Exhibit 10.26
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, entered into on September 9, 1996
(the "Signing Date") to be effective as of June 5, 1995 (the "Effective Date"),
between DOCTORS HEALTH SYSTEM, INC., a Maryland corporation (the "Company"), and
XXXXXXX XXXXXXX (the "Executive").
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BACKGROUND
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The Company is engaged, directly or through service contracts
with others, in the business of (i) negotiating contracts to provide health care
services and products, (ii) managing health care providers and (iii) providing
health care services and products (the "Business").
The Executive is experienced in designing and implementing
globally capitated health care products and serving in a leadership capacity in
the administration of health care management.
The Company desires to hire Executive, and the Executive
desires to be employed by the Company, on the terms and conditions set forth in
this Agreement.
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 EMPLOYMENT.
(a) On the Effective Date, the Company shall
employ the Executive as its Vice President of Managed Care Products and
Services. In such capacity, the Executive shall report directly to and be
subject to the supervision and direction of the President and Chief Executive
Officer of the Company (the "CEO"). The Executive shall have overall
responsibility and authority for development and implementation of the managed
care products and services (including network Independent Physician
Associations) offered by the Company. The Executive shall perform her duties
faithfully and to the best of her abilities.
(b) The Executive shall, subject to SECTION
1.1(c) hereof, devote her full working time and creative energies to the
performance of her duties hereunder and will at all times devote such additional
time and efforts as are reasonably sufficient for fulfilling the significant
responsibilities entrusted to her. So
long as such activities, in the aggregate, do not interfere with the performance
by the Executive of her duties hereunder: (i) the Executive shall be permitted a
reasonable amount of time to supervise her personal, passive, investments;
(ii) the Executive shall be permitted a reasonable amount of time to
participate (as board member, officer or volunteer) in civic, political and
charitable activities; and (iii) the Executive shall be permitted to deliver
lectures to and teach at educational institutions and business organizations.
1.2 PLACE OF EMPLOYMENT. The Executive's principal
place of employment shall be in the Baltimore, Maryland metropolitan area,
subject to such travel as may be reasonably required by her employment pursuant
to the terms hereof. The Executive shall not be required to relocate outside of
the Baltimore, Maryland metropolitan area during the Term unless the Company
provides relocation benefits.
2. TERM OF EMPLOYMENT. The term of the Executive's employment
under this Agreement (the "Term") shall commence on the Effective Date and shall
end on June 4, 1998, unless sooner terminated, or extended, as herein provided.
Not later than April 1, 1998 (and each April 1 of each calendar year during any
Extension Period (defined below)), the Company and the Executive shall enter
into good faith negotiations to determine whether and on what terms to extend or
renew this Agreement beyond June 4 of such calendar year. If by February 1, 1998
(and February 1 of any calendar year occurring during an Extension Period)
either party gives written notice to the other of its desire to terminate this
Agreement as of June 4, then this Agreement shall so terminate, and the
Executive shall be permitted a reasonable amount of time during the balance of
the Term within which to explore alternative employment opportunities. If no
such written notice to terminate is given by either party by February 1, 1998
(or by February 1 of any calendar year occurring during an Extension Period),
then the Term shall, without further act or deed, automatically be extended upon
the same terms and conditions as previously in effect, for an additional 12
month period, commencing on June 5 of the applicable calendar year and ending on
June 4 of the immediately following calendar year. Each such 12 month extension
during the Term is referred to herein as an "Extension Period", and shall
constitute a part of the Term of this Agreement for all purposes, including the
provisions regarding extensions contained in this SECTION 2.
3. COMPENSATION.
3.1 SALARY. As compensation for all services to be
rendered pursuant to this Agreement, the Company shall pay to the Executive,
during the Term, a "Base Salary" (as defined in this SECTION 3.1) less such
deductions as shall be required to be withheld by applicable laws and
regulations. The "BASE SALARY" shall be a salary of $110,000 per annum from the
Effective Date to June 4, 1996 and $140,000 from June 5, 1996 to the end of the
Term. The Base Salary shall accrue from and after
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the Effective Date, and shall be payable during the Term, in arrears in equal
bi-weekly installments.
3.2 BONUS POOL.
(a) Beginning with the calendar year 1996,
the Company shall establish for the benefit of the Executive and certain other
Company employees a "Bonus Pool" with respect to each calendar year, or portion
thereof, that occurs during the Term (each a "Bonus Year").
(b) During the Term, except as otherwise
provided herein, the Executive shall be entitled to participate in the Bonus
Pool to the extent determined by the CEO; provided, however, that the bonus
award which the Executive shall receive for the first Bonus Year shall be an
amount determined with reference to performance criteria set forth in a letter
agreement between the Executive and the Corporation. However, in no event shall
the Bonus exceed 25% of the Base Salary. All amounts allocated to the Executive
pursuant to this SECTION 3.2 shall become payable to the Executive and are
hereinafter collectively referred to as the "Bonus". The amount of the
Executive's Bonus for each Bonus Year, if any, shall be determined by the first
day of March, and paid by the fifteenth day of March, next following the Bonus
Year for which the Bonus is payable.
