1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 25th day of June, 1996 by and
between Healthsource, Inc., a corporation organized under the laws of the
State of New Hampshire ("Healthsource") and Xxxxxx X. Xxxxxxxxx ("Xxxxxxxxx").
RECITALS
WHEREAS, Healthsource is engaged in the operation of a health
maintenance organization and other managed health care programs and operations,
as well as health insurance companies, third party administrators, and
utilization review organizations; and
WHEREAS, Healthsource wishes to engage Xxxxxxxxx as its chief
financial officer;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the parties agree as
follows:
1. Employment. Healthsource agrees to employ Xxxxxxxxx and Xxxxxxxxx
agrees to be employed by Healthsource, upon the terms and conditions set forth
in this Agreement.
2. Duties. Xxxxxxxxx shall assume the title, function and duties of
Chief Financial Officer which generally shall mean that he is responsible for
financial affairs of Healthsource. Xxxxxxxxx shall report to the Chief Executive
Officer of Healthsource, and shall have a functional relationship with the
Executive Vice President of Healthsource, as the same shall be designated from
time to time. Xxxxxxxxx shall devote his full time to performance of his duties
as specified in this Agreement.
3. Compensation. For all services rendered by Xxxxxxxxx under this
Agreement, Healthsource shall compensate Xxxxxxxxx as set forth in this
Section 3:
3.1 Salary. Healthsource shall pay Xxxxxxxxx an annual salary of
$325,000, provided that Xxxxxxxxx shall be eligible for salary adjustments which
shall be determined in the discretion of Healthsource in accor-
2
dance with criteria applied to other Healthsource senior executives generally
("Base Salary"). The initial review of Base Salary will be made at January 1,
1997. The Base Salary will be paid in 26 equal installments.
3.2 Bonus Compensation. Xxxxxxxxx will be eligible for an annual bonus
of up to thirty percent (30%), and a minimum of twenty percent (20%), of the
Base Salary, the first review being at January 1, 1997. Bonus compensation,
other than the minimum 20%, will be determined by Healthsource based on company
performance, Zubretsky's performance, or such other criteria as determined by
Healthsource in its sole discretion. Payment of bonus compensation, other than
the minimum 20%, will be made at such time and in such manner as determined by
Healthsource.
3.3 Fringe Benefits. Xxxxxxxxx shall be entitled to participate in all
fringe benefits generally made available to senior management, as such benefits
may be established, amended or discontinued from time to time. The fringe
benefits made available to senior management as of the execution of this
Agreement include:
3.1 The Healthsource New Hampshire health plan or other
reasonably equivalent coverage from another Healthsource subsidiary for
Xxxxxxxxx and his family at a cost to Xxxxxxxxx in accordance with
Healthsource's regular policy for its senior management.
3.2 Thirty (30) paid leave days for each year of employment,
accrued at two and one-half (2.5) days per month, which shall include holiday,
vacation and sick days.
3.3 Participation in the Healthsource 401k deferred compensation
plan in accordance with its terms as they may be amended from time to time,
provided that nothing herein shall prevent Healthsource from terminating such
401k plan in whole or in part.
3.4 Stock Options. Upon commencement of employment, and confirmation
by the Compensation Commit- tee of the Healthsource Board of Directors,
Xxxxxxxxx shall receive 50,000 options to purchase the common stock of
Healthsource, in accordance with the 1994 Healthsource Employee Stock Option
Plan. Fifty percent (50%) of such
2
3
stock options shall vest on the first anniversary of the grant of the options by
the Compensation Committee, and the remainder shall vest on the second
anniversary of the grant of the options by the Compensation Committee.
Thereafter, Xxxxxxxxx shall be annually considered for additional options in
accordance with Healthsource stock option plans or policies for key or senior
management employees as are in effect from time to time, and as determined by
the Stock Option Plan Committee in its discretion, the first consideration being
at January 1, 1997 for services provided during 1996.
4. Reimbursement of Expenses. Healthsource shall reimburse Xxxxxxxxx
for travel and other expenses reasonably and necessarily incurred in the
performance of his duties in accordance with Healthsource's normal documen-
tation procedure.
5. Term and Termination.
5.1 Term of Agreement. The term of this Agreement shall be for an
initial term commencing in July, 1996 and ending December 31, 1997, unless this
Agreement shall be terminated as provided below. Employment shall continue from
year to year thereafter, unless one party provides the other with notice of an
intent not to renew this Agreement no less than sixty (60) days before the
beginning of the next renewal term or unless terminated as provided below.
