EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of this 26th day of November, 1996 by and between MERIT BEHAVIORAL CARE
CORPORATION, a Delaware corporation (the "Company"), and Xxxx X. Xxxxxxxx, M.D.,
an individual with an address at 00 Xxxxxxxxxxxx Xxxx, Xxxxx Xxxxxx, Xxx Xxxx
00000 ("Employee").
WHEREAS, the Company desires to engage Employee to provide services pursuant to
the terms of this Agreement;
WHEREAS, Employee desires to provide such services to the Company pursuant to
this Agreement;
WHEREAS, this Agreement shall be effective on March 1, 1997; and
WHEREAS, both parties hereto acknowledge that the services to be performed by
Employee under this Agreement shall require a high degree of diligence,
creativity and responsiveness appropriate to the Company's business intentions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
SELECTED DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the following
meanings:
"Affiliate" shall mean a subsidiary of the Company
and any other business entity controlled by, controlling, or
under common control with, the Company from time to time.
"Anniversary Date" means March 1, the anniversary of
the Effective Date of this Agreement.
"Board" shall mean the Board of Directors of the
Company.
"Business" shall mean the business of the Company and
it subsidiaries, including, without limitation, the business
of providing and arranging for the provision of behavioral
health (including mental health and substance abuse) managed
care programs, behavioral health care delivery services, and
employee assistance programs.
"CEO" shall mean the Chairman of the Board and Chief
Executive Officer of the Company.
"Common Stock" shall mean the common stock, par value
$.01 per share, of the Company.
"Compensation Committee" shall have the meaning such
term is given in Section 4.1 hereof.
"Confidential Information" shall have the meaning
such term is given in Section 5.1 hereof.
"Designated Companies" shall have the meaning such
term is given in Section 5.3(b) hereof.
"Developments" shall have the meaning such term is
given in Section 5.2 hereof.
"Disability Termination Right" shall have the meaning
such term is given in Section 3.5 hereof.
"Effective Date" of this Agreement shall mean
March 1, 1997.
"Employee Note" has the meaning such term is given
in Section 4.4 hereof.
"Employment Period" shall have the meaning such term
is given in Section 3.1 hereof.
"MBC Corp." has the meaning such term is given in
Section 2.1 hereof.
"1995 Option Plan" shall mean the 1995 Stock Purchase
and Option Plan for employees of Medco Behavioral Care
Corporation and Subsidiaries.
"Non-Competition Period" shall have the meaning such
term is given in Section 5.3(a) hereof.
"Option Agreement" shall have the meaning such term
is given in Section 4.3(a) hereof.
"Options" shall mean non-qualified options to
purchase newly issued shares of Common Stock.
"Purchase Shares" shall have the meaning such term is
given in Section 4.4 hereof.
"Post-Employment Compensation Period" shall mean the
period (which in no event shall exceed three (3) years)
commencing on the date of termination of Employee's employment
with the Company under Section 3.3 or 3.4 hereof and ending
twenty-four (24) months after the Anniversary Date of this
Agreement next succeeding the date of termination of
Employee's employment with the Company. For example, if
Employee's employment with the Company terminates under
Section 3.3 or 3.4 hereof on July 15, 1998, the
Post-Employment Compensation Period would commence on such
date and end on March 1, 2001. The Post-Employment
Compensation Period applies only in the case of a termination
under Section 3.3 or 3.4 hereof occurring prior to March 1,
2000.
"Section 5.3(a) Agreement" shall have the meaning
such term is given in Section 5.3(a).
"Stockholder's Agreement" shall have the meaning such
term is given in Section 4.4 hereof.
"Termination for Cause" shall have the meaning such
term is given in Section 3.2 hereof.
"Termination for Good Reason" shall have the meaning
such term is given in Section 3.4 hereof.
"Territory" means the United States of America, its
territories and possessions (including Puerto Rico).
"Total Base Compensation" shall have the meaning such
term is given in Section 4.1 hereof.