3.3 STOCK OPTIONS.
(a) Upon the adoption by the Company of an
Omnibus Stock Option Plan or other stock benefit plan (the "Plan") which affords
to key employees of the Company the opportunity to participate in the Company's
growth through stock ownership, the Company will grant to the Executive options
(the "Options") to purchase 10,000 shares of the Company's Class A Common Stock
(the "Initial Option Shares"). Additional Option Shares may be granted to the
Executive as described below.
(b) Notwithstanding anything herein to the
contrary, the date of grant (the "Grant Date") of such Options shall be
coincident with the date of adoption of the Plan by the Company, and the
exercise price of such Options shall be determined, as described in greater
detail below, with respect to the fair market value of the Option Shares as of
the Grant Date. As soon as practicable after the Executive is notified by the
Company of such fair market value, but in no event later than three (3) days
following such notification, the Executive shall inform the Company in writing
of the Executive's election to receive "Qualified Incentive Stock Options"
issued under the Plan, or to receive "Non-Qualified Stock Options", whether
under the Plan or otherwise, or some combination of the two as the Executive and
the CEO may reasonably agree.
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(c) Additional Options (the "Additional
Options") may be issued to you pursuant to the Company's Omnibus Stock Option
Plan from time to time as determined by the CEO. The grant of any Additional
Options shall be subject to and based upon the broad criteria described in
paragraph 3.3(d) of this Agreement and the Additional Options shall have the
effect of providing you the opportunity to own 50 percent of an assumed fully
diluted physician ownership position in the Company (approximately 50 percent of
.758 percent of the outstanding Common Stock of all classes of the Company). The
Additional Options will be granted upon the successful inauguration of one or
more of the Company's globally capitated products. The Executive will be deemed
to have satisfied this requirement when any physician groups associated with the
Company have any patients (subscribers) directly or indirectly enrolled in
capitation services for the Company providing primary, specialty, ancillary,
acute and subacute care.
(d) All of the Executive's Options shall be
exercisable for a period of ten (10) years from the date they are granted to the
Executive. All shares issued to the Executive pursuant to the exercise of the
Options granted under this SECTION 3.3 shall be subject to the vesting and
forfeiture provisions set forth in this SECTION 3.3. Two-fifths of the Initial
Option Shares shall vest upon the first anniversary of the Effective Date. The
remaining Initial Option Shares shall vest equally during each month from June
5, 1997 to June 4, 2001, so long as the Executive remains employed with the
Company. The Additional Options shall be granted after June 4, 1996 if the
capitation requirements described in SECTION 3.3(c) have been satisfied. The
Additional Options shall vest over a period of five years from the grant date in
equal annual installments on each anniversary of the grant date. Except as
otherwise set forth herein, the Executive shall not be entitled to transfer any
Options, or shares that are subject to forfeiture, until such share has vested
in the Executive. Notwithstanding the foregoing, all Options shall, at the
Executive's election, immediately become exercisable, and all shares shall,
notwithstanding anything to the contrary herein, vest in the Executive and no
longer be subject to restriction or forfeiture, upon occurrence of any initial
public offering of Company securities, a liquidating distribution of the
Company, a combination, consolidation or merger where the Company is not the
survivor, any sale or issuance of Company securities that places a majority of
the voting power of shares in the control of persons or entities not having such
control on the date hereof, or any sale, exchange or other disposition of all or
substantially all of the Company's assets (each a "Change in Control").
(e) The Initial Option Shares and the
Additional Options shall have an exercise price per share equal to (i) in the
case of "Qualified Incentive Stock Options", the fair market value of a share of
the Company's Class A Common Stock as of the Grant Date, as determined by the
Company in good faith, and (ii) in the case of "Non-Qualified Stock Options", an
amount determined by the CEO and the Plan's Committee. The payment of any
exercise price for Options granted to the
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Executive hereunder may be made by the Executive in cash or, if the Executive so
requests in writing, by delivery to the Company of a full-recourse promissory
note of the Executive secured by the shares received upon exercise of the
Options. Any such promissory note shall have a term of ten years, shall accrue
(but not be payable until due) interest at the "applicable Federal rate" for
income tax purposes, and shall be subject to mandatory prepayment by the
Executive upon any disposition of shares for cash upon exercise of any Options
or upon any termination of the Executive's employment pursuant to SECTION
4.3(a).
(f) All Options granted hereunder may be
exercised in whole or in part, and, except as otherwise set forth herein, in any
combination of Qualified Incentive Stock Options and Non-Qualified Stock
Options, as the Executive may elect to exercise.
(g) The Executive agrees to and shall
execute a stockholder's agreement restricting her ability to transfer shares of
the Company's Class A Common Stock, or any other shares of the Company's stock
which the Executive may own or in which the Executive may have an interest, in
form substantially similar to the stockholders agreement attached hereto as
APPENDIX A (the "Stockholder's Agreement").
