EXHIBIT 10.69
RETENTION AND SEVERANCE AGREEMENT
This Retention and Severance Agreement (the "Agreement") is entered into as
of October 31, 2008, between United American Healthcare Corporation (the
"Company") and Stephen D. Harris, an individual (the "Executive"). All payments
under the Agreement are intended to comply with the requirements of Internal
Revenue Code Section 409A, and the regulations thereunder.
RECITALS
WHEREAS, the Company has hired Stephen D. Harris as Executive
Vice-President, Chief Financial Officer and Treasurer;
WHEREAS, the Company is evaluating its strategic alternatives following the
loss of the recent bid by UAHC Tenn to continue to provide managed care services
to the State of Tennessee Bureau of Tenncare's West Grand Region under an
agreement with the State of Tennessee (the "Tenncare Contract"); and
WHEREAS, the Company, acting through the Compensation Committee of the
Company's Board of Directors, has determined that it is in the best interests of
the Company to retain the Executive.
NOW, THEREFORE, in consideration of the mutual covenants and consideration
set forth below, the sufficiency of which is hereby acknowledged, the parties
agree as follows:
RETENTION
1. Retention Payment. Should the Executive remain employed by the Company
at least through the period ending two years from the Effective Date (the
"Retention Period"), and, assuming continued satisfactory performance during the
Retention Period, the Company shall pay Executive a one-time lump sum cash
payment equal to 100% of his current base salary of One Hundred and Eighty Four
Thousand Dollars ($184,000.00) (the "Retention Payment"), subject to a credit
for the 25% Payment (as defined below) if made by the Company. Except as
provided in Section 4, should the Executive separate from service with the
Company prior to the end of the Retention Period, he will not be entitled to any
Retention Payment other than as provided in the next sentence. Assuming
continued satisfactory performance during the Retention Period, this cash
payment is to be made as follows: (i) 25% of the Retention Payment (the "25%
Payment") is to be paid to the Executive on or before the 30th day immediately
following the earlier of the expiration of the Tenncare Contract or the date the
State of Tennessee releases statutory reserves currently required by the
TennCare Contractor Risk Agreement , and (ii) the remainder of the Retention
Payment is to be paid to the Executive on or before the 30th day immediately
following the last day of the Retention Period, if that day is a business day,
and if not, the first business day immediately following.
2. Status of Payments. The Retention Payment is in addition to any payments
due the Executive under his current pay arrangement.
3. Forfeiture of Payments. If the Executive Involuntarily Separates from
Service (as defined in Section 5.E) for Cause, or if he voluntarily resigns from
the Company, before the completion of the Retention Period, his right to the
Retention Payment will be forfeited, and he will be obligated to return any
portion of the Retention Payment he may have received.
"Cause" shall mean (i) a material breach by the Executive of his
obligations under his employment agreement with the Company, (ii) a breach of
his fiduciary duties to the Company, (iii) conviction of a felony or any offense
involving moral turpitude or misappropriation of Company funds, or (iv) willful
breach or material neglect of the Executive's duties.
4. Separation From Service on Account of Death, Disability or Involuntary
Termination for Other Than Cause. If the Executive Separates From Service with
the Company on account of death, Disability, or Involuntarily Separates From
Service (as defined in Section 5.E) with the Company for reasons other than
Cause before the end of the Retention Period, the Executive, or his Designated
Beneficiary, as applicable, is entitled to a Retention Payment on a pro-rata
basis.
"Disability" shall mean either (i) that the Executive is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or be
expected to last for a continuous period of not less than 12 months, or (ii) is
receiving income replacement benefits for a period of not less than three months
under the Company's long term disability plan.
SEVERANCE
5. Severance Benefit. The Company will provide the Executive with a
"Severance Benefit," described below. Payment of the Severance Benefit shall not
be considered "compensation" for purposes of determining any benefits provided
under any pension, savings, or other benefit plan maintained by the Company.
