EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this 3rd day of September, 1996 by and between MERIT BEHAVIORAL CARE
CORPORATION, a Delaware corporation (the "Company"), and Xxxxx X. Xxxxxxxx, an
individual with an address at 000 Xxxxxxx Xxx, Xxxxxxx, Xxx Xxxxxx 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; 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.
"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.
"Consideration Date" shall have the meaning such term is
given in Section 2.1(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.
"Employee Note" shall have 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.
"Initial Shares" shall have the meaning such term is given
in Section 4.4 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 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.
"Stockholder's Agreement" shall have the meaning such term
is given in Section 4.4 hereof.
"Subsequent Shares" 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. (a) The Company agrees to employ Employee as
Executive Vice President, Business Operations of the Company for the Employment
Period, and Employee hereby accepts such employment. In such position, Employee
shall report to Xxxxxx X. Xxxxxx, Ph.D., Chairman of the Board and CEO;
provided, that if Xx. Xxxxxx is no longer employed by the Company, Employee
shall report to the then current CEO. Employee shall be responsible for, among
other areas, the following operations: Information Systems, Network
Administration, Claims and Human Resources, as well as other areas assigned to
Employee by the CEO. Employee also shall perform such other duties with regard
to the Business 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.
(b) (i) The Company agrees that, not later than six (6) months
after the date of this Agreement (the "Consideration Date"), the Company shall
consider Employee for promotion to the position of President and Chief Operating
Officer of the Company. It is understood that any such promotion is entirely at
the discretion of the CEO and the Board, and that the Company shall not be
obligated to promote Employee to such position.
(ii) If the Company offers to promote Employee to such position on or
prior to the Consideration Date, and Employee accepts such promotion, then
Employee shall continue to report to the CEO. If Employee receives such offer
and accepts such promotion, Employee also shall perform such other duties with
regard to the Business 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. In the event the Company determines to offer to
promote Employee to President and Chief Operating Officer of the Company as
described above, and Employee accepts such promotion, Employee shall be entitled
to receive the additional grant of Options described in Section 4.3(b) hereof.
(iii) In the event the Company does not offer to promote Employee to the
position of President and Chief Operating Officer of the Company on or
prior to the Consideration Date:
(A) Employee may elect to terminate this Agreement for
Good Reason under Section 3.4(d) hereof; provided, that Employee
must make such election in a written notice delivered to the
Company not later than sixty (60) days after the Consideration
Date; or
(B) If Employee does not deliver the notice described in
clause (A) above prior to such date, Employee shall continue in
his position as Executive Vice President, Business Operations of
the Company, subject to all terms and conditions of this
Agreement.
2.2 Performance of Duties. 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 or the CEO).
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 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.
2.3 Directorship. At the next meeting of the Board, Employee shall
be elected a director of the Company.
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 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 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, for any or all of the following "causes" (a
"Termination for Cause"):
(a) a finding by the Board that Employee has harmed the Company or
any Affiliate through a dishonest, fraudulent, willful or
reckless act in the performance of his employment duties, or
refusal or failure to perform such duties, and such harm is not
remedied by Employee within twenty (20) days after notice to
Employee from the Company specifying such harm and demanding that
Employee remedy such problem;
(b) Employee's conviction of a crime; or
(c) Employee's willful disregard of the lawful policies or procedures
of the Company, or his failure to follow a lawful direction of
the Board or CEO, and such disregard or failure is not remedied
by Employee within twenty (20) days after notice to Employee from
the Company specifying such disregard or failure and demanding
that Employee remedy such problem.
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 one hundred eighty (180) 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 one hundred eighty (180) 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;
(c) a material breach by the Company of the Stockholder's Agreement; or
(d) a determination by the Company not to offer to promote Employee to the
position of President and Chief Operating Officer on or prior to the
Consideration Date, as provided in Section 2.1(b) hereof.
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 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 $350,000 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 (other than the period from
the date hereof through September 30, 1996) 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 thirty percent (30%); for any successor plan,
Employee's bonus percentage (subject to the applicable terms of the plan) also
shall be thirty percent (30%). 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. (a) Employee shall be granted Options to purchase 350,000
shares of Common Stock on the date of this Agreement. 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 date of this Agreement attached hereto
as Exhibit B (the "Option Agreement").