(h) Nothing in this SECTION 3.3 shall
adversely effect the Executive's right to participate, together with other key
employees of the Company, in any future grants of options, stock or other equity
related vehicles by the Company pursuant to the Plan as in effect from time to
time. All such future grants shall be subject to the terms of the Plan as in
effect at the time of grant.
3.4 WITHHOLDING. The Company is authorized to
withhold from the amount of any Salary, Bonuses, and any other things of value
paid to or for the benefit of the Executive, all sums authorized by the
Executive or required to be withheld by law, court decree, or executive order,
including (but not limited to) such things as income taxes, employment taxes,
and employee contributions to fringe benefit plans sponsored by the Company.
3.5 PARTICIPATION IN EXECUTIVE BENEFIT PLANS. The
Executive shall be permitted during the Term, if and to the extent legally
eligible, to participate in any group life, health, hospitalization or
disability insurance plan, health program, automobile allowance, pension plan or
similar benefit plan of the Company which may be available to other comparable
executives or professional employees, including physicians, of the Company
generally on the same terms as such other executives. All group life, health,
hospitalization and disability plan or policy premiums applicable to
participation in such plans or policies by the Executive and her spouse and
children (subject to reasonable policy and plan limitations) shall be paid by
the Company.
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3.6 VACATION. The Executive will receive four (4)
weeks vacation per year, to be scheduled and taken at the Executive's option at
such times as her duties may permit. Should the Company's policy provide for
more vacation to comparable executives the Executive will be accorded such
higher vacation. Unused vacation time shall not be cumulated or carried over nor
shall the Executive receive any compensation for unused vacation time.
3.7 EXPENSES. Subject to such policies as may from
time to time be established by the Board, the Company shall pay or reimburse the
Executive for all ordinary, necessary and reasonable expenses approved by the
CEO in advance (including, without limitation, travel, meetings, dues,
subscriptions, fees, educational expenses, mobile telephones, professional
insurance, and the like) actually incurred or paid by the Executive during the
Term in the performance of the Executive's services under this Agreement
(including, without limitation, expenses incident to attendance at board or
management meetings of the Company, or its Subsidiaries or Affiliates). The
Executive shall present expense statements or vouchers or such other supporting
information as the Board may require prior to payment for such expenses.
3.8 SIGNING BONUS. The parties acknowledge and
confirm that the Company has paid the Executive a signing bonus in consideration
of the termination of her employment with another employer prior to the
Effective Date and the loss of an incentive bonus made available by such
employer.
4. TERMINATION.
4.1 TERMINATION UPON DEATH. If the Executive dies
during the Term, the Executive's employment shall terminate as of the date of
death of the Executive.
4.2 TERMINATION UPON DISABILITY. Notwithstanding
any other provision of this Agreement, if during the Term the Executive becomes
physically, mentally or emotionally disabled, whether totally or partially, as
determined by an independent qualified physician, so that the Executive is, in
the good faith determination of the Board, substantially unable to perform her
services hereunder for (i) a period of three consecutive months, or (ii) shorter
periods aggregating three months during any twelve month period, the Company may
at any time after the last day of the three consecutive months of disability or
on the last day of the shorter period aggregating three months of disability, by
written notice to the Executive, terminate the Executive's employment hereunder
as of the date such written notice becomes effective.
4.3 TERMINATION AT ELECTION OF COMPANY.
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(a) Notwithstanding any other provision of
this Agreement, the Company may terminate the Executive's employment hereunder
at any time upon: (i) the continued failure or refusal by, or manifest inability
of, the Executive to perform her duties after reasonable prior notice to the
Executive; (ii) the Executive engaging in any acts or omissions involving
dishonesty or acts or omissions that demonstrate a lack of integrity; (iii) the
conviction of the Executive of a felony; (iv) the Executive engaging in acts or
omissions that demonstrably and materially injure the business and affairs of
the Company, monetarily or otherwise; and/or (v) any knowing material
misrepresentation made by the Executive to the Company or any material breach by
the Executive of her obligations hereunder.
(b) In addition to the Company's right to
terminate the Executive's employment pursuant to SECTION 4.3(a), and
notwithstanding any other provision of this Agreement, the Company may, for any
or for no reason, terminate the Executive's employment upon 60 days prior
written notice to the Executive.
4.4 TERMINATION BY THE EXECUTIVE.
(a) Provided that the Executive has
delivered to the Company at least sixty (60) days prior written notice setting
forth in reasonable detail any alleged material breach by the Company of this
Agreement or acts or omissions engaged in by the Company constituting
"constructive termination" of the Executive's employment with the Company, which
breach, acts or omissions have not been cured by the Company as of the end of
such period to the reasonable satisfaction of the Executive, then,
notwithstanding any other provision of this Agreement, the Executive shall be
entitled to terminate her employment for such reasons, effective immediately
upon the delivery by the Executive to the Company of a notice to the effect that
such breach, acts or omissions have not been cured to the reasonable
satisfaction of the Executive; provided, however, that if such constructive
termination is caused by the Executive's incapacity or inability to serve due to
a disability of the type described in SECTION 4.2 above and the Company elects
to terminate the Executive pursuant to the provisions of SECTION 4.2, the
Executive shall, for purposes of this Agreement, be deemed to have been
terminated pursuant to the provisions of SECTION 4.2 and not of this SECTION
4.4.