A. Severance Not On Account of a Change-in-Control ("CIC") Event. In
the event of an Involuntary Separation From Service, other than for Cause,
that is not on account of a CIC Event, the Executive is entitled to a cash
Severance Benefit equal to 12 months' of base salary. This Severance
Benefit will be payable every other Friday on the same schedule and in the
same manner as his monthly compensation was paid while the Executive was
employed by the Company. This Severance Benefit will be paid for the number
of months set forth in this Section 5.A (the "Severance Period"), beginning
on the first payroll date of the seventh month immediately following the
Executive's Separation From Service date.
B. Severance On Account of a CIC Event. In the event of a Separation
From Service on account of a CIC Event, the Executive is entitled to the
amount due under the Company's Supplemental Executive Retirement Plan to be
paid in a lump sum on the first day of the seventh month immediately
following his Separation From Service date. Nothing in this Agreement is
intended to, nor does, modify the Executive's entitlement to benefits to
which he is otherwise entitled under the Company's Supplemental Executive
Retirement Plan.
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C. CIC Event Defined. For purposes of this Agreement a CIC Event
occurs when one person, or more than one person acting as a group (i)
acquires control of stock which, when combined with stock already held by
such person or group, constitutes more than 50% of the total fair market or
total voting power of the Company's stock ("Majority Control"), (ii)
acquires, or has acquired during the 12-month period ending on the date of
the most recent acquisition of stock by such person or group, ownership of
the stock in the Company possessing 30% or more of the total voting power
of the Company's stock ("Effective Control"), or (iii) acquires, or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or group, Company assets having a gross market
value equal to or greater than 40% of the total gross fair market value of
the assets of the Company immediately before such acquisition or
acquisitions.
D. Separation From Service Defined. Separation From Service means the
Executive's termination of employment with the Company on account of a
voluntary quit, resignation, death or Disability (as defined in Section 4).
E. Involuntary Separation From Service Defined. An Involuntary
Separation From Service means a Separation From Service due to the
independent exercise of the Company's unilateral authority to terminate the
Executive's service. The Executive's voluntary separation from service will
be treated as an Involuntary Separation From Service if the separation
occurs within two years from the date the Company imposed a material
negative change in (i) the Executive's base compensation, (ii) his
authority, duties or responsibilities, (iii) the authority, duties or
responsibilities of the supervisor to whom the Executive is to report, (iv)
the budget over which the Executive has authority, (v) the geographic
location at which the Executive must perform services, and (vi) any other
action or inaction that constitutes a material breach by the Company of the
agreement under which the Executive provides his services.
6. Treatment of Current Year Annual Incentive. In the event of a
CIC-related, or a non-CIC-related, Involuntary Separation From Service, other
than for Cause, the Executive is to receive a pro-rata payment of whatever
annual incentive compensation he would be due under the Company's then existing
incentive compensation program, based on actual achievement.
7. Treatment Of Long-Term Incentive Plan ("LTIP") Awards. The Executive
will be entitled to receive any outstanding LTIP awards, subject to the existing
applicable terms of the LTIP, whether the Separation From Service, other than
for Cause, is on account of a CIC Event, or is not CIC-related.
8. Continuation of Health And Welfare Benefits. In the event of separation
from service on account of a CIC Event, or a non-CIC related Separation From
Service, other than for Cause, the Company will purchase for the Executive an
insurance policy covering him and his family for medical, dental, vision and
prescription drug expenses on a basis that is comparable to the coverage to
which the Executive was entitled immediately before his Separation From Service
date, for a period of up to three years following his Separation From Service
date; provided, however, that at any time within this three year period should
the Executive obtain coverage by virtue of a new employment opportunity, or if
his spouse has or obtains comparable
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coverage by virtue of her employment to which the Executive is entitled as a
covered dependent, the extended health insurance coverage provided to the
Executive under this Section 8 will terminate. Other welfare benefits, including
but not limited to life insurance, to which the Executive is entitled on the day
immediately preceding his Separation From Service date will be paid for by the
Company for the duration of the 6-month period immediately following the
Executive's Separation From Service date and the immediately following Severance
Period.
