Exhibit 10.23(b)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, entered into on
December 9, 1994 (the "Signing Date"), amended on February 24, 1995 and October
11, 1996 and dated as of the 1st day of July, 1994 (the "Effective Date"),
between DOCTORS HEALTH SYSTEM, INC., a Maryland corporation (the "Company") and
XXXXX X. XXXXXX (the "Physician Executive").
-------------
Background
-------------
The Company is engaged, directly or through service contracts
with others, in the business of (i) negotiating contracts to provide health care
services and products, (ii) managing health care providers, and (iii) providing
health care services and products (the "Business").
The Physician Executive is a primary care physician with
substantial skills and knowledge in the management and development of physician
practices, and is experienced in creating and expanding a physician run equity
model group practice working with hospitals, managed care organizations and
other physicians.
The Executive and the Company previously entered into an
Employment Agreement dated November 4, 1994, a copy of which is attached hereto
(the "Prior Agreement"), and each desires to amend and restate the Prior
Agreement in its entirety to incorporate certain additional matters.
The Company desires to hire the Physician Executive, and the
Physician Executive desires to work for the Company, on the terms and conditions
set forth in this Agreement.
1. Employment, Duties and Acceptance.
1.1 Employment. (a) Effective upon the Effective
Date, the Company shall employ the Physician Executive as its Executive
Vice President and Director of Development. In such capacities, the Physician
Executive shall have the duty, responsibility and authority for designing and
implementing medical and non-medical policies and procedures, and investigating,
structuring and negotiating on behalf of the Company and its Subsidiaries the
purchase of primary care physician practices, and shall assist with the creation
of, contractual relationships with hospitals, physician specialists, medical
institutions
1
and providers, negotiating managed care and other contracts, and related matters
involving the growth and development of the Business, all after consultation
with the Company's Executive Vice President and Director of Medical Affairs and
subject to the guidelines, policies and control of the Company's Chief Executive
Officer and Board of Directors (the "Board"), to whom he shall report. The
Physician Executive shall perform such other duties within these general
parameters as the Chief Executive Officer or the Board may from time to time
designate. The Physician Executive shall perform his duties faithfully and to
the best of his abilities. The Physician Executive shall also serve (A) during
the Term, as a director of the Company (subject to the power of the Board and
the Shareholders of the Company to remove him as set forth in the Company's
Bylaws), (B) as a director of all of the Company's Subsidiaries (as defined in
Section 5.2), and (C) until the "Financing Date" (as defined in Section 3.1(b)),
as the Chairman of the Board, all without any additional compensation.
(b) The Physician Executive shall devote a
significant portion of his working time and creative energies tothe performance
of his duties hereunder and will at such times devote such efforts as are
reasonably sufficient for fulfilling the significant responsibilities entrusted
to him. So long as such activities, in the aggregate, do not interfere with the
performance by the Physician Executive of his duties hereunder: (i) the
Physician Executive shall be permitted a reasonable amount of time to engage in
the practice of medicine as an employee of Baltimore Medical Group, Inc. and
to supervise his personal, passive, investments; (ii) the Physician Executive
shall be permitted a reasonable amount of time to participate (as board
member, officer or volunteer) in civic, political and charitable activities;
(iii) the Physician Executive shall be permitted to deliver lectures to and
teach at educational institutions and business organizations; and (iv) subject
to the provisions of Section 5 hereof, the Physician Executive may serve as
a director or trustee of one or more corporations not affiliated with the
Company.
1.2 Place of Employment. The Physician Executive's
principal place of employment shall be in the Baltimore, Maryland metropolitan
area, subject to such travel as may be reasonably required by his employment
pursuant to the terms hereof. The Physician Executive shall not be required
to relocate outside of the Baltimore, Maryland metropolitan area during the
Term, except by mutual agreement.
2. Term of Employment. The term of the Physician Executive's
employment under this Agreement (the "Term") shall commence on the Effective
Date and shall end on April 1, 2000 unless sooner terminated, or later extended,
as herein provided. Not later than February 1, 2000 (and each February 1 of each
calendar year during any Extension Period (defined below)), the Company and the
Physician Executive shall enter into good faith negotiations to determine
whether and on what terms to extend or renew this Agreement beyond April 1 of
such calendar year. If by October 15, 1999 (and October 15 of any calendar year
occurring during an Extension Period) either party gives written notice to the
other of its desire to terminate this Agreement as of April 1, then this
Agreement shall so terminate, and the Physician Executive shall be permitted a
reasonable amount of time
2
during the balance of the Term within which to explore alternative employment
opportunities. If no such written notice to terminate is given by either party
by October 15, 1999 (or by October 15 of any calendar year occurring during an
Extension Period), then the Term shall, without further act or deed,
automatically be extended upon the same terms and conditions as previously
in effect, for an additional 12 month period, commencing on April 1 of the
applicable calendar year and ending on March 31 of the immediately following
calendar year. Each such 12 month extension during the Term is referred to
herein as an "Extension Period", and shall constitute a part of the Term of this
Agreement for all purposes, including the provisions regarding extensions
contained in this Section 2.
3. Compensation.
3.1 Salary. As compensation for all services to
be rendered pursuant to this Agreement, the Company shall pay to the
Physician Executive, during the Term, a "Base Salary" (as defined in this
Section 3.1) less such deductions as shall be required to be withheld by
applicable laws and regulations. The "Base Salary" shall be a salary of $100,000
per annum. The amount of the Base Salary has been established based upon the
mutual assumption by the Company and the Physician Executive that the
Physician Executive shall devote approximately fifty percent (50%) of his
working time and creative energies to the performance of his duties hereunder.
