Exhibit 10.22
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TERMINATION AGREEMENT AND RELEASE
This Termination Agreement and Release is dated as of June 15, 2001,
by and among NCRIC Group, Inc., a District of Columbia corporation ("NCRIC
Group"), NCRIC MSO, Inc., a Delaware corporation ("NCRIC MSO"), HCI Ventures,
LLC, a Virginia limited liability company ("HCIV"), and L. E. Shepherd, Jr.,
William A. Hunter, Jr. and Barry S. Pillow (collectively, the "Executives").
WHEREAS, pursuant to a Purchase Agreement dated December 20, 1998, by
and among NCRIC Group and the Executives (the "Purchase Agreement"), NCRIC Group
or NCRIC MSO purchased from the Executives all of the issued and outstanding
common stock of HealthCare Consulting, Inc., a Virginia corporation ("HCI"), and
all of the outstanding membership interests in HCIV;
WHEREAS, pursuant to a Purchase Agreement dated December 20, 1998, by
and between Employee Benefit Services, Inc. ("EBSI") and NCRIC Group (the "EBSI
Purchase Agreement"), NCRIC Group or NCRIC MSO purchased all of the assets of
EBSI;
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Executives are entitled to receive aggregate contingent consideration (the
"Contingent Consideration") of up to $3,100,000 if HCI, HCIV and the assets of
EBSI achieve certain levels of adjusted earnings during calender years 2000,
2001 and 2002 (the "Earnout Period");
WHEREAS, pursuant to an Operating Agreement (the "Operating
Agreement") entered into as of January 4, 1999, NCRIC Group, NCRIC MSO, HCI,
HCIV and the Executives, the parties set forth their understanding with respect
to (i) certain accounting principles which will be applied to the calculation of
adjusted earnings, and (ii) certain management policies which will be in effect
during the Earnout Period;
WHEREAS, HCI was merged into NCRIC MSO, and the rights and
obligations of, and references to, HCI in the Operating Agreement as a result of
that merger relate to NCRIC MSO, unless the context otherwise requires;
WHEREAS, each of the Executives entered into an employment agreement
with NCRIC MSO as of January 4, 1999 (the "1999 Employment Agreements");
WHEREAS, pursuant to an Agreement to Amend Operating Agreement and
For Other Purposes (the "Amendment to Operating Agreement ") entered into as of
November 23, 1999, the parties amended the Operating Agreement, the Purchase
Agreement and the 1999 Employment Agreements in certain respects (for purposes
of this Agreement, the terms "Operating Agreement," "Purchase Agreement " and
"1999 Employment Agreements " shall be deemed to refer to and include the
original agreements as amended by the Amendment to Operating Agreement);
WHEREAS, the parties have mutually decided as follows: (i) to
terminate the continuing obligations under the Purchase Agreement (except as
otherwise set forth herein), (ii) to terminate the Operating Agreement and the
Amendment to Operating Agreement, (iii) to terminate each of the three 1999
Employment Agreements between NCRIC MSO and the Executives, and (iv) to
acknowledge that NCRIC MSO has no continuing obligations under the EBSI Purchase
Agreement; and
WHEREAS, each of the Executives is entering into a new replacement
employment agreement with NCRIC MSO (the "2001 Employment Agreement");
NOW, THEREFORE, in consideration of the promises and payments stated
and other good and valuable consideration, the receipt and adequacy of which is
acknowledged by each of the parties and who intend to be legally bound by this
Termination Agreement and Release, the parties state and agree as follows:
1. Termination of Continuing Obligations under Purchase Agreement.
The parties hereby mutually agree that the continuing requirements and
obligations set forth in the Purchase Agreement shall be terminated as of the
date hereof, and shall have no further legal force and effect, except as
follows:
(a) The representations and warranties made under Sections 3(k) and
4(f)(2) and (3) of the Purchase Agreement, as set forth in Schedule A attached
hereto, shall survive without time limitation.
(b) The obligations of the Executives to indemnify NCRIC Group set
forth in Section 10(b) of the Purchase Agreement solely with respect to the
aforementioned Section 3(k), and the obligations of NCRIC Group to indemnify
Executives set forth in Section 10(c) of the Purchase Agreement solely with
respect to the aforementioned Sections 4(f)(2) and (3), as set forth in Schedule
B attached hereto, shall not be terminated and shall have continuing effect.
