EXHIBIT 99.1
EMPLOYMENT AGREEMENT
AGREEMENT made this 7th day of February, 2003, effective February 1,
2003 by and between XXXX XXXX XXXXXXX, residing in Tampa, Florida at the most
recent residence address contained in Executive's personnel file (hereinafter
referred to as the "Executive") and COMPREHENSIVE CARE CORPORATION, a Delaware
corporation with principal offices located at 000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxxxxx 000, Xxxxx 000, Xxxxx, Xxxxxxx 00000, (hereinafter referred to as the
"Company").
W I T N E S S E T H :
WHEREAS, the Company, through its wholly-owned subsidiary
corporations, is currently engaged in the principal business of providing
various managed behavioral health care services through various contract service
agreements; and
WHEREAS, the Company desires to continue to benefit from the
executive talent and ability of Executive, and to continue to engage Executive
as its President and Chief Executive Officer; and
WHEREAS, Executive and the Company previously entered into an
Employment Agreement dated July 8, 1999, effective as of July 2, 1999 (the "1999
Employment Agreement"), as amended; and
WHEREAS, Executive and the Company intend this Employment Agreement
to supersede the 1999 Employment Agreement and to provide for the future and
continued employment of Executive upon the terms and conditions herein provided;
NOW, THEREFORE, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs and agrees during the term hereof, and subject to the
terms and conditions hereof, to continue the employment of the Executive, and
the Executive hereby accepts such continued employment in her capacity as
President and Chief Executive Officer of the Company, with the title of
President and Chief Executive Officer. Executive shall report to the Board of
Directors of the Company. Executive shall also serve as President and Chief
Executive Officer of the Company's principal operating subsidiary, Comprehensive
Behavioral Care, Inc. ("CBC") and any other subsidiaries or affiliates of the
Company as determined by the Board of Directors.
ARTICLE II
ELECTION OF EXECUTIVE AS A DIRECTOR;
DIRECTORS LIABILITY INSURANCE AND INDEMNIFICATION
(A) Election of Executive as a Director of the Company
Upon the execution of this Agreement and for the full term hereof
and any extended term, the Company shall cause Executive to continue to be
elected as a Class I Director of the Company. The Company shall, during the full
term of this Agreement and any extended term, utilize its best efforts to cause
Executive to be re-elected to such position. Such best efforts shall, in the
case of the Company, include but not be limited to including Executive as part
of management's slate of Directors to be elected by shareholders, endorsing the
election of Executive as a director, and soliciting proxies for the election of
Executive.
(B) Procurement of Directors Liability Insurance
So long as Executive shall serve as an officer and Director of the
Company, the Company shall procure and obtain, and continue in full force and
effect, at its sole cost and expense, an Officers and Directors liability
insurance policy in an amount of not less than
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$1 million. Such policy of insurance shall insure against claims and liability
while acting in the capacity of an officer or director of the Company or any
subsidiary thereof, shall provide for the defense of all such claims and shall
be subject to fraud exclusions and other usual and customary exclusions
contained in such policies as offered and written in the City of Tampa, Florida.
Such policy shall be obtained from a reputable insurance carrier rated B+ or
better by Best.
(C) Indemnification
During the term of employment, and subsequent thereto with respect
to any claim arising out of or in connection with her employment with the
Company or any subsidiary of the Company during the term of this Agreement, the
Company shall indemnify and hold Executive harmless from all claims and
liability, loss or damage (including but not limited to judgments, fines and
amounts paid in settlement), asserted against Executive or incurred by
Executive, including reasonable attorneys fees and costs of investigation (the
"Indemnification"). The Indemnification provided for herein shall be in addition
to and not in substitution or diminution of any and all rights to
indemnification which Executive may be entitled to under the laws of the State
of Delaware or the Certificate of Incorporation or By-Laws of the Company, or
existing Indemnification Agreement between Executive and the Company.
In furtherance of the Indemnification, the Company shall indemnify
Executive from any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, including any action
by or in the right of the Company, by reason of the fact that Executive is or
was an officer or director of the Company or any subsidiary of the Company.
All expenses, including reasonable attorneys fees, incurred by
Executive in defending any civil, criminal, administrative or investigative
action, suit or proceeding, shall, upon request by Executive, be paid and
advanced by the Company in advance of the final
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disposition of such action, suit, or proceeding; provided, however, that
Executive shall repay to the Company all amounts so advanced if it shall be
ultimately and finally determined that Executive is not entitled to be
indemnified under the laws of the State of Delaware. All advances shall be made
by the Company within 10 days after the request therefor by Executive
accompanied by a statement by Executive's counsel that the amount of advance
requested is fair and reasonable.