The Company and the Physician Executive acknowledge and agree that because the
performance by the Physician Executive of his duties hereunder will be of
critical importance to the growth and prosperity of the Company, the Company
shall from time to time, in its reasonable discretion, evaluate and determine
the working time and creative energies that the Physician Executive has devoted
to the performance of his duties hereunder during any preceding three (3) month
period (it being understood and agreed that the Physician Executive's use of
permitted vacation hereunder shall not be included in such determination). If
the Company determines that the Physician Executive has devoted significantly
more or significantly less of his working time and creative energies to his
duties hereunder during any such period, his Base Salary will be adjusted, up or
down, by the Company (in the exercise of its reasonable discretion) on each such
occasion, commencing with the beginning of the fiscal quarter of the Company
immediately following the Signing Date. The Base Salary shall accrue from and
after the Effective Time, and shall be payable as follows:
(a) The Company has paid Base Salary
of $65,068 on the date hereof, the receipt of which is hereby acknowledged by
the Physician Executive; and
(b) The Company shall, during the Term,
pay to the Physician Executive his Base Salary in arrears in equal monthly
installments each year, commencing March 31, 1995 (for the month of March,
1995).
3.2 Bonus Pool. (a) Beginning with the
calendar year 1995, the Company shall establish for the benefit of the
Physician Executive and other key Company employees a
3
"Bonus Pool", in an amount calculated as described herein, with respect to each
calendar year, or portion thereof, that occurs during the Term (each a "Bonus
Year").
(b) During the Term, the Physician Executive
shall be allocated at least five percent (5%) of the Bonus Pool, if any,
annually, which amount represents his minimum agreed upon share of the Bonus
Pool. The determination of whether, and to what extent, the Physician
Executive shall be entitled to an allocation from the Bonus Pool in excess of
said five percent (5%) shall be made by the Chief Executive Officer of the
Company in accordance with policies established by the Board. All amounts
allocated to the Physician Executive pursuant to this Section 3.2 shall become
payable to the Physician Executive and are hereinafter collectively referred to
as the "Bonus". Upon the closing of the initial underwritten public offering of
the capital stock of the Company pursuant to a registration statement filed with
the Securities and Exchange Commission (other than a registration statement on a
Form S-8 or any successor or similar Form) (the "IPO"), the Physician
Executive's right to participate in the Bonus Pool with respect to any period of
time subsequent to the closing of the IPO shall terminate (other than the
Physician Executive's right to receive all accrued but unpaid Bonus, which right
shall survive such closing), provided that the Company and the Physician
Executive each covenant and agree to enter into good faith negotiations to
establish a new bonus arrangement for the Physician Executive that fairly
compensates the Physician Executive for the services to the Company and provides
appropriate incentives consistent with prevailing market standards for similarly
situated and skilled executives.
(c) Provided that the Company has available
net cash flow, the Company shall pay the Bonus to the Physician Executive
within three (3) business days of the final determination of the amount of each
year's Bonus Pool pursuant to Section 3.2(e) below (each, a "Payment Date"),
and shall pay any accrued but unpaid Bonus to the Physician as soon after such
Payment Date as there is sufficient available net cash flow. For each partial
calendar year that occurs during the Term, the amount of the Physician
Executive's Bonus payable hereunder shall be prorated by multiplying the
amount, if any, of the Bonus that would have been payable had the entire
calendar year occurred during the Term by a fraction, the numerator of which
is the number of days of the calendar year that occurred during the Term and
the denominator of which is 365. Any accrued but unpaid Bonus shall accrue
simple interest from the date of the final determination of the amount of each
year's Bonus Pool until such amount is paid, at the rate of six and
one-half percent (6 1/2%) per annum, and shall be paid by the Company as soon
after such Payment Date as there is sufficient available net cash flow. In all
events, all accrued and unpaid Bonus, plus accrued interest thereon, shall be
paid to the Physician Executive upon the earlier to occur of (i) closing of the
IPO, or (ii) the redemption of all of the outstanding shares of Series A
Preferred Stock of the Company, or (iii) the conversion of all of the
outstanding shares of the Series A Preferred Stock of the Company, or (iv) upon
any merger or consolidation where the Company is not the survivor.
4
(d) The amount of the Bonus Pool with
respect to each Bonus Year, if any, shall be equal to ten percent (10%) of
the amount of the excess, if any, of (A) Operating Revenues (as defined in
Section 3.2(e) below) for the calendar year in which the Bonus Year occurs
over (B) Operating Expenses (as defined in Section 3.2(c) below) for the
calendar year in which the Bonus Year occurs.
(e) For purposes of this Section 3.2,
"Operating Revenues" shall be determined by the Company and the Chief
Physician Executive Officer pursuant to established procedures, and shall
mean all revenues earned by the Company and its controlled subsidiaries
whose revenues are consolidated with those of the Company during such Bonus
Year, including revenues from or in respect of the Company's direct or
indirect (i) provision of professional services, group consulting fees,
specialty contract and managed care risk taking revenues, (ii) provision of
related non-professional services, and (iii) sales of products related to the
provision of professional and non-professional services, plus an amount equal to
the lab and ancillary testing revenues of Baltimore Medical Group LLC, a
Maryland limited liability company ("BMG") and any Additional Primary Care
Entities as defined in the Practice Purchase Agreement of even date herewith
among the Company and other parties. "Operating Expenses" shall mean all
expenditures made by the Company in the ordinary course of its business during
the Bonus Year associated with the Company's provision of services and sale of
products, including corporate, administrative, lab and other ancillary salaries
and overhead, employed physician salaries and group information system expenses
and shall also include routinely scheduled payments in respect of the Company's
financing activities (such as scheduled amortization of principal and interest
on debt and dividends on securities), state, federal and local tax payments and
the amount of any reasonable reserves which the Board sets aside or establishes
to meet working capital requirements as such reserves are approved as being
adequate by the Accountants, future liabilities or contingencies or otherwise,
plus all expenses of BMG associated with lab and ancillary testing revenue.
