Exhibit 10.43
EXECUTION COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, entered into to be effective on May
1, 1996 (the "Effective Date"), between DOCTORS HEALTH SYSTEM, INC., a
Maryland corporation (the "Company"), and XXXX X. XXXXX, Xx. (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 administrative, financial and
business matters relating to the Business and in negotiating and implementing
transactions relating to the Business.
The Company desires to hire Executive, and the Executive
desires to work for the Company, on the terms and conditions set forth in this
Agreement.
1. Employment, Duties and Acceptance.
1.1 Employment. (a) Effective upon the Effective
Date, the Company shall employ the Executive as its Executive Vice President,
Treasurer and Chief Financial Officer. In such capacities, 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 managing all
financial affairs of the Company. The Executive will also, subject to the
supervision and direction of the CEO, assist the CEO and at the CEO's request
other officers of the Company in such aspects of the Company's commercial
relationships with hospitals, insurers, specialists, physicians employed by
affiliates of the Company and others as may be requested by the CEO. Whether
or not the Executive is then serving as a member of the Board of Directors of
the Company, the Executive shall have the right to attend and participate
in the discussions at all of the meetings of the Company's Board of
Directors, including meetings of the Executive Committee. thereof. The
Executive shall perform his duties faithfully and to the best of his abilities.
(b) The Executive shall, subject to
Section 1.1(c) hereof, devote his full working time and creative energies to
the performance of his duties hereunder and will at all times devote such
additional time and efforts as are reasonably sufficient for fulfilling
the significant responsibilities entrusted to him. So long as such
activities, in the aggregate, do not interfere with the performance by the
Executive of his duties hereunder: (i) the Executive shall be permitted a
reasonable amount of time to supervise his 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; (iii) the Executive shall be permitted to deliver lectures to
and teach at educational institutions and business organizations; and (iv)
subject to the provisions of Section 5 hereof, the Executive may serve as a
director or trustee of one or more corporations not affiliated with the
Company. Until April 30, 1997, the Executive shall be permitted to spend
approximately fifteen (15) hours per month to wind-up the affairs of his
clients from the firm of Xxxxxx, Xxxxxxxx and Xxxxx and active investment
activities.
(c) The Company shall use its commercially
reasonable best efforts to ensure that the Executive is nominated to serve as a
member of the Board of Directors of the Company.
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 his employment pursuant
to the terms hereof. The Executive shall not be required to relocate outside
of the Washington, D.C.-Baltimore, Maryland metropolitan area during the Term
unless the Company provides relocation benefits acceptable to the Executive in
his sole discretion.
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 April 30, 2000, unless sooner terminated, or later extended, as herein
provided. Not later than February 1, 2000 (and each February 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 April 1 of such calendar
year. If by October 15, 1999 (and October 15 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 April 1, 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 October 15, 1999 (or by October 15 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 May 1 of the
applicable calendar year and ending on April 30 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
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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 $195,000 per annum. The
Base Salary shall accrue from and after the Effective Time, 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 agreed to between the Executive and the CEO, provided,
however, that for calendar years 1996 and 1997, the Executive's bonus shall be
determined in accordance with Schedule 3.2(b) attached hereto. On or before
the fifteenth day of December in each year during the term beginning with
December 15, 1997, the Executive and the CEO shall agree upon the performance
standards and potential awards for the Executive applicable to the Bonus Year
beginning on the next following January 1. 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.
(c) Upon any Change in Control of the
Company (as herein defined), all accrued Bonus amounts reflected on the
Company's internally prepared financial statements shall become payable to
the Executive.
3.3 Stock Options. As soon practicable after
the date of this Agreement, the Company will grant to the Executive qualified
incentive stock options (the "Options") to purchase 70, 000 shares of the
Company's Class A Common Stock (the "Option Shares") pursuant to the
Company's Omnibus Stock Option Plan or other stock benefit plan (the
"Plan"). The exercise price of such Options shall be 11.00 per share,
representing the fairmarket value of the Option Shares. In addition to
the 70,000 options issued to the Executive on the date hereof, the Company
is contemplating, subject to approval of the appropriate committee of the
Board of Directors, the issuance of an additional 30,000 options to the
Executive, which options will vest over at least a
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four year period and be granted with or without a significant exercise price
and with significant conditions to exercise based upon earnings and other
criteria.
(b) The Executive agrees to and shall execute a
stockholder's agreement restricting his 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").
(c) 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 his wife and
children (subject to reasonable policy and plan limitations) shall be paid by
the Company.
3.6 Vacation. The Executive will receive at
least 4 weeks vacation per year, to be scheduled and taken at the Executive's
option at such times as his 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
(including, without limitation, travel, meetings, dues, subscriptions, fees,
educational expenses, computer equipment, mobile telephones, professional
insurance, and the like) actually incurred or paid by the
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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), upon presentation of expense statements or vouchers or such
other supporting information as the Company may require.
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 his 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.
(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 his 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 moral turpitude;
(iii) the conviction of the Executive of a felony after all appeals have been
exhausted; and (iv) the Executive engaging in intentional acts or omissions
that demonstrably and materially injure the business and affairs of the Company,
monetarily or otherwise.
(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
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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 his 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 (A) Stewart B. Gold's
employment as CEO of the Company terminating or the Executive no longer is
reporting directly to Stewart B. Gold, (B) 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; (C) 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") and (D) the Executive is not elected to the Company's Board
of Directors.