(b) For purposes of this SECTION 4.4,
"constructive termination" shall be limited to those circumstances where (i) the
Company creates working conditions that a reasonable person in the Executive's
position would consider unreasonable or intolerable which is not remedied by the
Company within sixty (60) days after notice thereof given by the Executive; and
(ii) such working conditions are not generally applicable to other executives of
the Company.
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4.5 COMPENSATION AND BENEFITS FOLLOWING
TERMINATION OF EMPLOYMENT.
(a) In the event of termination of the
Executive's employment for any reason other than a termination pursuant to
SECTION 4.3(b) (termination by the Company) or SECTION 4.4 (or a termination
caused merely by the expiration of the Term): (i) all compensation and other
benefits payable or provided hereunder shall cease as of the date of
termination; (ii) Base Salary (if any) then payable or accrued through the date
of termination; (iii) all accrued benefits (if any) then payable to the
Executive pursuant to the terms of any plans or arrangements referred to in
SECTION 3.5 shall be paid to the Executive (or to her heirs, legatees and/or
legal representatives) through the date of termination; and (iv) except in the
event of termination due to death (SECTION 4.1) or Disability (SECTION 4.2), any
Options that remain unexcercised and any shares of stock that remain unvested
pursuant to SECTION 3.3 shall immediately be forfeited to the Company. In the
event of termination due to death (SECTION 4.1) or Disability (SECTION 4.2), any
Options that remain unexcercised and any shares of stock that remain unvested
pursuant to SECTION 3.3 shall immediately be excercisable by the Executive (or
her heirs, legatees and/or legal representatives), and fully vested in the
Executive, and upon issuance all such shares shall be subject to the Company's
Stockholders Agreement then in effect.
(b) In the event of termination of the
Executive's employment pursuant to SECTION 4.3(b) or SECTION 4.4 (each a
"WRONGFUL TERMINATION"), the Executive (or, in the event of the Executive's
subsequent death or disability, her heirs, legatees and/or legal
representatives) shall receive (i) all accrued Base Salary and benefits (if any)
then payable to the Executive pursuant to the terms of any plans or arrangements
referred to in SECTION 3.5; (ii) as liquidated damages, an amount equal to the
Base Salary which the Executive would have earned through the end of the
contractual employment term then in effect in equal monthly installments or, at
the election, of the Company in a lump sum; and (iii) subject to the provisions
of the Company's Amended and Restated Articles (as in effect on the date
hereof), the Company's By-laws (as in effect on the date hereof), the
Stockholder's Agreement, and, if issued under a Plan, any Plan then in effect,
any Options that remain unexcercised and any shares of stock that remain
unvested pursuant to SECTION 3.3 shall immediately (and thereafter) be fully
excercisable and vest in the Executive and no longer be subject to forfeiture.
Any amounts then outstanding under any Promissory Note referred to in SECTION
3.3 above shall remain due and payable to the Company in accordance with the
terms of such Promissory Note.
5. CERTAIN COVENANTS OF THE EXECUTIVE.
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5.1 NECESSITY FOR COVENANTS. The Executive
acknowledges that (i) the Company, its Subsidiaries and its Affiliates (as
defined in SECTION 5.2) are engaged in the business, directly or through service
contracts with others, of providing primary and specialized medical and related
health care services and related products (the "Company Business"), and will in
the future be engaged in the Company Business; (ii) her employment pursuant to
this Agreement will give her access to customers and suppliers of, and trade
secrets of and confidential information concerning, the Company, its
Subsidiaries and its Affiliates; and (iii) the agreements and covenants
contained in this SECTION 5 are essential to protect the business and goodwill
of the Company, its Subsidiaries and its Affiliates. The Executive confirms to
the Company that she was not subject to any non-competition or contractual
confidentiality agreements in effect prior to the Effective Date which would
prevent the Executive's employment by the Company under the terms and conditions
set forth herein. In order to induce the Company to enter into this Agreement
and pay the compensation and other benefits at the levels requested by the
Executive, the Executive enters into the following covenants:
5.2 DEFINITIONS.
(a) For purposes of SECTIONS 5.3 through 5.8
only, the term "Company" shall include the Company and all of the Company's
Subsidiaries and Affiliates.
(b) "Provider" shall mean any health care
service provider or Affiliate thereof to whom the Company provided management or
other services.