"Operating Expenses" shall not include capital expenditures made by the Company,
including, without limitation, for the acquisition of physician practices, or
non-scheduled payments in retirement or redemption of debt or securities issued
by the Company. For purposes of this Section 3.2, references to "the Company"
shall include any Subsidiary of the Company. The Company agrees to treat the
Physician Executive and other Company employees fairly and in good faith with
respect to the calculation of the Bonus Pool, and not unfairly to attempt to
discriminate against the Physician Executive, whether by lowering Operating
Revenues, increasing Operating Expenses, shifting the same to or from any year
or otherwise, for the purpose or with the intention of lowering the amount of
the Bonus Pool in any year.
(f) A failure by the Company to make
available to the Physician Executive, within the appropriate time period
provided in Section 3, cash equal to that portion of the Bonus Pool which the
Physician Executive is entitled to receive, shall constitute a breach of
this Agreement by the Company and shall entitle the Physician Executive to
terminate this Agreement for "constructive termination" under Section 4.4.
5
3.3 Stock; Option Grant.
(a) The Company has transferred to the
Physician Executive twenty-five (25) shares of the voting common stock of the
Company. As a result of duly adopted resolutions of the Company's directors
and shareholders, and the filing with the Maryland SDAT of Amended Articles of
Incorporation of the Company, such 25 shares of voting common stock have been
reclassified and a stock dividend declared, so that the Physician Executive
on the date hereof is the registered owner of 50,000 shares of the Company's
Class A Common Stock (the "Class A Common Stock"). On February 24, 1995, the
Company issued to the Physician Executive, in addition to the Stock, an
option (the "Option") to purchase an additional 50,000 shares of its Class A
Common stock (the "Additional Stock").
(b) So long as the Physician Executive's
employment hereunder has not been earlier terminated by the Company pursuant
to the provisions of Section 4.3(a) hereof, the Option shall vest in full upon
the earlier to occur of (i) a Change in Control of the Company, or (ii)
twenty-four (24) months from the Signing Date, or (iii) termination of the
Physician Executive's employment pursuant to Section 4.3(b) or Section 4.4
(such earlier date, the "Vesting Date"). The option price for the Additional
Shares shall be $25 in the aggregate; to the extent the number of shares, or
the class, or designation, of the Stock is changed as the result of a
reclassification, stock split, stock dividend or other similar event, the number
and/or class of shares of Additional Stock issuable under the Option shall be
adjusted accordingly. The option may not be exercised within one year of the
Vesting Date, except upon an earlier change in Control of the Company.
(c) All Stock and Additional Stock
transferred to the Physician Executive hereunder is and shall remain subject
to any transfer restrictions and other protections as are set forth in the
Company's Charter, By-laws, or in any Shareholder's Agreement, and the
certificates or other instruments representing such stock shall bear or contain
a legend or statement regarding such transfer restrictions.
(d) "Change in Control" shall mean the earlier
to occur of (i) a liquidating distribution to Company's shareholders (or
similar event); (ii) a contribution, consolidation or merger where Company is
not the survivor; (iii) any sale, exchange or other disposition of all, or
substantially all of Company's assets; (iv) any public offering of Company's
securities at a company value of at least $25,000,000 with proceeds to Company
of at least $15,000,000.
3.4. Withholding. The Company is authorized to
withhold from the amount of any Salary and Bonuses and any other things of value
paid to or for the benefit of the Physician Executive (other than transfers of
Stock), all sums authorized by the Physician
6
Executive or required to be withheld by law, court decree, or Physician
Executive order, including (but not limited to) such things as income taxes,
employment taxes, and employee contributions to fringe benefit plans sponsored
by the Company.
3.5 Participation in Physician Executive Benefit
Plans. The Physician Executive shall be permitted during the Term, if and to
the extent eligible, to participate in any group life, hospitalization or
disability insurance plan, health program, automobile allowance, pension plan
or similar benefit plan of the Company which may be available to other
comparable executives and professional employees of the Company, generally
on the same terms as such other executives.
3.6 Vacation. The Physician Executive will
receive at least 4 weeks vacation per year, to be scheduled and taken at the
Physician Executive's option at such times as his duties may permit. Should
the Company's policy provide for more vacation to comparable Physician
Executives the Physician Executive will be accorded such higher vacation.
Unused vacation time shall not be cumulated or carried over nor shall the
Physician Executive receive any compensation for unused vacation time.
3.7 Expenses. Subject to such policies as may
from time to time be established by the Board, the Company shall pay or
reimburse the Physician Executive for all ordinary, necessary and reasonable
expenses (including, without limitation, travel, meetings, dues, subscriptions,
fees, educational expenses, computer equipment and the like) actually incurred
or paid by the Physician Executive during the Term in the performance of the
Physician Executive's services under this Agreement (including, without
limitation, expenses incident to attendance at board or management meetings of
the Company, or its Subsidiaries or Affiliates), upon presentation of expense
statements or vouchers or such other supporting information as the Board may
require.
