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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT made this 14th day of September, 1998, effective as of July 2,
1998, by and between Xxxxxx X. Xxxxxx, presently residing in California
(hereinafter referred to as the "Executive") and Comprehensive Care Corporation,
a Delaware corporation with principal offices located at 0000 Xxxx Xxxxxxx,
Xxxxx 000, Xxxxx, Xxxxxxx 00000 (hereinafter referred to as the "Company").
W I T N E S S E T H :
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WHEREAS, the Company, through its wholly-owned subsidiary corporations,
is currently engaged in the principal business of providing various managed
behavioral health care services on a fee for service or through contract
capitation agreements; and
WHEREAS, the Executive is offered employment by the Company in the
capacity as Executive Vice President and Chief Financial Officer; and
WHEREAS, the Company and Executive desire to provide for the future
continued employment of Executive upon the terms and conditions provided for
herein;
NOW, THEREFORE, it is mutually agreed by and between the parties hereto
as follows:
ARTICLE I
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EMPLOYMENT
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Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs and agrees to continue the employment of the Executive,
and the Executive hereby accepts such employment in his capacity as Executive
Vice President and Chief Financial Officer of the Company and Chief Financial
Officer of the Company's principal subsidiary, Comprehensive
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Behavioral Care, Inc. ("CBC"). Executive shall report to the Chairperson,
President and Chief Executive Officer.
ARTICLE II
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DUTIES
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(A) Executive shall, during the term of his employment with the Company,
and subject to the reasonable and good faith direction and control of the
Company's Board of Directors, perform such duties and functions for the Company
as he may be called upon to perform by the Board of Directors of the Company and
of CBC during the term of this Agreement consistent with the position of
Executive Vice President and Chief Financial Officer.
(B) The Executive agrees to devote his best efforts to the performance
of his duties for the Company and to render such services for any subsidiary
corporations of the Company.
(C) The Executive shall perform, in conjunction with the Company's
senior management, to the best of his ability the following services and duties
for the Company and its subsidiary corporations (by way of example, and not by
way of limitation):
(i) Those duties attendant to the position with the Company and of
CBC for which he is hired;
(ii) Supervision of the accounting and financial reporting functions
of the Company and of CBC;
(iii) Financial and strategic planning to preserve and enhance the
Company's business;
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(iv) Promotion of the relationships of the Company and its
subsidiary corporation with their respective employees, customers,
suppliers and others in the business and investment community.
ARTICLE III
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STOCK OPTIONS
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(A) Upon execution of this Agreement, there shall be granted to
Executive options (the "Stock Options") to purchase 87,500 shares of the
Company's common stock, par value $.01 per share (the "Common Stock"). The
exercise price of the Stock Options shall be equal to the Fair Market Value (as
defined below) of the Common Stock on the date of grant. For purposes of this
Agreement "Fair Market Value" shall be deemed to be the closing price of the
Common Stock on the New York Stock Exchange on the date of grant. The Stock
Options shall be designated as non-incentive stock options to the extent
eligible by law and practice with the balance designated as non-qualified stock
options. The Stock Options shall be exercisable in accordance with the standard
terms and conditions of the Company's stock option grants; provided, however,
that such Stock Options shall vest on the six (6) month anniversary date of
Executive's employment; and provided further, however, that the vesting of such
Stock Option shall accelerate upon the occurrence of a change in control as
defined in subsection (B)(v) of Article IX. In the event that prior to the six
(6) month anniversary date of Executive's employment, Executive voluntarily
terminates his employment with the Company or is terminated for cause as defined
in subsection B(iii) of Article IX, then all Stock Options shall terminate and
shall be cancelled.
(B) Commencing in July 1999 and subject to Executive being in the employ
of the Company, Executive shall be granted annually options (the "Annual Stock
Options") to purchase
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25,000 shares of the Company's Common Stock. The exercise price of the Annual
Stock Options shall be equal to the Fair Market Value of the Common Stock on the
date of grant. The Annual Stock Options shall be designated as non-incentive
stock options to the extent eligible by law with the balance designated as
non-qualified stock options. The Annual Stock Options shall be exercisable in
accordance with the standard terms and conditions of the Company's stock option
grants; provided, however, that such Annual Stock Options shall vest at the rate
of 50% on the first anniversary date of the grant and 50% on the second
anniversary date of the grant; and provided further, however, that the vesting
of such Annual Stock Options shall accelerate upon the occurrence of a change in
control as defined in subsection B(v) of Article IX. In the event that during
the twelve (12) months following the grant of Annual Stock Options, Executive
voluntarily terminates his employment with the Company or is terminated for
cause as defined in subsection B(iii) of Article IX, then such Annual Stock
Options shall be cancelled.
ARTICLE IV
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PRINCIPAL BUSINESS LOCATION OF EXECUTIVE
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Executive shall be based at the Company's corporate headquarters located
in Tampa, Florida and shall undertake such travel as directed within or without
the United States as is or may be reasonably necessary in the interests of the
Company and its operating subsidiaries and the performance of his duties
hereunder.
