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SEVERANCE AND NONCOMPETE AGREEMENT
This SEVERANCE AND NONCOMPETE AGREEMENT is dated as of June ____,
1998, by and between NEW AMERICAN HEALTHCARE CORPORATION, a Delaware
corporation (the "Company"), and XXXX X. XXXXXXXX, XX. (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive and Company previously have entered into an
Executive Employment Agreement dated December 19, 1995 (the "Employment
Agreement"); and
WHEREAS, Executive and Company have agreed to terminate the Employment
Agreement and to replace it with this Severance and Noncompete Agreement;
NOW, THEREFORE, for and in consideration of the premises hereof and the
mutual covenants contained herein, the parties hereto hereby covenant and agree
as follows:
1. Confidential Information. The Executive hereby covenants,
agrees and acknowledges as follows:
(a) The Executive has and will have access to and will
participate in the development of or be acquainted with confidential or
proprietary information and trade secrets related to the business of
the Company, and any present or future subsidiaries or affiliates
thereof (collectively with the Company, the "Companies"), including but
not limited to (i) customer lists; claims histories and related records
and compilations of information; the identity, lists or descriptions of
any new patients, referral sources or organizations; financial
statements; cost reports or other financial information; contract
proposals or bidding information; business plans; training and
operations methods and manuals; personnel records; software programs;
reports and correspondence; fee structures; and management systems,
policies or procedures, including related forms and manuals; (ii)
information pertaining to future developments such as future marketing
or acquisition plans or ideas, and potential new business locations and
(iii) all other tangible and intangible property, which are used in the
business and operations of the Companies but not made public. The
information and trade secrets relating to the business of the Companies
described hereinabove in this paragraph (a) are hereinafter referred to
collectively as the "Confidential Information", provided that the term
Confidential Information shall not include any information (x) that is
or becomes generally publicly available (other than as a result of
violation of this Agreement by the Executive) or (y) that the Executive
receives on a nonconfidential basis from a source (other than the
Companies or their representatives) that is not known by him to be
bound by an obligation of secrecy or confidentiality to any of the
Companies.
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(b) The Executive shall not disclose, use or make known for
his or another's benefit any Confidential Information or use such
Confidential Information in any way except as is in the best interests
of the Companies in the performance of the Executive's duties under
this Agreement. The Executive may disclose Confidential Information
when required by a third party and applicable law or judicial process,
but only after providing (i) immediate notice to the Company at any
third party's request for such information, which notice shall include
the Executive's intent with respect to such request, and (ii)
sufficient opportunity for the Company to challenge or limit the scope
of the disclosure on behalf of the Companies, the Executive or both.
(c) The Executive acknowledges and agrees that a remedy at law
for any breach or threatened breach of the provisions of this Section 1
would be inadequate and, therefore, agrees that the Companies shall be
entitled to injunctive relief in addition to any other available rights
and remedies in case of any such breach or threatened breach; provided,
however, that nothing contained herein shall be construed as
prohibiting the Companies from pursuing any other rights and remedies
available for any such breach or threatened breach.
(d) The Executive agrees that upon termination of his
employment with the Company for any reason, the Executive shall
forthwith return to the Company all Confidential Information in
whatever form maintained (including without limitation, computer discs
and other electronic media).
(e) The obligations of the Executive under this Section 1
shall, except as otherwise provided herein, survive the termination of
the Executive's employment with the Company and the expiration or
termination of this Agreement and shall terminate eighteen months after
the termination of Executive's employment with the Company.
(f) Without limiting the generality of Section 5 hereof, the
Executive hereby expressly agrees that the foregoing provisions of this
Section 1 shall be binding upon the Executive's heirs, successors and
legal representatives.
2. Restrictive Covenants.
(a) Competition. During Executive's employment with the
Company and during the eighteen (18) month period following termination
of Executive's employment with the Company for any reason whatsoever,
provided that payments, if any, required pursuant to Section 3(b)
hereof are made in full and in a timely fashion, the Executive will not
directly or indirectly (as a director, officer, executive employee,
manager, consultant, independent contractor, advisor or otherwise)
engage in competition with, or own any interest in, perform any
services for, participate in or be connected with any business or
organization which engages in competition with any of the Companies in
any state of the United States of America,
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provided, however, that the provisions of this Section 2(a) shall not
be deemed to prohibit the Executive's ownership of not more than two
percent (2%) of the total shares of all classes of stock outstanding of
any publicly held company, or ownership, whether through direct or
indirect stock holdings or otherwise, of one percent (1%) or more of
any other business.
(b) Non-Solicitation. During Executive's employment with the
Company and during the eighteen (18) month period following termination
of the Executive's employment with the Company for any reason
whatsoever, provided that payments, if any, required pursuant to
Section 3(b) hereof are made in full and in a timely fashion, the
Executive will not directly or indirectly induce or attempt to induce
any employee of any of the Companies to leave the employ of the Company
of such subsidiary or affiliate, or in any way interfere with the
relationship between any of the Companies and any employee thereof.