The Indemnification provided in this Article II shall enure to the
benefit of Executive, her heirs, executors and administrators. The Company shall
enter into a separate Indemnification Agreement with Executive, which shall
incorporate the provisions of this Article II.
(D) Indemnification Trust. The Company has, by agreement dated
January 21, 1999 entered into between it and Bank of America, as Trustee,
established an Indemnification Trust in the amount of $250,000 for the benefit
of its present and former officers and directors, of which Executive is included
therein and shall be deemed to be a beneficiary thereof (the "Indemnification
Trust"). The Company covenants and agrees to continue such Indemnification Trust
for the term and any extended term of this Agreement and, as to Executive, three
years following Executive having ceased to be a director or officer of the
Company. Except for increasing the amount of the Indemnification Trust, the
Company shall not alter, amend or modify the Indemnification Trust except upon
Executive's written consent.
ARTICLE III
DUTIES
(A) Executive shall, during the term of her employment with the
Company, and subject to the reasonable and good faith direction and control of
the Company's Board of Directors, perform such duties and functions for the
Company and any subsidiary or affiliate of
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the Company as she may be called upon to perform by the Company's Board of
Directors during the term and any extended term of this Agreement consistent
with the position of President and Chief Executive Officer of the Company and of
CBC.
(B) The Executive agrees to devote her full business time and best
efforts to the performance of her duties for the Company, and to render such
services for any subsidiary or affiliate corporations of the Company.
(C) The Executive shall perform, in conjunction with the Company's
Senior Management, to the best of her ability the following services and duties
for the Company and its subsidiary or affiliate corporations (by way of example,
and not by way of limitation):
1. Those duties attendant to the position with the Company for
which she is hired;
2. Strategic planning to preserve and enhance the Company's
business, including financial and operational oversight of the
business of the Company;
3. Promotion of the relationships of the Company and its
subsidiary and affiliate corporations with their respective
employees, customers, suppliers and others in the business and
investment community;
4. Supervision and oversight of the clinical functions of the
Company, including any related regulatory and compliance issues;
5. The development of responses by the Company to Requests For
Proposals and the oversight of managed behavioral health care
contracts obtained by the Company.
6. Supervision and oversight of the Company's Marketing
function.
(D) The Company acknowledges that Executive has substantial business
and financial background and experience, and may act in an advisory capacity to
various businesses,
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as well as the management of her own investments (the "Non-Competitive
Activities"). The Company consents to Executive continuing to engage in the
Non-Competitive Activities for her own pecuniary benefit, and to serve as a
director of any publicly held company; provided that such directorship is not
with a competitor of the Company, a vendor, or any client of the Company, its
subsidiaries and affiliates.
ARTICLE IV
PRINCIPAL BUSINESS LOCATION OF EXECUTIVE
Executive shall be based in the Greater Tampa, Florida Area, and
shall undertake such occasional travel, within or without the United States as
is or may be reasonably necessary in the interests of the Company. The Company
agrees that, during the term or extended term hereof, it will not permanently or
temporarily (in excess of 10 consecutive days in any six month period) assign or
locate Executive outside of the Greater Tampa, Florida Area regardless of where
the Company may determine to locate its principal executive offices.
ARTICLE V
COMPENSATION
(A) Commencing the effective date hereof and during the full term
and any extended term of this Agreement, Executive shall continue to receive a
base salary (the "Base Salary") at the rate of $175,000 per annum payable in
equal bi-weekly increments or such regular pay periods as the Company may adopt.
Such Base Salary shall be increased to $205,000 per annum effective June 1,
2003.
(B) In addition to the Base Salary, beginning with the Company's
fiscal year ending May 31, 2004, Executive shall be eligible to earn an annual
performance bonus (the "Performance Bonus") equal to the greater of 2 -1/2% of
the Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") or $25,000. EBITDA will be calculated to
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include any expense from such performance bonus and no performance bonus will be
earned by Executive in the event of an EBITDA loss. The Company's Compensation
and Stock Option Committee reserves the right to increase the Performance Bonus
based on exceptional performance by the Executive. The Performance Bonus as
herein provided shall be computed by the Company's Compensation and Stock Option
Committee, with review by the Company's independent auditors, and shall be paid
to Executive within ninety (90) days following the end of the Company's fiscal
year. Such computation by the Company's Compensation and Stock Option Committee
shall be final and binding.
(C) The Company shall deduct from Executive's compensation all
federal, state and local taxes which it may now or may hereafter be required to
deduct.
