1
EXHIBIT 10.6
AMENDMENT NO. 1
THIS INSTRUMENT, dated as of October 30, 1995, by and among Birman
Managed Care, Inc., a Tennessee corporation (the "Company"), BMC Health Plans,
Inc., a Tennessee corporation ("Birman"), and Xxxx X. Xxxx, an Arizona resident
("Executive"), constitutes a first amendment to that certain Employment
Agreement by and among the Company, Birman and Executive dated as of July 1,
1995 (the "Agreement"). The Company, Birman and Executive are hereinafter
referred to as the "Parties."
RECITALS:
WHEREAS, the Parties desire to amend the Agreement;
NOW, THEREFORE, for and in consideration of the premises set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by each of the parties, intending to be legally bound,
agree as follows:
1. Section 4.04 of the Agreement is hereby amended by striking the
whole thereof and by substituting in lieu thereof the following:
4.04 PARTICIPATION IN BENEFIT PLAN. Executive shall be entitled to
participate in all employee qualified and non-qualified deferred
compensation plans or supplemental income plans or programs maintained
by the Company or Birman, including any Section 401(k) plan adopted by
the Company or Birman, according to the terms and conditions thereof.
Executive shall also be entitled to participate in Birman's 1995 Stock
Option Plan, according to the terms and conditions of said plan and the
Stock Option Award Agreement attached hereto and shall be granted the
option to purchase five hundred thousand (500,000) shares of the $.001
par value common stock of Birman at a price of one dollar ($1.00) per
share, representing the fair market value of such shares on the date of
grant, exercisable in accordance with the terms of the Stock Option
Award Agreement attached hereto (the "Options").
2. Article 5 of the Agreement is hereby amended by striking Sections
5.01, 5.02 and 5.03 thereof and by substituting in lieu thereof the following:
5. ASSET PURCHASE; SHAREHOLDER AGREEMENT.
5.01 ASSET PURCHASE. The Company shall purchase from Executive,
and Executive shall sell, assign, transfer and deliver to the Company,
all furniture, office equipment, computer hardware systems and computer
software
2
programs physically located as of the date hereof on the premises of
the Executive's offices at 0000 Xxxx XxXxxxxx, Xxxxx X, Xxxxxxxxxx,
Xxxxxxx as described at Exhibit A hereto (the "Assets"). The purchase
price for the Assets is fifteen thousand and no/100 dollars
($15,000.00). By execution hereof, Executive acknowledges receipt of
such consideration.
3. Section 5.04 of the Agreement is hereby amended by striking any
references to Class A Stock and by renumbering Section 5.04 as Section 5.02.
4. Article 7 of the Agreement is hereby amended by striking any
references to Class A Stock.
5. The amendments delineated above constitute the sole amendments to
the Agreement. The Agreement and the above amendments contain the entire
agreement of the Parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be executed as of the date first above written.
BIRMAN MANAGED CARE, INC.
By:______________________________________
Xxxxx X. Xxxxxx, M.D.
President and Chief Executive Officer
BMC HEALTH PLANS, INC.
By:______________________________________
Xxxxx X. Xxxxxx, M.D.
Chairman
_________________________________________
XXXX X. XXXX
2
3
EXHIBIT A
2 Xxxxx, Particle Board Desks
2 Grey, Particle Board Desks
1 Grey, Particle Board Desk with Right Return
5 Grey Desk Chairs on Rollers
2 Black, 4 drawers, Legal File Cabinets
1 Black, Particle Board Shelves (36 x 28 x 15)
1 Xxxxx, Particle Board Microwave Cart on Wheels
4 Black, Trash Cans
1 Texas Instruments Travelmate 4000 portable with mouse 486 DX2 50MHZ with
case
1 Hewlett Packard, Laser Jet 4L, Printer
1 Hawlett Packard, Fax -- 900, Fax Machine
Miscellaneous Office Supplies
A-1
4
BAW, INC.
BIRMAN MANAGED CARE, INC.
EMPLOYMENT AGREEMENT
WITH
XXXX X. XXXX
DATED AS OF JULY 1, 1995
PREPARED BY:
XXXXXX X. XXXXX, XXX.
XXXXX 0000, XXXXX XXXXX
0000 XXXXXXXXX XXXX, X.X.
XXXXXXX, XXXXXXX 00000
000-000-0000
000-000-0000 (FACSIMILE)
5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 1st day of July, 1995, by and among BAW, INC., a Tennessee corporation (the
"Company"), BA-FORUM HEALTH CARE, INC. D/B/A BIRMAN MANAGED CARE, INC., a
Tennessee corporation ("Birman") and XXXX X. XXXX, an Arizona resident
("Executive").
