Exhibit 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, entered into on
December 9, 1994 (the "Signing Date"), amended on February 24, 1995, October 11,
1996, and April 21, 1997 and dated as of the 1st day of July, 1994 (the
"Effective Date"), between DOCTORS HEALTH SYSTEM, INC., a Maryland corporation
(the "Company") and XXXXX X. XXXXXX (the "Physician 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 Physician Executive is a primary care physician with
substantial skills and knowledge in the management and development of physician
practices, and is experienced in creating and expanding a physician run equity
model group practice working with hospitals, managed care organizations and
other physicians.
The Executive and the Company previously entered into an
Employment Agreement dated November 4, 1994, a copy of which is attached hereto
(the "Prior Agreement"), and each desires to amend and restate the Prior
Agreement in its entirety to incorporate certain additional matters.
The Company desires to hire the Physician Executive, and the
Physician 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 t he Effective
Date, the Company shall employ the Physician Executive as its Executive Vice
President and Director of Development. In such capacities, the Physician
Executive shall have the duty, responsibility and authority for designing and
implementing medical and non-medical policies and procedures, and investigating,
structuring and negotiating on behalf of the Company and its Subsidiaries the
purchase of primary care physician practices, and shall assist with the
creation of, contractual relationships with hospitals, physician specialists,
medical institutions and providers, negotiating managed care and other
contracts, and related matters involving the growth and
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development of the Business, all after consultation with the Company's Executive
Vice President and Director of Medical Affairs and subject to the guidelines,
policies and control of the Company's Chief Executive Officer and Board of
Directors (the "Board"), to whom he shall report. The Physician Executive shall
perform such other duties within these general parameters as the Chief Executive
Officer or the Board may from time to time designate. The Physician Executive
shall perform his duties faithfully and to the best of his abilities. The
Physician Executive shall also serve (A) during the Term, as a director of the
Company (subject to the power of the Board and the Shareholders of the Company
to remove him as set forth in the Company's Bylaws), (B) as a director of all of
the Company's Subsidiaries (as defined in Section 5.2), and (C) until the
"Financing Date" (as defined in Section 3.1(b)), as the Chairman of the Board,
all without any additional compensation.
(b) The Physician Executive shall
devote a significant portion of his working time and creative energies to the
performance of his duties hereunder and will at such times devote such 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 Physician Executive of his duties hereunder: (i)
the Physician Executive shall be permitted a reasonable amount of time to engage
in the practice of medicine as an employee of Baltimore Medical Group, Inc.
and to supervise his personal, passive, investments; (ii) the Physician
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 Physician 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 Physician Executive
may serve as a director or trustee of one or more corporations not affiliated
with the Company.
1.2 Place of Employment. The Physician 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 Physician Executive shall not be required
to relocate outside of the Baltimore, Maryland metropolitan area during the
Term, except by mutual agreement.
2. Term of Employment. The term of the Physician Executive's
employment under this Agreement (the "Term") shall commence on the Effective
Date and shall end on April 1, 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
Physician 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
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the Physician 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 April 1 of the
applicable calendar year and ending on March 31 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 Physician
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 $100,000 per annum.
The amount of the Base Salary has been established based upon the mutual
assumption by the Company and the Physician Executive that the Physician
Executive shall devote approximately fifty percent (50%) of his working
time and creative energies to the performance of his duties hereunder. The
Company and the Physician Executive acknowledge and agree that because the
performance by the Physician Executive of his duties hereunder will be of
critical importance to the growth and prosperity of the Company, the Company
shall from time to time, in its reasonable discretion, evaluate and determine
the working time and creative energies that the Physician Executive has devoted
to the performance of his duties hereunder during any preceding three (3) month
period (it being understood and agreed that the Physician Executive's use of
permitted vacation hereunder shall not be included in such determination). If
the Company determines that the Physician Executive has devoted significantly
more or significantly less of his working time and creative energies to his
duties hereunder during any such period, his Base Salary will be adjusted, up or
down, by the Company (in the exercise of its reasonable discretion) on each such
occasion, commencing with the beginning of the fiscal quarter of the Company
immediately following the Signing Date. The Base Salary shall accrue from and
after the Effective Time, and shall be payable as follows:
(a) The Company has paid Base Salary of
$65,068 on the date hereof, the receipt of which is hereby acknowledged by the
Physician Executive; and
(b) The Company shall, during the Term,
pay to the Physician Executive his Base Salary in arrears in equal monthly
installments each year, commencing March 31, 1995 (for the month of March,
1995).
