by applicable laws or regulations, deductions for
employee contributions to welfare and/or fringe benefits provided by CAI, CAHS
or an Affiliate or Subsidiary to Xx. Xxxxxxx and less such other deductions or
amounts, if any, as are authorized by Xx. Xxxxxxx. The Basic Salary shall be
prorated for the month in which employment by such companies or an Affiliate or
Subsidiary commences or terminates, and for any Employment Year which is less
than twelve (12) months in duration.
6. ADDITIONAL BENEFITS AND REIMBURSEMENT FOR EXPENSES
6.1 Additional Benefits. CAI and CAHS shall provide the following
additional benefits to Xx. Xxxxxxx during the Term, except, however, that either
company reserves the right to alter or modify any of these benefits provided
such alterations or modifications do not unreasonably affect Xx. Xxxxxxx'x terms
and conditions of employment:
(i) participation on an equitable basis in CAI's or CAHS' health
insurance benefit plans established for senior management employees of CAI or
CAHS;
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(ii) vacation leave consistent with CAI's and CAHS' vacation leave
policy;
(iii) personal leave consistent with CAI's and CAHS' personal leave
policy;
(iv) education leave consistent with CAI's and CAHS' education leave
policy;
(v) all holidays generally observed by employees of CAI and/or CAHS;
(vi) participation in the group life insurance policy available to
all employees of CAI or CAHS with Xx. Xxxxxxx having the option to purchase at
his own cost and expense additional insurance (with the benefit payable to Xx.
Xxxxxxx'x designee), and the option to purchase or continue the policy, at his
sole cost, upon termination of his employment hereunder if permissible under the
terms of the policy;
(vii) participation in the long-term disability plan whereby either
CAI or CAHS is to pay the premium for such long-term disability insurance
coverage. During the Term, Xx. Xxxxxxx shall be entitled to any improvements to
CAI's or CAH's long-term liability plan;
(viii) participation in the short-term disability plan whereby
either CAI or CAHS is to pay the premium for such short-term disability
insurance coverage. During the Term, Xx. Xxxxxxx shall be entitled to any
improvements to CAI's or CAH's short-term disability plan;
(ix) participation by Xx. Xxxxxxx in a stock award and stock option
plan for senior management of CAI and CAHS on a basis determined by such
companies' Board of Directors on a basis at least consistent for senior
management;
(x) participation by Xx. Xxxxxxx in either CAI's or CAHS' 401(K)
plan;
(xi) participation by Xx. Xxxxxxx in either CAI's or CAHS' Cafeteria
Plan which will include a Flexible Spending Account;
(xii) Xx. Xxxxxxx shall be eligible to participate in the CAI
Executive Long Term Incentive Plan or any successor plan thereto (the "Long Term
Plan") and the cash payment made under the Long Term Plan to Xx. Xxxxxxx is
referred to herein as the "Long Term Bonus." Xx. Xxxxxxx'x Long Term Bonus paid
under the Long Term Plan shall be consistent with his position as President and
Chief Operating Officer;
(xiii) Xx. Xxxxxxx shall be eligible to participate in the CAI
Executive Short Term Incentive Plan or any successor plan thereto (the "Short
Term Plan") and the cash payment made under the Short Term Plan to Xx. Xxxxxxx
is referred to herein as the "Short Term Bonus." Xx. Xxxxxxx' Short Term Bonus
paid under the Short Term Plan shall be consistent with his position as
President and Chief Operating Officer;
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(xiv) Either CAI or CAHS will purchase and maintain professional
liability insurance for Xx. Xxxxxxx in the minimum amount of $1,000,000.000 per
claim and a minimum annual aggregate of $3,000,000.00; and
(xv) During the period commencing on the Commencement Date and
terminating on October 1, 2000, either CAI or CAHS shall pay to Xx. Xxxxxxx an
allowance of $1,200 monthly in lieu of payment for Xx. Xxxxxxx'x travel expenses
between Baltimore, Maryland and Iselin, New Jersey and Xx. Xxxxxxx shall obtain
and maintain suitable lodging in New Jersey during this period.
6.2 Reimbursement of Licensing Fees and Subscription Charges. Either
CAI or CAHS shall reimburse Xx. Xxxxxxx, consistent with CAI's and/or CAHS'
continuing education program, Xx. Xxxxxxx for any out-of-pocket expenses (not
paid directly by either CAI or CAHS) that are incurred by Xx. Xxxxxxx in
connection with the renewal of his medical license(s) and subscription charges
and costs incurred by Xx. Xxxxxxx in connection with his receipt of professional
periodicals and publications.