4. Termination.
4.1 Termination upon Death. If the Physician
Executive dies during the Term, the Physician Executive's employment shall
terminate as of the date of death of the Physician Executive.
4.2 Termination upon Disability. Notwithstanding
any other provision of this Agreement, if during the Term the Physician
Executive becomes physically, mentally or emotionally disabled, whether totally
or partially, as determined by an independent qualified physician, so that the
Physician Executive is, in the good faith determination of the Board,
substantially unable to perform his services hereunder for (i) a period of
three consecutive months, or (ii) shorter periods aggregating three months
during any twelve month period, the Company may at any time after the last day
of the three consecutive months of disability or on the last day of the
shorter period aggregating three months of disability, by written notice
7
to the Physician Executive, terminate the Physician Executive's employment
hereunder as of the date such written notice becomes effective.
4.3 Termination at Election of Company.
(a) Notwithstanding any other provision
of this Agreement, the Company may terminate the Physician Executive's
employment hereunder at any time upon: (i) the continued failure or refusal by,
or manifest inability of, the Physician Executive to perform his duties after
reasonable prior notice to the Physician Executive; (ii) the Physician Executive
engaging in any acts or omissions involving dishonesty or acts or omissions that
demonstrate a lack of integrity; (iii) the conviction of the Physician Executive
of a felony; (iv) the Physician Executive engaging in acts or omissions that
demonstrably and materially injure the business and affairs of the Company,
monetarily or otherwise; and/or (v) any knowing material misrepresentation made
by the Physician Executive to the Company or any material breach by the
Physician Executive of his obligations hereunder.
(b) In addition to the Company's right
to terminate the Physician Executive's employment pursuant to Section 4.3(a),
and notwithstanding any other provision of this Agreement, the Company may,
for any or for no reason, terminate the Physician Executive's employment upon
60 days prior written notice to the Physician Executive.
4.4 Termination by the Physician Executive.
(a) Provided that the Physician Executive
has delivered to the Board at least sixty (60) days prior written notice setting
forth in reasonable detail any alleged material breach by the Company of this
Agreement or other acts or omissions engaged in by the Company constituting
"constructive termination" of the Physician Executive's employment with the
Company, which breach, acts or omissions have not been cured by the Company as
of the end of such period to the reasonable satisfaction of the Physician
Executive, then, notwithstanding any other provision of this Agreement, the
Physician Executive shall be entitled to terminate his employment for such
reasons, effective immediately upon the delivery by the Physician Executive to
the Board of a notice to the effect that such breach, acts or omissions have not
been cured to the reasonable satisfaction of the Physician Executive; provided,
however, that if such constructive termination is caused by the Physician
Executive's incapacity or inability to serve due to a disability of the type
described in Section 4.2 above and the Company elects to terminate the Physician
Executive pursuant to the provisions of Section 4.2, the Physician Executive
shall, for purposes of this Agreement, be deemed to have been terminated
pursuant to the provisions of Section 4.2 and not of this Section 4.4.
(b) For purposes of this Section 4.4,
"constructive termination" shall be limited to those circumstances where (i)
the Company creates working conditions that a reasonable person in the Physician
Executive's position would consider unreasonable or
8
intolerable which is not remedied by the Company sixty (60) days after notice
thereof given by the Physician Executive;; and (ii) such working conditions are
not generally applicable to other Physician executives of the Company.
4.5 Compensation and Benefits Following
Termination of Employment.
(a) In the event of termination of the
Physician Executive's employment for any reason other than a termination
pursuant to Section 4.3(b) or Section 4.4 (or a termination caused merely by the
expiration of the Term): (i) all compensation and other benefits payable or
provided hereunder shall cease as of the date of termination; (ii) Base Salary
(if any) then payable or accrued through the date of termination; (iii) all
accrued benefits (if any) then payable to the Physician Executive pursuant to
the terms of any plans or arrangements referred to in Section 3.5 shall be paid
to the Physician Executive (or to his heirs, legatees and/or legal
representatives) through the date of termination; and (iv) any shares of
Additional Stock issuable pursuant to Section 3.3, shall immediately be
canceled.
(b) In the event of termination of the
Physician Executive's employment pursuant to Section 4.3(b) or Section 4.4, the
Physician Executive (or, in the event of the Physician Executive's subsequent
death or disability, his heirs, legatees and/or legal representatives) shall
receive, when and as the same would have been payable hereunder if the Physician
Executive's employment had not been so terminated, each of the following
payments and benefits:
(i) all accrued benefits (if
any) then payable to the Physician Executive pursuant to the terms of any plans
or arrangements referred to in Section 3.5;
(ii) with respect to any periods
on or prior to June 30, 1996, all payments of the full Base Salary which
would have been due to the Physician Executive through June 30, 1996, at the
times such payments would otherwise be made, all as if this Agreement were
still in effect;
(iii) with respect to any periods
after June 30, 1996, 50% of the Base Salary which would have been due to the
Physician Executive from July 1, 1996 through the remainder of the Term, at
the times such payments would otherwise be made, all as if this Agreement were
still in effect;
(iv) with respect to any periods
on or prior to June 30, 1996, all payments in respect of all Bonuses that the
Physician Executive would have received with respect to each calendar year, or
each portion thereof, through June 30, 1996, at the times such payments would
otherwise be made, all as if this Agreement were still in effect;
(v) with respect to any periods
after June 30, 1996, 25% of the payments in respect of all Bonuses that the
Physician Executive would have received with
9
respect to each calendar year, or each portion thereof, from July 1, 1996
through the remainder of the Term, at the times such payments would otherwise
be made, all as if this Agreement were still in effect; and
(vi) subject to the provisions
of the Company's Amended and Restated Articles, By-laws and any Shareholder's
Agreement, all of the shares of Additional Stock issuable under the Option
pursuant to Section 3.3 shall be issued to the Physician Executive free of
any restrictions.
