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EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 1995 by and
between Healthsource, Inc., a corporation organized under the laws of the
State of New Hampshire ("Healthsource"), and Xxxxxxx X. Xxxxxxxxx, M.D.
("Middleton").
RECITALS
WHEREAS, Healthsource is engaged in the operation of a health
maintenance organization and other managed health care programs and operations,
as well as health insurance companies, third party administrators, and
utilization review organizations; and
WHEREAS, Healthsource wishes to engage Middleton's as an employee
of Healthsource or a subsidiary designated by Healthsource;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the parties agree as
follows:
1. Employment. Healthsource agrees that it or one of its subsidiaries
shall employ Middleton and Middleton agrees to be employed by Healthsource or
its designated subsidiary, upon the terms and conditions set forth in this
Agreement.
2. Duties. Middleton shall assume the title, function and duties of
President of Healthsource South, which generally shall mean development,
management and oversight of the Healthsource subsidiaries based in the southern
portion of the United States, as designated by and under the direction and
control of Healthsource's Board of Directors. Middleton shall devote his full
time to performance of his duties as specified in this Agreement.
3. Compensation. For all services rendered by Middleton under this
Agreement, Healthsource (or the subsidiary designated by Healthsource as
Middleton's employer) shall compensate Middleton as set forth in this Section 3:
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3.1 Salary. Healthsource (or the subsidiary designated by
Healthsource as Middleton's employer) shall pay Middleton an annual salary of
$285,000, provided that, after the first year of this Agreement, Middleton shall
be eligible for salary increases which shall be determined in the discretion of
the Board of Directors of Healthsource in accordance with criteria applied to
other Healthsource senior executives generally ("Base Salary"). The Base Salary
will be paid in 26 equal installments.
3.2 Additional Compensation. In lieu of any Board stipends and
fees for attendance at Board of Directors meetings of Healthsource and its
subsidiaries, all rights to which Middleton hereby waives, Healthsource (or the
subsidiary designated by Healthsource as Middleton's employer) shall pay
Middleton additional compensation of $35,000 annually. This additional
compensation will be paid with the Base Salary.
3.3 Bonus Compensation. Middleton will be eligible for an annual
bonus of up to twenty percent (20%) of the Base Salary. Bonus compensation, if
any, will be determined by the Healthsource Board of Directors based on company
performance, Middleton's performance, or such other criteria as determined by
the Healthsource Board of Directors in its sole discretion. Payment of bonus
compensation, if any, will be made at such time and in such manner as determined
by the Healthsource Board of Directors.
3.4 Fringe Benefits. Middleton shall be entitled to participate
in all fringe benefits generally made available to senior management, as such
benefits may be established, amended or discontinued from time to time,
including the following employee benefits:
4.1 The Healthsource South Carolina, Inc. HMO (or indemnity
or other reasonably equivalent coverage from another Healthsource subsidiary)
for Middleton and his family at a cost to Middleton in accordance with
Healthsource's regular policy for its senior management.
4.2 Three (3) weeks fully paid vacation during each
calendar year, at such times as will not unreasonably interfere with Middleton's
performance of his duties under this Agreement.
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4.3 Middleton shall be entitled to participate in the 401k
deferred compensation plan, in effect on January 1, 1995, in accordance with its
terms as they may be amended from time to time, provided that nothing herein
shall prevent Healthsource from terminating such 401k plan in whole or in part.
3.5 Stock Options. Middleton shall be eligible to receive
options to purchase stock of Healthsource, Inc. in accordance with Healthsource
stock option plans or policies for key or senior management employees as are in
effect from time to time, and as determined by the Board of Directors of
Healthsource in its sole discretion.
4. Reimbursement of Expenses. Healthsource (or the subsidiary
designated by Healthsource as Middleton's employer) shall reimburse Middleton
for travel and other expenses reasonably and necessarily incurred in the
performance of his duties in accordance with Healthsource's normal documentation
procedure.
5. Termination.
5.1 Without Cause Termination. This Agreement may be terminated
by either party, at will, without cause, by giving sixty (60) days prior written
notice to the other. If termination is accomplished in this manner the effective
date of termination shall be the 60th day following receipt of the termination
notice.
5.2 Termination on Change of Control. Within ninety (90) days
following a Change of Control of Healthsource, to a party not "affiliated with"
Healthsource, Middleton may elect to terminate this Agreement by providing sixty
(60) days advance written notice to Healthsource (or its successor in interest).