9. Retirement Benefits. Following the date of his Separation From Service,
the Executive will not be entitled to any additional accruals under any of the
Company's retirement plans, nor will any contributions be made to any of the
Company's retirement plans on behalf of the Executive, other than those required
to be made for service accrued and compensation earned prior to his Separation
From Service date.
10. Outplacement Services. The Company will provide, at its cost,
outplacement services to the Executive through a designated outplacement firm,
for the 6-month period immediately following the Executive's separation from
service date, with the cost of such outplacement services to be capped at
$5,000.
11. Release. Prior to or immediately following his separation from service,
and as a condition of receiving the Severance Benefit described in Sections
5-10, the Executive will sign the Release of Claims attached and made a part of
this Agreement as Exhibit A (the "Release"). The Executive's failure to sign the
Release on or before the 30th day following his Separation From Service or
Involuntary Separation From Service with the Company, the Severance Benefits
described in Sections 5-10, and that are conditioned on the Release, shall be
irrevocably forfeited.
12. Time Period to Accept Agreement. With respect to the Severance Benefit
provisions of this Agreement (Sections 5-10) and the Release , the Executive has
had at least 21 days to review the terms of this Agreement and the Release, and
has been advised in writing to consult with his attorney of choice regarding the
terms of the Agreement and the Release. The Executive may revoke this Agreement
and the Release up to seven days after signing them (the "Revocation Period").
Revocation of the Release is also a revocation of the Agreement. To be
effective, the revocation must be in writing and delivered to the person who
executed this Agreement on the Company's behalf. If the Agreement is not revoked
within the Revocation Period, it shall be fully enforceable without any further
affirmative action by either party. This Agreement does not become effective
until the Revocation Period has expired (the "Effective Date").
OTHER IMPORTANT PROVISIONS
13. Covenant Not To Compete. The Executive acknowledges and agrees that,
during his employment, he formed certain business relationships that are part of
the goodwill of the Company, and that he had access to and knowledge of the
Company's Proprietary/Confidential Information, which is information that gives
the Company a competitive advantage over its competitors. The Executive
acknowledges and agrees that the Company is entitled to protect its investment
in the foregoing and to keep the results of its efforts, its goodwill, and its
Proprietary/Confidential Information for its sole and exclusive use.
Accordingly, the Executive
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agrees and covenants that for a period equal to the Severance Period, he shall
not, unless with the Company's prior written consent, directly or indirectly
(whether on his own behalf or on behalf of any other person, business or
entity):
A. own, maintain, operate, or engage in any business in the same or
similar Line of Business as the Company or in any business or activity that
competes with the Company in Tennessee.
B. serve, advise, manage, work for, or be employed, retained or
engaged in any capacity (including, but not limited to, as an employee,
consultant, contractor or agent) by any individual, firm, agency,
partnership, business, or corporation which engages in the same or similar
Line of Business as the Company or which competes with the Company in
Tennessee.
C. undertake any efforts or activities toward pre-incorporating,
incorporating, financing, or commencing any competing business or activity
which engages in the same or similar Line of Business as the Company in
Tennessee.
D. advise, serve or consult with any person, business or entity which
is or will be undertaking efforts toward incorporating, financing, or
commencing any competing business or activity which engages in the same or
similar Line of Business as the Company in Tennessee.
E The activities prohibited in this section also include:
businesses/activities that have a physical presence outside of the
specified geographic area that solicit customers, employees or business in
Tennessee.
(i) For purposes of this Agreement, "Line of Business" shall mean
any entity that provides managed care or HMO services intended to
provide coverage to Medicare or Medicaid recipients and their
dependents through insurance or otherwise.