(c) In the event of termination under
Section 4.2 (disability), the Physician Executive or his legal representative,
as the case may be, shall, in addition to such other payments as may be due
hereunder, be entitled to receive the proceeds of any disability policies
maintained by the Company and payable to the Physician Executive.
5. Certain Covenants of the Physician Executive.
5.1 Necessity for Covenants. The Physician
Executive acknowledges that (i) the Company, its Subsidiaries and its Affiliates
(as defined in Section 5.2) are engaged in the Business, and will in the future
be engaged in the Business; (ii) his work and providing management services to
health care entities for the Company and its Affiliates will give him access to
customers and suppliers of, and trade secrets of and confidential information
concerning, the Company, its Subsidiaries and its Affiliates; and (iii) the
agreements and covenants contained in this Section 5 are essential to protect
the business and goodwill of the Company, its Subsidiaries and its Affiliates.
In order to induce the Company to enter into this Agreement and pay the
compensation and other benefits at the levels requested by the Physician
Executive, the Physician Executive enters into the following covenants:
5.2 Definitions.
(a) For purposes of Sections 5.3 through
5.8 only, the term "Company" shall include the Company and all of the Company's,
Subsidiaries and Affiliates.
(b) "Provider" shall mean any health
care service provider or Affiliate thereof to whom the Company provided
management or other services.
(c) "Payor" means any insurer, employer,
health maintenance organization, preferred provider organization, health
benefit plan or other entity or organization to which, or to whose members,
insured's, employees, enrollees, beneficiaries or other persons affiliated
with it (collectively "Beneficiaries"), the Company provides services or
products.
(d) "Service Area" means the geographic
area in which the Company provides health care services and in which the
Beneficiaries of those services
10
generally reside, which shall include all areas within a 25 mile radius of the
site of any Provider's office.
(e) "Subsidiary" means any person or
entity in which the Company owns, beneficially or otherwise, an equity interest
of more than 50%.
(f) "Affiliate" means a Subsidiary of
the Company; a person or entity which is owned, controlled, or operated
by the Company; any person owning an equity interest in the Company; any person
who has appointed the Company as its exclusive agent for the provision of
professional services and the collection of revenues therefrom; and any
partner, member, employee, owner or agent of any Affiliate and any person
or entity which is under common ownership, control or operation with the
specified person or entity.
5.3 Restrictions. During the Term and, unless
the Physician Executive's employment is terminated other than pursuant to
Sections 4.3(b) or 4.4 hereof, for a period of twelve (12) months after the
Physician Executive's employment hereunder is terminated (the "Termination
Date") (the "Restricted Period"), the Physician Executive shall not, directly
or indirectly, for himself or on behalf of any other person, firm, corporation
or other entity, whether as a principal, agent, employee, stockholder,
partner, officer, member, director, sole proprietor, or otherwise:
(a) call upon or solicit any Provider
for the purpose of persuading the Provider to engage the Physician Executive
or any other person, firm, corporation or other entity to provide services
which are the same or similar to those the Company provided to the Provider;
(b) call upon or solicit any Payor for
the purpose of persuading the Payor to engage any person or entity other
than the Company to provide health care services to the Payor with respect to
any of its Beneficiaries in the Service Area;
(c) solicit, participate in or promote
the solicitation of any person who was employed by the Company or a Provider
at any time during the twelve (12) months preceding the Termination Date to
leave the employ of the Company, or hire or engage any of those persons;
(d) make any disparaging remarks about
the Company's business, services or personnel;
(e) interfere in any way with the
Company's business, prospects or personnel; or
(f) become affiliated with or render
services to any person engaged in any business that competes with the Business
within the Service Area, directly or
11
indirectly, in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, employee, trustee
or consultant; provided, however, that the Physician Executive may own, directly
or indirectly, solely as an investment, securities which are publicly traded if
the Physician Executive (a) is not a controlling person of, or a member of a
group which controls, the issuer and (b) does not, directly or indirectly, own
5% or more of any class of securities of the issuer.
5.4 Trade Secrets and Confidential Information
5.4.1 Trade Secrets Defined. The term
"Trade Secrets," as used in this Agreement, includes, without limitation,
(i) all information concerning billing practices and procedures of the
Company, (ii) the rates and amounts that the Company pays to its personnel,
(iii) information about the Company's contracts with insurers, health
maintenance organizations, employers, and other payors, (iv) all formulae,
compilations, programs, devices, lists, methods, techniques or processes
of the Company, and (v) all other information of the Company that would be
deemed to be "trade secrets" within the meaning of the Maryland Uniform Trade
Secrets Act (the "Act").
5.4.2 Confidential Information Defined. Any
other information not qualifying as a Trade Secret, but relating to the business
of the Company which is disclosed by the Company to the Physician Executive,
or is discovered by the Physician Executive in the course of employment, is
Confidential Information.