(c) "Payor" means any insurer, employer,
health maintenance organization, preferred provider organization, health benefit
plan or other entity or organization to which, or to whose members, insured's,
employees, enrollees, beneficiaries or other persons affiliated with it
(collectively "Beneficiaries"), the Company provides services or products.
(d) "Service Area" means the geographic area
in which the Company provides health care services and in which the
Beneficiaries of those services generally reside, which shall include all areas
within a 25 mile radius of the site of any Provider's office.
(e) "Subsidiary" means any person or entity
in which the Company owns, beneficially or otherwise, an equity interest of more
than 50%.
(f) "Affiliate" means a Subsidiary of the
Company; a person or entity which is owned, controlled, or operated by the
Company; any person
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owning an equity interest in the Company; any person who has appointed the
Company as its exclusive agent for the provision of professional services and
the collection of revenues therefrom; and any partner, member, employee, owner
or agent of any Affiliate and any person or entity which is under common
ownership, control or operation with the specified person or entity.
5.3 RESTRICTIONS. During the Term and, unless the
Executive's employment is terminated other than pursuant to SECTIONS 4.3(b) or
4.4 hereof, for a period of twelve (12) months after the Executive's employment
hereunder is terminated (the "Termination Date") (the "Restricted Period"), the
Executive shall not, directly or indirectly, for her self or on behalf of any
other person, firm, corporation or other entity, whether as a principal, agent,
employee, stockholder, partner, officer, member, director, sole proprietor, or
otherwise:
(a) call upon or solicit any Provider for
the purpose of persuading the Provider to engage the Executive or any other
person, firm, corporation or other entity to provide services which are the same
or similar to those the Company provided to the Provider;
(b) call upon or solicit any Payor for the
purpose of persuading the Payor to engage any person or entity other that the
Company to provide health care services to the Payor with respect to any of its
Beneficiaries in the Service Area;
(c) solicit, participate in or promote the
solicitation of any person who was employed by the Company or a Provider at any
time during the twelve (12) months preceding the Termination Date to leave the
employ of the Company, or hire or engage any of those persons;
(d) make any disparaging remarks about the
Company's business, services or personnel;
(e) interfere in any way with the Company's
business, prospects or personnel; or
(f) become affiliated with or, subject to
SECTION 5.16 hereof, render services to any person engaged in any business that
competes with the Company Business within the Service Area, directly or
indirectly, in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, employee, trustee or
consultant; provided, however, that the Executive may own, directly or
indirectly, solely as an investment, securities which are publicly traded if the
Executive (a) is not a controlling person of, or a member of a group which
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controls, the issuer and (b) does not, directly or indirectly, own 5% or more of
any class of securities of the issuer.
5.4 TRADE SECRETS AND CONFIDENTIAL INFORMATION
5.4.1 TRADE SECRETS DEFINED. The term "Trade
Secrets," as used in this Agreement, includes, without limitation, (i) all
information concerning billing practices and procedures of the Company, (ii) the
rates and amounts that the Company pays to its personnel, (iii) information
about the Company's contracts with insurers, health maintenance organizations,
employers, and other payors, (iv) all formulae, compilations, programs, devices,
lists, methods, techniques or processes of the Company, and (v) all other
information of the Company that would be deemed to be "trade secrets" within the
meaning of the Maryland Uniform Trade Secrets Act (the "Act").
5.4.2 CONFIDENTIAL INFORMATION DEFINED. Any
other information not qualifying as a Trade Secret, but relating to the business
of the Company which is disclosed by the Company to the Executive, or is
discovered by the Executive in the course of employment, is Confidential
Information.
5.4.3 DUTY TO MAINTAIN SECRECY AND
CONFIDENTIALITY. During the Period of the Executive's employment with the
Company, the Executive shall maintain the secrecy and confidentiality of the
Trade Secrets and the Confidential Information and shall not (i) divulge,
furnish or make accessible to anyone or in any way or use, for her own benefit
or for the benefit of any other individual firm or entity (other than in the
ordinary course of the Company's business), any Trade Secret or Confidential
Information; (ii) take or permit any action to be taken which would reduce the
value of the Trade Secrets or Confidential information to the Company; or
(iii) otherwise misappropriate or suffer the misappropriation of the Trade
Secrets or the Confidential information, within the meaning of the Act. After
Termination Date, Executive shall continue to maintain the secrecy and
confidentiality of such information, but only to the extent that the Executive
is prohibited from directly or indirectly competing with Company pursuant to
the provisions of SECTION 5.3.
5.4.4 INFORMATION WHICH IS PUBLICLY KNOWN.
Notwithstanding anything herein to the contrary, the obligations of secrecy and
confidentiality set forth herein shall not apply to any information which is now
generally publicly known or which subsequently becomes generally publicly known
other than as a direct or indirect result of the breach of this Agreement by the
Executive, or which is required by law or order of any court to be disclosed.