6.3 Reimbursement of Expenses. Either CAI or CAHS shall reimburse Xx.
Xxxxxxx for any reasonable and necessary out-of-pocket expenses (not paid
directly by either CAI or CAHS) that are incurred by Xx. Xxxxxxx in connection
with the duties performed under this Agreement, including travel, lodging and
meals.
6.4 Documentation. Xx. Xxxxxxx will submit appropriate documentation,
approved as to form, by either CAI or CAHS, to either CAI or CAHS on a monthly
basis for the expenses incurred during that time period. Payment will be made to
Xx. Xxxxxxx no later than the thirtieth (30th) business day following receipt of
such bills.
6.5 Change in Control Bonus. In addition to the Basic Salary and
Additional Benefits paid and provided to Xx. Xxxxxxx under this Agreement, and
as an additional inducement to Xx. Xxxxxxx not to voluntarily leave the employ
of CAI, CAHS or any of its Affiliates or Subsidiaries, Xx. Xxxxxxx shall be
eligible to receive a Bonus Payment following a "Change in Control of the
Company" as such term is hereinafter defined.
(i) "Change in Control of the Company" is defined as, and shall be
deemed to occur if:
(W) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than a trustee or other fiduciary holding securities under an employee benefit
plan of CAI or Blue Cross and Blue Shield of New Jersey, Inc. ("BCBS") or CW
Ventures II, L.P. ("CW") or any person who represents CW or BCBS or controls
BCBS or CW, or a person engaging in a transaction of the type described in
clause (Y) of this subsection but which does not constitute a change in control
under such clause, is or become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of CAI
representing 51% or more of the combined voting power of CAI's then outstanding
securities; or
(X) during any period in which Xx. Xxxxxxx is eligible to receive a
Bonus Payment for a Change in Control of the Company, individuals who at the
beginning of such
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period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with CAI to effect a
transaction described in clauses (W), (Y) or (Z) of this subsection or a
director nominated by CW or BCBS in accordance with the terms of the
Stockholders' Agreement among CW, BCBS and CAI dated February 22, 1996 as the
same may be amended from time to time) whose election by the Board or nomination
for election by CAI's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or
(Y) the shareholders of CAI approve or, if no shareholder approval is
required or obtained, CAI or a Subsidiary thereof completes a merger,
consolidation or similar transaction of CAI or a Subsidiary thereof with or into
any other corporation, or a binding share exchange involving CAI's securities,
other than any such transaction which would result in the voting securities of
CAI outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 75% of the combined voting power of the voting
securities of CAI or such surviving entity outstanding immediately after such
transaction, or the shareholders of CAI approve a plan of complete liquidation
of CAI or an agreement for the sale or disposition by CAI of all or
substantially all of CAI's assets; or
(Z) CAI or a Subsidiary thereof executes a definitive agreement with
respect to the merger, consolidation or similar transaction of CAI or a
Subsidiary thereof with or into any other corporation or entity, or the sale or
disposition of all or substantially all of CAI's assets; provided, however, that
if such agreement is subsequently terminated, a "Change in Control of the
Company" shall be deemed not to have occurred.
(ii) In the event any person commences a tender or exchange offer,
circulates a proxy statement to CAI's shareholders or takes other steps designed
to effect a Change in Control of the Company as defined herein, Xx. Xxxxxxx
agrees that he will not voluntarily leave the employ of CAI, CAHS or a
Subsidiary, and will continue to perform his regular duties and to render the
services specified in this Agreement, until such person has abandoned or
terminated his efforts to effect a Change in Control of the Company or until a
Change in Control of the Company has occurred. Should Xx. Xxxxxxx voluntarily
terminate his employment before any such effort to effect a Change in Control of
the Company has commenced, or after any such effort has been abandoned or
terminated without effecting a Change in Control of the Company and no such
effort is then in process, this Section 6.5 shall lapse and be of no further
force or effect.
(iii) If a Change in Control of the Company shall have occurred, Xx.
Xxxxxxx shall be entitled to the benefits provided in this Section 6.5 if Xx.