5.4.3 Duty to Maintain Secrecy and
Confidentiality. During the Period of the Physician Executive's employment with
the Company, the Physician Executive shall maintain the secrecy and
confidentiality of the Trade Secrets and the Confidential Information and shall
not (i) divulge, furnish or make accessible to anyone or in any way or use, for
his own benefit or for the benefit of any other individual firm or entity (other
than in the ordinary course of the Company's business), any Trade Secret or
Confidential Information; (ii) take or permit any action to be taken which would
reduce the value of the Trade Secrets or Confidential Information to the
Company; or (iii) otherwise misappropriate or suffer the misappropriation of
the Trade Secrets or the Confidential information, within the meaning of the
Act. After the Termination Date, Physician Executive shall continue to maintain
the secrecy and confidentiality of such information, but only to the extent that
the Physician Executive is prohibited from directly or indirectly competing with
Company pursuant to the provisions of Section 5.3.
5.4.4 Information Which is Publicly Known.
Notwithstanding anything herein to the contrary, the obligations of secrecy and
confidentiality set forth herein shall not apply to any information which is now
generally publicly known or which subsequently becomes generally publicly known
other than as a direct or indirect result of the breach of this Agreement by
the Physician Executive, or which is required by law or order of any court to be
disclosed.
12
5.5 Property of the Company. All memoranda,
notes, lists, records and other documents or papers (and all copies thereof),
including but not limited to, such items stored in computer memories, on
microfiche or by any other means, made or compiled by or on behalf of the
Physician Executive, or made available to the Physician Executive concerning the
Business, are and shall be the property of the Company and shall be delivered
to the Company promptly upon the termination of the Physician Executive's
employment with the Company or at any other time on request; provided however,
that the Physician Executive may inspect during normal business hours such
records as shall be necessary for the purpose of assisting the Physician
Executive to file, or prepare for an audit of, his personal income tax returns.
5.6 Physician Executive's Ideas, Etc. All
inventions, prototypes, discoveries, improvements, innovations and the like
("Inventions") and all works of original authorship or images that are fixed in
any tangible medium of expression and all copies thereof ("Works") which are
designed, created or developed by Physician Executive, solely or in conjunction
with others, in the course of performance of the Physician Executive's duties
which relate to the Business, shall be made or conceived for the exclusive
benefit of and shall be the exclusive property of the Company. The Physician
Executive shall immediately notify the Company upon the design, creation or
development of all Inventions and Works. At any time thereafter, the Physician
Executive, at the request and expense of the Company, shall execute and deliver
to the Company all documents or instruments which may be necessary to secure or
perfect the Company's title to or interest in the Inventions and Works,
including but not limited to applications for letters of patent, and extensions,
continuations or reissues thereof, applications for copyrights and documents or
instruments of assignment or transfer. All Works are agreed and stipulated to be
"works made for hire," as that term is used and understood within the Copyright
Act of 1976, as amended. To the extent any Works are not deemed to be works made
for hire as defined above, and to the extent that title to or ownership of any
Invention or Work and all other rights therein are not otherwise vested
exclusively in the Company, the Physician Executive shall, without further
consideration but at the expense of the Company, assign and transfer to the
Company the Physician Executive's entire right, title and interest (including
copyrights and patents) in or to those Inventions and Works.
5.7 Rights and Remedies Upon Breach. If the
Physician Executive breaches, or threatens to commit a breach of, any of the
provisions of Sections 5.1 through 5.6 (the "Restrictive Covenants"), the
Company shall, in addition to its right immediately to terminate this Agreement,
have the right and remedy (which right and remedy shall be independent of
others and severally enforceable, and which shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company under law or in
equity) to have the Restrictive Covenants specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach could cause
13
irreparable injury to the Company or its Affiliates and that money damages may
not provide adequate remedy to the Company.
5.8 Covenants Currently Binding Physician
Executive. The Physician Executive warrants that his employment by the Company
will not (a) violate any non-disclosure agreements, covenants against
competition, or other restrictive covenants made by the Physician Executive
to or for the benefit of any previous employer or partner, or (b) violate or
constitute a breach or default under, any statute, law, judgment, order,
decree, writ, injunction, deed, instrument, contract, lease, license or permit
to which the Physician Executive is a party or by which the Physician
Executive is bound.
5.9 Litigation. There is no litigation,
proceeding or investigation of any nature (either civil or criminal) which is
pending or, to the best of the Physician Executive's knowledge, threatened
against or affecting the Physician Executive or which would adversely affect his
ability to substantially perform the duties herein.
5.10 Review. The Physician Executive has received
or been given the opportunity to review the provisions of this Agreement, and
the meaning and effect of each provision, with independent legal counsel of the
Physician Executive's choosing.
5.11 Severability of Covenants. The Physician
Executive acknowledges and agrees that the Restrictive Covenants are reasonable
and valid in geographical and temporal scope and in all respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.
5.12 Blue-Penciling. If any court determines
that any of the Restrictive Covenants, or any part thereof, is unenforceable
because of the duration or geographic scope of such provision, such court shall
have the power to reduce the duration or scope of such provision, as the case
may be, and, in its reduced form, such provision shall then be enforceable
and shall be enforced. If any such court declines to so revise such covenant,
the parties agree to negotiate in good faith a modification that will make
such duration or scope enforceable.
5.13 Enforceability in Jurisdictions. The parties
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of such
Covenants. If the courts of any one or more of such jurisdictions hold any
Restrictive Covenant unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties that such determination not bar
or in any way affect the Company's right to the relief provided above in the
courts of any other jurisdiction within the geographical scope of such
Covenants, as to breaches of such
14
Covenants in such other respective jurisdictions, such Covenants as they
relate to each jurisdiction being, for this purpose, severable into diverse
and independent covenants.
