EXHIBIT 10.6 (2)
EMPLOYMENT AGREEMENT
This Agreement is made this 15th day of November 1997, by and between
SIERRA HEALTH SERVICES, Inc., a Nevada Corporation, of Las Vegas, Nevada
(hereinafter referred to as "Employer"), and Xxxxx X. Xxxxxxx , (hereinafter
referred to as "Employee").
WITNESSETH
WHEREAS, Employer is a publicly traded company engaged in the
business of providing managed health care services through subsidiary companies;
WHEREAS, Employee has expertise and experience in providing
managed health care services; and,
WHEREAS, Employee has made and is expected to continue to make
a major contribution to the profitability, growth and financial strength of
Employer;
NOW, THEREFORE, in consideration of the mutual promises and
agreements hereinafter set forth, Employer and Employee agree as follows:
ARTICLE I
EMPLOYMENT/DUTIES AND POWERS
1. Employer hereby employs, engages and hires Employee as Executive
Vice President, Secretary and General Counsel , and Employee hereby accepts and
agrees to such hiring, engagement and employment, subject to the general
supervision and direction of Employer.
2. Employee shall perform such duties as are assigned by the CEO of
Employer or his/her designee, and shall at all times faithfully and to the best
of his/her ability perform all the duties that may be required of Employee to
the reasonable satisfaction of Employer. Employee shall exercise only those
powers for signing contracts and conveyances in the ordinary course of business
as are expressly authorized by Employer's CEO or the appropriate Board of
Directors. Employee further agrees to participate in and assist in the
development of quality improvement programs offered by Employer.
ARTICLE II
TERM OF EMPLOYMENT - TERM OF AGREEMENT
1. The term of employment governed by this Agreement shall be for
approximately a 4 year period starting November 15, 1997 and terminating
December 31, 2001 subject, however, to prior termination as hereinafter provided
in Article VII. Unless earlier terminated by the mutual agreement of the parties
hereto, this Agreement shall terminate at December 31, 2001 or, if Employee has
become entitled to any benefit under Article VII due to termination of
employment on or before December 31, 2001,
1
at such date as Employer has no further obligations to Employee under Article
VII; provided, however, that the provisions of Article V and Article VI (and
this clause of Article II) shall survive any termination of this Agreement.
ARTICLE III
COMPENSATION AND REVIEW
1. Employer shall pay Employee and Employee shall accept from Employer as
payment for Employee's services hereunder, compensation in the form of base
salary in the amount as set forth in Attachment A of this Agreement, payable at
such times as are deemed appropriate by Employer, but not less than twice a
month, and other compensation payable under this Agreement.
2. (a) Employer shall reimburse Employee for all necessary and reasonable
business expenses incurred by Employee while performing services pursuant to
Employer's direction.
(b) Employee agrees to maintain adequate records of expenses, in
such detail as Employer may reasonably request.
3. (a) Employee shall also be eligible for those Employee fringe benefit
programs, bonus plans, and stock option plans as are made available to other
employees of the corporation at the same organizational level, and as approved
by the Board of Directors.
(b) Except for Employee's vested benefits under the Supplemental
Executive Retirement Plan ("SERP"), Employer may, at any time and at its sole
discretion, amend any fringe benefit programs, bonus programs, or stock option
programs without prior notice to Employee even though such an amendment may
decrease the future benefits available under said programs.
4. Employee's performance shall be reviewed at least annually based on
established job duties, goals and objectives and other reasonable standards as
deemed necessary and appropriate by Employer.
ARTICLE IV
OTHER EMPLOYMENT
Employee shall devote all of his time, attention, knowledge, and
skills solely to the business and interest of Employer, unless otherwise
authorized by Employer, and Employer shall be entitled to all of the income,
benefits, or profits arising from or incident to all work, work associations,
services, or advice of Employee, unless otherwise authorized in writing by
Employer. Employee shall not, during the term hereof, be interested in any
manner, as partner, officer, director, advisor, employee or in any other
capacity in any other business similar to Employer's business or any allied
trade, or obtain any interest adverse to Employer; provided, however, that
Employee may provide advice and consultation to other entities with the written
approval of Employer, and further provided, however, that nothing herein
contained shall be deemed to prevent or limit the right of Employee to invest
any of his/her surplus funds in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or are regularly traded
on any public
2
exchange, nor shall anything herein contained be deemed to prevent Employee from
investing or limit Employee's right to invest his/her surplus funds in real
estate. Employee shall complete a Conflict of Interest form by February 15 of
each calendar year and submit it to Employer for review. All conflicts of
interest or any potential conflicts of interest which arise during the year must
be immediately reported to Employer. All conflict of interest concerns must be
resolved to the reasonable satisfaction of Employer as a condition of
continuation of employment.