5.5 PROPERTY OF THE COMPANY. All memoranda, notes,
lists, records and other documents or papers (and all copies thereof), including
but not
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limited to, such items stored in computer memories, on microfiche or by
any other means, made or compiled by or on behalf of the Executive, or made
available to the Executive concerning the Company Business, are and shall be the
property of the Company and shall be delivered to the Company promptly upon the
termination of the Executive's employment with the Company or at any other time
on request; provided however, that the Executive may inspect during normal
business hours such records as shall be necessary for the purpose of assisting
the Executive to file, or prepare for an audit of, her personal income tax
returns.
5.6 EXECUTIVE'S IDEAS, ETC. All inventions,
prototypes, discoveries, improvements, innovations and the like ("Inventions")
and all works of original authorship or images that are fixed in any tangible
medium of expression and all copies thereof ("Works") which are designed,
created or developed by Executive, solely or in conjunction with others, in the
course of performance of the Executive's duties which relate to the Company
Business, shall be made or conceived for the exclusive benefit of and shall be
the exclusive property of the Company. The Executive shall immediately notify
the Company upon the design, creation or development of all Inventions and
Works. At any time thereafter, the Executive, at the request and expense of the
Company, shall execute and deliver to the Company all documents or instruments
which may be necessary to secure or perfect the Company's title to or interest
in the Inventions and Works, including but not limited to applications for
letters of patent, and extensions, continuations or reissues thereof,
applications for copyrights and documents or instruments of assignment or
transfer. All Works are agreed and stipulated to be "works made for hire," as
that term is used and understood within the Copyright Act of 1976, as amended.
To the extent any Works are not deemed to be works made for hire as defined
above, and to the extent that title to or ownership of any Invention or Work and
all other rights therein are not otherwise vested exclusively in the Company,
the Executive shall, without further consideration but at the expense of the
Company, assign and transfer to the Company the Executive's entire right, title
and interest (including copyrights and patents) in or to those Inventions and
Works.
5.7 RIGHTS AND REMEDIES UPON BREACH. If the
Executive breaches, or threatens to commit a breach of, any of the provisions of
SECTIONS 5.1 through 5.6 (the "Restrictive Covenants"), the Company shall, in
addition to its right immediately to terminate this Agreement, have the right
and remedy (which right and remedy shall be independent of others and severally
enforceable, and which shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity) to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach could cause irreparable injury to the Company or its
Affiliates and that money damages may not provide adequate remedy to the
Company.
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5.8 COVENANTS CURRENTLY BINDING EXECUTIVE. The
Executive warrants that her employment by the Company will not (a) violate any
non-disclosure agreements, covenants against competition, or other restrictive
covenants made by the Executive to or for the benefit of any previous employer
or partner, or (b) violate or constitute a breach or default under, any statute,
law, judgment, order, decree, writ, injunction, deed, instrument, contract,
lease, license or permit to which the Executive is a party or by which the
Executive is bound.
5.9 LITIGATION. There is no litigation, proceeding
or investigation of any nature (either civil or criminal) which is pending or,
to the best of the Executive's knowledge, threatened against or affecting the
Executive or which would adversely affect her ability to substantially perform
the duties herein.
5.10 REVIEW. The Executive has received or been
given the opportunity to review the provisions of this Agreement, and the
meaning and effect of each provision, with independent legal counsel of the
Executive's choosing.
5.11 SEVERABILITY OF COVENANTS. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in geographical and temporal scope and in all respects. If any court determines
that any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
5.12 BLUE-PENCILING. If any court determines that
any of the Restrictive Covenants, or any part thereof, is unenforceable because
of the duration or geographic scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable and shall be
enforced. If any such court declines to so revise such covenant, the parties
agree to negotiate in good faith a modification that will make such duration or
scope enforceable.
5.13 ENFORCEABILITY IN JURISDICTIONS. The parties
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of such
Covenants. If the courts of any one or more of such jurisdictions hold any
Restrictive Covenant unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties that such determination not bar or
in any way affect the Company's right to the relief provided above in the courts
of any other jurisdiction within the geographical scope of such Covenants, as to
breaches of such Covenants in such other respective jurisdictions, such
Covenants as they relate to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
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5.14 EXTENSION. If the Executive violates any
Restrictive Covenant, the Company shall not be deprived of the full benefit of
the period of the covenant. Accordingly, the duration of that covenant shall be
extended by the period of any violation of that covenant.
5.15 REMEDIES. The Company shall be entitled to
injunctive or other equitable relief because it will be caused irreparable
injury and damage by a breach of the provisions of any of the Restrictive
Covenants. The right to injunctive relief shall include the right to both
preliminary and permanent injunctions. The Company shall not be required to post
a bond or other similar assurance if it brings an action to enforce the
provisions of any of the Restrictive Covenants. The Company's right to equitable
relief shall not preclude any other rights or remedies which the Company may
have, all of which rights and remedies are cumulative.
6. DISPUTE RESOLUTION.
6.1 COSTS OF LITIGATION. If either party files
suit or brings an arbitration proceeding to enforce its rights under this
Agreement, the prevailing party shall be entitled to recover from the other
party all expenses incurred by it in preparing for and in trying the case,
including, but not limited to, investigative costs, court costs and reasonable
attorney's fees.