5.14 Extension. If the Physician Executive
violates any Restrictive Covenant, the Company shall not be deprived of the
full benefit of the period of the covenant. Accordingly, the duration of
that covenant shall be extended by the period of any violation of that
covenant.
5.15 Remedies. The Company shall be entitled to
injunctive or other equitable relief because it will be caused irreparable
injury and damage by a breach of the provisions of any of the Restrictive
Covenants. The right to injunctive relief shall include the right to both
preliminary and permanent injunctions. The Company shall not be required to post
a bond or other similar assurance if it brings an action to enforce the
provisions of any of the Restrictive Covenants. The Company's right to equitable
relief shall not preclude any other rights or remedies which the Company may
have, all of which rights and remedies are cumulative.
6. Dispute Resolution.
6.1 Costs of Litigation. If either party files
suit or brings an arbitration proceeding to enforce its rights under this
Agreement, the prevailing party shall be entitled to recover from the other
party all expenses incurred by it in preparing for and in trying the case,
including, but not limited to, investigative costs, court costs and reasonable
attorney's fees.
6.2 Consent to Jurisdiction. The parties submit
to the jurisdiction and venue of the courts of the State of Maryland.
6.3 No Jury Trial. NEITHER PARTY SHALL ELECT
A TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
6.4 Arbitration. Any dispute between the
Company and the Physician Executive concerning any part of the Physician
Executive's compensation arising under Section 3 or Section 4 hereof (including
the amount of the Bonus Pool) shall be resolved by binding arbitration
pursuant to the terms of Schedule 6.4, attached hereto as a part hereof.
7. Other Provisions.
7.1 Notices. Any notice or other communication
required or which may be given hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed, sent by facsimile transmission
or sent by certified, registered or express mail, postage paid, and shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, four days after the date of mailing, as
follows:
15
(i) if to the Company, to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: President
with copies to:
St. Xxxxxx Medical Center, Inc.
c/o Xxxx Xxxxx
0000 Xxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxxx, Esquire
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
(ii) if to the Physician Executive, to:
Xxxxx X. Xxxxxx
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Any party may by notice given in accordance with this Section
to the other party designate another address or person for receipt of notices
hereunder.
7.2 Entire Agreement. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings, written or oral,
with respect thereto, including the Prior Agreement.
7.3 Waivers and Amendments. This Agreement may
be amended, modified, superseded, canceled, renewed or extended, and the terms
and conditions hereof
16
may be waived, only by a written instrument signed by the Physician Executive
and a duly authorized officer of the Company (each, in such capacity, a party)
or, in the case of a waiver, by the party waiving compliance. No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
party of any right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
7.4 Governing Law. This Agreement has been
negotiated and is to be performed in the State of Maryland, and shall be
governed and construed in accordance with the laws of the State of Maryland
applicable to agreements made and to be performed entirely within such State.
7.5 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.
7.6 Confidentiality. Neither party shall
disclose the contents of this Agreement or of any other agreement they have
simultaneously entered into to any person, firm or entity, except the agents or
representatives of the parties, or except as required by law.
7.7 Word Forms. Whenever used herein, the
singular shall include the plural and the plural shall include the singular.
The use of any gender, tense or conjugation shall include all genders, tenses
and conjugations.
7.8 Headings. The Section headings have been
included for convenience only, are not part of this Agreement, and are not
to be used to interpret any provision hereof.
7.9 Binding Effect and Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties, their
successors, heirs, personal representatives and other legal representatives.
This Agreement may be assigned by the Company to any entity which buys
substantially all of the Company's assets. However, the Physician Executive
may not assign this Agreement without the prior written consent of the Company.
7.10 Separability. The covenants contained in this
Agreement are separable, and if any court of competent jurisdiction declares
any of them to be invalid or unenforceable, that declaration of
invalidity or unenforceability shall not affect the validity or enforceability
of any of the other covenants, each of which shall remain in full force and
effect.
7.11 Consent or Approval. Whenever under the terms
of this Agreement the approval or consent of the Company is required or the
Company must make any
17
determination, the Company, unless this Agreement specifically requires
otherwise, may not unreasonably withhold or delay that consent or approval.
7.12 Background. The Background is a part of
this Agreement.
IN WITNESS WHEREOF, the parties, intending to be legally
bound, have executed this Agreement or caused it to be executed and attested by
their duly authorized officers as a document under seal on the day and year
first above written.
ATTEST/WITNESS: DOCTORS HEALTH SYSTEM, INC.
, Secretary By: (SEAL)
___________________ __________________________
Xxxxxxx Gold, President
PHYSICIAN EXECUTIVE:
(SEAL)
___________________ __________________________
Xxxxx X. Xxxxxx
18
SCHEDULE 6.4
ARBITRATION PROCEDURE
1. Institution of Arbitration Proceeding.
1.1. Any party to this Agreement (an "Initiating Party") may initiate
an arbitration proceeding (the "Proceeding") to resolve a dispute subject to
resolution under this Schedule (a "Dispute") by giving written notice (the
"Dispute Notice") to the other party (the "Responding Party") to such Dispute.
The Dispute Notice shall describe the substance of the Dispute with sufficient
specificity to give the Responding Party adequate notice of its nature. Unless
otherwise specified, time periods specified in this Schedule 6.4 shall be
calculated from the date of the Dispute Notice (the "Commencement Date").
2. Selection of Arbitral Panel.
2.1. The Arbitral Panel (the "Panel") shall consist of three
arbitrators, two of whom (the "Party Designated Arbitrators") shall be selected
by the parties pursuant to Section 2.2 hereof. The third arbitrator shall be a
"Neutral Arbitrator" selected by the Party Designated Arbitrators pursuant to
Section 2.3 hereof.