SECTION 2. EMPLOYMENT
2.1 Title; Duties. The Company agrees to employ Employee as Chief Medical
Officer of the Company and Executive Vice President, Clinical Services of MBC
Corp., the behavioral health managed care division of the Company ("MBC Corp."),
for the Employment
Period, and Employee hereby accepts such employment. In such position, Employee
shall report to Xxxxxxx X. Xxxxxx, Ph.D., Executive Vice President, Operations
of the Company; provided, that if Xx. Xxxxxx is no longer employed by the
Company, Employee shall report to the then current Executive Vice President,
Operations of the Company. Employee shall perform such duties with regard to the
Business as are assigned to him by Xx. Xxxxxx and as are generally performed by
such an employee of a company, and such other duties as may from time to time be
reasonably requested by the CEO or the Board.
2.2 Performance of Duties. (a) Subject to the other provisions of this Section
2.2:
(i) Employee agrees to devote his exclusive and full professional time and
attention to his duties as an employee of the Company and to perform such duties
in an efficient, trustworthy and businesslike manner. In addition, Employee
agrees that he will not render to others any service of any kind or engage in
any other business activity (including, without limitation, any involvement in
any business in which Employee has any administrative or operating
responsibility) which conflicts with the performance of his duties under this
Agreement (except as to any other activities which are approved in writing by
the Board, Xx. Xxxxxx or the CEO).
(ii) During the term of this Agreement, Employee agrees to devote his full
business time and efforts, and to otherwise use his best efforts, to manage the
operations of the Company and its subsidiaries, to maximize the Company's
results of operations and profits, to satisfy the directions of the Board, Xx.
Xxxxxx and the CEO, and to otherwise fulfill the agreements and covenants set
forth in this Agreement. Employee acknowledges that the failure to satisfy any
covenant set forth in this Agreement may cause the Company irreparable harm and
shall have denied the Company and the Affiliates of a substantial and valuable
asset.
(b) Employee represents and warrants that he is not bound by any employment,
consulting, noncompetition, confidentiality, finders, marketing or other
agreement or arrangement that would, or might reasonably be expected to,
prohibit or restrict him in any manner from performing his duties and
obligations hereunder.
(c) The Company acknowledges that Employee is involved in, and will continue to
participate in, certain other businesses and professional activities in the
health care field during the course of his employment with the Company. The
Company agrees that, notwithstanding the other provisions of this Section 2.2
and Article 5 hereof, Employee shall be permitted to engage in the following
activities:
(i) professional conferences and speaking engagements;
(ii) professional consultations with drug companies, hospitals and universities,
provided, that such consultations shall not involve more than 100 hours in the
aggregate in any year during the term of this Agreement without the consent of
Xx. Xxxxxx or the CEO;
(iii) the businesses described in the last sentence of Section 5.3(a) hereof;
and
(iv) business and professional activities not related to the Business
specifically and the behavioral health business generally (i.e., except for
those described in the last sentence of Section 5.3(a) hereof, Employee will not
engage in the Business or the behavioral health business other than as an
employee of the Company).
With respect to the foregoing provisions, the Company and Employee agree that:
(A) in the event Employee contemplates engaging in any activity which might be
construed as the Business or another business in the behavioral health field,
Employee shall consult with Xx. Xxxxxx and the CEO prior to engaging in such
activity. Employee, Xx. Xxxxxx and the CEO will mutually determine in good faith
whether such activity constitutes the Business or another behavioral health
business.
(B) Notwithstanding any other term of this Section 2.2(c), Employee shall not be
permitted to engage in any of the activities described in Section
2.02(c)(i)-(iv) above to the extent such activities interfere (in the reasonable
judgment of Xx. Xxxxxx or the CEO) in the prompt and effective discharge by
Employee of his duties described in Section 2.1 hereof or would prevent Employee
from devoting his full (i.e., at least 40 hours per week) business time and
attention to his responsibilities to the Company.
2.3 Support. Employee shall be provided appropriate administrative support at
the Company's headquarters in Park Ridge, New Jersey, including both an
Executive Assistant and a Research Assistant.
2.4 Relocation Agreement. The Company and Employee agree to enter into the
Relocation Agreement attached hereto as Exhibit F.
SECTION 3. EMPLOYMENT PERIOD; TERMINATION OF EMPLOYMENT
3.1 Employment Period. Subject at all times to Section 3.3 hereof, this
Agreement and Employee's employment hereunder shall continue until terminated by
the earliest of (a) the Company's discharge of Employee and termination of this
Agreement pursuant to Sections 3.2, 3.3 or 3.5 hereof; (b) Employee's death; or
(c) Employee's termination of his employment and this Agreement pursuant to
Section 3.4 or 3.6 hereof. If Employee shall continue in the employ
of the Company beyond the termination of this Agreement, such employment shall
be deemed to continue on a month-to-month basis terminable by either party on
thirty (30) days prior written notice. The period during which Employee is
employed by the Company under this Agreement or otherwise is referred to herein
as the "Employment Period." In all events, the post-termination provisions of
Section 5 hereof shall survive termination of the Employment Period and this
Agreement.