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) 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 his 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
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(or his 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, his heirs, legatees and/or legal
representatives) shall receive, at the times and as the same would have been
payable hereunder if the Executive's employment had not been so terminated,
each of the following payments and benefits:
(i) 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;
(ii) with respect to any
periods on or prior to April 1, 1997, all payments of the full Base Salary
which would have been due to the Executive through April 1, 1997, at the
times such payments would otherwise be made, all as if this Agreement were still
in effect;
(iii) with respect to any periods
after April 1, 1997, 100% of the Base Salary which would have been due to
the Executive through the remainder of the Term, at the times such payments
would otherwise be made, all as if this Agreement were still in effect;
(iv) with respect to any
periods on or prior to April1, 1997, all payments in respect of all Bonuses
that the Executive would have received (determined by taking the average of
the amounts of the Bonuses actually received by the Executive, if any,
for the Bonus Years immediately preceding the calendar year during which the
Executive's employment is terminated, or such lesser number of Bonus years
during the Term; if the Executive's employment is terminated during 1996 prior
to determination of a Bonus for the 1996 Bonus Year, it shall be assumed
that the Executive would have received a Bonus calculated in accordance
with Schedule 3.2(b) for the 1996 Bonus Year) with respect to each calendar
year, or each portion thereof, through April 1, 1997, subject to the
provisions of Section 3.2(b) hereof, at the times such payments would
otherwise be made, all as if this Agreement were still in effect and subject
to the provisions of Section 3.2(c) hereof;
(v) with respect to any
periods after April 1, 1997, 50% of the payments in respect of all Bonuses
that the Executive would have received (determined by taking the average of
the amounts of the Bonuses actually received by the Executive, if any, for
the three Bonus years immediately preceding the calendar year during which the
Executives employment is terminated, or such lesser number of Bonus years
during the Term) with respect to each calendar year, or each portion thereof,
through the remainder of the Term, subject to the provisions of Section 3.2(b)
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hereof, at the times such payments would otherwise be made, all as if this
Agreement were still in effect and subject to the provisions of Section 3.2(c)
hereof;
(vi) subject to the provisions
of the Company's Amended and Restated Articles (as in effect on the date
hereof), the Company's Bylaws (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.
(c) In the event of termination under
Section 4.2 (disability), the Executive or his legal representative, as the
case may be, shall, in addition to such other payments benefits and rights as
may be due from the Company hereunder, be entitled to receive from insurers
the proceeds of any disability policies maintained by the Company and payable
to the Executive.
5. Certain Covenants of the Executive.
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) his employment pursuant to this Agreement will give him 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.
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,
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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 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, if
the Executive's employment is terminated other than pursuant to Sections
4.3(b) or 4.4 hereof or upon expiration of the Term for any reason other than
Section 4, 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 himself 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;
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(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
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 his 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.
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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 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, his 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
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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.
5.8 Covenants Currently Binding Executive. The
Executive warrants that his 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 and which would adversely affect his 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
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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.
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.
5.16 Scope of Restrictions. The parties
expressly acknowledge and agree that nothing contained in this Section 5
shall preclude the Executive from engaging in or limit the Executive's
ability to serve as investment banker, financial consultant, merchant banker or
attorney, as a member of, stockholder or partner in or employee of a
partnership, professional corporation or other entity performing such services
unless such services directly or indirectly or materially are adverse to the
interests of the Company.
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 the Executive's compensation arising
under Section 3 or Section 4 hereof (including the amount of the Bonus Pool)
shall be resolved by binding arbitration pursuant to the terms of Schedule
6.4, attached hereto as a part
13
hereof. Any other dispute arising hereunder may, if all parties to such
dispute expressly agree in writing, be so resolved.
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:
(i) if to the Company, to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: President and CEO
(ii) if to the Executive, to:
Xxxx X. Xxxxx, Xx.
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 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
14
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
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.
15
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.
/s/ Xxxx Xxxxxx /s/ Stewart B. Gold
_____________________________ By:_______________________(SEAL)
Xxxx Xxxxxx, Secretary Stewart B. Gold, President
EXECUTIVE:
/s/ Xxxx X. Xxxxx, Xx.
_____________________________ _________________________(SEAL)
Xxxx X. Xxxxx, Xx.
The undersigned, Stewart B. Gold, enters into the Employment Agreement by
and between Xxxx X. Xxxxx, Xx., and Doctors Health System, Inc. dated
May 1, 1996 solely for the purpose of making the following
representations, warranties and covenants to Xxxx X. Xxxxx, Xx., that (i) he
is the holder as of the date hereof, of 600,000 shares (the "Shares") of the
Company's Class A Common Stock, including such shares as may be issued as a
result of any recapitalization, stock split, stock dividend or other
change in the corporate structure or shares of the Company and (ii) so long
as he is the holder of such shares of Common Stock, he will vote all of such
shares, and any other equity securities of the Company he may hold from time
to time, for the election of Xxxx X. Xxxxx, Xx. as a member of the Company's
Board of Directors.
/s/ Stewart B. Gold
___________________________
Stewart B. Gold
16
SCHEDULE 3.2(b)
1996 Bonus
The Parties have agreed that there shall be no guaranteed 1996 Bonus.
17
SCHEDULE 3.2(b)
1997 Bonus
The 1997 Bonus shall be determined by reference to the Company's net income
before taxes and bonuses as set forth in the audit of the Company's financial
statements for calendar year 1997 ("Audit Net Income") compared to $3,011,958,
the projected net income set forth in the Company's 1997 Financial Projections
dated April 24, 1996 ("Projection Net Income"), as modified or approved by the
DHS Board of Directors.
The 1997 Bonus shall be determined by multiplying the Executive's Base Salary by
a fraction, the numerator of which shall be the Audit Net Income and the
denominator of which shall be the Projection Net Income. The 1997 Bonus shall
be equal to the product of such multiplication.
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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.
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.
19
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.
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.
20
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.
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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