Xxxxxxx shall remain in the employ of CAI, CAHS or one of its Subsidiaries for a
period of six (6) months after the date of the Change in Control of the Company
(the "Bonus Period") or such employment shall terminate during the Bonus Period
other than by reason of a Qualified Termination. For purposes of clarification,
if a Change in Control of the Company as defined in Section 6.5(i)(Z) shall have
occurred, the Bonus Period shall be defined as the period of six (6) months
after the
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execution of the definitive agreement set forth in Section 6.5(i)(Z) provided
the Change in Control actually occurs, or, if the Change in Control does not
occur within such six (6) month period, upon the date of the subsequent closing
of the transactions contemplated by such definitive agreement.
(iv) If, during the Bonus Period, either CAI, CAHS or a Subsidiary
causes Xx. Xxxxxxx to sustain a Qualified Termination, either CAI or CAHS shall
pay to Xx. Xxxxxxx his full Basic Salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given, and either CAI or
CAHS shall have no further obligations to Xx. Xxxxxxx under this Agreement.
(v) For purposes of this Agreement.
(A) "Qualified Termination" shall mean:
(I) if a Change in Control of the Company as defined in
Section 6.5(i)(W), (X) or (Y) shall have occurred, the termination of employment
of Xx. Xxxxxxx for Cause, voluntarily by Xx. Xxxxxxx without Good Reason, or by
death or Disability of Xx. Xxxxxxx; and
(II) if a Change in Control of the Company as defined in
Section 6.5(i)(Z) shall have occurred, the termination of employment of Xx.
Xxxxxxx for Cause or by death or Disability of Xx. Xxxxxxx.
(B) "Good Reason" shall mean:
(I) The assignment by CAI or a Subsidiary to Xx. Xxxxxxx of
duties without Xx. Xxxxxxx'x express written consent, which: (i) are materially
different or require travel significantly more time-consuming or extensive than
Xx. Xxxxxxx'x duties or business travel obligations immediately prior to the
Change in Control of the Company; or (ii) result, in either a significant
reduction in Xx. Xxxxxxx'x authority and responsibility as the President and
Chief Operating Officer of CAI or a Subsidiary thereof; or, (iii) without Xx.
Xxxxxxx'x express written consent, the removal of Xx. Xxxxxxx from, or any
failure to reappoint or reelect Xx. Xxxxxxx to, President and Chief Operating
Officer of CAI, except in connection with a termination of Xx. Xxxxxxx'x
employment by CAI for Cause, or by reason of Xx. Xxxxxxx'x death, or Disability;
(II) A reduction by CAI or a Subsidiary of Xx. Xxxxxxx'x Basic
Salary, or the failure to grant increases in Xx. Xxxxxxx'x Basic Salary on a
basis at least substantially comparable to those granted to other executives of
CAI or a Subsidiary of comparable title, salary and performance ratings made in
good faith;
(III) The relocation of CAI's principal executive offices (or
in the case of an employee of a Subsidiary; the principal executive offices of
such Subsidiary) to a location outside the State of New Jersey, or CAI's
requiring Xx. Xxxxxxx to be based anywhere other than CAI's principal executive
offices (or in the case of an employee of a Subsidiary; the principal executive
offices of such Subsidiary) except for required travel on CAI's or a
Subsidiary's business to an extent substantially consistent with Xx. Xxxxxxx'x
business travel
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obligations immediately prior to the Change in Control of the Company, or in the
event of any relocation of Xx. Xxxxxxx with Xx. Xxxxxxx'x express written
consent, the failure by CAI or a Subsidiary to pay (or reimburse Xx. Xxxxxxx
for) all reasonable moving expenses by Xx. Xxxxxxx relating to a change of
principal residence in connection with such relocation and to indemnify Xx.
Xxxxxxx against any loss realized in the sale of Xx. Xxxxxxx'x principal
residence in connection with any such change of residence, all to the effect
that Xx. Xxxxxxx shall incur no loss upon such sale on an after tax basis;
(IV) The failure by CAI or a Subsidiary to continue to provide
Xx. Xxxxxxx with substantially the same benefits (which for purposes of this
Agreement shall mean benefits under all welfare plans as that term is defined in
Section 3(l) of the Employee Retirement Income Security Act of 1974, as
amended), and perquisites, including participation on a comparable basis in
CAI's, CAHS' or a Subsidiary's retirement plans, stock options plans, stock
award plans, and other plans in which executives of CAI or CAHS of comparable
title and salary participate and as were provided to Xx. Xxxxxxx immediately
prior to such Change in Control of the Company, or with a package of welfare
benefits and perquisites, that, though one or more of such benefits or
perquisites may vary from those, including participation on a comparable basis
in CAI's, CAHS' or a Subsidiary's retirement plans, stock option plans and stock
award plans, is substantially comparable in all material respects to such
benefits and perquisites, including participation on a comparable basis in
CAI's, CAHS' or a Subsidiary's retirement plans, stock option plans and stock
award plans, taken as a whole; or
(V) The failure of CAI to obtain the express written
assumption of and agreement to perform this Agreement by any successor as
contemplated in this Section 6.5 hereof.