3.2 Termination by the Company for "Cause." The Company shall have the
right immediately (except as provided below) to discharge Employee and terminate
this Agreement, by written notice provided to Employee, for any or all of the
following "causes" (a "Termination for Cause"):
(a) Employee's conviction for, or entry of a plea of guilty or nolo contendere
with respect to, any felony or any crime involving an act of moral turpitude or
misuse or misappropriation of money or other property of the Company or any
Affiliate;
(b) Employee's commission of any act of fraud or dishonesty with respect to his
duties under this Agreement;
(c) Employee's conduct which is intentionally detrimental to the Company's or
any Affiliate's reputation, goodwill or business operations;
(d) Employee's gross or habitual neglect of his duties or his breach of his
duties or his misconduct in discharging his duties;
(e) Employee's absence from his duties without the consent of Xx. Xxxxxx, his
designee or his successor for a period of at least ten (10) business days, which
consent shall not be unreasonably withheld or delayed; or
(f) Employee's failure or refusal to comply with the directions of Xx. Xxxxxx,
his designee or his successor, or with the policies, standards and regulations
of the Company as may from time to time be made known to Employee; provided,
that -------- such directions, policies, standards and regulations are not
inconsistent with the provisions and terms of this Agreement or with applicable
law or regulations or with applicable professional ethical considerations; and
provided, further, that -------- ------- such failure or refusal is not remedied
by Employee within five (5) business days after notice from the Company
demanding such remedy.
3.3 Termination by the Company without "Cause." The Company shall have the right
to discharge Employee and terminate this Agreement, by written notice provided
to Employee not less than thirty (30) days prior to the intended date of
discharge and termination, without "cause" at any time during the Employment
Period, for any reason or for no reason.
3.4 Termination by Employee for "Good Reason." Employee may terminate his
employment with the Company and this Agreement, by written notice provided to
the Company not more than thirty (30) days prior to the intended date of
termination, for any or all of the following reasons (a "Termination for Good
Reason"):
(a) a material adverse change in the nature of Employee's job duties without his
consent;
(b) a material reduction in the rate of Employee's Total Base Compensation; or
(c) a material breach by the Company of the Stockholder's Agreement;
and, in any such case, the Company fails to remedy the applicable situation or
cure such breach prior to the end of such thirty (30) day period.
3.5 Termination by the Company due to Disability of Employee. The Company shall
have the right to discharge Employee and terminate this Agreement, by written
notice provided to Employee not less than thirty (30) days prior to the intended
date of discharge and termination, upon the determination by the Board in good
faith and in its discretion that Employee is unable to engage in activities
required by his employment (or reasonable substitute employment) by reason of
any medically determined physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months (referred to herein as the
"Disability Termination Right").
3.6 Termination by Employee without "Good Reason." In addition to his
termination right under Section 3.4 hereof, Employee also may terminate his
employment with the Company and this Agreement, by written notice provided to
the Company not more than thirty (30) days prior to the intended date of
termination, for any reason.
3.7 Death. The Employment Period shall terminate forthwith upon the death of
Employee.
SECTION 4. COMPENSATION
4.1 Annual Salary. The Company shall pay to Employee during the Employment
Period base compensation at the rate of $250,000 per year ("Total Base
Compensation"), payable in equal installments pursuant to the Company's
customary payroll policies in force at the time of payment (but not less
frequently than monthly), less required payroll deductions. Employee shall be
entitled to annual increases of Total Base Compensation as may be determined
from time to time by the Board, or any compensation committee designated by the
Board from its members (the "Compensation Committee"), in either case in its
sole discretion.