6.2 CONSENT TO JURISDICTION. The parties submit to
the jurisdiction and venue of the courts of the State of Maryland.
6.3 NO JURY TRIAL. NEITHER PARTY SHALL ELECT A
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS AGREEMENT.
6.4 ARBITRATION. Any dispute between the Company
and the Executive concerning any part of this Agreement may, if all parties to
such dispute expressly agree in writing, be resolved pursuant to the procedure
set forth in Schedule 6.4.
7. OTHER PROVISIONS.
7.1 NOTICES. Any notice or other communication
required or which may be given hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage paid, and shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, four days after the date of mailing, as follows:
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(i) if to the Company, to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: President and CEO
with copies to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx
Attention: Corporate Counsel
(ii) if to the Executive, to:
Xxxxxxx Xxxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Any party may by notice given in accordance with this Section
to the other party designate another address or person for receipt of notices
hereunder.
7.2 ENTIRE AGREEMENT. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, written or oral, with
respect thereto, including the Prior Agreement.
7.3 WAIVERS AND AMENDMENTS. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
Executive and a duly authorized officer of the Company (each, in such capacity,
a party) or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
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7.4 GOVERNING LAW. This Agreement has been
negotiated and is to be performed in the State of Maryland, and shall be
governed and construed in accordance with the laws of the State of Maryland
applicable to agreements made and to be performed entirely within such State.
7.5 COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
7.6 CONFIDENTIALITY. Neither party shall disclose
the contents of this Agreement or of any other agreement they have
simultaneously entered into to any person, firm or entity, except the agents or
representatives of the parties, or except as required by law.
7.7 WORD FORMS. Whenever used herein, the singular
shall include the plural and the plural shall include the singular. The use of
any gender, tense or conjugation shall include all genders, tenses and
conjugations.
7.8 HEADINGS. The Section headings have been
included for convenience only, are not part of this Agreement, and are not to be
used to interpret any provision hereof.
7.9 BINDING EFFECT AND BENEFIT. This Agreement
shall be binding upon and inure to the benefit of the parties, their successors,
heirs, personal representatives and other legal representatives. Neither the
Executive nor the Company may assign this Agreement without the prior written
consent of the other.
7.10 SEPARABILITY. The covenants contained in this
Agreement are separable, and if any court of competent jurisdiction declares any
of them to be invalid or unenforceable, that declaration of invalidity or
unenforceability shall not affect the validity or enforceability of any of the
other covenants, each of which shall remain in full force and effect.
7.11 CONSENT OR APPROVAL. Whenever under the terms
of this Agreement the approval or consent of the Company is required or the
Company must make any determination, the Company, unless this Agreement
specifically requires otherwise, may not unreasonably withhold or delay that
consent or approval.
7.12 BACKGROUND. The Background is a part of this
Agreement.
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IN WITNESS WHEREOF, the parties, intending to be legally
bound, have executed this Agreement or caused it to be executed and attested by
their duly authorized officers as a document under seal on the day and year
first above written.
ATTEST/WITNESS: DOCTORS HEALTH SYSTEM, INC.
_____________________________ By:_______________________(SEAL)
Stewart B. Gold, President
EXECUTIVE:
_____________________________ _________________________(SEAL)
Xxxxxxx Xxxxxxx
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SCHEDULE 6.4
ARBITRATION PROCEDURE
1. INSTITUTION OF ARBITRATION PROCEEDING.
1.1. Any party to this Agreement (an "Initiating Party") may initiate
an arbitration proceeding (the "Proceeding") to resolve a dispute subject to
resolution under this Schedule (a "Dispute") by giving written notice (the
"Dispute Notice") to the other party (the "Responding Party") to such Dispute.
The Dispute Notice shall describe the substance of the Dispute with sufficient
specificity to give the Responding Party adequate notice of its nature. Unless
otherwise specified, time periods specified in this Schedule 6.4 shall be
calculated from the date of the Dispute Notice (the "Commencement Date").
2. SELECTION OF ARBITRAL PANEL.
2.1. The Arbitral Panel (the "Panel") shall consist of three
arbitrators, two of whom (the "Party Designated Arbitrators") shall be selected
by the parties pursuant to SECTION 2.2 hereof. The third arbitrator shall be a
"Neutral Arbitrator" selected by the Party Designated Arbitrators pursuant to
SECTION 2.3 hereof.
2.2. The Initiating Party shall designate its Party Designated
Arbitrator in the Dispute Notice. Within fifteen days of the Commencement Date,
the Responding Party shall designate its Party Designated Arbitrator.
2.3. Within forty-five days of the Commencement Date, the two Party
Designated Arbitrators shall agree upon and appoint a Neutral Arbitrator who
shall be an accountant and a partner in an international, "Big Six" accounting
firm.