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3.2 Bonus Pool. (a) Beginning with the calendar
year 1995, the Company shall establish for the benefit of the Physician
Executive and other key Company employees a "Bonus Pool", in an amount
calculated as described herein, with respect to each calendar year, or
portion thereof, that occurs during the Term (each a "Bonus Year").
(b) During the Term, the Physician
Executive shall be allocated at least five percent (5%) of the Bonus Pool, if
any, annually, which amount represents his minimum agreed upon share of the
Bonus Pool. The determination of whether, and to what extent, the Physician
Executive shall be entitled to an allocation from the Bonus Pool in excess of
said five percent (5%) shall be made by the Chief Executive Officer of the
Company in accordance with policies established by the Board. All amounts
allocated to the Physician Executive pursuant to this Section 3.2 shall become
payable to the Physician Executive and are hereinafter collectively referred to
as the "Bonus". Upon the closing of the initial underwritten public offering of
the capital stock of the Company pursuant to a registration statement filed with
the Securities and Exchange Commission (other than a registration statement on a
Form S-8 or any successor or similar Form) (the "IPO"), the Physician
Executive's right to participate in the Bonus Pool with respect to any period of
time subsequent to the closing of the IPO shall terminate (other than the
Physician Executive's right to receive all accrued but unpaid Bonus, which right
shall survive such closing), provided that the Company and the Physician
Executive each covenant and agree to enter into good faith negotiations to
establish a new bonus arrangement for the Physician Executive that fairly
compensates the Physician Executive for the services to the Company and provides
appropriate incentives consistent with prevailing market standards for similarly
situated and skilled executives.
(c) Provided that the Company has available
net cash flow, the Company shall pay the Bonus to the Physician Executive
within three (3) business days of the final determination of the amount
of each year's Bonus Pool pursuant to Section 3.2(e) below (each, a "Payment
Date"), and shall pay any accrued but unpaid Bonus to the Physician as soon
after such Payment Date as there is sufficient available net cash flow. For
each partial calendar year that occurs during the Term, the amount of the
Physician Executive's Bonus payable hereunder shall be prorated by multiplying
the amount, if any, of the Bonus that would have been payable had the entire
calendar year occurred during the Term by a fraction, the numerator of which
is the number of days of the calendar year that occurred during the Term and
the denominator of which is 365. Any accrued but unpaid Bonus shall accrue
simple interest from the date of the final determination of the amount of each
year's Bonus Pool until such amount is paid, at the rate of six and
one-half percent (6 1/2%) per annum, and shall be paid by the Company as soon
after such Payment Date as there is sufficient available net cash flow. In all
events, all accrued and unpaid Bonus, plus accrued interest thereon, shall be
paid to the Physician Executive upon the earlier to occur of (i) closing of the
IPO, or (ii) the
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redemption of all of the outstanding shares of Series A Preferred Stock
of the Company, or (iii) the conversion of all of the outstanding
shares of the Series A Preferred Stock of the Company, or (iv) upon any merger
or consolidation where the Company is not the survivor.
(d) The amount of the Bonus Pool with
respect to each Bonus Year, if any, shall be equal to ten percent (10%) of
the amount of the excess, if any, of (A) Operating Revenues (as defined in
Section 3.2(e) below) for the calendar year in which the Bonus Year occurs
over (B) Operating Expenses (as defined in Section 3.2(c) below) for the
calendar year in which the Bonus Year occurs.
(e) For purposes of this Section 3.2,
"Operating Revenues" shall be determined by the Company and the Chief
Physician Executive Officer pursuant to established procedures, and shall
mean all revenues earned by the Company and its controlled
subsidiaries whose revenues are consolidated with those of the Company during
such Bonus Year, including revenues from or in respect of the Company's direct
or indirect (i) provision of professional services, group consulting fees,
specialty contract and managed care risk taking revenues, (ii) provision of
related non-professional services, and (iii) sales of products related to the
provision of professional and non-professional services, plus an amount equal to
the lab and ancillary testing revenues of Baltimore Medical Group LLC, a
Maryland limited liability company ("BMG") and any Additional Primary Care
Entities as defined in the Practice Purchase Agreement of even date herewith
among the Company and other parties. "Operating Expenses" shall mean all
expenditures made by the Company in the ordinary course of its business during
the Bonus Year associated with the Company's provision of services and sale of
products, including corporate, administrative, lab and other ancillary salaries
and overhead, employed physician salaries and group information system expenses
and shall also include routinely scheduled payments in respect of the Company's
financing activities (such as scheduled amortization of principal and interest
on debt and dividends on securities), state, federal and local tax payments and
the amount of any reasonable reserves which the Board sets aside or establishes
to meet working capital requirements as such reserves are approved as being
adequate by the Accountants, future liabilities or contingencies or otherwise,
plus all expenses of BMG associated with lab and ancillary testing revenue.