4.2 Bonus. In addition to Total Base Compensation, Employee shall be eligible
for a bonus based upon Employee's Total Base Compensation with respect to each
calendar year or portion of a calendar year during the Employment Period. Such
bonus shall be awarded pursuant to the existing bonus plan of the Company (a
copy of which has been provided to Employee prior to the date hereof) or a
successor plan applicable to executive officers of the Company adopted by the
Board or the Compensation Committee. For purposes of the existing bonus plan,
Employee's "Target Percentage" is twenty-five percent (25%); for any successor
plan, Employee's bonus percentage (subject to the applicable terms of the plan)
also shall be twenty-five percent (25%). Employee acknowledges and agrees that
bonuses under such existing plan (and any successor plan) are determined by the
CEO, the Board or the Compensation Committee, in his or its absolute discretion,
based upon the attainment of agreed financial targets and other factors, are not
guaranteed for any calendar year or period or in any specified amount, and may
be less than or greater than Employee's "Target Percentage" or bonus percentage,
as applicable, of his Total Base Compensation.
4.3 Options. Employee shall be granted Options to purchase 96,000 shares of
Common Stock on the Effective Date. The exercise price for such Options will be
$5.00 per share. Such Options will be granted pursuant to, and governed by, the
1995 Option Plan (a copy of which is attached hereto as Exhibit A) and the
Non-Qualified Stock Option Agreement to be entered into between the Company and
Employee on the Effective Date attached hereto as Exhibit B (the "Option
Agreement").
4.4 Purchase of Common Stock. On the Effective Date, the Company and Employee
will enter into the Stockholder's Agreement attached hereto as Exhibit C (the
"Stockholder's Agreement"), providing for the issuance and sale by the Company
to Employee, and the purchase by Employee from the Company, of 32,000 shares of
Common Stock at the price of $5.00 per share. The purchase of such shares of
Common Stock (the "Purchase Shares") will take place on the Effective Date.
Employee will effect payment for 16,000 of such shares by delivery to the
Company of $80,000 in cash, and will effect payment for the other 16,000 of such
shares by delivery to the Company of Employee's promissory note to the order of
the Company, attached hereto as Exhibit D, in the principal amount of $80,000
(the "Employee Note") in accordance with the terms of the Stockholder's
Agreement. The payment of the principal amount of, and all accrued and unpaid
interest under, the Employee Note will be secured by the pledge by Employee of
the 16,000 shares financed by the Employee Note pursuant to the Repayment and
Stock Pledge Agreement attached hereto as Exhibit E.
4.5 Reimbursement of Expenses. During the term of this Agreement, the Company
will reimburse Employee for all ordinary and necessary business expenses
incurred by Employee in connection with the Business. Reimbursement of such
expenses shall be paid on a regular basis, upon submission by Employee of
vouchers itemizing such expenses in a form satisfactory to the Company, properly
identifying the nature and business purpose of any expenditures.
4.6 Benefits. During the term of this Agreement, the Company shall provide
Employee with such insurance, medical, sick leave, holiday and other benefits as
may be given from time to time to other officers of the Company as set forth
from time to time by the Board and management of the Company. Employee may take
such vacation period or periods during each year as shall be consistent, in the
Company's judgment, with Employee's responsibilities and the Company's vacation
policies and practices for other officers of the Company, but not more than four
(4) weeks during any full calendar year of the Employment Period.
4.7 Effect of Termination of Employment. (a) Termination by the Company for
"Cause," pursuant to the Disability Termination Right or upon Employee's Death.
In the event of termination of Employee's employment and this Agreement by the
Company pursuant to Sections 3.2, 3.5 or 3.7 hereof, Employee (or, if
applicable, his estate) shall be entitled to receive only payment of his earned
and unpaid compensation and benefits through the effective date of such
termination.
(b) Termination by the Company without "Cause" or by Employee for "Good Reason."
(i) Prior to March 1, 2000. In the event of termination of Employee's employment
and this Agreement by the Company under Section 3.3 hereof or by Employee under
Section 3.4 hereof prior to the third Anniversary Date of this Agreement (i.e.,
March 1, 2000), Employee shall be entitled to (A) continue to receive from the
Company Total Base Compensation in accordance with Section 4.1 hereof for the
Post-Employment Compensation Period and (B) subject to the terms of the
Stockholder's Agreement, exercise all Options granted in accordance with Section
4.3 hereof which are vested as of the date of termination (subject to and in
accordance with the terms of the 1995 Option Plan and the Option Agreement). The
shares of Common Stock purchased by Employee as described in Section 4.4 hereof
shall continue to be governed by the provisions of the Stockholder's Agreement.