2.4. Each party agrees promptly to disclose to the other party any
circumstances known to it which would cause reasonable doubt regarding the
impartiality of an individual under consideration or appointed as the Neutral
Arbitrator and any such individual shall also promptly disclose to the parties
any such circumstances.
2.5. During the process of selecting the Neutral Arbitrator and
thereafter during the course of this Proceeding, ex parte communications with
the Neutral Arbitrator or any individual under consideration as the Neutral
Arbitrator are prohibited and shall be disclosed by the party making any ex
parte communication, the Neutral Arbitrator or any individual under
consideration as a Neutral Arbitrator immediately upon discovery.
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3. PRE-HEARING PROCEDURES.
3.1. Within fifteen days of the appointment of the Neutral Arbitrator,
the Panel may convene a Pre-Hearing Conference to, inter alia, familiarize the
Neutral Arbitrator with the nature of the Dispute between the Parties, determine
the need for and the nature of discovery and establish a procedural schedule for
the further conduct of the Proceeding.
4. DISCOVERY.
4.1. Discovery, appropriately limited by the nature of the Dispute, is
expressly contemplated and permitted. However, the Parties acknowledge and agree
that one of the benefits of resolving Disputes through arbitration is the
opportunity reasonably to limit discovery. The Parties further agree that they
will endeavor to agree upon procedures and a schedule for discovery that will
result in a prompt and fair hearing under these procedures.
4.2. Discovery requests and responses need not be served upon the Panel
but the Panel shall promptly convene upon motion of either party to resolve
discovery disputes, if any.
4.3. Discovery will be completed within sixty days of the Pre-Hearing
Conference.
5. SUBMISSION OF EVIDENCE AND HEARING.
5.1. The Panel may receive evidence in the form of written statements
filed prior to Hearing for cross-examination on such statements or may receive
oral testimony at Hearing. Each party shall be entitled to submit rebuttal
testimony. The Panel may also permit opening and closing statements of counsel
at Hearing.
5.2. The Panel shall convene for Hearing the evidence and argument of
the parties at a time and place to be established by the Panel. The Hearing
shall be held no later than thirty days after the close of discovery or thirty
days after the Pre-Hearing Conference if there is no discovery.
5.3. At the Hearing, and for all other purposes related to the
Proceeding, the Initiating Party shall be deemed the party seeking affirmative
relief, shall go first and shall bear the burdens of proof and of persuasion.
5.4. The Hearing shall be transcribed.
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6. POST-HEARING PROCEDURES.
6.1. The Panel may request Post-Hearing briefs and, if it does so,
shall establish a schedule for submission of such briefs at the close of
Hearing.
6.2. Within thirty days of the later of the close of the Hearing or its
receipt of Post-Hearing briefs, the Panel shall issue a written Decision and
Award which shall include findings of fact and explain the reasons for the
Decision.
7. CONFIDENTIALITY.
7.1. Unless otherwise agreed, the Proceeding and all information and
documents relating to it shall be kept confidential by the Parties, the Panel,
witnesses and all other persons involved with the Proceeding. Specifically, but
without limitation, the Confidential Information of the parties shall be
safeguarded and maintained as confidential by all participants in the
Proceeding.
8. COSTS.
8.1. The Neutral Arbitrator's fees and expenses, and all expenses of
the Pre-Hearing Conference, Hearing or any other aspect of the Proceeding not
directly attributable to either party, such as the cost of transcription of
Panel Hearings and rental of Hearing rooms, shall be borne equally by the
parties.
8.2. The Panel shall in its Decision and Award determine whether and to
what extent either party is a prevailing party and entitled to an award of its
costs, including attorneys' fees.
9. MISCELLANEOUS.
9.1. The parties may agree at any time to depart from these procedures,
including the time periods herein established. Although not favored, the Panel
may also permit departures from these procedures and time periods absent
agreement of the parties to prevent a miscarriage of justice.
9.2. Until the Neutral Arbitrator is appointed, any issue relating to
the Proceeding that is not provided for in these procedures shall be governed by
the Commercial Arbitration Rules of the American Arbitration Association. Once
the Neutral Arbitrator is appointed, the Panel is empowered to resolve all
issues not contemplated by these procedures and upon which the parties cannot
agree.
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9.3. The Panel may grant any remedy or relief that it deems just and
equitable and within the scope of the agreement of the parties, including, but
not limited to, specific performance of a contract, injunctive relief or other
equitable relief.
9.4. These procedures contemplate a two-party Proceeding. If there are
more than two parties to a Proceeding, and they are unable by unanimous
agreement to align themselves as two parties, each party shall be entitled to
all the rights of a party hereunder, including specifically but without
limitation the right to appoint a Party Designated Arbitrator, and the Neutral
Arbitrator shall have a number of votes as to all matters decided by the Panel
equal to the sum of (i) the votes of all Party Designated Arbitrators, and (ii)
one.
9.5. The Panel may, in its discretion, convene and act by conference
call for all purposes other than taking oral testimony.
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