For purposes of this Agreement, "Change of Control" of Healthsource shall be
deemed to occur if Healthsource shall merge or consolidate with, or transfer
substantially all of its assets to, another corporation, association or business
or person not affiliated with Healthsource or an affiliate of Healthsource. For
purposes of this Agreement, "affiliate" or "affiliated with" Healthsource shall
mean any person or entity which owns or in which Healthsource or any
"affiliated" of Healthsource owns at least a five percent (5%) interest, or with
which
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Healthsource or any affiliate of Healthsource has a management agreement in
effect to manage such person's or entity's business.
5.3 For-Cause Termination. Healthsource (or the subsidiary
designated by Healthsource as Middleton's employer) may terminate this
Agreement, for cause, if:
3.1 Middleton is convicted by a court of competent
jurisdiction of any criminal offense involving dishonesty, breach of trust or
other act of moral turpitude.
3.2 Middleton shall commit an act of fraud upon, or
materially evidence bad faith toward, Healthsource.
3.3 Middleton willfully refuses to perform the duties
reasonably assigned to him by the Board of Directors of Healthsource consistent
with his duties as described in this Agreement, after notice and opportunity for
thirty (30) days to cure such willful refusal.
6. Middleton's Obligations Upon Termination.
6.1 Middleton. Upon termination of this Agreement, all records
created or maintained by Middleton in the course of his employment shall remain
the property of Healthsource and be returned to Healthsource.
6.2 Non Disclosure of Information.
2.1 Middleton acknowledges that as a consequence of his
employment under this Agreement, he has been and will be given access to
confidential information relating to valued physicians, subscribers, and
customers of Healthsource subsidiaries, and such other confidential matters as
Healthsource's systems, procedures, manuals, confidential reports, and the
nature and type of services rendered by Healthsource. In consideration of the
covenants of Healthsource under this Agreement, Middleton agrees that while
employed, and for a period of two (2) years after termination of this Agreement
for any reason, he shall not disclose any confidential information to third
persons, except for the benefit of Healthsource and its subsidiaries, or in the
course of
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performing his duties. If any court of competent jurisdiction shall determine
this covenant to be unenforceable upon the term or scope set forth in this
subsection 6.2.1, then this covenant shall nonetheless be enforceable by such
court for such shorter term or within such lesser scope as may be determined by
the court to be reasonable and enforceable. Middleton shall execute the
Healthsource Confidentiality Statement annexed hereto as attachment 1. In the
event of any inconsistency between the Confidentiality Statement and this
Agreement, the terms of this Agreement shall prevail.
6.3 Non-Compete. Upon termination of this Agreement for any
reason, Middleton agrees that, for a period of one (1) year following the date
of termination, he shall not be employed by or associated with (as employee,
consultant, director, officer or shareholder) any company which engages in the
HMO, HMO management, preferred provider organization, physician hospital
organization, integrated delivery system, utilization review or other managed
care business in any state in which Healthsource or any affiliate of
Healthsource is engaged in business or is engaged in discussions or negotiations
regarding any such business as of the effective date of termination; provided,
however, that such restriction shall not apply to Middleton's status as a
participating provider for any such company, or employment in the field of
hospital administration. If any court of competent jurisdiction shall determine
this covenant to be unenforceable upon the term or scope set forth in this
Section 6.3, then this covenant shall nonetheless be enforceable by such court
for such shorter term or within such lesser scope as may be determined by the
court to be reasonable and enforceable.
6.4 Injunctive Relief. In the event that Middleton breaches or
threatens to breach the covenants contained in Article 6, Healthsource (or the
subsidiary designated by Healthsource as Middleton's employer) shall, without
limitation, be entitled to an injunction restraining Middleton (and any person
acting for or on behalf of Middleton) from disclosing in whole or in part any
such confidential information of Healthsource (or the subsidiary designated by
Healthsource as Middleton's employer). Nothing herein shall be construed as
prohibiting Healthsource from pursuing and obtaining any other
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remedies available to it for such breach or threatened breach.
6.5 Survival. The rights and obligations contained in this
Section 6 shall survive termination of this Agreement for any reason.
7. Healthsource's Obligations Upon Termination.
7.1 Severance.
1.1 In the event that Healthsource (or any successor in
interest) terminates this Agreement under Section 5.1, Healthsource (or its
successor in interest) shall pay Middleton three hundred thousand dollars
($300,000), plus an additional two (2) months Base Salary for each calendar year
or portion of a calendar year that this Agreement remains in effect up to a
maximum of twelve (12) months; provided that Middleton complies with the
obligations set forth in Article 6.