(ii) On or after March 1, 2000 and prior to March 1, 2001. In the event of
termination of Employee's employment and this Agreement by the Company under
Section 3.3 hereof or by Employee under Section 3.4 hereof on or after the third
Anniversary Date, but prior to the fourth Anniversary Date, of this Agreement,
Employee shall be entitled to (A) continue to receive from the Company Total
Base Compensation in accordance with Section 4.1 hereof through the fifth
Anniversary Date of this Agreement and (B) subject to the terms of the
Stockholder's Agreement, exercise all Options granted in accordance with Section
4.3 hereof which are vested as of the date of termination (subject to and in
accordance with the terms of the 1995 Option Plan and the Option Agreement). The
shares of Common Stock purchased by Employee as described in Section 4.4 hereof
shall continue to be governed by the provisions of the Stockholder's Agreement.
(iii) On or after March 1, 2001. In the event of termination of Employee's
employment and this Agreement by the Company under Section 3.3 hereof or by
Employee under Section 3.4 hereof on or after the fourth Anniversary Date of
this Agreement, Employee shall be entitled to (A) continue to receive from the
Company Total Base Compensation in
accordance with Section 4.1 hereof for a period of twelve (12) months from the
date of termination and (B) subject to the terms of the Stockholder's Agreement,
exercise all Options granted in accordance with Section 4.3 hereof which are
vested as of the date of termination (subject to and in accordance with the
terms of the 1995 Option Plan and the Option Agreement). The shares of Common
Stock purchased by Employee as described in Section 4.4 hereof shall continue to
be governed by the provisions of the Stockholder's Agreement.
(c) Termination by Employee without "Good Reason." In the event of termination
of Employee's employment and this Agreement by Employee under Section 3.6
hereof, Employee shall not be entitled to any compensation (other than the
payment of his earned and unpaid compensation and other benefits to the
effective date of termination) and, subject to the terms of the Stockholder's
Agreement, shall be entitled to exercise all Options granted in accordance with
Section 4.3 hereof which are vested as of the date of termination (subject to
and in accordance with the terms of the 1995 Option Plan and the Option
Agreement). The shares of Common Stock purchased by Employee as described in
Section 4.4 hereof shall continue to be governed by the terms of the
Stockholder's Agreement.
4.8 Release. The payments and other rights of Employee described in Section
4.7(b) hereof may, at the Company's option, be conditioned upon Employee's
execution and delivery of a general release of the Company and the Affiliates,
and its and their respective directors, officers, employees and agents, from any
claims or obligations arising out of this Agreement and the termination hereof,
other than the express obligations of the Company to make such payments and
provide such rights, if any, as are described in Section 4.7(b) hereof and to
pay to Employee his earned and unpaid compensation and other benefits to the
effective date of termination. Employee acknowledges that the payments and
rights under Section 4.7(b) hereof are in lieu of all such claims that Employee
may have against the Company and the Affiliates and are liquidated damages (and
not a penalty). Notwithstanding any termination hereunder, the Company shall
have no obligation to make such payments or provide such rights under Section
4.7(b) hereof, and the Options shall terminate immediately, in the event of a
breach by Employee of his covenants in Section 5 hereof.
SECTION 5. CONFIDENTIAL INFORMATION, DEVELOPMENTS,
NON-COMPETITION/NON-SOLICITATION AND RELATED MATTERS
5.1 Restrictions on Use and Disclosure. Employee will not disclose or use at any
time, for so long as Employee is employed by the Company or any Affiliate and
for a period of five years thereafter, any Confidential Information (as defined
below) of which Employee is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by Employee's performance of duties, if any, assigned to
Employee by Xx. Xxxxxx, the CEO or the Company, such Confidential Information
becomes public other than through action of Employee or is compelled by legal
process. In the event that Employee plans to speak at a professional conference
and information to be presented includes or may include Confidential
Information, Employee shall consult with
Xx. Xxxxxx or the CEO concerning such Confidential Information prior to
participating in such conference and presenting such information. As used in
this Agreement, the term "Confidential Information" means information that is
not generally known to the public and that is used, developed or obtained by the
Company or any Affiliate in connection with its business, including, but not
limited to: (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) computer software, including operating systems, applications
and program listings, (v) flow charts, manuals and documentation, (vi) data
bases, (vii) accounting and business methods, (viii) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (ix) customers, clients and providers, and
customer, client and provider lists, (x) other copyrightable works, (xi) all
technology and trade secrets, and (xii) all similar and related information in
whatever form. Confidential Information will not include any information that
has been published in a form generally available to the public prior to the date
Employee proposes to disclose or use such information. Employee will perform all
actions reasonably requested by the Company (whether during or after the
Non-Competition Period) to establish and confirm such ownership at the Company's
expense (including, without limitation, assignments, consents, powers of
attorney and other instruments).