(C) Notwithstanding any other provisions of this
Agreement, "Basic Salary" shall mean the amount determined by multiplying Xx.
Xxxxxxx'x highest semimonthly or other periodic rate of base pay paid to Xx.
Xxxxxxx during the twelve (12) month period immediately prior to the giving of
the Notice of Termination by the number of pay periods per year. The following
items are not part of base pay, as used herein: reimbursed expenses, any amount
paid on account of overtime or holiday work, payment on account of insurance
premiums or other contributions made to other welfare benefit plans, any
year-end or other bonuses, commissions and gifts.
(vi) (A) Upon the earlier to occur of: (I) the date
immediately following the expiration of the Bonus Period if Xx. Xxxxxxx shall be
employed by CAI or a Subsidiary on the last day of the Bonus Period; or (II)
date of the termination of employment of Xx. Xxxxxxx by CAI or a Subsidiary
during the Bonus Period, where such termination is other than by reason of a
Qualified Termination, then CAI shall pay Xx. Xxxxxxx a cash bonus in the amount
of $95,000 (subject to any applicable payroll or other taxes required to be
withheld);
(B) In the event that any payment or benefit received or
to be received by Xx. Xxxxxxx in connection with a Change in Control of the
Company or the termination of Xx. Xxxxxxx'x employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with CAI,
any person whose actions result in a Change in Control of the Company or any
person affiliated with CAI or such person) (collectively
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with the payments and benefits hereunder; "Total Payments") would not be
deductible (in whole or part) as a result of Section 280G of the Code by CAI, an
Affiliate or other person making such payment or providing such benefit, the
payments and benefits hereunder shall be reduced until no portion of the Total
Payments is not deductible, or the payments and benefits hereunder are reduced
to zero. At CAI's sole discretion, such reduction may be effected by extending
the date the payment would otherwise be due by not more than one (1) year or by
decreasing the amount of the payment or benefit otherwise due and payable. For
purposes of this limitation: (I) no portion of the Total Payments the receipt or
enjoyment of which Xx. Xxxxxxx shall have effectively waived in writing prior to
the date of payment under subsection (vi)(A) shall be taken into account; (II)
no portion of the Total Payments shall be taken into account which, in the
opinion of tax counsel selected by Xx. Xxxxxxx and acceptable to CAI's
independent auditors, is not likely to constitute a "parachute payment" within
the meaning of Section 280G(b)(2) of the Code; (III) the payments and benefits
hereunder shall be reduced only to the extent necessary so that, in the opinion
of the tax counsel referred to in clause (ii), the Total Payments (other than
those referred to in clauses (i) or (ii)) in their entirety are likely to
constitute reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code or are otherwise not likely to be
subject to disallowance as deductions; and (IV) the value of any non-cash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by CAI's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
(C) The cash bonus payable under this Section 6.5 shall
be in addition to any other Severance to which Xx. Xxxxxxx may be entitled
hereunder.
(vii) Notwithstanding any other provision of this Agreement,
this Section 6.5 shall continue in effect commencing on the Commencement Date
and terminating on December 31, 1998; provided, however, that if the Term has
not expired, the term of this Section 6.5 may be extended for additional six (6)
month periods upon written notice from CAI to Xx. Xxxxxxx.
(viii) If litigation or other proceeding shall be brought to
enforce or interpret any provision contained in this Section 6.5 or in
connection with any tax audit to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder, CAI shall
indemnify Xx. Xxxxxxx for his reasonable attorneys' fees and disbursements
incurred in connection therewith and pay prejudgment interest on any money
judgment obtained by Xx. Xxxxxxx calculated at the prime rate of interest as
quoted in the Wall Street Journal for banking institutions in effect from time
to time from the date that payment should have been made under this Agreement;
provided, however, that if Xx. Xxxxxxx initiated the proceedings, Xx. Xxxxxxx
shall not have been found by the court or other fact finder to have acted in bad
faith in initiating such litigation or other proceeding, which finding must be
final without further rights of appeal.