This Section 2(b) shall not prohibit the Executive from employing any
employee of the Company if such employee initially contacts Executive
seeking such employment, and such employee has stated his or her
intention to terminate his or her employment with the Company.
(c) Non-Interference. During the Employment Term and during
the eighteen (18) month period following the end of the Employment Term
for any reason whatsoever (or, if later, the eighteen (18) month period
following termination of the Executive's employment with the Company),
provided that payments, if any, required pursuant to Section 3(b)
hereof are made in full and in a timely fashion, the Executive will not
directly or indirectly hire, engage, send any work to, place orders
with, or in any manner be associated with any supplier, contractor,
subcontractor or other business relation of any of the Companies if
such action by him would have a material adverse effect on the
business, assets or financial condition of any of the Companies, or
materially interfere with the relationship between any such person or
entity and any of the Companies.
(d) Certain Definitions.
(i) For purposes of this Section 2, a person or entity
(including, without limitation, the Executive) shall be deemed to be a
competitor of one or more of the Companies, or a person or entity
(including, without limitation, the Executive) shall be deemed to be
engaging in competition with one or more of the Companies, if such
person or entity (A) subject to the proviso set forth below, is a
for-profit general acute care hospital company, or (B) in any way
conducts, operates, carries out or engages in the business of managing
for-profit general acute care hospitals, in either case in any state of
the United States of America, provided, however, nothing in this
Agreement shall prohibit the Executive from becoming associated in any
capacity at a single for-profit general acute care hospital, as long as
such hospital is not owned, operated or managed by a for-profit
multi-facility hospital company or management company.
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(ii) For purposes of this Section 2, no corporation or entity
that may be deemed to be an affiliate of the Company solely by reason
of its being controlled by, or under common control with, Welsh,
Carson, Xxxxxxxx & Xxxxx VII, L.P. or any of its affiliates other than
the Company, will be deemed to be an affiliate of the Company.
(e) Certain Representations of the Executive. In connection
with the foregoing provisions of this Section 2, the Executive
represents that his experience, capabilities and circumstances are such
that such provisions will not prevent him from earning a livelihood.
The Executive further agrees that the limitations set forth in this
Section 2 (including, without limitation, time and territorial
limitations) are reasonable and properly required for the adequate
protection of the current and future businesses of the Companies. It is
understood and agreed that the covenants made by the Executive in this
Section 2 (and in Section 1 hereof) shall survive the expiration or
termination of this Agreement.
(f) Injunctive Relief. The Executive acknowledges and agrees
that a remedy at law for any breach or threatened breach of the
provisions of Section 2 hereof would be inadequate and, therefore,
agrees that the Company and any of its subsidiaries or affiliates shall
be entitled to injunctive relief in addition to any other available
rights and remedies in cases of any such breach or threatened breach;
provided, however, that nothing contained herein shall be construed as
prohibiting the Company or any of its affiliates from pursuing any
other rights and remedies available for any such breach or threatened
breach.
(g) Change of Control. Notwithstanding the foregoing, the
restrictive covenants contained in Section 2 shall not apply to
Executive in the event there is a Change in Control at the Company. For
purposes of this Agreement, A "Change in Control" shall have occurred
if at any time during the term of this Agreement any of the following
events shall occur:
(i) Any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) who is not on the date hereof the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
5% or more of any class of the outstanding equity securities of the
Company become the beneficial owner of securities which when added to
any securities already owned by such person would represent 25% or more
of the combined voting power of the then-outstanding voting securities
of the Company;
(ii) The Company is merged, consolidated or reorganized into
or with another corporation or other person and as a result of such
merger, consolidation or reorganization less then 80% of the combined
voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior to
such transaction;
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(iii) The Company sells all or substantially all of its assets
to any other corporation;
(iv) During the period of two consecutive years, individuals
who, at the beginning of any such period, constitute the directors of
the Company cease for any reason to constitute at least a majority
thereof unless the election or the nomination for election by the
Company stockholders of such director of the Company first elected
during such period was approved by a vote of at lease two-thirds of the
directors of the Company at the beginning of any such period; or
(v) The Company is no longer engaged, directly or indirectly,
in the business of owning, managing or operating for-profit general
acute care hospitals in the United States of America.
3. Termination.
(a) The Executive's employment hereunder shall be terminated
upon the occurrence of any of the following:
(i) death of the Executive;
(ii) termination of the Executive's employment hereunder by
the Company because of the Executive's inability to perform his duties
on account of disability or incapacity for a period of six (6)
consecutive months;
(iii) termination of the Executive's employment hereunder by
the Company at any time "for cause" (as defined below), such
termination to take effect immediately upon written notice from the
Company to the Executive to such effect; and
(iv) termination of the Executive's employment hereunder (A)
by the Company at any time, other than (x) termination by reason of
death, disability or incapacity as contemplated by clause (i) or (ii)
above or (y) termination by the Company "for cause" as contemplated by
clause (iii) above or (B) by the Executive for the breach of any
provision of this Agreement by the Company.