Employee further agrees that he will not disclose to the Company, any Affiliate
or any of its or their respective directors, officers, employees, agents or
representatives, any of the information described in Section IV of the Section
5.3(a) Agreement (as defined below), and will not use any such information in
connection with the performance of his duties described in Sections 2.1 and 2.2
hereof.
5.2 Assignment of Developments. All Developments that are at any time made,
conceived or suggested by Employee, whether acting alone or in conjunction with
others, as a result of or in connection with Employee's employment with the
Company or any Affiliate shall be the sole and absolute property of the Company,
free of any reserved or other rights of any kind on Employee's part, provided,
that the Company will have no ownership interest in any Developments conceived
or developed by Employee which do not relate to the Business or do not arise out
of the activities of Employee in his capacity as an executive officer of the
Company. Employee shall promptly make full disclosure of any such Developments
to the Company and, at the Company's cost and expense, do all acts and things
(including, among others, the execution and delivery under oath of patent and
copyright applications and instruments of assignment) deemed by the Company to
be necessary or desirable at any time in order to effect the full assignment to
the Company of Employee's right and title, if any, to such Developments. For
purposes of this Agreement, the term "Developments" shall mean all data,
discoveries, findings, reports, designs, inventions, improvements, methods,
practices, techniques, developments, programs, concepts and ideas, whether or
not patentable, relating to the present or planned activities, or future
activities of which Employee is aware, or the products and services of the
Company or any Affiliate except for those relating to or arising from the
activities permitted under Section 5.3(d) hereof.
5.3 Restriction on Competitive Employment. (a) Except under the circumstances
described in Section 5.3(b) or 5.3(c) below (which Section 5.3(b) or 5.3(c), as
applicable, will govern for all purposes), Employee shall not (as an individual,
principal, agent, employee, consultant or otherwise), directly or indirectly,
during the period commencing on the Effective Date and ending on the later of
(x) the first anniversary of termination of Employee's employment with the
Company or (y) if applicable, the date the Company is no longer required to make
the payments to Employee contemplated by Section 4.7(b) hereof (the applicable
period being the "Non-Competition Period"), absent the Company's prior written
approval, engage in activities in the Territory for, on behalf of or relating
to, or render services to, or have any equity, ownership or profit participation
interest in (other than as a 5% or less holder of the equity securities of a
public company), any firm or business engaged or about to become engaged in (i)
the Business or (ii) any other business in which the Company or any subsidiary
of the Company was engaged during Employee's employment with the Company and as
to which Employee had involvement during such employment or obtained
Confidential Information.
(b) In the event of termination of Employee's employment and this Agreement
under Section 4.7(b)(i), (ii) or (iii) hereof, Employee agrees that Employee
shall not (as an individual, principal, agent, employee, consultant or
otherwise), directly or indirectly, during the Non- Competition Period, absent
the Company's prior written approval, engage in activities in the Territory for
or on behalf of, or render services to, or have any equity, ownership or profit
participation interest in (other than as a 5% or less holder of the equity
securities of a public company), any of the companies listed on Schedule I or
any of their affiliates (as that term is defined in the federal securities laws)
(the "Designated Companies"); provided, that in the event Employee desires, at
any time after the first anniversary of the effective date of the termination of
his employment and this Agreement, to engage in activities on behalf of, or
render services to (as an individual, principal, agent, employee, consultant or
otherwise), any of the Designated Companies, Employee shall notify the Company
of such desire to do so. In such event, effective the date of receipt by the
Company of such notification, (i) Employee shall be released from his
obligations under this Section 5.3(b) and (ii) the Company shall be released
from its obligations to make the payments described in Section 4.7(b) (i), (ii)
or (iii), as applicable; provided, further, that nothing in the foregoing
provision shall be deemed to release Employee or the Company of any of his or
its obligations relating to the period prior to the Company's receipt of such
notification.