2.2. The Initiating Party shall designate its Party Designated
Arbitrator in the Dispute Notice. Within fifteen days of the Commencement Date,
the Responding Party shall designate its Party Designated Arbitrator.
2.3. Within forty-five days of the Commencement Date, the two Party
Designated Arbitrators shall agree upon and appoint a Neutral Arbitrator who
shall be an accountant and a partner in an international, "Big Six" accounting
firm.
2.4. Each party agrees promptly to disclose to the other party any
circumstances known to it which would cause reasonable doubt regarding the
impartiality of an individual under consideration or appointed as the Neutral
Arbitrator and any such individual shall also promptly disclose to the parties
any such circumstances.
2.5. During the process of selecting the Neutral Arbitrator and
thereafter during the course of this Proceeding, ex parte communications with
the Neutral Arbitrator or any individual under consideration as the Neutral
Arbitrator are prohibited and shall be disclosed by the party making any ex
parte communication, the Neutral Arbitrator or any individual under
consideration as a Neutral Arbitrator immediately upon discovery.
19
3. Pre-Hearing Procedures.
3.1. Within fifteen days of the appointment of the Neutral Arbitrator,
the Panel may convene a Pre-Hearing Conference to, inter alia, familiarize the
Neutral Arbitrator with the nature of the Dispute between the Parties, determine
the need for and the nature of discovery and establish a procedural schedule for
the further conduct of the Proceeding.
4. Discovery.
4.1. Discovery, appropriately limited by the nature of the Dispute, is
expressly contemplated and permitted. However, the Parties acknowledge and agree
that one of the benefits of resolving Disputes through arbitration is the
opportunity reasonably to limit discovery. The Parties further agree that they
will endeavor to agree upon procedures and a schedule for discovery that will
result in a prompt and fair hearing under these procedures.
4.2. Discovery requests and responses need not be served upon the Panel
but the Panel shall promptly convene upon motion of either party to resolve
discovery disputes, if any.
4.3. Discovery will be completed within sixty days of the Pre-Hearing
Conference.
5. Submission of Evidence and Hearing.
5.1. The Panel may receive evidence in the form of written statements
filed prior to Hearing for cross-examination on such statements or may receive
oral testimony at Hearing. Each party shall be entitled to submit rebuttal
testimony. The Panel may also permit opening and closing statements of counsel
at Hearing.
5.2. The Panel shall convene for Hearing the evidence and argument of
the parties at a time and place to be established by the Panel. The Hearing
shall be held no later than thirty days after the close of discovery or thirty
days after the Pre-Hearing Conference if there is no discovery.
5.3. At the Hearing, and for all other purposes related to the
Proceeding, the Initiating Party shall be deemed the party seeking affirmative
relief, shall go first and shall bear the burdens of proof and of persuasion.
5.4. The Hearing shall be transcribed.
6. Post-Hearing Procedures.
6.1. The Panel may request Post-Hearing briefs and, if it does
so, shall establish a schedule for submission of such briefs at the close
of Hearing.
20
6.2. Within thirty days of the later of the close of the Hearing or its
receipt of Post-Hearing briefs, the Panel shall issue a written Decision and
Award which shall include findings of fact and explain the reasons for the
Decision.
7. Confidentiality.
7.1. Unless otherwise agreed, the Proceeding and all information and
documents relating to it shall be kept confidential by the Parties, the Panel,
witnesses and all other persons involved with the Proceeding. Specifically, but
without limitation, the Confidential Information of the parties shall be
safeguarded and maintained as confidential by all participants in the
Proceeding.
8. Costs.
8.1. The Neutral Arbitrator's fees and expenses, and all expenses of
the Pre-Hearing Conference, Hearing or any other aspect of the Proceeding not
directly attributable to either party, such as the cost of transcription of
Panel Hearings and rental of Hearing rooms, shall be borne equally by the
parties.
8.2. The Panel shall in its Decision and Award determine whether and to
what extent either party is a prevailing party and entitled to an award of its
costs, including attorneys' fees.
9. Miscellaneous.
9.1. The parties may agree at any time to depart from these procedures,
including the time periods herein established. Although not favored, the Panel
may also permit departures from these procedures and time periods absent
agreement of the parties to prevent a miscarriage of justice.
9.2. Until the Neutral Arbitrator is appointed, any issue relating to
the Proceeding that is not provided for in these procedures shall be governed by
the Commercial Arbitration Rules of the American Arbitration Association. Once
the Neutral Arbitrator is appointed, the Panel is empowered to resolve all
issues not contemplated by these procedures and upon which the parties cannot
agree.
9.3. The Panel may grant any remedy or relief that it deems just and
equitable and within the scope of the agreement of the parties, including, but
not limited to, specific performance of a contract, injunctive relief or other
equitable relief.
9.4. These procedures contemplate a two-party Proceeding. If there are
more than two parties to a Proceeding, and they are unable by unanimous
agreement to align themselves as two parties, each party shall be entitled to
all the rights of a party hereunder, including
21
specifically but without limitation the right to appoint a Party Designated
Arbitrator, and the Neutral Arbitrator shall have a number of votes as to all
matters decided by the Panel equal to the sum of (i) the votes of all Party
Designated Arbitrators, and (ii) one.
9.5. The Panel may, in its discretion, convene and act by
conference call for all purposes other than taking oral testimony.
22