(ix) CAI's obligation to pay Xx. Xxxxxxx the compensation and
to make the arrangements provided herein shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which CAI may have
against Xx. Xxxxxxx or anyone else. All amounts payable by CAI hereunder shall
be paid without notice or demand. Except as
11
expressly provided herein, CAI waives all rights which it may now have or may
hereafter have conferred upon it, by statute or otherwise, to terminate, cancel
or rescind this Agreement in whole or in part. Each and every payment made
hereunder by CAI shall be final and CAI will not seek to recover for any reason
all or any part of such payment from Xx. Xxxxxxx or any person entitled thereto.
Xx. Xxxxxxx shall not be required to mitigate the amount of any payment or other
benefit provided for in this Agreement by seeking other employment or otherwise.
7. TERMINATION OF EMPLOYMENT
7.1 Death. If Xx. Xxxxxxx dies during the Term, on the date of his
death this Agreement shall terminate.
7.2 Disability. If, during the Term, Xx. Xxxxxxx has a Disability,
either CAI or CAHS may, at any time after Xx. Xxxxxxx has a Disability,
terminate Xx. Xxxxxxx'x employment by written notice to him; provided, however,
that either CAI or CAHS shall maintain in effect and continue to pay all
premiums due under Xx. Xxxxxxx'x disability insurance policy if the continued
payments of such premium is a condition of the continuation of Xx. Xxxxxxx'x
disability payments.
7.3 Retirement. The Agreement will be terminated by Xx. Xxxxxxx'x
Retirement at the date of such Retirement.
7.4 Termination for Cause. Either CAI or CAHS may terminate Xx.
Xxxxxxx'x employment hereunder for Cause at any time by written notice given to
Xx. Xxxxxxx.
7.5 Notice of Termination. Any purported termination of employment: (x)
by CAI, CAHS or a Subsidiary by reason of Xx. Xxxxxxx'x Disability or for Cause;
or (y) by Xx. Xxxxxxx to CAI and CAHS for Good Reason shall be communicated by
written Notice of Termination to the other parties. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice given: (i) by either
CAI or CAHS to Xx. Xxxxxxx; or (ii) by Xx. Xxxxxxx to CAI and CAHS which shall
indicate the specific basis for termination and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for determination
of termination under this Agreement.
7.6 Date of Termination. For purposes of this Agreement, "Date of
Termination" shall mean the date of Death, Retirement or the Date of Termination
of employment specified in the Notice of Termination, which date shall not be
more than ninety (90) days after such Notice of Termination is given.
7.7 Payments on Termination. Upon termination of Xx. Xxxxxxx'x
employment by either CAI or CAHS other than by reason of Xx. Xxxxxxx'x Death,
Disability, Retirement or for Cause, but, including for failure to renew this
Agreement, either CAI or CAHS will pay to Xx. Xxxxxxx the following Severance
(subject to any applicable payroll or other taxes required to be withheld),
one-twelfth (1/12) of the Basic Salary of Xx. Xxxxxxx'x payable monthly for a
period covering twelve (12) months.
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7.8 Termination by CAI or CAHS for Cause. In the event of the
termination of Xx. Xxxxxxx'x employment by either CAI or CAHS for Cause, Xx.
Xxxxxxx or his estate or beneficiary, as the case may be, shall receive his
Basic Salary to the Date of Termination and no other amount except as required
by law or by the terms of employee welfare plans in which Xx. Xxxxxxx was a
participant.
7.9 Termination by Death, Retirement or Disability. In the event of the
termination of Xx. Xxxxxxx'x employment by Retirement, Death or Disability, Xx.
Xxxxxxx or his estate or beneficiary, as the case may be, shall receive his
Basic Salary through the Date of Termination.
8. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION BY EMPLOYEE
8.1 Representations and Warranties. Xx. Xxxxxxx represents that each of
the representations and warranties previously made by him in the Employment
Agreement are true, correct and complete as of the Commencement Date.