(b) In the event the Company determines to offer to promote
Employee to President and Chief Operating Officer, and Employee accepts that
promotion, as contemplated in Section 2.1(b) hereof, the Company shall grant to
Employee Options to purchase an additional 250,000 shares of Common Stock. The
exercise price for such additional Options will be established by the Board in
its reasonable judgment on or shortly after the Consideration Date. Such
Options, if granted, also will be granted pursuant to the 1995 Option Plan and a
stock option agreement having terms substantially similar to those contained in
the Option Agreement.
4.4 Purchase of Common Stock. On the date of this Agreement, 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
150,000 shares of Common Stock at the price of $5.00 per share. The purchase of
100,000 of such shares of Common Stock (the "Initial Shares") will take place on
the date of this Agreement. Employee will effect payment for the Initial Shares
by delivery to the Company of Employee's promissory note in favor of the
Company, attached hereto as Exhibit D, in the principal amount of $500,000 (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
Initial Shares. Such pledge will be made by Employee pursuant to the Repayment
and Stock Pledge Agreement attached hereto as Exhibit E. Provided that he is
still employed by the Company, Employee will purchase the remaining 50,000
shares of Common Stock (the "Subsequent Shares") not later than December 31,
1996. As provided in the Stockholder's Agreement, Employee will effect payment
for the Subsequent Shares by delivery to the Company of $250,000 in cash.
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 monthly, 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 executive 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 executive officers of the
Company, but not less 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 3.6 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." 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, Employee shall be entitled to (i) 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, (ii) require the
Company to continue Employee's insurance and medical benefits (or provide
substantially comparable benefits if Employee ceases to be eligible to
participate in the relevant insurance and medical benefit arrangements) for the
remainder of the term for which Total Base Compensation is required to be paid
pursuant to clause (i) above at the same rates as then in effect with respect to
current employees and (iii) 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.
4.8 Release. The benefits to 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
benefits, 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 benefits 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 continue such benefits 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 the CEO or the Company, or such
Confidential Information becomes public other than through action of Employee or
is compelled by legal process. 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).
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, during or as a result of 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. During Employee's
employment and, if such Developments were made, conceived or suggested by
Employee during or as a result of Employee's employment with the Company or any
Affiliate, thereafter, 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.
5.3 Restriction on Competitive Employment. Employee shall not (as an
individual, principal, agent, employee, consultant or otherwise), directly or
indirectly, during the period commencing on the date hereof and ending on the
first anniversary of termination of Employee's employment with the Company
(whether under this Agreement or otherwise) (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.
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.
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:
Xxxxx X. Xxxxxxxx
000 Xxxxxxx Xxx
Xxxxxxx, XX 00000
With a copy to:
Xxxx Xxxxxxx Xxxxxxxx Xxxxxxxx & Xxxxx
Park 00 Xxxxx Xxxx-Xxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
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
/s/Xxxxxx X.Xxxxxx
Xxxxxx X. Xxxxxx, Ph.D.
Chairman of the Board and
Chief Executive Officer
/s/Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
EXHIBITS
A. 1995 Option Plan (previously filed)
B. Non-Qualified Stock Option Agreement (previously filed)
C. Stockholder's Agreement (previously filed)
D. Employee Note
E. Repayment and Stock Pledge Agreement
Exhibit D -- Employee Note
SECURED PROMISSORY NOTE
$500,000.00 Park Ridge, New Jersey
November 15, 1996
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of Merit Behavioral Care Corporation (the "Company"), at its
office at Xxx Xxxxxxx Xxxxx, Xxxx Xxxxx, Xxx Xxxxxx 00000 in lawful money of the
United States, FIVE HUNDRED THOUSAND DOLLARS ($500,000.00). The undersigned
promises to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding from the date hereof at the rate of
6.5% per annum. Interest shall be calculated annually on the basis of a 365 day
year and the number of actual days elapsed.
All accrued and unpaid interest hereunder shall be due and payable as of
the first day of each calendar year commencing January 1, 1997. Except as
otherwise provided herein or in the Repayment and Stock Pledge Agreement between
the Company and the undersigned dated the date hereof (the "Pledge"), the
principal amount hereof and any accrued and unpaid interest and all other
amounts owing hereunder shall be due and payable in full on December 31, 2000.