ARTICLE V
BUSINESS SECRETS
1. Employee shall not at any time or in any manner, either directly or
indirectly, divulge, disclose or communicate to any person, firm or corporation,
in any manner whatsoever, any proprietary or confidential information concerning
any matter affecting or relating to the business of Employer or its
subsidiaries, including without limiting the generality of the foregoing, any of
their customers, the prices they obtain from providers or have obtained from the
sale of, or at which they sell or have sold, its services, or any other
information concerning the business of Employer or its subsidiaries, their
manner of operation, or their plans, if such a disclosure would be detrimental
to the business interests of Employer or its subsidiaries.
2. If Employee's employment hereunder is terminated by either party at any
time hereafter, then Employee agrees to turn over to Employer all papers,
documents, working papers, correspondence, memos and any and all other documents
in Employee's possession relating to or concerning any matter affecting or
relating to the business of Employer or its subsidiaries.
ARTICLE VI
NONCOMPETITION AGREEMENT
1. Employee acknowledges that in Employee's employment hereunder, Employee
will have continual contacts with the groups, members, and providers who are
covered by or associated with the managed health care programs offered by
Employer or its subsidiaries in Nevada and other states. In all of Employee's
activities, Employee, through the nature of Employee's work, will have access to
and will acquire confidential information related to the business and operations
of Employer and its subsidiaries, including, without limiting the generality of
the foregoing, member and group lists, and confidential information relating to
processes, plans, methods of doing business and special needs of doctors,
hospitals, members, groups, pharmacies, or other health care providers who
contract with Employer or its subsidiaries. Employee acknowledges that all such
information is the property of Employer or its subsidiaries solely and
constitutes confidential information of such parties; that the disclosure
thereof would cause substantial loss to the goodwill of Employer and its
subsidiaries; that disclosure thereof to Employee is being made only because of
the position of trust and confidence which Employee will occupy and because of
Employee's agreement to the restrictions herein contained; that his knowledge of
these matters would enable him, on termination of this
3
Agreement, to compete with Employer or its subsidiaries in a manner likely to
cause Employer and its subsidiaries irreparable harm, and disclosure of such
matters would, likewise, cause such harm; and that the restrictions imposed upon
Employee herein would not prohibit Employee in earning a living.
2. It is understood and agreed by Employee and Employer that the essence
of this Employment Agreement is the mutual covenants of the parties herein made,
that the present and future members and groups of Employer or its subsidiaries
will remain Employer's or its subsidiaries' members and groups during the term
of this Agreement and following its termination for any reason. In consideration
for the employment and continued employment of Employee by Employer, and also
for the amount received by Employee as compensation, Employee hereby irrevocably
warrants, covenants, and agrees as follows:
(a) during the term of Employee's employment and after leaving
the employment of Employer for any reason, whether involuntary or voluntary,
Employee will not take any action whatsoever which may or might disturb any
existing business relationship of Employer or its subsidiaries with any doctors,
groups, members, hospitals, pharmacies or other health care providers in Nevada
who contract with Employer or its subsidiaries;
(b) for a period of one (1) year after leaving the employment of
Employer, Employee will not solicit business from the members or groups of
Employer or its subsidiaries in Nevada, or in any manner disrupt any business
relationship Employer or its subsidiaries has with any contracted health care
provider in Nevada with whom Employee came in contact as an employee of
Employer.
(c) for a period of one (1) year after leaving the employment of
Employer, Employee will not, either directly or indirectly, work for any present
or future competitors of Employer operating in the state of Nevada who in any
manner offer any managed health care programs, insurance coverage, or administer
health care claims for employers. Such competitors shall include, but are not
limited to, HMOs, PPOs, insurance companies, utilization management companies,
or third party administrators.