5.2 Without Cause Termination. This Agreement may be terminated
by either party, at will, without cause, by giving sixty (60) days prior written
notice to the other. If termination is accomplished in this manner the effective
date of termination shall be the 60th day following receipt of the termination
notice.
5.3 For-Cause Termination. Healthsource may terminate this
Agreement immediately, for cause, in the event of:
3.1 Conviction of Xxxxxxxxx by a court of competent
jurisdiction of any criminal offense involving dishonesty, breach of trust or
other act of moral turpitude;
3
4
3.2 Commission by Xxxxxxxxx of an act of fraud upon, or
materially evidencing bad faith toward, Healthsource;
3.3 Death of Xxxxxxxxx;
3.4 Disability of Xxxxxxxxx, provided that he is unable to
perform the necessary functions of his job for a period of ninety (90) days.
6. Zubretsky's Obligations Upon Termination.
6.1 Non Disclosure of Information. Xxxxxxxxx acknowledges that
as a consequence of his employment under this Agreement, he has been and will be
given access to confidential information including but not limited to
information relating to valued physicians, subscribers, and customers of
Healthsource subsidiaries, and such other confidential matters as Healthsource's
systems, procedures, manuals, confidential reports, and the nature and type of
services rendered by Healthsource. In consideration of the covenants of
Healthsource under this Agreement, Xxxxxxxxx agrees that anytime during or
following the term of the Agreement, he shall not directly or indirectly
disclose any confidential information to third persons except for the benefit of
Healthsource and its subsidiaries, or in the course of performing his duties. In
addition, Xxxxxxxxx agrees that all records created or maintained by Xxxxxxxxx
in the course of his employment shall remain the property of Healthsource and
Xxxxxxxxx shall, upon termination of his employment, immediately return all such
records, without maintaining any copies, to Healthsource. Xxxxxxxxx shall
execute the Healthsource Confidentiality Statement annexed hereto as Attachment
1. In the event of any conflict between the Confidentiality Statement and this
Agreement, the terms of this Agreement shall prevail. If any court of compe-
tent jurisdiction shall determine this covenant to be unenforceable then this
covenant shall nonetheless be enforceable by such court for such lesser scope as
may be determined by the court to be reasonable and enforceable.
6.2 Non-Compete. Upon termination of this Agreement for any
reason, Xxxxxxxxx agrees that, during the term of this Agreement and for a
period of one (1) year following the date of termination, he shall not be
employed by or associated with (as employee, consultant,
4
5
director, officer or shareholder) any company which engages in the HMO, HMO
management, preferred provider organization, physician-hospital organization,
integrated delivery system, utilization review or other managed care business in
any state in which Healthsource or any affiliate of Healthsource is engaged in
business or is engaged in discussions or negotiations regarding any such
business as of the effective date of termination. However, Xxxxxxxxx may return
to employment with Coopers & Xxxxxxx LLP and not be in violation of this
non-compete clause. If any court of competent jurisdiction shall determine this
covenant to be unenforceable upon the term or scope set forth in this Section
6.2, then this covenant shall nonetheless by enforceable by such court for such
shorter term or within such lesser scope as may be determined by the court to be
reasonable and enforceable.
6.3 Injunctive Relief. In the event that Xxxxxxxxx breaches or
threatens to breach the covenants contained in Article 6, Healthsource shall,
without limitation, be entitled to an injunction restraining Xxxxxxxxx (and any
person acting for or on behalf of Xxxxxxxxx) from disclosing in whole or in part
any such confidential information of Healthsource and from competing with
Healthsource. Nothing herein shall be construed as prohibiting Healthsource from
pursuing and obtaining any other remedies available to it for such breach or
threatened breach.
6.4 Survival. The rights and obligations contained in this
Article 6 shall survive termination of this Agreement for any reason.
7. Healthsource's Obligation Upon Termination.
7.1 Severance.
7.1.1 In the event that Healthsource (or any successor in
interest) issues a notice of intent not to renew this Agreement under Section
5.1 or terminates this Agreement without cause under Section 5.2, Healthsource
(or its successor in interest) shall pay Xxxxxxxxx the Base Salary in effect
immediately prior to termination for a period of two (2) years, provided that
Xxxxxxxxx complies with the obligations set forth in Article 6.