(c) In the event of termination of Employee's employment and this Agreement
under Section 4.7(c) hereof, Employee agrees that Employee shall not (as an
individual, principal, agent, employee, consultant or otherwise), directly or
indirectly, during the period commencing on the date of such termination and
ending on the first anniversary of such termination date, absent the Company's
prior written approval, engage in activities in the Territory for or on behalf
of, or render services to, or have an equity, ownership or profit participation
interest in (other than as a 5% or less holder of the equity securities of a
public company), any of the Designated Companies or their respective affiliates.
(d) Notwithstanding anything in Section 5.3(a), (b) or (c) above, Employee shall
be permitted (A) to continue as a director, officer and shareholder of Expert
Knowledge Systems, (B) to invest in, consult with and become a director of, Mood
Sciences, Inc., (C) to continue the work in which he is involved on the date of
this Agreement in the field of disability remediation services, (D) to continue
as a director of HealthCare America, (E) to continue to provide private clinical
consultations, but only to patients in treatment with Employee on the date of
this Agreement or others as may from time to time be approved by Xx. Xxxxxx or
his successor (which approval will not be unreasonably withheld), (F) to
continue the work in which he is engaged described in the agreement described in
Schedule II (the "Section 5.3(a) Agreement") and (G) to engage in any activity
permitted pursuant to Section 2.2(c) hereof.
5.4 Restriction on Solicitation. During Employee's employment with the Company
and until the end of the Non-Competition Period, Employee shall not, directly or
indirectly, (i) solicit or contact for business purposes any existing customer,
provider or patient, or prospective customer, provider or patient, of the
Company or any subsidiary of the Company, (ii) induce, or attempt to induce, any
employees, agents, consultants or providers of or to the Company or any
subsidiary of the Company to do anything from which Employee is restricted by
reason of Sections 5.1 through 5.4 hereof, (iii) interfere with existing or
proposed contracts, business agreements or other arrangements, or knowingly
interfere with future contracts, business agreements or other arrangements,
between the Company or any subsidiary of the Company and any individual, firm or
enterprise including, but not limited to, third party payors, through disrupting
or diverting or attempting to divert such contracts, business agreements or
other arrangements to any other individual, firm or enterprise (including a
competitor of the Company or any subsidiary of the Company) or (iv) offer or aid
others to offer employment to anyone who is an employee, agent or consultant of
or to the Company or any subsidiary of the Company.
5.5 Equitable Relief. Employee acknowledges that a breach of the covenants
contained herein, including without limitation the covenants contained in
Sections 5.1 through 5.4 hereof, may cause irreparable damage to the Company or
one or more of its subsidiaries, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such breach will be inadequate.
Accordingly, Employee agrees that, in addition to any other remedy which may be
available at law or in equity, the Company and any such subsidiary shall be
entitled to specific performance and injunctive relief to prevent any actual,
intended or likely breach. The parties acknowledge that the time, scope,
geographic area and other provisions of Sections 5.1 through 5.4 hereof have
been specifically negotiated by sophisticated commercial parties and agree that
all such provisions are reasonable under the circumstances of the transactions
contemplated by this Agreement, including the compensation to Employee described
in Section 4 hereof. In the event that the agreements in Section 5.1 through 5.4
hereof or any other provision contained in this Agreement shall be determined by
any court of competent jurisdiction to be unenforceable by reason of their
extending for too great a period of time or over too great a geographical area
or by reason of their being too extensive in any other respect, such agreements
or provisions shall be interpreted to extend only over the maximum period of
time for which they may be enforceable and/or over the maximum geographical area
as to which they
may be enforceable and/or to the maximum extent in all other respects as to
which they may be enforceable, all as determined by such court in such action so
as to be enforceable to the extent consistent with then applicable law. The
existence of any claim or cause of action which Employee may have against the
Company or any such subsidiary of the Company, as the case may be, shall not
constitute a defense or bar to the enforcement of any of the provisions of
Sections 5.1 through 5.4 hereof and shall be pursued through separate court
action by Employee.
5.6 Survival. Unless otherwise provided, the provisions of Sections 5.1 through
5.5 hereof shall survive the termination of this Agreement.
SECTION 6. INDEMNIFICATION
During the Employment Period, the Company shall provide Employee with directors
and officers indemnification as provided in the Company's articles of
incorporation and bylaws and directors and officers liability insurance coverage
as is generally afforded executive officers of the Company.