8.2 Indemnification. Xx. Xxxxxxx hereby agrees to indemnify, defend and
hold harmless CAI and CAHS from and against any and all claims, losses,
liabilities, damages (including, without limitation, compensatory and/or
punitive damages), costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by either CAI or CAHS as a result of any
claim or action relating to Xx. Xxxxxxx'x practice of medicine prior to the
Commencement Date.
8.3 The foregoing representations, warranties and indemnification shall
remain in effect throughout the Term and for a period of two (2) years following
the termination or expiration of this Agreement.
9. CONFIDENTIAL INFORMATION AND PROPRIETARY INTERESTS
9.1 Acknowledgment of Confidentiality. Xx. Xxxxxxx understands and
acknowledges that he may obtain Confidential Information during the course of
his employment by CAI and CAHS. Xx. Xxxxxxx further acknowledges that the
services to be rendered by him are of a special, unique and extraordinary
character and that, in connection with such services, he will have access to
Confidential Information vital to both CAI's, CAHS' and their Affiliates'
business. Accordingly, Xx. Xxxxxxx agrees that he shall not, either during the
Term or at any time within one (1) year after the Date of Termination: (i) use
or disclose any such Confidential Information outside of CAI, CAHS and their
Affiliates; or (ii), except as required in the proper performance of his
services hereunder, remove or aid in the removal from the premises of CAI, CAHS
or any Affiliate, any Confidential Information or any property or material
relating thereto.
The foregoing confidentiality provisions shall cease to be applicable
to any Confidential Information which becomes generally available to the public
(except by reason of or as a consequence of a breach by Xx. Xxxxxxx of his
obligations under this Section 9).
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In the event Xx. Xxxxxxx is required by law or a court order to
disclose any such Confidential Information, he shall, subject to the
requirements of applicable law, promptly notify both CAI and CAHS of such
requirement and provide CAI and CAHS with a copy of any court order or of any
law which in his opinion requires such disclosure and, if either CAI or CAHS so
elects, and if he is legally able to do so, permit either CAI or CAHS an
adequate opportunity, at its own expense, to contest such law or court order.
9.2 Delivery of Material. Xx. Xxxxxxx shall promptly, and without
charge, deliver to CAI and CAHS on the termination of his employment hereunder,
or at any other time CAI or CAHS may so request, all memoranda, notes, records,
reports, manuals, computer disks, videotapes, drawings, blueprints and other
documents (and all copies thereof) relating to the business of CAI and CAHS and
the Affiliates, and all property associated therewith, which he may possess or
have under his control.
9.3 Extension of Section 12. All of the provisions of Section 12 shall
be deemed to be applicable to all Confidential Information to which Xx. Xxxxxxx
may have obtained access or which he may have invented or developed during his
employment by CAI, CAHS or any Affiliate or Subsidiary.
10. DISPUTES AND REMEDIES
10.1 Waiver of Jury Trial. Each of Xx. Xxxxxxx, CAI and CAHS hereby
waives the right to a trial by jury in the event of any dispute, which arises
under this Agreement.
10.2 Injunctive Relief. If Xx. Xxxxxxx commits a breach, or threatens
to commit a breach, of any of the provisions of Section 12, either CAI or CAHS
shall have the following rights and remedies (each of which shall be independent
of the other, and shall be severally enforceable, and all of which shall be in
addition to, and not in lieu of, any other rights and remedies available to
either CAI or CAHS at law or in equity):
(i) the right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged by Xx. Xxxxxxx that any such breach or threatened breach will or
may cause irreparable injury to CAI and CAHS and that money damages will or may
not provide an adequate remedy thereto; and
(ii) the right and remedy to require Xx. Xxxxxxx to account for and
pay over to CAI and CAHS all compensation, profits, monies, increments, things
of value or other benefits, derived or received by Xx. Xxxxxxx as the result of
any acts or transactions constituting a breach of any of the provisions of
Section 12 of this Agreement, and Xx. Xxxxxxx hereby agrees to account for and
pay over all such compensation, profits, monies, increments, things of value or
other benefits to CAI and CAHS.
10.3 Partial Enforceability. If any provision contained in Section 12,
or any part thereof, is construed to be invalid or unenforceable, the same shall
not affect the remainder of Xx. Xxxxxxx'x agreements, covenants and
undertakings, or the other restrictions which he has
14
accepted, in Section 12, and the remaining such agreements, covenants,
undertakings and restrictions shall be given the fullest possible effect,
without regard to the invalid parts.