2. Termination of Operating Agreement and Amendment to Operating
Agreement. The parties hereby mutually agree that the Operating Agreement, and
the Amendment to Operating Agreement, shall be terminated as of the date hereof,
and shall have no further legal force and effect.
3. Termination of 1999 Employment Agreements. By executing this
Termination Agreement and Release, each of the Executives agrees that the 1999
Employment Agreement between NCRIC MSO and the Executive shall be terminated as
of the date hereof and shall have no further legal force and effect. In
consideration of the agreements contained and referred to herein, each of the
Executives hereby irrevocably and unconditionally waives and releases NCRIC MSO,
its affiliates and subsidiaries, officers, directors, and executives, from any
and all causes of actions, debts and claims, known or unknown, which each
Executive may now have or may have in the future, concerning Executive's
employment under the 1999 Employment Agreement, or separation from service
thereunder, including but not limited to any claims for alleged breach of
contract, wrongful discharge, or any rights or claims arising out of any
federal, state or municipal statute or ordinance.
4. Payment of Contingent Consideration Pursuant to Section 2(b) of
the Purchase Agreement. In payment for the Stock, as defined in the Purchase
Agreement, pursuant to Section 2(b) of said agreement, NCRIC MSO shall pay to
the Executives an aggregate of $1,392,941.37, payable by certified check in the
following amounts: (i) L. E. Shepherd, Jr. - $502,866.92; (ii) William A.
Hunter, Jr. - $502,866.92; and (iii) Barry S. Pillow - $387,207.53. Such amounts
shall be payable on the date hereof. As further payment for the Stock, NCRIC
Group, NCRIC MSO and HCIV hereby irrevocably transfer to the Executives all
rights and interests in the proceeds collected from the one hundred and twenty
(120) day old balances of all accounts receivable ("120 Day Accounts ") owed by
clients of NCRIC Group, NCRIC MSO and HCIV (the "Clients "), which 120 Day
Accounts are set forth in Schedule C attached hereto. The parties hereto agree
that, notwithstanding the foregoing, NCRIC MSO and HCIV shall have sole
authority to service the 120 Day Accounts. NCRIC Group, NCRIC MSO and HCIV
shall, at their sole expense, and without any cost to the Executives, use their
reasonable efforts to collect the 120 Day Accounts. NCRIC MSO and HCIV shall
have full authority in their sole discretion to determine whether any actions,
other than making written request in the normal course of business, shall be
taken to collect the 120 Day Accounts. Schedule C also sets forth the accounts
receivable owed by the Clients which are current, thirty (30), sixty (60) (the
"Current/30/60 Day Accounts") and ninety (90) days old. As soon as NCRIC Group,
NCRIC MSO and HCIV have received aggregate payments after the date of this
Agreement from any Client in excess of the sum of such Client's Current/30/60
Day Accounts, NCRIC Group, NCRIC MSO and HCIV shall deliver to the Executives
any additional payments received from such Client until such Client's 120 Day
Account is paid in full. Payments to the Executives shall occur within fifteen
(15) days after the end of each quarterly period in which payments of the 120
Day Accounts are received by NCRIC Group, NCRIC MSO and/or HCIV from a Client.
Starting in August 2001, NCRIC Group, NCRIC MSO and HCIV shall deliver financial
reports to the Executives on a monthly basis showing the history of payments
from any or all Clients in reasonable detail until all the 120 Day Accounts are
fully paid to the Executives; provided, however, that the obligations of NCRIC
Group, NCRIC MSO and HCIV under this Agreement with respect to the 120 Day
Accounts shall terminate as of June 30, 2002, whether or not any 120 Day
Accounts remain outstanding as of such date. Payments of the 120 Day Accounts
will be paid to the Executives according to the percentages as set forth in the
Purchase Agreement. NCRIC MSO and its subsidiaries and affiliates shall have no
further obligation or liability to the Executives pursuant to the Purchase
Agreement, the Operating Agreement, the Amendment to Operating Agreement, or the
several 1999 Employment Agreements, except as otherwise set forth herein or as
set forth in the 2001 Employment Agreements entered into between NCRIC MSO and
the Executives as of June 15, 2001.