1.2 In the event that Middleton terminates this Agreement
under Section 5.2, Healthsource (or its successor in interest) shall pay
Middleton five hundred thousand dollars ($500,000); provided that Middleton
complies with the obligations set forth in Article 6, plus an additional two (2)
months Base Salary for each calendar year or portion of a calendar year that
this Agreement remains in effect up to a maximum of twelve (12) months; provided
that Middleton complies with the obligations set forth in Article 6.
7.2 Survival. The rights and obligations contained in this
Section 7 shall survive termination of this Agreement for any reason.
8. Miscellaneous.
8.1 Amendments. This Agreement may be modified only by a
writing executed by the parties hereto.
8.2 Integration. This Agreement supersedes all prior agreements
and understandings of the parties as to the employment of Middleton by
Healthsource or any affiliate of Healthsource, including but not limited to the
Employment Agreement by and among Physician's Health Systems, Inc., Healthsource
South Carolina, Inc. and
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Middleton dated as of July 1991 (the "PHS Agreement") and the Employment
Agreement by and between Healthsource, Inc. and Middleton dated as of February
1, 1994 (the "Healthsource Agreement"). Healthsource and Middleton agree that
the PHS Agreement and the Healthsource Agreement are hereby terminated, and that
all obligations set forth in th PHS Agreement and the Healthsource Agreement
have been satisfied and that, notwithstanding anything to the contrary neither
party (nor their affiliates) has any further obligation to each other under such
agreements.
8.3 Captions. All captions used herein are for purposes of
convenience only and shall not be referred to in construing this Agreement.
8.4 Governing Law. This Agreement shall be governed, construed
and enforced in accordance with the internal laws of the State of New Hampshire,
without regard to conflicts of interest. The parties agree that any action
brought in connection with this Agreement shall be maintained only in a state or
federal court of competent subject matter jurisdiction located within the state
in which Middleton resides.
8.5 Waiver of Breach. The failure by either party to insist upon
strict compliance with any of the terms, conditions, or covenants contained
herein shall not be deemed a waiver of any such terms, conditions or covenants;
nor shall any waiver any one or more times be deemed a waiver at any other time
or times.
8.6 Severability. The provisions of this Agreement are severable
and the invalidity of any term or provision of this Agreement shall not
invalidate any other term or provision of this Agreement.
8.7 Succession. This Agreement shall be binding upon the parties
hereof, their heirs, estates, assigns, transferees and successors in interest.
Middleton's duties shall be non-delegable and non-assignable.
8.8 Notice. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail
or courier, with a signed receipt required, as follows:
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To Healthsource: Healthsource, Inc.
0 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
ATTN: Vice President,
Human Resources
with a copy to: Healthsource, Inc.
0 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
ATTN: General Counsel
To Middleton: Xxxxxxx X. Xxxxxxxxx, M.D.
000 Xxxx Xxx Xxxxxx
Xxxxxxxxxx, XX 00000
with a copy to: T. Xxxxxxx Xxxxxx, Xx.
Evans, Carter, Canes and
Grant, P.A.
000 Xxxxxxxxxxxx Xxxxxx,
Xxxxx 000
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
or to such other persons as may from time to time be designated by either of the
parties hereto in writing.
8.9 Corporate Authority. Healthsource and Middleton warrant that
all necessary corporate actions have been taken to authorize them to enter into
this Agreement.
8.10 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement.
8.11 Guarantee. In the event that Healthsource designates a
subsidiary as Middleton's employer, Healthsource hereby guarantees satisfaction
by the subsidiary of the obligations set forth in this Agreement.
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IN WITNESS WHEREOF, Middleton and Healthsource, by its duly
authorized representative, have executed this Agreement as of the date first
written above.
HEALTHSOURCE, INC. XXXXXXX X. XXXXXXXXX, M.D.
BY: /s/ Xxxxxx X. Xxxxxx BY: /s/ Xxxxxxx X. Xxxxxxxxx, M.D.
----------------------------- -------------------------------
Xxxxxx X. Xxxxxx, M.D. Xxxxxxx X. Xxxxxxxxx, M.D.
President and Chief
Executive Officer
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HEALTHSOURCE, INC.
Xxx Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxxxxx 00000
February 5, 1997
Xxxxxxx X. Xxxxxxxxx, M.D.
Healthsource South, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Dear Xxxxx:
This letter will correct a scrivener's error in your Employment Agreement dated
as of January 1, 1995.
The severance provision of Paragraph 7.1.2 was intended to provide for the base
amount of $500,000 plus an additional two (2) months salary for each year of
your full-time employment with Healthsource, i.e., from July 1, 1991, not from
the date of the 1995 Agreement as literally stated.
Sincerely,
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, M.D.
Accepted:
/s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx, M.D.