(ii) The Executive agrees that the conditions set forth in this
Section 13: (a) are reasonable and necessary to preserve and protect
the legitimate business interests of the Company, (b) do not impose an
undue hardship on him, (c) are not injurious to the public, and (d)
shall be binding for the time period specified. In the event the
Executive engages in any activities in violation of this section at
any time during the Severance Period described in the immediately
preceding paragraphs above, then the Severance Period referred to
above shall be tolled and shall not expire, and the Executive shall be
prohibited from engaging in the activities prohibited by this Section
13 for a period of one year from the date this Agreement is enforced,
in whole or in part, by a court in which such enforcement action is
sought, provided such enforcement action was commenced within the
initial Severance Period.
(iii) The Executive acknowledges and agrees that his covenants
and obligations set forth in this Agreement shall continue
notwithstanding any prior breach of this Agreement or any other
agreement by the Company.
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14. No Contact With or Solicitation of Clients. The Executive acknowledges
and agrees: (i) that the Company expends considerable time, money and resources
to market to current and prospective clients, to maintain relationships with its
clients, to develop and maintain business relationships with referral sources,
and to acquire, compile and develop confidential and proprietary client and
prospect lists and confidential information regarding clients; (ii) that the
Company has a legitimate business interest in maintaining relationships and
goodwill with its clients, prospects and referral sources and not having those
relationships and goodwill unfairly interfered with; and (iii) that the
relationship between the Company and its past, present, and future clients,
prospects and referral sources, and all rights, title, interest, goodwill and
prospective business opportunities associated with such relationships, are and
shall remain the sole and exclusive property of the Company.
A. The Executive acknowledges and agrees that for a period of two
years after the first day of the Severance Period any reason, he shall not,
directly or indirectly (whether on his own behalf, working with others, or
on behalf of any other person, business or entity): (i) communicate or
attempt to communicate with any client, prospect or referral sources of the
Company with respect to any managed care or HMO services intended to
provide coverage to Medicare or Medicaid recipients and their dependents
through insurance or otherwise; and/or (ii) conduct any transactions or
business with any client, prospective client or referral source of the
Company with respect to any managed care or HMO services intended to
provide coverage to Medicare or Medicaid recipients and their dependents
through insurance or otherwise.
B. The Executive acknowledges and agrees that any violation of this
section constitutes improper interference with the Company's legitimate,
actual and prospective business expectations and client, prospect and
referral source relationships, misappropriates the Company's goodwill, and
unfairly harms the Company.
C. The Executive acknowledges and agrees that it is his affirmative
obligation to determine whether any person with whom he (or any person or
company/business by whom he is employed) have contact is a client or
prospect of the Company. In any proceeding to enforce this Agreement, there
shall be a legal presumption that the performance of any managed care or
HMO services intended to provide coverage to Medicare or Medicaid
recipients and their dependents through insurance or otherwise for a client
or prospect of the Company by him (or by any other person or
company/business by whom he is employed) was undertaken and performed in
violation of this Agreement.
15. Nondisparagement. Except when providing testimony in any legal
proceeding in accordance with this Agreement, the Executive will not disparage
either the Company or its products and services in a negative, derogatory, or
unflattering manner. Under no circumstances may the Executive disclose to any
member of the public, including the media, any material, negative or detrimental
information relating to the Company or its products or services.
16. Non-Disclosure of Proprietary/Confidential Company Information. The
Executive acknowledges and agrees that during the course of his employment with
the Company
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he gained access to, used, and compiled information that is the Company's
"Proprietary/Confidential Information," as defined below.