ARTICLE VI
SPECIAL SEVERANCE BENEFIT UPON CHANGE
IN CONTROL; SEVERANCE UPON TERMINATION
In the event of a Change in Control of the Company, as defined
herein, Executive, in her sole discretion, may elect to terminate her employment
at any time within one (1) year following a change in control. Upon the election
of the Executive to terminate her employment, the Company shall pay to Executive
a special lump sum severance payment equal to two times the sum of Executive's
prevailing Base Salary (the "Severance Benefit"). In the event that Executive
does not elect to terminate her employment within one year following a Change in
Control and during such one year period or at any time thereafter during the
unexpired term of this Agreement and (i) her employment is terminated by the
Company for reasons other than cause, as defined herein, or (ii) though not
terminated by the Company, Executive's duties and responsibilities are
materially curtailed or diminished from those prevailing immediately preceding
the time of the Change in Control, and following such material curtailment or
diminution, Executive elects to terminate her employment irrespective of whether
or not the term
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of this Agreement shall have expired, then the Company shall pay to the
Executive a severance benefit equal to the greater of the Executive's Base
Salary for the unexpired portion of the term or an amount equal to two times the
amount of Executive's Base Salary.
As used herein, a Change in Control of the Company shall mean (i)
the acquisition by any person or group as defined in Rule 13D(3) under the
General Rules and Regulations under the Securities Exchange Act of 1934 (other
than a corporation or employee benefit plan sponsored by the corporation) of the
beneficial ownership of right to vote 20% or more of the total number of votes
of the Company's voting securities eligible to vote in the election of Directors
of the Company or (ii) the election of a majority in number of Directors of the
Company not proposed by (a) the existing Directors of the Company or (b)
Directors appointed by existing Directors to fill vacancies on the Board. For
the purpose of this Article VI, cause shall constitute (i) cause as defined in
Paragraph A of Article XIII, (ii) the death of Executive or (iii) the inability
of Executive to perform her usual duties by reason of physical or mental
disability for sixty consecutive days or sixty days in any consecutive twelve
month period.
ARTICLE VII
BENEFITS
(A) During the term or any extended term hereof, (i) the Company
shall provide to Executive the Company's standard health and major medical
insurance for Executive and Executive's dependents as generally available to
other executives of the Company; (ii) Executive shall be permitted to
participate in any retirement savings plan (i.e. 401k Plan) as generally offered
and made available to other executives of the Company; (iii) the Company shall
provide to Executive life and disability insurance as generally made available
to executives of the Company; (iv) Executive shall be reimbursed by the Company,
upon presentation of
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appropriate vouchers, for all reasonable business expenses incurred by the
Executive on behalf of the Company consistent with the Company's travel and
reimbursement policies; (v) the Company shall provide Executive with the use of
an automobile or alternatively pay to Executive an automobile allowance of $250
bi-weekly, which shall be for the purpose of partially reimbursing Executive for
the use by Executive of her personal automobile. The Company reserves the right
to alter, modify, or change any currently offered health insurance, retirement
savings plan, or other group benefit.
(B) For each year of the term hereof, Executive shall be entitled to
receive four weeks of paid vacation during each 12-month period of employment,
to be accrued in accordance with the Company's vacation policies and to be taken
at such time as not to interfere with projects then in process and within the
maximum carry over limits as available to all employees of the Company.
Additionally, Executive shall be accorded such leave and holidays generally made
available to other Executive Officers of the Company.
(C) Executive shall be eligible to participate, if adopted, in any
Senior Executive Retirement Plan as implemented and approved by the Board of
Directors. Participation shall be in an amount and shall be earned and vested in
accordance with any plan the Company may ultimately adopt.
(D) Executive shall be eligible to participate in any Deferred
Compensation Plan as implemented by the Company in its discretion. Participation
will be intended to give the ability to defer portions of the Executive's annual
base salary and up to all of a Participant's earned annual incentive in
accordance with finalized parameters of any approved Plan.
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ARTICLE VIII
SPECIAL TRANSACTION BONUS
The Company, in furtherance of a desire and general purpose to
preserve and enhance its value for the benefit of itself and its shareholders,
desires to make provision for Executive to receive a special transaction bonus
(the "Special Transaction Bonus") as a result of a transaction occurring during
the term or within 12 months thereafter in which the Company (i) with the
approval of its Board of Directors, (ii) enters into and concludes a merger with
and into another entity in which the Company is not the surviving entity or a
sale of all or substantially all of the Company's assets (a "Special
Transaction") and (iii) in which the value of the Special Transaction is $5
million or more (the "Special Transaction Value"). As an incentive to Executive,
the Company shall pay to Executive upon consummation of a Special Transaction, a
Special Transaction Bonus equal to 1% of the Special Transaction Value in excess
of $5 million.