Notwithstanding the foregoing, the unpaid principal amount hereof, all
accrued and unpaid interest hereunder and all other amounts owing hereunder
shall be due and payable in full on the date which is two months after the date
of termination of the undersigned's employment with the Company or any of its
subsidiaries, provided, however, this paragraph shall have no force and effect
in the event the Company has not elected to repurchase the shares purchased by
the undersigned pursuant to this Note.
This Note is issued in connection with the purchase by the undersigned
of shares of Common Stock of the Company and the execution by the undersigned of
the Stockholder's Agreement (the "Stockholder's Agreement") and the pledge of
such Stock and other collateral (the "Pledged Securities") pursuant to the
Pledge.
The undersigned shall have the right to prepay this Note, in whole or in
part, at any time without notice and without penalty and, notwithstanding
anything to the contrary herein, this Note shall be prepaid, in whole or in part
and from time to time, from the proceeds from any sale, transfer or other
disposition of Pledged Securities. Any partial prepayments shall be applied
first to accrued and unpaid interest and then to principal.
Notwithstanding the existence of the Pledged Securities as security for
repayment of the Note, the undersigned remains personally liable to the Company
for any deficiency which the Pledged Securities do not cover.
If an Event of Default (as defined in the Pledge) shall have occurred
and be continuing, then, at such time, the unpaid principal amount hereof, all
accrued and unpaid interest hereunder and all other amounts owing hereunder
shall be and become immediately due and payable without notice to the
undersigned.
The Company shall have all of the rights of a secured creditor under the
New York Commercial Code with respect to the Pledged Securities pledged as
security hereunder.
The undersigned promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by the Company in collecting or attempting
to collect the indebtedness under this Note.
If any payment of principal or interest on this Note becomes due and
payable on a day other than a business day, such payment shall be made on the
next succeeding business day. As used herein, the term "business day" means any
day other than a Saturday, Sunday or other day on which banks in the City of New
York, New York are authorized by law to close.
Except as otherwise provided herein, presentment for payment, demand,
notice of dishonor, protest and notice of protest are hereby waived. All
notices, declarations and other communications hereunder shall be in writing,
hand delivered (including delivery by a courier service) as follows:
If to the Company
Merit Behavioral Care Corporation
Xxx Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxx Xxxxxx 00000
Attn: General Counsel
If to the undersigned:
Xxxxx X. Xxxxxxxx
000 Xxxxxxx Xxx
Xxxxxxx, Xxx Xxxxxx 00000
or to such other address as the Company or the undersigned may deliver to the
other party from time to time in writing in like manner.
This Note shall not be assigned by the undersigned without the prior
written consent of the Company. This Note may be assigned by the Company at any
time.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Exhibit E -- Repayment and Stock Pledge Agreement
REPAYMENT AND STOCK PLEDGE AGREEMENT
THIS REPAYMENT AND STOCK PLEDGE AGREEMENT dated as of
November 15, 1996 is made and entered into by and between Merit Behavioral Care
Corporation (the "Company"), and Xxxxx X. Xxxxxxxx (the "Pledgor").
RECITALS
A. The Company has entered into a Stockholder's Agreement, dated
as of September 3, 1996 with the Pledgor (the "Stockholder's Agreement") whereby
the Company has agreed to issue and sell to Pledgor certain shares of Common
Stock of the Company, and has granted or may in the future grant to Pledgor
options to purchase Common Stock of the Company.
B. As the purchase price for 100,000 shares of the Purchase Stock
(as defined in the Stockholder's Agreement), the Pledgor is delivering to the
Company the promissory note of the Pledgor dated November 15, 1996 in the
principal amount of $500,000.00 (the "Note").
C. The Pledgor wishes to grant further security and assurance to
the Company in order to secure the payment of the Note and to that effect to
pledge to the Company the Stock (as defined in the Stockholder's Agreement) to
be acquired pursuant to the Stockholder's Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
i. Pledge.
(a) As security for the payment and performance of all
obligations of the Pledgor on the Note, including the payment of the
principal of and interest on the Note, and in order to secure the
Pledgor's obligations under the Stockholder's Agreement and this
Agreement, the Pledgor hereby delivers, pledges and assigns the Stock to
the Company and creates in the Company a security interest in the
Pledged Securities (as defined below).