The following actions, failures and events by or affecting the
Executive shall constitute "cause" for termination within the meaning of clause
(iii) above: (A) conviction of the Executive of, or the entering of a plea of
nolo contendere by the Executive with respect to, having committed a felony, (B)
acts of dishonesty or moral turpitude by the Executive that are materially
detrimental to one or more of the Companies, (C) acts or omissions by the
Executive that the Executive knew were likely to materially damage the business
of one or more of the Companies, (D) gross negligence by the Executive in the
performance of, or willful disregard by the Executive of, his obligations
hereunder or otherwise relating to his employment, or (E) failure by the
Executive to obey the reasonable and lawful orders of the Board of Directors
that are consistent with the provisions of this
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Agreement (provided that, in the event such failure does not also constitute
"cause" under any of clauses (A) through (D) above, the Executive shall have
received written notice of such failure and a reasonable opportunity to discuss
the matter with the Board of Directors, followed by a notice that the Board of
Directors adheres to its position and a reasonable opportunity to comply with
such orders).
(b) In the event that the Executive's employment is terminated
pursuant to clause (iv) of Section 3(a) above, the Company shall pay to
the Executive, as severance pay or liquidated damages or both, monthly
payments at the rate per annum of his salary at the time of such
termination and shall provide the Executive with the benefits and the
disability benefits being provided to Executive prior to termination,
for a period from the date of such termination to eighteen months after
such termination.
(c) Notwithstanding anything to the contrary expressed or
implied herein, except as required by applicable law and except as set
forth in Section 3(b) above, the Company (and its affiliates) shall not
be obligated to make any payments to the Executive or on his behalf of
whatever kind or nature by reason of the Executive's cessation of
employment (including, without limitation, by reason of termination of
the Executive's employment by the Company for "cause"), other than (i)
such amounts, if any, of his salary and bonus as shall have accrued and
remained unpaid as of the date of said cessation and (ii) such other
amounts, if any, which may be then otherwise payable to the Executive
from the Company's benefits plans or reimbursement policies.
(d) No interest shall accrue on or be paid with respect to any
portion of any payments hereunder.
(e) Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to exclusion, attachment, levy or similar process or
to assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void and of no
effect.
4. Non-Assignability. Neither this Agreement nor any right or
interest hereunder shall be assignable by the Executive or his beneficiaries or
legal representatives without the Company's prior written consent; provided,
however, that nothing in this Section 4 shall preclude the Executive from
designating a beneficiary to receive any benefit payable hereunder upon his
death or incapacity.
5. Binding Effect. Without limiting or diminishing the effect
of Section 4 hereof, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, successors, legal
representatives and assigns.
6. Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given
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in writing and: (i) delivered personally, (ii) mailed by certified or registered
mail, return receipt requested and postage prepaid, (iii) sent via a nationally
recognized overnight courier or (iv) sent via facsimile confirmed in writing to
the recipient, if to the Company, at the Company's principal place of business,
and if to the Executive, at his home address most recently filed with the
Company, or to such other address or addresses as either party shall have
designated in writing to the other party hereto.
7. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
8. Severability. The Executive agrees that in the event that
any court of competent jurisdiction shall finally hold that any provision of
Section 1 or 2 hereof is void or constitutes an unreasonable restriction against
the Executive, the provisions of such Section 1 or 2 shall not be rendered void
but shall apply with respect to such extent as such court may judicially
determine constitutes a reasonable restriction under the circumstances. If any
part of this Agreement other than Section 1 or 2 is held by a court of competent
jurisdiction to be invalid, illegible or incapable of being enforced in whole or
in part by reason of any rule of law or public policy, such part shall be deemed
to be severed from the remainder of this Agreement for the purpose only of the
particular legal proceedings in question and all other covenants and provisions
of this Agreement shall in every other respect continue in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant
or provision.
9. Waiver. Failure to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
10. Entire Agreement; Modifications. This Agreement
constitutes the entire and final expression of the agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements, oral
and written, between the parties hereto with respect to the subject matter
hereof, including, without limitation, the Employment Agreement, which is hereby
terminated and rendered of no further force and effect. This Agreement may be
modified or amended only by an instrument in writing signed by both parties
hereto.
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Executive have duly
executed and delivered this Agreement as of the day and year first above
written.
COMPANY:
NEW AMERICAN HEALTHCARE CORPORATION
By:
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Title:
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EXECUTIVE:
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Xxxx X. XxXxxxxx, Xx.
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