ARTICLE IX
NON-DISCLOSURE
The Executive shall not, at any time during or after the termination
of her employment hereunder except when acting on behalf of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
marketing information, managed care business, plans and programs, contract
proposals, psychiatric and dependency operations, and information relating to
any managed care, capitation, sales or marketing programs of the Company
(collectively referred to as the "Proprietary Information"). For the purposes of
this Agreement, trade secrets and confidential information shall mean
information disclosed to the Executive or known by her solely as a consequence
of her employment by the Company, whether or not pursuant to this Agreement,
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and not generally known (other than as disclosed by any person in breach of any
obligation of confidentiality to the Company) in the industry, concerning the
business, finances, methods, operations, marketing information, and information
relating to the sales and marketing of the Company.
ARTICLE X
RESTRICTIVE COVENANT
(A) In the event of the voluntary termination of employment with the
Company by Executive, Executive agrees that she will not, for a period of twelve
months following such termination, directly or indirectly enter into or become
associated with or engage in any other business (whether as a partner, officer,
director, shareholder, employee, consultant, or otherwise), which business is
primarily involved in providing or marketing managed behavioral health care
programs on a contract or capitated basis.
(B) In furtherance of the foregoing, Executive shall not during the
aforesaid period of non-competition, directly or indirectly, in competition with
the Company, solicit any management person who was employed by the Company or
solicit any provider, insurer or group through, from or with which the Company
transacted any managed behavioral health care business. The foregoing shall not
be deemed or construed to prevent Executive from soliciting any consultant or
advisor to the Company for any project that Executive may participate in which
is not in violation of this Article X.
(C) If any court shall hold that the duration of non-competition or
any other restriction contained in this paragraph is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed amended
to delete therefrom such provision or portion adjudicated to be invalid or
unenforceable or in the alternative such judicially substituted term may be
substituted therefor.
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ARTICLE XI
TERM
This Agreement shall have an initial term commencing February 1,
2003 and terminating on May 31, 2006. This Agreement shall be automatically
renewed and extended on its same terms and conditions for up to two consecutive
eighteen month periods unless either party gives written notice to the other at
least six months prior to the initial termination date or renewal termination
date, as the case may be, of its intention not to renew. In the event that the
Company notifies Executive of its intent not to renew this Agreement, the
Company agrees to pay to Executive, upon the expiration of this Agreement
without renewal, a lump sum severance payment equal to six (6) months Base
Salary plus one month's Base Salary for each year of service since the
commencement of Executive's initial employment with the Company, plus a further
sum equal to 50% of the maximum amount of annual Performance Bonus that
Executive could have earned in the year in which the non-renewal occurs as
provided in Article V(B) hereof, regardless of actual or pro forma pre-tax
earnings. In addition, and commencing upon the expiration of this Agreement
without renewal, the Company shall, at its expense, continue to provide
Executive with her existing healthcare insurance coverage for 18 months or such
shorter period that the Company may legally continue Executive's healthcare
insurance, in which case the Company shall reimburse Executive for the cost of
comparable healthcare insurance coverage for Executive and her dependents for
the period commencing the time of termination or discontinuance of Executive's
existing healthcare insurance and 18 months following Executive's separation
from the Company. However, no such entitlement will continue once Executive has
coverage through another employer or has been added onto coverage available
through her spouse's employer if applicable.
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ARTICLE XII
DISABILITY DURING TERM
In the event that the Executive becomes totally disabled so that she
is unable or prevented from performing any one or all of her usual duties
hereunder, the Company shall nevertheless continue to compensate her, and she
shall continue to receive her Base Salary as provided under Article V of this
Agreement for the remainder of the unexpired term. The obligation of the Company
to make the aforesaid payments shall be modified and reduced and the Company
shall receive a credit for all disability insurance payments which Executive may
receive or to which she may become entitled; provided, however, that the
premiums for such disability insurance had been paid by the Company or had been
reimbursed to Executive by the Company.