"Operating Expenses" shall not include capital expenditures made by the Company,
including, without limitation, for the acquisition of physician practices, or
non-scheduled payments in retirement or redemption of debt or securities issued
by the Company. For purposes of this Section 3.2, references to "the Company"
shall include any Subsidiary of the Company. The Company agrees to treat the
Physician Executive and other Company employees fairly and in good faith with
respect to the calculation of the Bonus Pool, and not unfairly to attempt to
discriminate against the Physician Executive, whether by lowering Operating
Revenues, increasing Operating Expenses, shifting the same to or from any year
or otherwise, for the purpose or with the intention of lowering the amount of
the Bonus Pool in any year.
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(f) A failure by the Company to make
available to the Physician Executive, within the appropriate time period
provided in Section 3, cash equal to that portion of the Bonus Pool which the
Physician Executive is entitled to receive, shall constitute a breach of
this Agreement by the Company and shall entitle the Physician Executive to
terminate this Agreement for "constructive termination" under Section 4.4.
3.3 Stock; Option Grant.
(a) The Company has transferred to the
Physician Executive twenty-five (25) shares of the voting common stock of the
Company. As a result of duly adopted resolutions of the Company's directors
and shareholders, and the filing with the Maryland SDAT of Amended Articles of
Incorporation of the Company, such 25 shares of voting common stock have been
reclassified and a stock dividend declared, so that the Physician Executive on
the date hereof is the registered owner of 100,000 shares of the Company's
Class A Common Stock (the "Class A Common Stock"). On August 10, 1995, the
Company issued to the Physician Executive, in addition to the Stock, an
option (the "Option") to purchase an additional 100,000 shares of its Class A
Common Stock (the "Additional Stock").
(b) So long as the Physician Executive's
employment hereunder has not been earlier terminated by the Company pursuant
to the provisions of Section 4.3(a) hereof, the Option shall vest in full upon
the earlier to occur of (i) a Change in Control of the Company, or (ii)
twenty-four (24) months from the Signing Date, or (iii) termination of the
Physician Executive's employment pursuant to Section 4.3(b) or Section 4.4
(such earlier date, the "Vesting Date"). The option price for the Additional
Shares shall be $25 in the aggregate; to the extent the number of shares, or
the class, or designation, of the Stock is changed as the result of a
reclassification, stock split, stock dividend or other similar event, the number
and/or class of shares of Additional Stock issuable under the Option shall be
adjusted accordingly. The option may not be exercised within one year of the
Vesting Date, except upon an earlier Change in Control of the Company.
(c) All Stock and Additional Stock
transferred to the Physician Executive hereunder is and shall remain subject
to any transfer restrictions and other protections as are set forth in the
Company's Charter, By-laws, or in any Shareholder's Agreement, and the
certificates or other instruments representing such stock shall bear or contain
a legend or statement regarding such transfer restrictions.
(d) "Change in Control" shall mean the
earlier to occur of (i) a liquidating distribution to Company's shareholders
(or similar event); (ii) a contribution, consolidation or merger where Company
is not the survivor; (iii) any sale, exchange or other disposition of all, or
substantially all of Company's assets; (iv) any public offering of
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Company's securities at a company value of at least $25,000,000 with proceeds to
Company of at least $15,000,000.
3.4. Withholding. The Company is authorized to
withhold from the amount of any Salary and Bonuses and any other things of
value paid to or for the benefit of the Physician Executive (other than
transfers of Stock), all sums authorized by the Physician Executive or required
to be withheld by law, court decree, or Physician 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 Physician Executive Benefit
Plans. The Physician Executive shall be permitted during the Term, if and to
the extent eligible, to participate in any group life, 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 and professional employees of the Company, generally
on the same terms as such other executives.
3.6 Vacation. The Physician Executive will receive
at least 4 weeks vacation per year, to be scheduled and taken at the Physician
Executive's option at such times as his duties may permit. Should the
Company's policy provide for more vacation to comparable Physician
Executives the Physician Executive will be accorded such higher vacation.