W I T N E S S E T H:
WHEREAS, Executive is currently employed by the Company as a marketing
specialist;
and
WHEREAS, the Company and Executive desire that Executive be employed in
accordance with the terms and conditions hereof (i) as President of BA-Forum
Health Care, a division of the Company established to market the Company's
products and services, and (ii) as the Company's Executive Vice President -
Sales and Marketing; and
WHEREAS, the Company is a wholly-owned subsidiary of Birman;
NOW, THEREFORE, in consideration of the foregoing, the payment of $1.00
and other good and valuable consideration and the mutual covenants and
agreements contained herein, the receipt and sufficiency whereof the parties
hereby acknowledge, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive, and Executive
hereby accepts employment from the Company (i) as President of BA-Forum Health
Care ("BAForum"), and (ii) as the Company's Executive Vice President - Sales and
Marketing. Executive shall perform services for the Company for the period and
upon the terms and conditions set forth in this Agreement and shall hold such
other positions with the Company or its Affiliate (as hereinafter defined) as
may be mutually agreed upon, from time to time. Executive acknowledges receipt
of the separate consideration of four thousand and no/100 dollars ($4,000.00),
the sufficiency of which is hereby acknowledged, for entering into this
Agreement.
2. TERM. Subject to the provisions for termination set forth herein,
the term of Executive's employment under this Agreement shall commence as of the
date hereof and shall continue up to and including June 30, 2001 (the "Initial
Term"). Thereafter, as of July 1 of each year beginning July 1, 2001, the term
of this Agreement shall be extended for an additional one (1) year.
6
3. POSITION AND DUTIES.
3.1 SERVICE WITH THE COMPANY. During the term of this Agreement,
Executive shall perform such duties as are customarily performed by one holding
such position in the same business as the Company shall, from time to time,
reasonably request. Executive also shall serve, for any period for which he is
elected, as a member of the Company's Board of Directors without additional
compensation.
3.2 PERFORMANCE OF DUTIES. Executive shall serve the Company faithfully
and to the best of his ability devote his full time, attention, skill and effort
exclusively to performing services for the Company pursuant to this Agreement
and shall not be employed or otherwise provide services to any other entity
without the prior written consent of the Company. Executive shall undertake such
reasonable travel to the corporate headquarters of the Company in Cookeville,
Tennessee and to such other locations in which the Company does, or proposes to
do, business as shall be necessary to perform Executive's duties hereunder.
Executive shall receive reimbursement for travel expenses in accordance with
Section 4.7.
4. COMPENSATION; BENEFITS.
4.1 BASE SALARY. The Company shall pay to Executive as compensation for
all services to be rendered by Executive under this Agreement a base salary
("Base Salary"), in accordance with the Company's customary payroll practices,
reduced by applicable federal, state and local withholding taxes, as a draw
against Incentive Compensation. From the date hereof up to and including
December 31, 1995, the Executive's Base Salary shall be one hundred sixty-five
thousand and no/100 dollars ($165,000) per annum. In subsequent years, the Base
Salary payable to Executive shall be reviewed by the Company's Board of
Directors, or the Compensation Committee thereof, at least annually. In
reviewing and setting Executive's Base Salary, the Board or Compensation
Committee, as the case may be, shall consider cost of living, results of
operations, financial condition, prospects, salary levels for similarly sized
companies in the Company's industry for comparable executive positions,
Executive's performance and other criteria deemed relevant by the Company in
assessing Executive's compensation.
4.2 INCENTIVE COMPENSATION. In addition to the Base Salary described in
Section 4.1, the Company shall pay Executive an annual performance-based bonus
("Incentive Compensation"), payable to Executive in cash not later than ninety
(90) days after the audit of the books of the Company for such annual period has
been completed by the Company's independent accountants, determined in
accordance with the following:
(a) On all Adjusted Gross Revenue from Managed Care Business
in Mississippi in the annual fiscal period for which the Incentive
Compensation is being calculated:
2
7
=============================================================================================================================
ANNUAL
ANNUAL ANNUAL INCENTIVE
INCENTIVE INCENTIVE COMPENSATION
ANNUAL ADJUSTED COMPENSATION COMPENSATION YEAR 3 AND
GROSS REVENUE YEAR 1 YEAR 2 THEREAFTER
-----------------------------------------------------------------------------------------------------------------------------
$800,000 to $2,000,000 7% 3.5% 1.75%
-----------------------------------------------------------------------------------------------------------------------------
On the next $1,000,000 6% 3% 1.5%
-----------------------------------------------------------------------------------------------------------------------------
On the next $1,000,000 5% 2.5% 1.25%
-----------------------------------------------------------------------------------------------------------------------------
Above $4,000,000 4% 2% 1%
=============================================================================================================================
(b) On all Adjusted Gross Revenue from Managed Care Business
(excluding Mississippi Managed Care Business) generated by a New Client
in the initial annual fiscal period for which the Incentive
Compensation is being calculated, Incentive Compensation equal to three
percent (3%) thereof; and
(c) On all Adjusted Gross Revenue from Managed Care Business
(excluding Mississippi Managed Care Business) generated by a Renewal
Client in the following subsequent fiscal periods for which the
Incentive Compensation is being calculated:
==========================================================================================================================
ANNUAL INCENTIVE ANNUAL INCENTIVE
ANNUAL ADJUSTED COMPENSATION COMPENSATION
GROSS REVENUE YEAR 2 YEAR 3 AND THEREAFTER
--------------------------------------------------------------------------------------------------------------------------
$0 and Above 1.5% .75%
==========================================================================================================================
Notwithstanding the foregoing, the Incentive Compensation payable in accordance
with Sections 4.2(b) and (c) shall not exceed the aggregate amount of two
hundred fifty thousand and no/100 dollars ($250,000) per annum. For purposes
hereof, "Adjusted Gross Revenue" means all management fee revenue actually
received and booked as a receipt by the Company from the management, sponsorship
or operation of Managed Care Plans less (i) a corporate expense allocation for
Birman general and administrative expenses attributable to the Company of six
percent (6%) of the Company's gross revenue and (ii) any adjustments, credits,
rebates or returns. "Affiliate" means a person that, directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person specified. "Managed Care Business" means
arrangements among health care providers, third-party payors and patients
developed and managed by the Company or an Affiliate that through capitated
payment arrangements or other financial incentives or disincentives and case
management endeavor to eliminate inefficiencies in health care delivery and
reduce unnecessary utilization of services while maintaining or improving
quality of care. "Managed Care Plan"
3
8
means a health plan offered to plan participants for which the health care
services provided thereunder are paid for in whole or in part by third-party
payors, including commercial insurers, Medicaid, Medicare and self-funded
employers. "New Client" means a Managed Care Plan that has not previously paid
management fees to the Company or its Affiliate for operation and management
services. "Renewal Client" means a Managed Care Plan that has paid management
fees to the Company or its Affiliate for operation and management services
rendered during the previous twelve (12) month period.