(b) The Pledged Securities under this Agreement shall
consist of the Stock and all securities, certificates and instruments
representing or evidencing ownership of the Pledged Securities
hereunder, and all proceeds and products of any Pledged Securities
hereunder, including, without limitation, stock, cash, property or other
dividends, securities, rights and other property now or hereafter at any
time or from time
to time received, receivable or otherwise distributed or distributable
in respect of or in exchange for any or all of such Pledged Securities
including proceeds delivered to the Pledgee pursuant to Section 2 and
any substituted or additional Pledged Securities required to be supplied
under the terms of this Agreement.
ii. Repayment. The Pledgor hereby agrees that at any time if the Pledgor
shall have received any cash payment or other distribution in respect of,
or upon transfer, sale or other disposition of, the Pledged Securities,
then and in each case until the Note is paid in full (including interest),
the Pledgor shall immediately deliver to the Company such amount in partial
or full payment of the principal and interest on the Note.
iii. Administration of Security. The following provisions shall govern the
administration of the Pledged Securities:
(a) So long as no Event of Default (as defined below) has occurred and is
continuing, the Pledgor shall be entitled to act with respect to the
Pledged Securities in any manner not inconsistent with this Agreement, the
Stockholder's Agreement, the Note, or any document or instrument delivered
or to be delivered pursuant to or in connection with the Stockholder's
Agreement.
(b) The Pledgor shall immediately upon request by the Company and in
confirmation of the security interests hereby created, execute and deliver
to the Company such further instruments, deeds, transfers, assurances and
agreements, in form and substance as the Company shall request, including
any financing statement and amendments thereto, or any other documents, as
required under New York law and other applicable law to protect the
security interests created hereunder.
iv. Defaults. The occurrence of any one or more of the following events or
conditions shall constitute an "Event of Default" under this Agreement:
(a) The Pledgor fails to make any principal or interest payment required
pursuant to the Note within 30 days of the due date therefor.
(b) The Pledgor makes or has made, or furnishes or has furnished, any
material written warranty, representation or statement to the Company in
connection with this Agreement or the Note which is or was false or
misleading when made or furnished.
(c) Any lien or encumbrance other than that created by this Agreement is
placed on or any levy is made on the Pledged Securities, or any portion
thereof; or the Pledged Securities, or any portion thereof, are seized or
attached pursuant to legal process, and such lien, encumbrance, levy,
seizure, or attachment is not removed or released within thirty (30) days
from the time such lien or encumbrance was placed thereon or such levy,
seizure or attachment was effected.
(d) The Pledgor commences or proposes to commence any bankruptcy,
reorganization or insolvency proceeding, or other proceeding under any
federal, state or other law for the relief of debtors.
(e) The Pledgor fails to obtain dismissal, within sixty (60) days after
commencement thereof, of any bankruptcy, insolvency, or reorganization
proceeding or other proceeding for relief under any bankruptcy law,
including, without limitation, the Federal Bankruptcy Code, or any law for
the relief of debtors, instituted against the Pledgor by one or more third
parties, fails to oppose actively such proceeding, or, in any such
proceeding defaults or files an answer admitting the material allegations
upon which the proceeding was based, or alleges its willingness to have an
order for relief entered or its desire to seek liquidation, reorganization
or adjustment of its debts.
(f) Any receiver, trustee or custodian is appointed by a court of competent
jurisdiction to take possession of all or any substantial portion of the
assets of the Pledgor.
(g) The Pledgor shall fail generally to pay his debts as such debts become
due.
(h) The Pledgor shall effect or there shall otherwise occur a Transfer (as
defined in the Stockholder's Agreement) not otherwise permitted under the
Stockholder's Agreement.
v. Remedies in Case of an Event of Default.
(a) In case an Event of Default shall have occurred and be continuing, the
Company shall be entitled to vote the Pledged Securities and shall have all
of the remedies of a secured party under the New York Uniform Commercial
Code, and, without limiting the foregoing, shall have the right, subject to
any necessary regulatory approvals, to sell, assign and deliver the whole
or, from time to time, any part of the Pledged Securities, or any interest
in any part thereof, at any private sale or at public auction, with or
without demand of performance or other demand, advertisement or notice of
the time or place of sale or adjournment thereof or otherwise (except the
Company shall give 10 days' notice to the Pledgor of the time and place of
any sale pursuant to this Section 5), for cash, and credit or for other
property, for immediate or future delivery, and for such price or prices
and on such terms as the Company shall, in its absolute discretion,
determine, the Pledgor hereby waiving and releasing any and all right or
equity of redemption whether before or after sale hereunder. At any such
sale the Company may bid for and purchase the whole or any part of the
Pledged Securities so sold free from any such right or equity of
redemption. The Company shall apply the proceeds of any such sale first to
the payment of all costs and expenses, including reasonable attorneys fees,
incurred by the Company in enforcing its rights under this Agreement and
then to the payment of interest on and principal of the Note, with such
payments to be applied in the Company's sole discretion.