Unused vacation time shall not be cumulated or carried over nor shall the
Physician 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 Physician Executive for all ordinary, necessary and
reasonable expenses (including, without limitation, travel, meetings, dues,
subscriptions, fees, educational expenses, computer equipment and the like)
actually incurred or paid by the Physician Executive during the Term in the
performance of the Physician 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 Board may require.
4. Termination.
4.1 Termination upon Death. If the Physician
Executive dies during the Term, the Physician Executive's employment shall
terminate as of the date of death of the Physician Executive.
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4.2 Termination upon Disability. Notwithstanding
any other provision of this Agreement (except the other provisions of this
Section 4.2), if during the Term the Physician Executive becomes
physically, mentally or emotionally disabled, whether totally or partially, as
determined by an independent qualified physician, so that the Physician
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 (a) continue the Physician Executive's
employment hereunder until one (1) year following the end of the Term at a Base
Salary equal to the Base Salary in effect at the time of the determination of
the disability, or (b) by written notice to the Physician Executive, terminate
the Physician Executive's employment hereunder as of the date of such written
notice and pay the Physician Executive as severance an amount equal to the
amount he would have been paid (at the Base Salary that is in effect on the date
of termination) for the period from the date of termination until one (1) year
following the end of the Term if his employment had not been terminated. The
preceding sentence shall be in effect only until, and shall terminate upon, the
occurrence of any of the following events: (a) the cessation of the Company's
business, (b) the bankruptcy, liquidation, receivership, or dissolution of, or
assignment for the benefit of creditors by, the Company, (c) any Change in
Control of the Company (as defined in the Company's Amended and Restated
Stockholders Agreement, as it may be amended from time to time), or (d) the
consummation of any public offering of the Company's capital stock (the
"Extraordinary Events"). If any Extraordinary Event occurs and thereafter the
Physician Executive becomes physically, mentally or emotionally disabled,
whether totally or partially, as determined by an independent qualified
physician, so that the Physician 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
Physician Executive, terminate the Physician 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 Physician Executive's
employment hereunder at any time upon: (i) the continued failure or refusal by,
or manifest inability of, the Physician Executive to perform his duties
after reasonable prior notice to the Physician Executive; (ii) the
Physician Executive engaging in any acts or omissions involving dishonesty
or acts or omissions that demonstrate a lack of integrity; (iii) the conviction
of the Physician Executive of a felony; (iv) the Physician 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
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material misrepresentation made by the Physician Executive to the Company
or any material breach by the Physician Executive of his obligations
hereunder.
(b) In addition to the Company's right to
terminate the Physician 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 Physician Executive's employment
upon 60 days prior written notice to the Physician Executive.
4.4 Termination by the Physician Executive.
(a) Provided that the Physician Executive
has delivered to the Board at least sixty (60) days prior written notice
setting forth in reasonable detail any alleged material breach by the Company
of this Agreement or other acts or omissions engaged in by the Company
constituting "constructive termination" of the Physician 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
Physician Executive, then, notwithstanding any other provision of this
Agreement, the Physician Executive shall be entitled to terminate his employment
for such reasons, effective immediately upon the delivery by the Physician
Executive to the Board of a notice to the effect that such breach, acts or
omissions have not been cured to the reasonable satisfaction of the Physician
Executive; provided, however, that if such constructive termination is caused by
the Physician 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 Physician Executive pursuant to the provisions of Section 4.2, the Physician
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 Physician
Executive's position would consider unreasonable or intolerable which is
not remedied by the Company sixty (60) days after notice thereof given by the
Physician Executive;; and (ii) such working conditions are not generally
applicable to other Physician executives of the Company.
4.5 Compensation and Benefits Following
Termination of Employment.
(a) In the event of termination of the
Physician 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; and (ii) Base Salary (if any) then payable or accrued through the
date of termination and all accrued benefits (if any) then payable to the
Physician Executive pursuant to the terms of any plans or
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arrangements referred to in Section 3.5 shall be paid to the Physician
Executive (or to his heirs, legatees and/or legal representatives) through the
date of termination.