4.3 PARTICIPATION IN EXECUTIVE BONUS POOL. Executive shall be entitled
to participate in an executive bonus pool established by the Company ("Executive
Bonus Pool"), to which up to ten percent (10%) of the net pretax profits of the
Company derived from the Managed Care Business is allocable, in such amounts and
under such circumstances as determined from time to time by the Board or the
Compensation Committee thereof, as the case may be.
4.4 PARTICIPATION IN BENEFIT PLANS. Executive shall be entitled to
participate in all employee qualified and non-qualified deferred compensation
plans or supplemental income plans or programs maintained by the Company or
Birman, including any Section 401(k) plan adopted by the Company or Birman,
according to the terms and conditions thereof. Executive shall also be entitled
to participate in Birman's 1995 Stock Option Plan, according to the terms and
conditions of said plan, and shall be granted the option to purchase one hundred
thousand (100,000) shares of the $.001 par value common stock of Birman at a
price of one dollar ($1.00) per share, representing the fair market value of
such shares on the date of grant, exercisable sequentially at the rate of twenty
percent (20%) per year commencing on June 30, 1997 (the "Options").
4.5 BENEFIT PLANS. Executive shall be entitled to participate in any
and all plans, arrangements or distributions maintained by the Company
pertaining to or in connection with any pension, life, health insurance,
disability insurance or similar benefits provided by the Company to its
employees, as determined by the Company's Board of Directors pursuant to the
governing instruments which establish and determine eligibility and other rights
of the participants and beneficiaries under such plans or other benefit
programs.
4.6 VACATION AND SICK LEAVE. Executive will be entitled to participate
in the vacation and sick leave benefit program of the Company to the extent that
his position, title, salary and other qualifications make him eligible to
participate, but not less than twenty-one (21) days per year. Vacation time and
sick leave may not be accumulated after the end of any year and, to the extent
unused, shall have no economic value to Executive. Executive's use of vacation
time shall be subject to the prior approval of the Company.
4.7 EXPENSES. The Company will pay or reimburse Executive for all
reasonable and necessary travel and other out-of-pocket expenses incurred by
Executive in the performance of
4
9
duties under this Agreement, subject to the presentment of appropriate vouchers
in accordance with the Company's policies and procedures as adopted from time to
time.
4.8 OFFICE FACILITIES. The Company shall provide Executive with a
furnished office, together with such staff, equipment and materials as may be
reasonably necessary for Executive to fulfill his duties under this Agreement.
5. PURCHASE AND SALE OF BIRMAN STOCK; SUBSTANTIAL RISKS OF FORFEITURE;
VESTING.
5.1 PURCHASE AND SALE OF STOCK; VESTING. Pursuant to a Proposal and
Stock Subscription submitted to Birman by Executive of even date herewith,
Birman shall sell to Executive, and Executive shall purchase from Birman, four
hundred thousand (400,000) shares of Birman's Class A convertible preferred
stock, $.001 par value, described in the Certificate of Designation attached
hereto (the "Class A Stock"), at a purchase price of $.01 per share (the
"Purchase Price") for a total purchase price of four thousand and no/100 dollars
($4,000.00); provided, however, that Executive's right, title and interest in
and to the Class A Stock shall vest only in the following circumstances:
(a) As to the first increment of one hundred thousand
(100,000) shares, only following recognition by the Company of two
million dollars ($2,000,000) of Adjusted Gross Revenue earned by
BA-Forum;
(b) As to the second increment of one hundred thousand
(100,000) shares, only following (i) June 30, 1997 and (ii) recognition
by the Company in any annual fiscal period of three million dollars
($3,000,000) of Adjusted Gross Revenue earned by BAForum;
(c) As to the third increment of one hundred thousand
(100,000) shares, only following (i) June 30, 1998 and (ii) recognition
by the Company in any annual fiscal period of four million dollars
($4,000,000) of Adjusted Gross Revenue earned by BAForum; and
(d) As to the fourth increment of one hundred thousand
(100,000) shares, only following (i) June 30, 1999 and (ii) recognition
by the Company in any annual fiscal period of five million dollars
($5,000,000) of Adjusted Gross Revenue earned by BAForum.