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ARTICLE V
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COMPENSATION
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(A) Commencing the effective date of this Agreement and during the full
term of this Agreement, Executive shall receive a base salary (the "Base
Salary") at the rate of $150,000 per annum payable in equal bi-weekly increments
or such other regular pay periods of the Company.
(B) Executive may receive such other bonuses or additional compensation
as may be determined from time to time by the Board of Directors in its sole
discretion.
(C) The Company shall deduct from Executive's compensation all federal,
state and local taxes which it may now or may hereafter be required to deduct.
(D) In addition to the Base Salary, Executive shall be eligible to earn
an annual incentive bonus (the "Incentive Bonus") through Executive's
participation in the Company's Annual Management Bonus Plan ("MBP Plan") as
follows: For the fiscal year ended May 31, 1999, and provided Executive shall be
employed by the Company, the Company shall pay to Executive within ninety (90)
days following the end of the fiscal year, an Incentive Bonus in an amount equal
to the amount earned under the terms of the MBP Plan. For the fiscal year ended
May 31, 1999, Executive shall be eligible to earn an Incentive Bonus up to an
amount not exceeding $50,000; such amount pro-rated based on actual date of
employment; provided, however, that the Company has achieved a profit for such
fiscal year of not less than $1 million on an adjusted EBIT basis. Executive's
Incentive Bonus shall not be less than $25,000 for the fiscal year ended May 31,
1999. For the purpose of computing EBIT, there shall be excluded extraordinary
non-recurring items of earnings.
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ARTICLE VI
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BENEFITS
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(A) During the term hereof, (i) the Company shall provide Executive with
standard health insurance, life insurance and disability insurance as generally
offered and made available to executive officers of the Company, and upon the
same terms and conditions as provided to other executive officers of the
Company; (ii) Executive shall be reimbursed by the Company, upon presentation of
appropriate vouchers, for all reasonable business expenses incurred by the
Executive on behalf of the Company, consistent with the Company's expense
reimbursement policies.
(B) Commencing upon the date of Executive employment through the date
that Executive is eligible to participate in the Company's group health care and
group dental plans, the Company shall reimburse the employee for the gross
premium cost to Executive for coverage continuation for existing medical and
dental care for Executive and Executive's family.
(C) Executive shall be entitled to three weeks of paid vacation during
each 12-month period of employment, to be accrued in accordance with the
Company's vacation policies and to be taken at such times as not to interfere
with projects then in process. Additionally, during the term hereof, Executive
shall be accorded such leave and holidays generally made available to other
executive officers of the Company.
(D) The Company will reimburse Executive up to an amount not exceeding
$35,000 upon presentation of reasonably itemized expense statements with back up
substantiation for reasonable and necessary expenses incurred in connection with
Executive's relocation from California to Tampa, Florida. Relocation expenses,
which shall be reimbursed by the Company shall include, but not be limited to,
transfer of household goods, temporary housing, closing costs coincident with
the
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purchase of a new residence, travel, and other relocation expenses typically
reimbursed as part of the Company's relocation policy. In the event that
Executive voluntarily terminates his employment with the Company prior to June
30, 1999, Executive hereby agrees to reimburse the Company for all relocation
expenses reimbursed to Executive by the Company. In the event that Executive is
terminated by the Company other than for cause as defined in subsection (B)(iii)
of Article IX, then the Company shall reimburse Executive up to an amount not
exceeding $35,000, for reasonable and necessary expenses actually incurred by
Executive in connection with Executive's relocation to California or any other
state in the United States.
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ARTICLE VII
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NON-DISCLOSURE
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The Executive shall not, at any time during or after the termination of
his employment hereunder, except when acting on behalf of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
marketing information, managed care business, plans and programs, contract
proposals, psychiatric and dependence operations, and information relating to
any managed care, capitation, sales or marketing programs of the Company
(collectively referred to as the "Proprietary Information"). For the purposes of
this Agreement, trade secrets and confidential information shall mean
information disclosed to the Executive or known by him solely as a consequence
of his employment by the Company, whether or not pursuant to this Agreement, and
not generally known (other than as disclosed by any person in breach of any
obligation of confidentiality to the Company) in the industry, concerning the
business, finances, methods, operations, marketing information, and information
relating to the sales and marketing of the Company. The foregoing is intended to
be confirmatory of the statutory law and common law of the state of California
relating to trade secrets and confidential information.
ARTICLE VIII
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RESTRICTIVE COVENANT
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(A) In the event of the voluntary termination of employment with the
Company by Executive, Executive agrees that he will not, for a period of one (1)
year following such termination, directly or indirectly enter into or become
associated with or engage in any other business (whether as a partner, officer,
director, shareholder, employee, consultant, or otherwise), which business is
primarily involved in the business of developing, marketing, owning or operating
facilities providing
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psychiatric care or drug or alcohol dependency rehabilitation or treatment, or
providing or marketing managed health care programs on a contract or capitated
basis.