5. No obligations under EBSI Purchase Agreement. The parties hereto
acknowledge and agree that NCRIC Group and NCRIC MSO, and their subsidiaries and
affiliates, have no further obligation or liability under the EBSI Purchase
Agreement.
6. Effect of Termination. As of the date hereof, no party to the
Purchase Agreement, the Operating Agreement, the Amendment to Operating
Agreement or the 1999 Employment Agreements shall have any liability or further
obligation to any other party under those agreements, except as set forth in
this Termination Agreement and Release or in the 2001 Employment Agreements.
7. Release. NCRIC Group, NCRIC MSO and HCIV, on behalf of themselves
and their respective affiliates and subsidiaries, jointly and severally, hereby
waive and release each of the Executives from any and all causes of action,
debts, claims and liabilities, whether known or unknown, which NCRIC Group,
NCRIC MSO and HCIV may now have or may have in the future, under the 1999
Employment Agreements, the Purchase Agreement, the Operating Agreement and/or
the Amendment to Operating Agreement, except as otherwise set forth herein or in
the 2001 Employment Agreements. The foregoing waiver and release shall be
inapplicable and of no effect as to cause of action, debt, claim or liability
arising out of, or resulting from, any unlawful, fraudulent or intentionally
wrongful activity by any of the Executives. Each of the Executives hereby
represents and warrants that he is not aware of any potential cause of action,
debt, claim or liability that may be asserted against NCRIC Group, NCRIC MSO or
HCIV by any third party (relating to the operation of NCRIC MSO and HCIV), other
than as previously disclosed.
8. Arbitration. (a) In the event the parties are unable to resolve a
controversy under this Termination Agreement and Release, the parties agree to
submit the matter to binding arbitration under the rules of the American
Arbitration Association, but not using the American Arbitration Association,
unless the parties mutually agree to do so. One arbiter shall be chosen by NCRIC
Group and one by Executives before commencement of arbitration. The two arbiters
shall choose a third arbiter. The decision of the first two arbiters shall be
final and binding upon both parties; however, if those arbiters fail to agree,
the third arbiter shall participate and the decision of the majority shall be
final and binding. The parties expressly covenant and agree to be bound by the
decisions of the arbiters and accept any decision by a majority of the arbiters
as final determination of the matter in dispute. In connection with the
foregoing, the parties hereby waive any right to an appeal or to commence any de
novo action with respect to the final determination. All arbiters chosen
pursuant to this Section 7 shall have substantial experience in the healthcare
management field and shall have demonstrated knowledge concerning the types of
issues involved.
(b) Each party shall bear its own expenses, including legal,
accounting and expert fees, in connection with the arbitration except that NCRIC
Group and Executives shall each pay 50% of the expenses of the arbiters.
(c) Any such arbitration shall take place in Washington, D.C., unless
some other location is mutually agreed upon by the parties.
9. Counterparts. This Termination Agreement and Release may be
executed in one or more counterparts, each of which shall be deemed to
constitute an original.
10. Governing Law. This Termination Agreement and Release shall be
governed by, and interpreted in accordance with, the laws of the District of
Columbia, without regard to the conflict of law principles thereof.
11. Headings. The headings contained in this Termination Agreement
and Release are for reference purposes only and are not part of this Termination
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in counterparts as of the 18th day of June 2001.
NCRIC GROUP, INC.
By: /s/ Stephen S. Fargis
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Name: Stephen S. Fargis
Title: Senior Vice President and Chief Operating Officer
NCRIC MSO, INC.
By: /s/ Stephen S. Fargis
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Name: Stephen S. Fargis
Title: President
HCI VENTURES, LLC
By: /s/ Stephen S. Fargis
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Name: Stephen S. Fargis
Title: President
/s/ L. E. Shepherd, Jr.
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L. E. Shepherd, Jr.
/s/ William A. Hunter, Jr.
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William A. Hunter, Jr.
/s/ Barry S. Pillow
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Barry S. Pillow