5.2 SUBSTANTIAL RISK OF FORFEITURE. Any unvested shares of Class A
Stock held by Executive shall automatically revert, and be reconveyed, to the
Company in the following circumstances: If the Company tenders to Executive the
Purchase Price therefor (i) at any time during the 90-day period following the
cessation of Executive's employment with the Company for any reason; or (ii) at
any time during the 90-day period commencing July 1, 2000.
5
10
5.3 SECTION 83(b) ELECTION. The Company will assist Executive in making
an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended. Executive understands that the purpose of this election is to enable
Executive to avoid taxation on any appreciation in the value of the Class A
Stock that occurs between the date of purchase and sale and the dates the Class
A Stock fully vests.
5.4 SHAREHOLDER AGREEMENT. The Class A Stock and any common stock of
the Company issued to Executive upon exercise of the Options (the "Option
Stock") shall be subject to a Shareholder Agreement which includes provisions
customary to agreements of this type and, after June 30, 2000 if the Company is
not a reporting company under the Securities Exchange Act of 1934, as amended,
permits Executive to put the whole of his vested Class A Stock to the Company
and the Company to call the vested Class A Stock held by Executive at a price
per share based upon (i) the most recent independent valuation of the Company's
then extant qualified Employee Stock Ownership Plan (if available) or (ii) the
fair market value of the Class A Stock and the Option Stock.
6. CONFIDENTIALITY; RETURN OF MATERIALS.
6.1 CONSEQUENCES OF ENTRUSTMENT. Executive hereby acknowledges that (i)
Executive's services to the Company will be of a special, unique, extraordinary
and intellectual character, (ii) Executive's position with the Company will
place Executive in a position of confidence, responsibility and trust with
respect to the operations of the Company, and (iii) in reliance on Executive's
ethical responsibility and loyalty, the Company expects to entrust Executive
with highly sensitive, confidential, restricted and proprietary information
involving Trade Secret Information (as hereinafter defined). Executive
acknowledges that Executive is legally and ethically responsible for protecting
and preserving the Company's proprietary rights for use only for the Company's
benefit, and these responsibilities may impose limitations on Executive's
ability to pursue some kinds of business opportunities that might interest
Executive after Executive's employment.
6.2 DEFINITION OF "TRADE SECRET INFORMATION". It is acknowledged and
agreed that the Executive is experienced in the managed care industry and
possesses significant knowledge and information about the industry. Such
existing knowledge and information is not, for purposes of this Agreement,
"Trade Secret Information." For purposes of this Agreement, "Trade Secret
Information" means information, whether or not in written or tangible form, in
the possession of the Company and considered by the Company to be proprietary,
valuable and confidential, from which the Company derives economic value, actual
or potential, by such information not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use, and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. Trade Secret
Information includes, without limitation, (a) any data or information acquired
by Executive during his employment by the Company relating to the products,
services, business methods,
6
11
customer accounts or operations of the Company, its Affiliates or its customers,
and (b) the techniques and business methods for (i) applying scientific
literature to merge resources and clinical language used in defining medical
payments for purposes of Medicare diagnostic related group ("DRG") optimization,
(ii) utilizing concurrent case review activity to merge resources and clinical
language used in defining medical payments for the purpose of DRG optimization,
(iii) developing and managing health care provider organizations and providing
services thereto, (iv) developing reimbursement and at-risk systems under
capitation, prepayment, indemnity and other forms of compensatory arrangements,
and (v) managing the delivery, reporting and financing of health care services
in managed care and managed cost settings, including the systems, techniques,
strategies and methods used to compete successfully in these lines of business.
6.3 RESTRICTIONS ON USE AND DISCLOSURE OF TRADE SECRET INFORMATION.
Except as authorized by the Company, Executive shall not, during the term of
this Agreement and for so long after the termination of employment as the
information or data remains Trade Secret Information, directly or indirectly
divulge, furnish or make accessible to anyone or use in any way (other than in
the ordinary course of business of the Company) the Trade Secret Information.
6.4 RETURN OF MATERIALS. Upon the request of the Company and, in any
event, upon the termination of Executive's employment, Executive shall return to
the Company and leave at its disposal all copies of memoranda, notes, records,
drawings, manuals, computer programs, documentation, diskettes and other
documents or media, in Executive's possession or control, pertaining in any way
to the business, practices or techniques of the Company.