3. The one (1) year period specified in this Article will be tolled during
any period of breach of any of the terms of Article VI by Employee.
4. Employee agrees that in the event of a breach of any term of this
Agreement, and more particularly, in the event of a breach of any of the terms
and provisions of Article VI, Employer shall be entitled to secure an order in
any suit brought for that purpose to enjoin Employee from violating any of the
provisions of the Agreement and that, pending the hearing and the decision on
the application for such order, Employer shall be entitled to a temporary
restraining order without prejudice to any other remedy available to Employer,
all at the expense of Employee should Employer prevail in such action. Employee
understands that the covenants of this Article are the essence of this
Employment Agreement, and without which no Employment Agreement with Employee
would be entered into by Employer.
5. The provisions of Article VI shall in no event be construed to be an
exclusive remedy and such remedy shall be held and construed to be cumulative
and not exclusive of any rights or remedies, whether
4
in law or equity, otherwise available under the terms of this Agreement or under
the laws of the United States or the state of Nevada.
6. The covenants and agreements made by Employee in this Article VI shall
be construed as an agreement independent of any other provision in the Agreement
and the existence of any claim or cause of action by Employee against Employer,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Employer, by injunctive relief or otherwise, of
the provisions of Article VI. The invalidity of all or any part of any section
or paragraph of this Article VI shall not render invalid the remainder of this
Article or any section hereof.
7. No failure or failures on the part of Employer to enforce any violation
by Employee of this Noncompetition agreement, shall constitute a waiver of
Employer's rights thereafter to enforce all of the terms, covenants, provisions
and agreements herein contained.
ARTICLE VII
TERMINATION OF EMPLOYMENT
1. Termination of employment by either Employer or Employee shall follow
established Sierra Health Services Policies and Procedures including appropriate
notice, except as otherwise specifically set forth in this Article.
2. Employee may terminate employment hereunder with sixty (60) days prior
written notice. If Employee shall voluntarily terminate employment all eligible
separation compensation and benefits as are routinely made available to other
employees of Employer at the same organizational level, shall be paid or made
available to Employee. 3. If Employer shall terminate Employee's employment
hereunder without cause, except as otherwise set forth in Paragraph 7 of this
Article, Employee shall be entitled to twelve (12) months salary and all other
separation compensation and benefits as are routinely made available to other
employees of Employer at the same organizational level. 4. In the event
Employee's employment hereunder terminates for any reason other than for cause,
including those reasons set forth in Paragraph 6 of this Article, Employee and
his/her family shall be eligible to remain covered under Employer's health care
coverage program, at no expense, for a period of time equal to Employee's length
of service or until Medicare eligible, whichever occurs first, following
termination of such employment.
5. Notwithstanding any other provision in this Agreement to the
contrary, Employee hereby agrees that any separation compensation due to
Employee, other than accrued vacation, shall be paid out 25% after the first 90
days, 37 1/2% after the first 180 days, and the remaining 37 1/2% at the end of
365 days, except in the event of a change in control. Payment of such amounts
shall fully release Employer from any and all liability of Employer relating to
this Agreement or the employment hereunder. Any payments of such amounts which
would otherwise be payable after a change in control, or arising as a result of
a change in control, shall
5
be made in a lump sum within five (5) business days following the date of the
change in control and shall, except as otherwise provided in any other benefit
program or in this Agreement, fully release Employer from any and all liability
of Employer relating to this Agreement or the employment hereunder.
6. If Employer shall terminate Employee's employment due to Employee's
conduct that is materially detrimental to the Company's reputation, business
relationships, or for misappropriation of Employer's funds, Employee shall be
eligible for four (4) weeks salary and any other separation compensation and
benefits as are routinely made available to other employees of Employer at the
same organizational level, as full and final payment under this Agreement.
Payment of such amounts shall fully release Employer from any and all liability
of Employer relating to this Agreement or the employment hereunder.
7. (a) If Employee is unable to perform Employee's duties hereunder, by
reason of illness or incapacity of any kind, for a period of more than twelve
(12) months in excess of accrued sick leave, Employee's employment hereunder may
be terminated by Employer at its absolute discretion with one week of prior
written notice.