(b) The Pledgor recognizes that the Company may be unable to effect a
public sale of all or a part of the Pledged Securities by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Act"), or in the rules and regulations promulgated thereunder, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Pledged Securities for their own account, for investment and not with a
view to the distribution or resale thereof. The Pledgor agrees that private
sales so made may be at prices and on other terms less favorable to the
seller than if the Pledged Securities were sold at public sale, and that
the Company has no obligation to delay the sale of the Pledged Securities
for the period of time necessary to permit the registration of the Pledged
Securities for public sale under the Act. The Pledgor agrees that a private
sale or sales made under the foregoing circumstances shall be deemed to
have been made in a commercially reasonable manner.
(c) If any consent, approval or authorization of any state, municipal or
other governmental department, agency or authority should be necessary to
effectuate any sale or disposition by the Company pursuant to this Section
5 of the Pledged Securities, or any partial disposition of the Pledged
Securities, the Pledgor will execute all such applications and other
instruments as may be required in connection with securing any such
consent, approval or authorization, and will otherwise use his best efforts
to secure the same.
(d) Neither failure nor delay on the part of the Company to exercise any
right, remedy, power or privilege provided for herein or by statute or at
law or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
vi. Pledgor's Obligations Not Affected. The obligations of the Pledgor
under this Agreement shall remain in full force and effect without regard
to, and shall not be impaired or affected by: (a) any subordination,
amendment or modification of or addition or supplement to the Stockholder's
Agreement or the Note, or any assignment or transfer of either thereof; (b)
any exercise or non-exercise by the Company of any right, remedy, power or
privilege under or in respect of this Agreement, the Stockholder's
Agreement or the Note, or any waiver of any such right, remedy, power or
privilege; (c) any waiver, consent, extension, indulgence or other action
or inaction in respect of this Agreement, the Stockholder's Agreement or
the Note, or any assignment or transfer of any thereof; or (d) any
bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like, of the Company or its successors,
whether or not the Pledgor shall have notice or knowledge of any of the
foregoing.
vii. Transfers by Pledgor. The Pledgor will not sell, assign, transfer or
otherwise dispose of, grant any option with respect to, or mortgage, pledge
or otherwise encumber the Pledged Securities or any interest therein.
viii. Attorney-in-Fact. The Company or its successor is hereby appointed
the attorney-in-fact of the Pledgor for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any
instrument which the Company reasonably may deem necessary or advisable to
accomplish the purposes hereof, including without limitation, the execution
of the applications and other instruments described in Section 5(c), which
appointment as attorney-in-fact is irrevocable as one coupled with an
interest.
ix. Termination. Upon payment in full of principal of and interest on the
Note and upon the due performance of and compliance with all the provisions
of the Note, this Agreement shall terminate, and the Pledgor shall be
entitled to the return of such of the Pledged Securities as has not
theretofore been sold, released pursuant to Section 5 or otherwise applied
pursuant to the provisions of this Agreement.
x. Notices. All notices or other communications required or permitted to be
given hereunder shall be delivered as provided in the Stockholder's
Agreement.
xi. Miscellaneous. The Company and its assigns shall have no obligation in
respect of the Pledged Securities, except to hold and dispose of the same
in accordance with the terms of this Agreement. Neither this Agreement nor
any provisions hereof may be amended, modified, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the amendment, modification, waiver, discharge
or termination is sought. The provisions of this Agreement shall be binding
upon the successors and assigns of the Pledgor. The captions in this
Agreement are for convenience of reference only and shall not define or
limit the provisions hereof. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New
York, without regard to the conflicts of laws rules thereof. This Agreement
may be executed simultaneously in several counterparts, each of which is an
original, but all of which together shall constitute one instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Repayment
and Pledge Agreement to be executed and delivered on the date first above
written.
MERIT BEHAVIORAL CARE CORPORATION
By________________________________
Its________________________________
PLEDGOR
---------------------------------
Xxxxx X. Xxxxxxxx