A. For purposes of this Agreement, "Proprietary/ Confidential
Information" means: (i) non-public information relating to or regarding the
Company's business, personnel, customers, operations or affairs; (ii)
non-public information which the Company labeled or treated as
confidential, proprietary, secret or sensitive business information, or
which Executive reasonably knew or should have known is or should be
treated as confidential and/or proprietary information; (iii) information
that is not generally known to the public or others in the industry and
gives the Company a competitive advantage; (iv) information that is
expensive and/or burdensome to compile or is compiled through proprietary
methods, whether compiled by the Company or acquired as such; (v) all
non-public customer and prospective customer information; (vi) trade
secrets of the Company; (vii) non-public information pertaining to the
Company's "Intellectual Property;" and (viii) information that was
otherwise Proprietary/Confidential Information of the Company but which was
disclosed or disseminated in violation of this Agreement.
B. The Executive acknowledges and agrees that: (i) he shall hold and
maintain all Proprietary/Confidential Information in the strictest of
confidence and that he shall preserve and protect the confidentiality,
privacy and secrecy of all Proprietary/Confidential Information; (ii) he
shall not disclose, reveal or expose any Proprietary/Confidential
Information to any person, business or entity (nor forward or disseminate
such information to persons outside the Company or to a personal e-mail
account); (iii) he shall not use any Proprietary/Confidential Information
for any purpose except as may be authorized by the Company in writing; and
(iv) he shall take all necessary precautions to keep
Proprietary/Confidential Information secret, private, concealed and
protected from disclosure, and shall notify the Company immediately of any
breach in privacy or disclosure of Proprietary/Confidential Information.
C. The Executive acknowledges and agrees that: (i) all documents,
records, memos, e-mails, voicemails, faxes, rolodexes, planners, letters,
reports, files, data, information, Proprietary/Confidential Information,
compilations, books, manuals, handbooks, training materials, presentations,
employee lists, client/customer lists, prospect lists, reports received
from, sent to or pertaining to the Company (or a related Company) or
containing Company information (together "Company Records") irrespective of
the form or medium in which such information is stored (including
hardcopies and electronic copies; text, audio, image, and/or video files;
and the originals and all copies thereof), and (ii) all office equipment
and supplies (including, but not limited to, pagers, phones, fax machines,
blackberries, PDAs, keys, badges, credit cards, lists, computers, computer
diskettes, CDs, computer parts, software, disks, tapes, modems,
telecommunication equipment, office furniture, office supplies, security
tokens, and the like) directly or indirectly obtained by the Company for
use by the Executive or furnished to the Executive by the Company (together
"Company Equipment"), are and shall remain the property of the Company. The
Executive agrees to return all Company Equipment in his possession or under
his control immediately.
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17. Remedies for Breach of Post-Agreement Obligations. The Executive
acknowledges and agrees that (a) any violation or breach of his post-agreement
obligations set forth above will result in irreparable injury to the Company for
which no adequate remedy at law may be available; (b) he consents to the
issuance of a temporary restraining order and injunction prohibiting any conduct
by him in violation of this Agreement without the requirement of posting a bond,
the same being waived by him.
A. A restraining order or injunctive relief shall not be the Company's
exclusive remedy for violation of these covenants or for violation of any
other terms and conditions contained in this Agreement. In the event the
Company takes action to enforce the post-agreement obligations set forth
herein, each party shall be solely responsible for their own fees and
expenses (including reasonable attorney's fees) incurred in connection with
such action.
B. In addition to the remedies set forth above, the Executive shall
return to the Company the full amount of the Severance Benefit set forth in
Section 5 of this Agreement if a court having jurisdiction in the matter in
a final adjudication from which there is no further right of appeal
determines that the Executive has violated any of Sections 13-16 of this
Agreement.
18. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained in this Agreement.
19. Complete Agreement. This Agreement embodies the complete agreement and
understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter of this Agreement in any
way.
20. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
21. Successors and Assigns. Except as otherwise provided in this Agreement,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Employee and the Company, and their respective successors and assigns; provided
that rights and obligations of the Employee under this Agreement shall not be
assigned without the Company's prior written consent.
22. Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity and interpretation of this Agreement and the exhibits
to this Agreement will be governed by and construed in accordance with the
domestic laws of the State of Michigan, without giving effect to any choice of
law or conflict of law provision or rule (whether
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of the State of Michigan or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Michigan.
Any lawsuit arising out of or in any way related to this Agreement shall be
brought only in either any state court located in Wayne County, Michigan, having
jurisdiction over the lawsuit or the United States District Court for the
Eastern District of Michigan. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF
THE PARTIES TO ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD OPPORTUNITY TO
CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT.
23. Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Company and the Executive.
24. No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction shall be applied against either party.
25. Headings. The paragraph and section headings in this Agreement are
inserted merely for the convenience of reference only and shall not be used to
construe, affect or modify the terms of any paragraph or provision of this
Agreement.
UNITED AMERICAN HEALTHCARE
CORPORATION
/s/ Stephen D. Harris By: /s/ William C. Brooks
- ---------------------------------- -------------------------------------
Stephen D. Harris William C. Brooks
Date: October 31, 2008 Its: President and Chief Executive Officer
Date: October 31, 2008
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EXHIBIT A: RELEASE OF CLAIMS
For and in consideration of the above, the Executive releases the Company
and all present and former directors, officers, shareholders, agents,
representatives, employees, successors and assigns of the Company (the "Released
Parties"), from any liability relating to all Claims and Rights as defined in
this Exhibit A of the Agreement. The Executive will not pursue or allege any
Claims or Rights against the Released Parties in violation of this Agreement.
The Executive is surrendering and releasing any and all rights the Executive may
have to sue the Released Parties related to, in any way, his employment with the
Company or the termination of such employment, to the extent permitted by law.
The Executive's release of all Claims and Rights is an essential and material
term of this Agreement and without such release the Company would not have
agreed to the terms of this Agreement. For purposes of this Agreement, the term
"Claims and Rights" means all manner of action and causes of action, charges,
claims, complaints, demands, liabilities, losses, damages, costs or expenses
(including related attorneys' fees) of any kind whatsoever, known or unknown,
suspected or unsuspected, that the Executive may now have or has ever had
against any of the Released Parties by reason of any act, omission, transaction,
or event occurring up to and including the Effective Date, including any manner
of action or causes of action, charges, claims, complaints, demands,
liabilities, losses, damages, costs or expenses relating to the Employee's
employment with the Company or the termination thereof. To the extent permitted
by law, Claims and Rights include, without limitation, any wrongful discharge
claim, any claim relating to any contract(s) of employment, whether express or
implied, any claim for or relating to compensation, bonus, commissions, any
retirement or 401(k) plan administered by the Company or the management,
thereof, any claim for defamation, invasion or privacy, misrepresentation,
fraud, infliction of emotional distress, any claim of breach of covenant of good
faith and fair dealing, or any other claim relating in any way to the Employee's
employment relationship with the Company or its termination. Claims and Rights
also include, without limitation, any claims based on Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the
Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era
Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment
and Retraining Notification Act, Executive Order 11246, the Employee Retirement
Income Security Act of 1974 (all of these may have been amended), the Age
Discrimination in Employment Act, the Older Workers Benefit Protection Act,
Michigan's Elliott-Larsen Civil Rights Act, Michigan's Persons With Disabilities
Civil Rights Act, Michigan's Whistleblowers' Protection Act, and any other
applicable federal, state, or local laws, ordinances and regulations, including
those relating to discrimination to the extent permitted by law. The foregoing
shall not discharge the Company's obligations under this Agreement or with
respect to Executive's vested benefits in any of the Company's retirement or
pension plans, if any.
[The next page is a signature page]
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UNITED AMERICAN HEALTHCARE
CORPORATION
_______________________________ By: ____________________________________
Stephen D. Harris
Date: _________________________ Its: ___________________________________
Date: __________________________________
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