7. RESTRICTIONS ON COMPETITION.
7.1 PREMISES. The Company has invested prior to the date hereof and
expects to continue to invest considerable time, effort, and capital in
developing the business of the Company and enhancing the value and desirability
of the skills of its executives and technical personnel. This investment,
together with the Base Salary and Incentive Compensation payable to Executive,
Executive's entitlement to participate in the Executive Bonus Pool, the issuance
to Executive of the Class A Stock and the grant to Executive of the Options,
reflect the Company's expectation of receiving a considerable return from the
exclusive use of Executive's services and know-how in the future, free from any
risk that the Company's competitors may attempt to induce Executive to leave the
Company and wrongfully gain the benefit of the Company's investment. The partial
restraint set forth in Section 7.2 hereof does not, and cannot, provide complete
protection for the Company's investment, but the Company and Executive believe
that, in combination with the other provisions of this Agreement, it is a fair
and reasonable measure permitted under applicable law to protect the Company's
interests, giving due regard to both the interests of Executive and the
interests of the Company. Executive hereby (i) agrees that the restrictions
contained within Section 7 are reasonable and necessary
7
12
for the protection of the goodwill of the business of the Company during the
term of this Agreement and thereafter and that the limitations as to period of
time and geographic area contained in Section 7.2 are reasonable and necessary
for the protection of the Company's business; and (ii) acknowledges that the
Company would not have entered into this Agreement but for these restrictions.
7.2 COVENANT NOT TO COMPETE; SOLICIT. In consideration of Executive's
employment hereunder and the issuance to Executive of the Class A Stock and the
grant to Executive of the Options, during the term of this Agreement and for a
period of three (3) years from the date of expiration or termination of this
Agreement (at any time for any reason) Executive shall not:
(a) directly or indirectly, for himself, as an owner, partner,
principal, shareholder, officer, director, employee, or independent
contractor engage in the development, management or operation of (i)
independent practice associations ("IPAs"), physician-hospital
organizations ("PHOs"), management services organizations ("MSOs"),
preferred provider organizations ("PPOs"), integrated delivery systems
("IDS"), health maintenance organizations ("HMOs"), point of service
("POS") plans, long-term plans or other types of managed care
organizations ("MCOs") that contract with commercial third-party
payors, self-insured employers, health care purchasing cooperatives or
Medicare fiscal intermediaries for the delivery of health care services
within one hundred (100) miles from any city, town where the Company
has established such an IPA, PHO, MSO, PPO, IDS, HMO, POS plan or MCO;
or (ii) IPAs, PHOs, MSOs, PPOs, IDS, HMOs, POS plans, long-term plans
or other MCOs that contract with state Medicaid agencies for the
delivery of health care services within any state in which the Company
has established such an IPA, PHO, MSO, PPO, IDS, HMO, POS plans or MCO;
or
(b) attempt, directly or indirectly, to solicit or entice (i)
any employee of the Company to terminate his or her employment or to
become employed by any person, firm or corporation other than the
Company, or approach any such employee for any of the foregoing
purposes or authorize or assist in the taking of any such action by any
third party; (ii) any existing customer or client of the Company to
terminate or reduce its relationship with the Company; or (iii) any
prospective customer or client of the Company to refrain from doing
business with the Company.
7.3 DURATION. If Employee violates the restrictive covenant in Section
7.2 and the Company brings legal action for injunctive or other relief, the
Company shall not, as a result of the time involved in obtaining the relief, be
deprived of the benefit of the full period of the restrictive covenant.
Accordingly, unless Executive contests the alleged violation in a court of law
and is the prevailing party in a nonappealable decision of the applicable court,
the restrictive covenant shall be deemed to have the three-year post-employment
duration specified in Section 7.2 hereof computed from the date the relief is
granted but reduced by the period when the restriction began to run and the date
of the first violation by Executive. Notwithstanding the
8
13
foregoing, however, to the extent this provision is invalid or unenforceable
under the laws of any applicable jurisdiction, the remainder of Section 7 shall
be interpreted, status quo ante, as if Section 7.3 had never been included
herein and was an absolute nullity.
7.4 NO ADEQUATE REMEDY AT LAW. Executive hereby acknowledges and agrees
that a violation of any of the provisions contained in Section 7.2 will cause
irreparable damage to the Company, the exact amount of which may be impossible
to ascertain and that, for such reason, among others, the Company shall be
entitled to injunctive relief, both pendente lite and permanently, against
Executive to restrain any further violation of such provisions, and Executive
hereby (i) consents to any initiation by the Company in a court of competent
jurisdiction of any action to enjoin immediately any breach of this Agreement,
and (ii) hereby releases the Company from the requirement of posting any bond in
connection with temporary or interlocutory injunctive relief, to the extent
permitted by law. This provision with respect to injunctive relief shall not,
however, diminish the right of the Company to pursue any other rights and
remedies the Company may have against Executive, including, but not limited to,
the recovery of damages.
7.5 ATTORNEYS' FEES. Executive hereby agrees to reimburse the Company
for any legal or other expenses reasonably incurred by the Company in connection
with successfully seeking injunctive relief or other rights and remedies
pursuant to Section 7.4 by reason of Executive's violation of Section 7.2, in a
court of competent jurisdiction. In the event the Executive is found, in a court
of competent jurisdiction, not to have violated Section 7.2, then the Company
shall reimburse Executive's reasonable legal costs or other expenses incurred in
defense thereof.