(b) If Employee's illness or incapacity shall have ended, and
Employee shall have assumed Employee's duties hereunder, prior to the date
specified in the notice of termination, Employee shall be entitled to resume
Employee's employment hereunder as if such notice had not been given.
8. In the event of a change in control of Employer, whereby any
"person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or
indirectly, of securities of Employer representing 51% or more of the combined
voting power of the then outstanding securities of Employer, and such change in
control was not approved by a majority of the Board of Directors of Employer,
Employee, at his/her sole option, shall be entitled to terminate his/her
employment hereunder and, upon such termination, will be entitled to a cash
amount equal to (2.99) times Employee's current salary and the target annual
bonus for which Employee is eligible in the year of termination, together with
any other separation compensation and benefits as are routinely made available
to other employees of Employer at the same organizational level. Employee's
right to terminate under this Paragraph 8 may be exercised at the time of the
change in control or at any time within two years after the change in control,
including upon receipt of any notice that Employer has elected to terminate
Employee's employment without cause during such two-year period. Payment of such
amounts shall be made in a lump sum within five (5) business days following the
date such amounts become payable hereunder and shall, except as otherwise
provided in any other benefit program or in this Agreement, fully release
Employer from any and all liability of Employer relating to this Agreement or
the employment hereunder.
9. In the event of a change in control of Employer, whereby any "person"
(as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934) is or becomes the beneficial owner, directly or
indirectly, of securities of Employer representing 51% or more of the combined
voting power of the then outstanding securities of Employer, and such change in
control is approved by a majority of the Board
6
of Directors of Employer, Employee, at his/her sole option, shall be entitled to
terminate his/her employment hereunder and, upon such termination, will be
entitled to a cash amount equal to (2.99) times Employee's current salary and
the target annual bonus for which Employee is eligible in the year of
termination, together with any other separation compensation and benefits as are
routinely made available to other employees of Employer at the same
organizational level, if, within two (2) years after the effective date of the
change in control any one of the following occurs: (a) the assignment to
Employee of any duties inconsistent with Employee's position (including status,
offices, titles, and reporting requirements), authority, duties, or
responsibilities or any other action by the Company that results in a material
diminution in such position, authority, duties, or responsibilities, excluding
for this purpose an action not taken in bad faith and that is remedied by the
Company within 10 days after receipt of written notice by Employee; (b) a
reduction in Employee's annual base salary or target bonus; (c) the relocation
of the Company's principle executive offices to a location more than 75 miles
from the current location of such offices or (d), in the event such change in
control occurs within the final two years prior to the calendar date stated as
the termination date of the Agreement in Article II, and if, prior to such
stated termination date and prior to termination of Employee's employment, the
Company has not offered to enter into an extension of this employment agreement
or a new employment agreement providing benefits substantially equal to those
under this agreement for a term to extend until at least two years after the
date of such change in control. In addition, if Employee's employment hereunder
is terminated for reasons other than those set forth in Paragraph 6 of this
Article within two (2) years after the effective date of a change in control
which was approved by a majority of Employer's Board of Directors, Employee
shall be entitled to a cash amount equal to (2.99) times Employee's current
salary and the target annual bonus for which Employee is eligible in the year of
termination, together with all other separation compensation and benefits as are
routinely made available to other employees of Employer at the same
organizational level. Payment of such amounts shall be made in a lump sum within
five (5) business days following the date such amounts become payable hereunder,
and shall, except as otherwise provided in any other benefit program or in this
Agreement, fully release Employer from any and all liability of Employer
relating to this Agreement or the employment hereunder.
10. Anything contained herein to the contrary notwithstanding in the event
that Employer shall discontinue operation of Employer other than as a result of
a merger, consolidation or acquisition, then this Agreement shall terminate and
the provisions of Article VI shall terminate as of the last day of the month in
which Employer ceases operation with the same force and effect as if such last
day of the month were originally set as the termination date hereof.
11. Any amounts payable under this Article VII shall also be payable to
Employee in the event Employee is terminated without cause during the 90-day
period prior to a Change in Control.