ARTICLE XIII
TERMINATION
(A) Notwithstanding anything herein contained, if on or after the
date hereof and prior to the end of the employment term, Executive is terminated
"For Cause" (as defined below) then the Company shall have the right to give
notice of termination of Executive's services hereunder as of a date to be
specified in such notice, and this Agreement shall terminate on the date so
specified. For purposes of this Agreement, termination "For Cause" shall mean
the commission by Executive of any criminal act against the Company involving
theft, embezzlement, misappropriation of property, or criminal fraud. In the
event that Executive is terminated For Cause, Executive shall be entitled to
receive only the unpaid portion of her base salary to the date on which such
termination shall take effect. In addition, in the event of termination "For
Cause," Executive shall not be eligible for a Performance Bonus.
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(B) In the event that Executive shall die, then this Agreement shall
terminate on the date of Executive's death. Within 30 days following such
termination, the Company shall commence to make monthly payments to the estate
or personal representative of Executive in an amount equal to Executive's then
prevailing Base Salary for the full remaining unexpired term, or for 12 months,
whichever period is greater. In addition, if Executive shall die before payment
has been made by the Company to Executive specific to any Performance Bonus that
is determined by the Compensation and Stock Option Committee, and confirmed by
the Company's independent auditors, as having been earned by Executive but is
unpaid at the time of Executive's death having occurred within 90 days of the
fiscal year end, the Company shall make payment to the estate or personal
representative of Executive.
(C) In the event that the Company terminates Executive "Without
Cause," (as defined below) then the Company shall be obligated to pay to
Executive an amount equal to the greater of (i) the balance of the Base Salary
for the remainder of the employment term or (ii) an amount equal to two years
Base Salary. For purpose of this Agreement, termination Without Cause shall mean
(i) termination for any reason other than as provided under paragraph A or B of
this Article XII, (ii) a Change in Control, or (iii) a change in the title of
the Executive or a material curtailment or diminution of the Executive's duties
and responsibilities.
ARTICLE XIV
STOCK OPTIONS
Commencing on the execution of this agreement and continuing each
year thereafter at the date of the annual shareholders meeting beginning with
the 2003 annual shareholders meeting, subject however, to Executive being in the
continued employ of the Company and subject to the Company having options
available to grant, Executive shall be granted options (the "Annual Stock
Options") to purchase 25,000 shares of the Company's
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common stock. The Company's Compensation and Stock Option Committee reserves the
right to increase the Annual Stock Options award based on exceptional
performance by the Executive. The exercise price of the Annual Stock Options
shall be equal to the fair market value of the common stock of the Company on
the date of each annual grant. The Annual Stock Options shall be designated as
incentive stock options to the extent eligible by law, with the balance
designated as non-incentive stock options. Each Annual Stock Option shall be
exercisable in accordance with the standard terms and conditions of the
Company's stock option grants; provided, however, that 50% of each Annual Stock
Option shall vest and become exercisable on the six-month anniversary date of
the grant and the remaining 50% shall vest on the first anniversary date of the
grant; and provided further, however, that the vesting of each Annual Stock
Option shall immediately vest and become exercisable upon the occurrence of a
termination "Without Cause", as defined in Article XIII hereof.
ARTICLE XV
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the parties
and supersedes the 1999 Employment Agreement, and all prior agreements between
the parties, whether oral or written.
ARTICLE XVI
ARBITRATION
Any dispute arising out of the interpretation, application and/or
performance of this Agreement shall be settled through final and binding
arbitration before a single arbitrator in Tampa, Florida in accordance with the
commercial rules of the American Arbitration Association. The arbitrator shall
be selected by the Association and shall be an attorney at law
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experienced in the field of corporate law. Any judgment upon any arbitration
award may be entered in any court, federal or state, having competent
jurisdiction of the parties.
ARTICLE XVII
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE XVIII
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person or mailed by certified mail, return receipt
requested, as follows:
If to the Company: Comprehensive Care Corporation
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx 000, Xxxxx 000
Xxxxx, Xxxxxxx 00000
If to the Executive: Xxxx Xxxx Xxxxxxx
Addressed to the Most Recent
Residence Address Contained
in Executive's Personnel File
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
ARTICLE XIX
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and personal
representatives of the Executive.
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ARTICLE XX
WAIVER
The waiver by either party of any breach or violation of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of construction and validity.
ARTICLE XXI
GOVERNING LAW
This Agreement has been negotiated and executed in the State of
Florida, and Florida law shall govern its construction and validity.
ARTICLE XXII
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition or amendment shall be made hereto, except by written
agreement signed by the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and affixed their hands and seals the day and year first above written.
(Corporate Seal) COMPREHENSIVE CARE CORPORATION
By /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman, Chief Financial Officer,
and Treasurer
/s/ Xxxx Xxxx Xxxxxxx
------------------------------------
XXXX XXXX XXXXXXX (Executive)
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