7.6 SURVIVAL. The restrictions contained in this Section 7 shall inure
to the benefit of the Company and each of its Affiliates and shall survive the
termination of this Agreement.
8. TERMINATION OF EMPLOYMENT. This Agreement shall terminate prior to
its expiration upon the earliest to occur of any of the following events:
8.1 FOR CAUSE. Upon written notice by the Company to Executive
For Cause. "For Cause" means (i) any conduct which constitutes a felony
or another criminal act which involves moral turpitude; (ii) the
commission or participation of Executive in acts of personal
dishonesty; (iii) material breach by Executive of his obligations under
this Agreement, which breach is not cured within fifteen (15) days
after receipt of a notice of the breach; (iv) Executive (a) being
adjudicated as bankrupt or insolvent, (b) filing a voluntary petition
in bankruptcy or a petition or answer seeking a reorganization,
arrangement, composition, readjustment or other relief under any
provision of any insolvency law, (c) making an assignment for the
benefit of creditors, or (d) filing a petition for or consenting to the
appointment of any trustee, receiver or liquidator; (v) the engaging by
Executive in willful misconduct which is injurious to the Company;
9
14
(vi) dependence by Executive upon alcohol, prescription drugs or any
illegal substance; (vii) the failure of Executive to abide by the
Company's policies, procedures or protocols; or (viii) the failure of
Executive to carry out any lawful orders given to him by any officer or
by the Board of Directors of the Company;
8.2 OTHER CIRCUMSTANCES. Upon written notice by the Company to
Executive in the following circumstances: (i) the decision of the Board
of Directors of the Company within sixty (60) days following expiration
of the probationary period imposed upon Executive in connection with
the delivery to Executive of a written performance appraisal; (ii)
after March 31, 1996, the failure of the Company to generate at least
sixty thousand dollars ($60,000) in monthly Adjusted Gross Revenue in
the immediately preceding monthly fiscal period; (iii) after June 30,
1996, the failure of the Company to generate at least seven hundred
fifty thousand dollars ($750,000) of annual Adjusted Gross Revenue in
the immediately preceding twelve (12) month period; (iv) after June 30,
1997, the failure of the Company to generate at least three million
dollars ($3,000,000) of annual Adjusted Gross Revenue in the
immediately preceding twelve (12) month period; (v) after June 30,
1998, the failure of the Company to generate at least four million
dollars ($4,000,000) of annual Adjusted Gross Revenue in the
immediately preceding twelve (12) month period; and (vi) after June 30,
1999, the failure of the Company to generate at least five million
dollars ($5,000,000) of annual Adjusted Gross Revenue in the
immediately preceding twelve (12) month period;
8.3 DEATH. Upon Executive's death;
8.4 DISABILITY. Upon the Company's written notice, at the
Company's sole option, upon Executive's disability. "Disability" shall
have the definition ascribed in Executive's individual disability
policy if coverage under the policy is conditioned on using such
definition. If no such policy exists or if coverage is not conditioned
on using such definition, then, for purposes of this Agreement,
"Disability" means the inability of Executive to perform his duties
with reasonable accommodation by the Company for ninety (90) days in
any one hundred eighty (180) consecutive day period.
9. SEVERANCE.
9.1 DEATH. If Executive's employment is terminated pursuant to Section
8.3 as a result of Executive's death, the following provisions shall apply:
(a) The Company shall pay to Executive's personal
representative the Base Salary through the end of the calendar month in
which Executive's death occurs.
(b) The Company shall pay to Executive's personal
representative (i) the earned but unpaid Incentive Compensation for the
calculation period ended prior to the
10
15
date of Executive's death and (ii) a pro rata share (based on the
number of days in the period during which Executive was alive) of
Executive's Incentive Compensation for the calculation period in which
Executive died provided that more than three (3) months of such
calculation period have elapsed as of Executive's death. Such amounts
shall be payable in accordance with Section 4.2. If Executive's death
occurs during the first three (3) months of an Incentive Compensation
calculation period, no Incentive Compensation shall be payable with
respect to such period.
9.2 DISABILITY. If Executive's employment is terminated pursuant to
Section 8.4 as a result of Executive's Disability, the following provisions
shall apply:
(a) The Company shall maintain any health insurance coverage
provided to Executive hereunder until the expiration of the Initial
Term for Executive and Executive's dependents, or, if the Company's
benefit insurer does not permit such continuation, pay to Executive the
amount of the health insurance premium the Company would have paid to
provide such insurance to Executive and Executive's dependents. Nothing
herein shall affect any rights to continuation coverage of Executive or
Executive's dependents with respect to any insurance coverage as
provided by law.
(b) The Company shall maintain any life insurance coverage
provided to Executive hereunder on Executive's life, payable to
Executive or, as designated by Executive, Executive's beneficiaries
until the expiration of the Initial Term.
(c) The Company shall pay to Executive the Base Salary through
the end of the calendar month in which the employment termination
occurs.