12. Whether or not Employee becomes entitled to any payments under
Paragraphs 1 through 11 of this Article VII, if any payments or benefits
received, or to be received, by Employee (including the
7
vesting of any option and other non-cash benefits and property), whether
pursuant to any provision of this Agreement or any other plan, arrangement or
agreement with Employer or any affiliated company, excluding the Gross-Up
Payment described herein (such payments and benefits being the "Total
Payments"), will be subject to any excise tax imposed under section 4999 of the
Internal Revenue Code of 1986, as amended (such excise tax, including penalties
and interest thereon, being the "Excise Tax"), Employer shall pay to Employee an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Employee, after reduction for any Excise Tax on the Total Payments and any
federal and Excise Tax on the Gross-Up Payment, shall be equal to the sum of (i)
the Total Payments plus (ii) any deductions disallowed for federal income tax
purposes because of the inclusion of the Gross-Up Payment in Executive's
adjusted gross income multiplied by the Executive's highest marginal rate of
federal income taxation for the calendar year in which the Gross-Up Payment is
to be made.
ARTICLE VIII
EFFECT OF WAIVER
The waiver by either party of a breach of any provision of this agreement
shall not operate or be construed as a waiver of any subsequent breach thereof.
ARTICLE IX
ACTUAL ATTORNEY'S FEES EXPENDED
Employer and Employee agree that all attorneys fees expended by either
party in any dispute, arbitration or litigation concerning this Agreement will
be paid by the losing party in that dispute, arbitration or litigation.
ARTICLE X
NOTICE
Any and all notices referred to herein shall be sufficient if furnished in
writing, sent by registered mail to the representative parties at the addresses
subscribed below their signatures to this Agreement.
ARTICLE XI
ASSIGNMENT
The rights, benefits and obligations of Employee under this Agreement
shall be assignable, and all covenants and agreements hereunder shall inure to
the benefit of and be enforceable by or against Employer's successors or
assigns.
ARTICLE XII
ENTIRE AGREEMENT
This Agreement contains the entire Agreement between the parties, and the
parties hereby agree that no other oral representations or agreements have been
entered into in connection with this transaction.
ARTICLE XIII
8
AMENDMENT
No amendment or modification of this Agreement shall be deemed effective,
unless or until, it is executed in writing by the parties hereto.
ARTICLE XIV
VALIDITY
This Agreement, having been executed and delivered in the State of Nevada,
its validity, interpretation, performance and enforcement will be governed by
the laws of that state.
ARTICLE XV
SEVERABILITY
It is mutually agreed that all of the terms, covenants, provisions, and
agreements contained herein are severable and that, in the event any of them
shall be held to be invalid by any competent court, this Agreement shall be
interpreted as if such invalid term, covenant, provision, or agreement were not
contained herein.
ARTICLE XVI
FORUM
The parties hereto consent and agree that any action to enforce this
Agreement or any provision therein or any rights hereunder or any action
relating to the employment of Employee with Employer shall be brought in the
State of Nevada.
ARTICLE XVII
INDEMNIFICATION
Employer shall indemnify Employee whether or not then in
office, to the fullest extent provided for in Employer's Articles of
Incorporation or Bylaws, as in effect, or as may thereafter be amended, modified
or revised from time to time (collectively, "Employer's Articles"), or permitted
under the law of Nevada or such other state in which Employer may hereafter be
domiciled, against any and all costs, claims, judgments, fines, settlements,
liabilities, and fees or expenses (including, without limitation, reasonable
attorneys' fees) incurred in connection with any proceedings (including without
limitation, threatened actions, suits or investigations) arising out of, or
relating to, Employee's actions or in actions as a director, officer or employee
of Employer at any point during his employment by or service to Employer,
whether under this Agreement, any prior employment agreements or otherwise. The
indemnification contemplated under this Section shall be provided to Employee
unless, at the time indemnification is sought, such indemnification would be
prohibited under the law of Nevada or of the state in which Employer may then be
domiciled; Employer may rely on the advice of its counsel in determining whether
indemnification is so prohibited.
9
IN WITNESS WHEREOF, the parties have executed this Agreement at Las Vegas,
Nevada, on the day of , 19 .
---- ------------------ ----
SIERRA HEALTH SERVICES, INC.
By:______________________________
Chief Executive Officer
P. O. Xxx 00000
Xxx Xxxxx, XX 00000-0000
EMPLOYEE
By:______________________________
Xxxxx X. Xxxxxxx
0000 Xxxxxxxxxxx
Xxx Xxxxx, XX 00000
10