10.4 Intention of Parties. It is expressly understood and agreed that
the confidentiality and proprietary rights provisions of this Agreement have
been accepted, and agreed to by Xx. Xxxxxxx in contemplation of this Agreement.
It is therefore the specific intention of the parties, any general
considerations of public policy to the contrary notwithstanding, that the
provisions of Section 12 of this Agreement shall be enforced as written and to
the fullest extent possible.
11. GOOD STANDING
11.1 Each of CAI and CAHS represents that it is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of CAI and CAHS further represents that it has full power and
authority to conduct it business and to enter into this Agreement.
11.2 Xx. Xxxxxxx represents that he presently meets the following
criteria and that he will continue to maintain compliance with these criteria
unless waived by either CAI or CAHS:
(i) Current license to practice medicine in the State of Maryland;
(ii) Full compliance with all applicable federal, state and local
laws, regulations, and ethical standards governing the practice of medicine
generally; and
(iii) High ethical standards and is good professional standing in
the community.
12. RESTRICTIONS
12.1 Acknowledgment. Xx Xxxxxxx acknowledges that his services provided
to CAI and CAHS under this Agreement will provide him with exposure to insurance
companies and other third-party payers of health care services.
12.2 Restrictions. Accordingly, the parties hereby agree that during
the term of this Agreement and for a period of two (2) years from the date of
termination of this Agreement by any party (the "Restrictive Period"), Xx.
Xxxxxxx shall not directly or indirectly:
(i) induce or attempt to influence any organization or entity that
has a contractual relationship with CAI, CAHS or any Affiliate at any time
during the Restrictive Period to terminate such relationship or, to the extent
such relationship terminates for any reason, prevent or attempt to prevent the
reestablishment of such relationship(s);
(ii) solicit to provide medical management services, directly or
indirectly through association with any entity that so solicits, to any
insurance company or other
15
third party payor of health care services with which either CAI, CAHS or any
Affiliate has any such contractual relationship(s) at the time of termination of
his employment hereunder and at any time during the remainder of the Restrictive
Period; or
(iii) for the purpose of conducting or providing services similar to
those provided hereunder, engage, hire, offer to engage or hire, or employ or
enter into business with any person or entity which served as an employee or
independent contractor of either CAI, CAHS or any Affiliate at the time of
termination of his employment hereunder and at any time during the remainder of
the Restrictive Period, whether as a joint venture, partnership, corporation, or
otherwise, without the prior written consent of both CAI and CAHS.
12.3 During the term of this Agreement and for a period of two (2)
years following the termination of the Employment by any party, Xx. Xxxxxxx
agrees that he will not in any way, directly or indirectly, manage, operate,
control or accept employment or a consulting position with or otherwise be
connected with, or own, or have any other interest in or right with respect to
(other than through ownership of not more than five (5%) percent of the
outstanding shares of a corporation's stock which is publicly traded or listed
on a national securities exchange) a Care Management Company (as hereinafter
defined) which competes (or is deemed to compete by fulfilling the conditions
stated in the following sentence) with either CAI or CAHS or any Subsidiary or
Affiliate in the Care Management Business (as hereinafter defined).
For purposes of this Agreement, (i) a "Care Management Business" means,
and is limited to, utilization review of inpatient and outpatient care and
managed care or disease management services for other entities such as insurance
companies and other payers; (ii) a "Care Management Company" means an entity
substantially all of the business of which consists of the Care Management
Business.
The foregoing restriction on competition shall be limited to
competition in any State, including the District of Columbia, in which either
CAI, CAHS or any of its Affiliates or Subsidiaries conducts its Care Management
Business.
12.4 For purposes of Section 12.3, an enterprise shall be deemed to be
competing with CAI's or CAHS' or its Affiliates' or Subsidiaries' business
notwithstanding the fact that it does not within the two (2) year period
following the termination of the Employment actually compete with such entities
if (i) within the two (2) year period following the termination of the
Employment the enterprise is actively developing the capability to compete with
such entities; (ii) Xx. Xxxxxxx has knowledge of such efforts and (iii) within
six (6) months of developing such capability but in no event later than six (6)
months following two (2) years from the date of termination of the Employment
the enterprise actively competes with such entities.