(d) The Company shall pay to Executive (i) the earned but
unpaid Incentive Compensation for the calculation period ended prior to
the date of employment termination and (ii) a pro rata share (based on
the number of days in the period during which Executive was not
disabled) of Executive's Incentive Compensation for the calculation
period in which Executive was terminated from employment provided that
more than three (3) months of such calculation period has elapsed as of
the date of termination. Such amounts shall be payable in accordance
with Section 4.2. If Executive's employment termination occurs during
the first three (3) months of an Incentive Compensation calculation
period, no Incentive Compensation shall be payable with respect to such
period.
9.3 TERMINATION FOR CAUSE. If Executive's employment is terminated For
Cause pursuant to Section 8.1, the following provisions shall apply:
(a) The Company shall pay to Executive the Base Salary through
the date of termination.
11
16
(b) Executive shall forfeit all accrued but unpaid Incentive
Compensation and all unexercised Options. The foregoing sentence is not
a penalty, but is intended to constitute liquidated damages to
compensate the Company for damages, which may be difficult to measure,
suffered by the Company as a result of Executive's conduct. Nothing
contained in this Section 9.3 shall be deemed to limit the Company's
ability to obtain equitable relief.
(c) Health insurance coverage provided to Executive hereunder
for Executive and Executive's dependents and any life insurance
coverage provided to Executive hereunder on Executive's life, payable
to Executive or, as designated by Executive, Executive's beneficiaries
shall terminate as of the last day of the month in which Executive's
employment terminates. Nothing herein shall affect any rights to
continuation coverage of Executive or Executive's dependents with
respect to any insurance coverage as provided by law.
9.4 TERMINATION BY MUTUAL AGREEMENT. If Executive's employment is
terminated by mutual agreement, the parties hereto shall structure a mutually
acceptable severance benefits program which shall be documented in a Termination
Agreement to be executed by the parties immediately prior to Executive's
resignation from employment.
10. MISCELLANEOUS.
10.1 GOVERNING LAW. This Agreement shall be deemed to have been
executed in the State of Tennessee and shall be governed and construed as to
both substantive and procedural matters in accordance with the laws of the State
of Tennessee, but excepting (i) any State of Tennessee rule which would result
in judicial failure to enforce the arbitration provisions of Section 10.4 hereof
or any portion thereof and (ii) any State of Tennessee rule which would result
in the application of the law of a jurisdiction other than the State of
Tennessee.
10.2 PRIOR AGREEMENTS. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, including,
but not limited to, the Employment Agreement dated as of March 1, 1995, between
BAW, Inc. and Executive and the Management Agreement, dated as of March 1, 1995,
between BA-Forum, Inc. and Forum Health Care, Inc. and the parties hereto have
made no agreements, representations or warranties relating to the subject matter
of this Agreement which are not set forth herein.
10.3 AMENDMENT. This Agreement may not be amended, modified,
superseded, canceled or terminated, and any of the matters, covenants,
representations, warranties or conditions hereof may not be waived, except by
written instrument executed by the parties hereto or, in the case of a waiver,
by the party to be charged with such waiver.
12
17
10.4 ARBITRATION. Any controversy or claim arising out of or relating
to the Agreement, or the breach hereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, in the county in which the principal office of the Company is
located, and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction over the parties hereto. The dispute shall be
resolved by a panel of three arbitrators if the dollar amount in question that
is being arbitrated exceeds fifty thousand dollars ($50,000). The parties hereto
shall have full rights to pursue equitable remedies in furtherance of enforcing
this Agreement without interference from any arbitration proceedings.
10.5 SEVERABILITY. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and not in
limitation of business activities covered by, any provision of this Agreement be
in excess of that which is valid and enforceable under applicable law, then such
provision shall be construed to cover only that duration, extent or activities
which may validly and enforceably be covered. Executive acknowledges the
uncertainty of the law in this respect and expressly stipulates that this
Agreement be given the construction which renders its provisions valid and
enforceable to the maximum extent possible under applicable law.
10.6 SURVIVAL. The covenants contained in this Agreement shall survive
Executive's termination of employment, regardless of who causes the termination
and under what circumstances.
10.7 ATTORNEYS' FEES. If either party hereto shall be required to
retain the services of an attorney to enforce any of his or its rights
hereunder, the prevailing party shall be entitled to receive from the other
party all costs and expenses including, but not limited to, court costs and
attorneys' or experts' fees (whether in a court of original jurisdiction or one
or more courts of appellate jurisdiction) incurred by him or it in connection
therewith.
10.8 ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of Executive, assign its rights and
obligations under this Agreement to any corporation, firm or other business
entity with or into which the Company may merge or consolidate, or to which the
Company may sell or transfer all or substantially all of its assets, or of which
fifty percent (50%) or more of the equity investment and of the voting control
is owned, directly or indirectly, by, or is under common ownership with, the
Company. After any such assignment by the Company, the Company and Birman shall
be discharged from all further liability hereunder, and such assignee shall
thereafter be deemed to be the Company for the purposes of all provisions of
this Agreement including this Section 10.
13
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE COMPANY:
BAW, INC., a Tennessee corporation
By:
----------------------------- --------------------------------
Unofficial Witness Xxxxx X. Xxxxxx, M.D.