5
6
1.2 Notwithstanding subsection 7.1.1, if Healthsource (or a
successor in interest) terminates this Agreement without cause under Section 5.2
within one hundred eighty (180) days following a Change in Control of
Healthsource, or in any way reduces the authority or status of Xxxxxxxxx (by way
of example, making Xxxxxxxxx chief financial officer of a subsidiary but not the
surviving corporation) then Healthsource (or its successor in interest) shall
pay Xxxxxxxxx the Base Salary in effect immediately prior to termination for a
period of two years and 364 days. For purposes of this Section 7.1, a Change in
Control is a change of greater than one-half of the Healthsource Board of
Directors at one time, or the sale of a majority of stock or substantially all
of the assets of Healthsource, or a merger or exchange of stock with another
company in which at least 30% of Healthsource stock is issued or exchanged for
another Company's stock or the purchase of assets or stock of another company
the value of which is greater or equal to 30% of the market value of
Healthsource stock.
1.3 Xxxxxxxxx is not entitled to severance benefits if
Healthsource (or any successor in interest) terminates this Agreement for cause
under Section 5.3, or if Xxxxxxxxx submits a notice of intent not to renew this
Agreement under Section 5.1 or voluntarily resigns; provided, however, that
Xxxxxxxxx shall be entitled to severance benefits under subsection 7.1.1 if he
terminates this Agreement within one hundred eighty (180) days after a Change in
Control of Healthsource, pursuant to which his job title or duties are
diminished, including but not limited being designated only as the chief
financial officer of a subsidiary of Healthsource or its successor, as described
in paragraph 7.1.2.
7.2 Survival. The rights and obligations contained in this
Section 7 shall survive termination of this Agreement for any reason.
8. Miscellaneous.
8.1 Amendments. This Agreement may be modified only by a
writing executed by the parties hereto.
8.2 Integration. This Agreement supersedes all prior agreements
and understandings of the parties as to the employment of Xxxxxxxxx by
Healthsource or any
6
7
affiliate of Healthsource, except for the letter from Xxxxxx X. Xxxxxx M.D.
dated June 25, 1996.
8.3 Captions. All captions used herein are for purposes of
convenience only and shall not be referred to in construing this Agreement.
8.4 Governing Law. This Agreement shall be governed, construed
and enforced in accordance with the internal laws of the State of New Hampshire,
without regard to conflicts of interest. The parties agree that any action
brought in connection with this Agreement shall be maintained only in a State or
federal court of competent subject matter jurisdiction located within the state
of New Hampshire.
8.5 Waiver of Breach. The failure by either party to insist upon
strict compliance with any of the terms, conditions, or covenants contained
herein shall not be deemed a waiver of any such terms, conditions, or covenants;
nor shall any waiver any one or more times be deemed a waiver at any other time
or times.
8.6 Severability. The provisions of this Agreement are severable
and the invalidity of any term or provision of this Agreement shall not
invalidate any other term or provision of this Agreement.
8.7 Succession. This Agreement shall be binding upon the parties
hereof, their heirs, estates, assigns, transferees and successors in interest.
Zubretsky's duties shall be non-delegable and non-assignable.
8.8 Notice. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail
or courier, with a signed receipt required, as follows:
To Healthsource: Healthsource, Inc.
0 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxxxxx 00000
ATTN: Vice President,
Human Resources
7
8
with a copy to: Healthsource, Inc.
0 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxxxxx 00000
ATTN: General Counsel
To Xxxxxxxxx: Xxxxxx X. Xxxxxxxxx
00 Xxxxxxxxxx Xxxx
Xxxx, Xxxxxxxxxxx 00000
or to such other persons as may from time to time be designated by either of the
parties hereto in writing.
8.9 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement.
IN WITNESS WHEREOF, Xxxxxxxxx and Healthsource, by its duly
authorized representative, have executed this Agreement as of the date first
written above.
HEALTHSOURCE, INC. XXXXXX X. XXXXXXXXX
BY: /s/ Xxxxxx X. Xxxxxx BY: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------- ---------------------------------
Xxxxxx X. Xxxxxx, M.D. Xxxxxx X. Xxxxxxxxx
President and Chief
Executive Officer
8