Employee agrees to indemnify, defend and hold harmless the Company, the
Affiliates and its and their respective directors, officers, employees, agents
and representatives from any liabilities, losses or expenses arising from
Employee's breach or alleged breach of the Section 5.3(a) Agreement or his
breach or alleged breach of the second paragraph of Section 5.1 hereof.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 Assignment and Successors. The rights and obligations of the Company under
this Agreement may be assigned, and shall inure to the benefit of and be binding
upon the successors and assigns of the Company. Employee's rights or obligations
hereunder may not be assigned to or assumed by any other person. No other
persons shall have any right, benefit or obligation hereunder.
7.2 Notices. Any notice, request, instruction or other document or communication
to be given hereunder shall be in writing and shall be deemed to have been duly
given (i) if mailed, at the time when mailed in any general or branch office of
the United States Postal Service, enclosed in a registered or certified
postage-paid envelope, (ii) if sent by facsimile transmission, when so sent and
receipt acknowledged by an appropriate telephone or facsimile receipt, or (iii)
if sent by other means, when actually received by the party to which such notice
has been directed, in each case at the respective addresses or numbers set forth
below or such other address or number as such party may have fixed by notice:
If to the Company:
Merit Behavioral Care Corporation
Xxx Xxxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
Attn: Executive Vice President and General Counsel
Fax: (000) 000-0000
If to Employee:
Xxxx X. Xxxxxxxx, M.D.
_____________________
_____________________
7.3 Severability. If any provision or portion of this Agreement shall be or
become illegal, invalid or unenforceable in whole or in part for any reason,
such provision shall be ineffective only to the extent of such illegality,
invalidity or unenforceability without invalidating the remainder of such
provision or the remaining provisions of this Agreement. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the agreements contemplated
hereby are fulfilled to the extent possible.
7.4 Amendment. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be modified,
amended or waived only by a written instrument signed by both parties hereto.
7.5 Counterparts. This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
7.6 Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The language in all parts of this Agreement shall in all cases
be construed according to its fair meaning, and not strictly for or against any
party hereto. In this Agreement, unless the context otherwise requires, the
masculine, feminine and neuter genders and the singular and the plural include
one another.
7.7 Non-Waiver of Rights and Breaches. No failure or delay of any party hereto
in the exercise of any right given to such party hereunder shall constitute a
waiver thereof unless the time specified herein for the exercise of such right
has expired, nor shall any single or partial exercise of any right preclude
other or further exercise thereof or of any other right. The waiver of a party
hereto of any default of any other party shall not be deemed to be a waiver of
any subsequent default or other default by such party, whether similar or
dissimilar in nature.
7.8 Governing Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY APPLICABLE
TO CONTRACTS EXECUTED IN AND TO BE PERFORMED IN THAT STATE. Each party hereby
irrevocably (i) submits to the jurisdiction of any New Jersey State or federal
court sitting in the City of Newark, New Jersey, with respect to matters arising
out of or relating hereto; (ii) agrees that all claims with respect to such
action or proceeding may be heard and determined in such New Jersey State or
federal court; (iii) waives, to the fullest possible extent, the defense of an
inconvenient forum; (iv) consents to service of process upon it by mailing or
delivering such service, in the case of the Company, as specified in Section 7.2
hereof or, in the case of Employee, to CT Corporation System as his agent (the
costs of which agent shall be borne by the Company), and Employee authorizes and
directs his agent to accept such service; and (v) agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
EXECUTION
The parties, intending to be legally bound, executed this Agreement as
of the date first above written, whereupon it became effective in accordance
with its terms.
MERIT BEHAVIORAL CARE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, Ph.D.
Executive Vice President, Operations
/s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx, M.D.
Schedule I
1. Value Behavioral Health, Inc.
2. CMG Health, Inc.
3. FHC Options, Inc.
4. Foundation Health PsychCare Services, Inc.
5. Green Spring Health Services, Inc.
6. Human Affairs International, Inc.
7. MCC Behavioral Care, Inc.
8. United Behavioral Systems, Inc.
9. United States Behavioral Health
10. Pacificare
Schedule II
Agreement dated as of February 1, 1995 by and among Value Health Sciences, Inc.,
Employee and Xx. Xxxxxx X. Xxxxxxxx.