Chairman
Attest:
--------------------------------
Xxx X. Xxxxxx
Secretary
[CORPORATE SEAL]
BIRMAN:
BA-FORUM HEALTH CARE, INC.,
D/B/A BIRMAN MANAGED CARE,
INC., a Tennessee corporation
By:
----------------------------- --------------------------------
Unofficial Witness Xxxxx X. Xxxxxx, M.D.
Chairman
Attest:
--------------------------------
Xxx X. Xxxxxx
Secretary
[CORPORATE SEAL]
14
19
EXECUTIVE:
(SEAL)
----------------------------- ------------------------------
Unofficial Witness XXXX X. XXXX
For purposes of Section 10.2 only:
FORUM HEALTH CARE, INC., an
Arizona corporation
By:
----------------------------- ------------------------------
Unofficial Witness Xxxx X. Xxxx
President
Attest:
------------------------------
Secretary
[CORPORATE SEAL]
15
20
AMENDMENT NO. 2
---------------
THIS INSTRUMENT, dated as of September 1, 1996, by and among Birman
Managed Care, Inc., a Tennessee corporation ("Birman"), BMC Health Plans, Inc.,
a Tennessee corporation (the "Company"), and Xxxx X. Xxxx, an Arizona resident
("Executive"), constitutes a second amendment to that certain Employment
Agreement by and between Executive and the Company dated as of July 1, 1995
(the "Agreement"). The Company, Birman and Executive are hereinafter referred
to as the "Parties."
R E C I T A L S:
- - - - - - - -
WHEREAS, the Parties desire to amend the Agreement;
NOW, THEREFORE, for and in consideration of the premises set forth
herein and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged by each of the Parties, the Parties, intending to be
legally bound, hereby agree as follows:
1. The second preamble of the Agreement is hereby amended by
deleting the whole thereof and by inserting in lieu thereof the following:
WHEREAS, the Company and Executive desire that Executive be employed in
accordance with the terms and conditions hereof as the Company's
Executive Vice President - Sales and Marketing; and
2. The first sentence of Section 1 of the Agreement is hereby
amended by deleting the whole thereof and by inserting in lieu thereof the
following:
The Company hereby employs Executive, and Executive hereby accepts
employment from the Company as the Company's Executive Vice President -
Sales and Marketing.
3. Section 2 of the Agreement is hereby amended by deleting the
date, "June 30, 2001," and by inserting in lieu thereof the date, "August 31,
1998."
4. Section 4.1 of the Agreement is hereby amended by deleting the
whole thereof and by inserting in lieu thereof the following:
During the Initial Term and any renewal thereof, the Company shall pay
to Executive as compensation for all personal services to be rendered by
Executive under this Agreement a base salary ("Base Salary"), in
accordance with the Company's customary payroll practices, reduced by
applicable federal, state and local withholding taxes, of one hundred
sixty-five thousand and no/100 dollars ($165,000) per annum.
21
5. Section 4.2 of the Agreement is hereby amended by deleting the
whole thereof and by inserting in lieu thereof the following:
In addition to the Base Salary described in Section 4.1, the Company
shall pay Executive an annual performance-based bonus ("Incentive
Compensation") in cash not later than ninety (90) days after the audit
of the books of the Company for such annual period has been completed
by the Company's independent accountants based upon the cumulative
total enrollment in Care3 Health Plan of Mississippi, Inc. and Care3
Health Plan of Tennessee, Inc. at the completion of the annual fiscal
period for which the Incentive Compensation is being calculated, as
follows (not to exceed $85,000):
Number of Members Incentive Compensation
----------------- ----------------------
Less than 5,000 0
5,001 to 10,000 $20,000
10,001 to 15,000 $30,000
15,001 to 20,000 $35,000
Total: $85,000
6. Section 4.3 is hereby amended by deleting the whole thereof in its
entirety.
7. Section 4.4 is hereby amended by deleting the phrase, "five hundred
thousands (500,000) shares" and by inserting in lieu thereof the phrase, "two
hundred thousand (200,000) shares."
8. Section 8.2 is hereby amended by deleting the whole thereof in its
entirety.
9. A new Section 8.5 is hereby inserted and providing as follows:
Other. If Executive's employment is terminated for reasons other than
death, For Cause, mutual agreement or Disability, Executive shall be
entitled to receive as severance, the Base Salary for the six (6)
month period following Executive's severance of employment, all
accrued but unpaid Incentive Compensation for the calculation period
in which Executive was terminated from employment provided more than
three (3) months of such calculation period has elapsed as of the date
of termination, and all vested stock options granted pursuant to the
Company's 1995 Stock Option Plan.
2
22
10. The amendments delineated above, together with the Agreement and
Amendment No. 1 thereto constitute the sole amendment to the Agreement. The
Agreement and the above amendments contain the entire agreement of the Parties
relating to the subject matter hereof.
The Agreement, as above amended, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
BIRMAN MANAGED CARE, INC.
By: __________________________________
Xxxxx X. Xxxxxx, M.D.,
President and Chief Executive Officer
BMC HEALTH PLANS, INC.
By: __________________________________
Xxxxxxx X. Xxxx,
President and Chief Executive Officer
EXECUTIVE:
_______________________________________
XXXX X. XXXX
3