(B) In furtherance of the foregoing, Executive shall not during the
aforesaid period of non-competition, directly or indirectly, in competition with
the Company, solicit any management person who was employed by the Company or
solicit any provider, insurer or group through, from or with which the Company
transacted any managed health care business. The foregoing shall not be deemed
or construed to prevent Executive from soliciting any consultant or advisor to
the Company for any project that Executive may participate in which is not in
violation of this Article VIII.
(C) If any court shall hold that the duration of non-competition or any
other restriction contained in this paragraph is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed amended
to delete therefrom such provision or portion adjudicated to be invalid or
unenforceable or in the alternative such judicially substituted term may be
substituted therefor.
ARTICLE IX
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TERM AND TERMINATION
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(A) This Agreement shall be for an initial term of eighteen (18) months
commencing on the date of execution of this Agreement and continuing through a
date which is eighteen months thereafter.
(B) This Agreement may be terminated prior to the expiration of its term
as follows:
(i) upon the mutual agreement of the Company and Executive.
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(ii) upon the death or permanent disability of Executive, in which
case Executive shall be entitled to all Base Salary through the date of
termination. For the purposes of the foregoing, permanent disability
shall be the inability of Executive to attend to his usual duties for a
period of two (2) months in any 12 month period of the term or sixty
(60) consecutive calendar days.
(iii) for cause by the Company, in which case Executive shall only
be entitled to his Base Salary through the date of termination. For the
purpose of the foregoing, cause shall be (a) a breach or default in the
performance by Executive of any of his material obligations under this
Agreement, which breach or default is not cured within ten (10) business
days following written notice thereof to Executive, or (b) the
commission by Executive of any act resulting in or intending to result
in his personal gain or enrichment at the expense of the Company, or the
commission by Executive of any felony or misdemeanor or act involving
moral turpitude.
(iv) by the Company without cause, in which case Executive shall be
entitled to an amount equal to his Base Salary for the unexpired term of
this Agreement or twelve (12) months Base Salary, whichever is greater,
and a pro rata amount of the Incentive Bonus that Executive would have
earned had this Agreement not been terminated by the Company.
(v) by Executive if, at any time during the term, a change in
control of the Company shall have occurred and, following such change in
control, Executive's title shall be changed or Executive's duties and
responsibilities, as same were in effect prior to the change in control,
are diminished in any material respect. For the purpose of the
foregoing, a change in control shall occur in the event the Company
enters into any agreement involving
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the sale of a controlling interest in the Company or the sale by the
Company of all or substantially all of its assets to any other entity,
or the merger of the Company into and with another entity in which the
Company is not the survivor, or in which the Company is not the
controlling shareholder. In the event of termination by Executive under
this subparagraph, Executive shall be entitled to receive, as a special
severance benefit, the greater of (i) the balance of his Base Salary for
the unexpired portion of the term of this Agreement or (ii) twelve (12)
months Base Salary, together with the Incentive Bonus, as if this
Agreement had not been terminated. In addition, all options granted to
Executive and which shall not have heretofore vested, shall immediately
vest and become presently exercisable.
ARTICLE X
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TERMINATION OF PRIOR AGREEMENTS
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This Agreement sets forth the entire agreement between the parties and
supersedes all prior agreements between the parties, whether oral or written,
which are merged herein.
ARTICLE XI
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ARBITRATION
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Any dispute arising out of the interpretation, application and/or
performance of this Agreement shall be settled through final and binding
arbitration before a single arbitrator in Newport Beach, California in
accordance with the commercial rules of the American Arbitration Association.
The arbitrator shall be selected by the Association and shall be an attorney at
law experienced in the field of corporate law. Any judgment upon any arbitration
award may be entered in any court, federal or state, having competent
jurisdiction of the parties.
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ARTICLE XII
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SEVERABILITY
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If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE XIII
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NOTICE
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All notices required to be given under the terms of this Agreement shall
be in writing and shall be deemed to have been duly given only if delivered to
the addressee in person or mailed by certified mail, return receipt requested,
as follows:
If to the Company: Comprehensive Care Corporation
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: President
If to the Executive: At such address as Executive shall have
advised the Company in writing
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
ARTICLE XIV
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BENEFIT
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This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and personal
representatives of the Executive.
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ARTICLE XV
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WAIVER
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The waiver by either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of construction and validity.
ARTICLE XVI
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GOVERNING LAW
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This Agreement has been negotiated and executed in the State of
California, and California law shall govern its construction and validity.
ARTICLE XVI
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ENTIRE AGREEMENT
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This Agreement contains the entire agreement between the parties hereto.
No change, addition or amendment shall be made hereto, except by written
agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.
(Corporate Seal) COMPREHENSIVE CARE CORPORATION
By:
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Name: Xxxxxx X. Street
Title: Chairman, President and
Chief Executive Officer
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XXXXXX X. XXXXXX (Executive)
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