(b) In the event of termination of the
Physician Executive's employment pursuant to Section 4.3(b) or Section
4.4, the Physician Executive (or, in the event of the Physician
Executive's subsequent death or disability, his heirs, legatees and/or legal
representatives) shall receive, when and as the same would have been
payable hereunder if the Physician 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 Physician 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 June 30, 1996, all payments of the full Base Salary which
would have been due to the Physician Executive through June 30, 1996, 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 June 30, 1996, 50% of the Base Salary which would have been due to the
Physician Executive from July 1, 1996 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 June 30, 1996, all payments in respect of all Bonuses that the
Physician Executive would have received with respect to each calendar year, or
each portion thereof, through June 30, 1996, at the times such payments would
otherwise be made, all as if this Agreement were still in effect;
(v) with respect to any periods
after June 30, 1996, 25% of the payments in respect of all Bonuses that the
Physician Executive would have received with respect to each calendar year,
or each portion thereof, from July 1, 1996 through the remainder of the Term,
at the times such payments would otherwise be made, all as if this Agreement
were still in effect; and
(vi) subject to the provisions
of the Company's Amended and Restated Articles, By-laws, the Shareholder's
Agreement, and the Option Agreement all of the shares of Additional Stock
issuable under the Option pursuant to Section 3.3 shall be issued to the
Physician Executive free of any restrictions.
(c) In the event of termination under
Section 4.2 (disability), the Physician Executive or his legal
representative, as the case may be, shall, in addition to such
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other payments as may be due hereunder, be entitled to receive the proceeds
of any disability policies maintained by the Company and payable to the
Physician Executive.
5. Certain Covenants of the Physician Executive.
5.1 Necessity for Covenants. The Physician
Executive acknowledges that (i) the Company, its Subsidiaries and its
Affiliates (as defined in Section 5.2) are engaged in the Business, and will in
the future be engaged in the Business; (ii) his work and providing management
services to health care entities for the Company and its Affiliates 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
Physician Executive, the Physician 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 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,
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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
Physician 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
Physician Executive's employment hereunder is terminated (the "Termination
Date") (the "Restricted Period"), the Physician 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 Physician 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
than 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 render
services to any person engaged in any business that competes with the
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 Physician Executive may own, directly or indirectly,
solely as an investment, securities which are publicly traded if the Physician
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
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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 Physician
Executive, or is discovered by the Physician Executive in the course of
employment, is Confidential Information.
5.4.3 Duty to Maintain Secrecy and
Confidentiality. During the Period of the Physician Executive's
employment with the Company, the Physician 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 the Termination Date,
Physician Executive shall continue to maintain the secrecy and confidentiality
of such information, but only to the extent that the Physician 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 Physician 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
Physician Executive, or made available to the Physician Executive
concerning the Business, are and shall be the property of the Company and shall
be delivered to the
13
Company promptly upon the termination of the Physician Executive's
employment with the Company or at any other time on request; provided
however, that the Physician Executive may inspect during normal business
hours such records as shall be necessary for the purpose of assisting the
Physician Executive to file, or prepare for an audit of, his personal income tax
returns.
5.6 Physician 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 Physician
Executive, solely or in conjunction with others, in the course of performance of
the Physician Executive's duties which relate to the Business, shall be made or
conceived for the exclusive benefit of and shall be the exclusive property of
the Company. The Physician Executive shall immediately notify the Company upon
the design, creation or development of all Inventions and Works. At any time
thereafter, the Physician 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 Physician Executive
shall, without further consideration but at the expense of the Company, assign
and transfer to the Company the Physician 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
Physician 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.
5.8 Covenants Currently Binding Physician
Executive. The Physician Executive warrants that his employment by the
Company will not (a) violate any non-
14
disclosure agreements, covenants against competition, or other restrictive
covenants made by the Physician 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 Physician
Executive is a party or by which the Physician 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 Physician Executive's knowledge, threatened against
or affecting the Physician Executive or which would adversely affect his
ability to substantially perform the duties herein.
5.10 Review. The Physician 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 Physician Executive's choosing.
5.11 Severability of Covenants. The Physician
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.
15
5.14 Extension. If the Physician 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 Physician Executive concerning any part of the Physician
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
hereof.
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:
16
(i) if to the Company, to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: President
with copies to:
St. Xxxxxx Medical Center, Inc.
c/o Xxxx Xxxxx
0000 Xxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxxx, Esquire
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
(ii) if to the Physician Executive, to:
Xxxxx X. Xxxxxx
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
00xx Xxxxx
Xxxxxx Xxxxx, 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.
17
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 Physician 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.
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.
This Agreement may be assigned by the Company to any entity which buys
substantially all of the Company's assets. However, the Physician Executive
may not assign this Agreement without the prior written consent of the Company.
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.
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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.
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.
___________________, Secretary By: _________________________(SEAL)
Xxxxxxx Gold, President
PHYSICIAN EXECUTIVE:
___________________ _________________________(SEAL)
Xxxxx X. Xxxxxx
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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.
6. Post-Hearing Procedures.
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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.
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.
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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.