Notwithstanding any provision of this Agreement to the contrary,
nothing in this Agreement shall be interpreted to restrict Xx. Xxxxxxx from
treating clinical patients and conducting the practice of medicine (directly or
through another person or entity) during or after the term of this Agreement, or
after the term of this Agreement (subject to Section 12.5) accepting employment
with an insurance company or other third party payer, hospital, health
maintenance organization, or other facility providing care to patients.
12.5 During the term of this Agreement and for a period of two (2)
years following the termination of the Employment by any party, Xx. Xxxxxxx
agrees that he will not seek or accept employment, an affiliation, a consultancy
or any other arrangement with any company, entity, employer, health plan or
customer with which either CAI, CAHS or Contemporary HealthCare Management, Inc.
at the time of termination of his employment hereunder has or is negotiating a
customer/client relationship.
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12.6 Reasonableness of Restrictions. The parties hereby acknowledge
that the restrictions contained in Section 12.2 above are reasonable and
necessary to protect the legitimate interests of CAI and CAHS and that any
violation of such restrictions would result in irreparable injury to such
entities.. CAI, CAHS and Xx. Xxxxxxx acknowledge that in the event of a
violation of any such restriction which is not corrected within thirty (30) days
thereof, either CAI or CAHS shall be entitled to injunctive relief without
having to prove actual damages or immediate or irreparable harm or to post a
bond. CAI and CAHS shall also be entitled to an equitable accounting of all
earnings, profits, and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies to which
either CAI or CAHS may be entitled at law or in equity. In the event of any such
violation, the Restrictive Period referred to in Section 12.2 shall be extended
by a period of time equal to that period beginning with the commencement of any
such violation and ending when such violation finally shall have been terminated
in good faith.
13. GENERAL
13.1 Headings. The headings of the Sections of this Agreement are for
convenience only and shall not affect the meanings or interpretations of the
contents thereof.
13.2 Entire Agreement. This Agreement represents the complete
understanding among the parties, and supersedes all prior negotiations,
representations or agreements, whether written or oral, as to the matters
described herein. It may be amended only by a written instrument signed by the
duly authorized representatives of all parties. No requirement, obligation,
remedy or provision of this Agreement shall be deemed to have been waived,
unless so waived expressly in writing, and any waiver of any provision shall not
be considered a waiver of any right to enforce such provision thereafter.
13.3 Notice. All notices authorized or required herein shall be in
writing and shall be sent by first class mail, postage prepaid, to Xx. Xxxxxxx
or to CAI and CAHS at their respective addresses as set forth below.
Xxxxxxx X. Xxxxxxx, M.D.
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
and
CareAdvantage, Inc. and
CareAdvantage Health Systems, Inc.
000-X Xxxxx 0 Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
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13.4 Governing Law. This Agreement shall be construed and governed by
the laws of the State of New Jersey applicable to contracts made and to be
performed entirely within such state.
13.5 Negotiations. For all purposes, this Agreement shall be deemed to
have been drafted by all parties executing it. The representations, terms,
covenants and conditions contained herein shall be deemed to be material and to
have been relied upon by the party or parties to whom they have been made.
13.6 Assignment. Without the prior written consent of the other party
hereto, neither party may assign any of its rights or delegate any of its
obligations hereunder; provided, however, that either CAI or CAHS may assign
this Agreement to any Affiliate without the prior written consent of Xx.
Xxxxxxx. Subject to the foregoing, this Agreement inures to the benefit of, and
is binding upon, the successors and assigns of the parties hereto.
13.7 Financing. All amounts due and benefits provided under this
Agreement shall constitute general obligations of CAI in accordance with the
terms of this Agreement. Xx. Xxxxxxx shall have only an unsecured right to
payment thereof out of the general assets of CAI and CAHS. Notwithstanding the
foregoing, CAI may, by agreement with one or more trustees to be selected by
CAI, create a trust on such terms as CAI shall determine to make payments to Xx.
Xxxxxxx in accordance with the terms of this Agreement.
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IN WITNESS WHEREOF, the parties by their duly authorized
representatives have executed this Agreement under their respective hands and
seals as of the day and year first above written.
WITNESS:
_______________________________ _______________________________
XXXXXXX X. XXXXXXX, M.D.
ATTEST: CAREADVANTAGE HEALTH SYSTEMS, INC.
_______________________________ By:_______________________________(Seal)
Name:
Title:
ATTEST: CAREADVANTAGE, INC.
_______________________________ By:_______________________________(Seal)
Name:
Title:
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