Exhibit 2.7
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and
between Paul G. Shoffeitt, a resident of the State of Maryland ("Officer"),
and Magellan Health Services, Inc., a Delaware corporation ("Employer").
WHEREAS, Employer is engaged in the business of developing and providing
managed care health services and products; and
WHEREAS, Employer desires to obtain the services of Officer and Officer
desires to render services to Employer; and
WHEREAS, Employer and Officer desire to set forth the terms and
conditions of Officer's employment with Employer under this Agreement; and
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and agreements contained in this Agreement, the parties
agree as follows:
STATEMENT OF AGREEMENT
----------------------
1. EMPLOYMENT. Employer agrees to employ Officer on a part-time
basis, and Officer accepts such part-time employment, commencing on April 1,
1997, and continuing up to and including April 1, 2000, unless terminated
earlier pursuant to Section 6 below. After the initial three (3) year term
(the "Term") has expired, this Agreement will automatically renew on April
1st each year for a one (1) year term. Either party may terminate the
Agreement during a renewal year by providing the other party with thirty (30)
days written notice of their intent to terminate the Agreement.
2. POSITION AND DUTIES OF OFFICER. Officer will serve as Executive
Vice President of Managed Care reporting to Employer's Chief Executive
Officer. Officer agrees to serve in such position or in such other Senior
Officer level position as Employer determines from time to time, and to
perform the Officer level duties commensurate with Officer's professional
abilities and qualifications on a part-time basis as Employer may assign from
time to time to Officer until the expiration of the term or such time as
Officer's employment with Employer is terminated.
3. TIME DEVOTED AND LOCATION OF OFFICER.
(a) Employer recognizes that, due to a current medical condition,
Officer is unable to perform duties on a full-time basis that would
necessitate extensive business travel. As such, Employer agrees to employ
Officer on a part-time basis. Further, Employer agrees Officer shall not be
required to travel more than one business day per week (a business day is
defined as a full day which could include an overnight stay at the business
destination). Officer agrees that he will diligently endeavor to perform
services contemplated by this Agreement in accordance
with the policies and directives the Employer's Chief Executive Officer
establishes. Notwithstanding any provisions of this Agreement to the contrary,
this Agreement does not prohibit Officer from providing services to or on
behalf of Green Spring Health Services, Inc., its successors, assigns ("Green
Spring"), or affiliates.
(b) Officer may elect to locate his primary business office either
at Green Spring's Corporate Offices located in Columbia, Maryland, or at
Officer's personal residence.
4. COMPENSATION.
(a) BASE SALARY. Employer shall pay Officer a salary in the
amount of Fifty Thousand Dollars (50,000.00) per year which amount shall be
paid semi-monthly, minus required withholdings for federal, state, and local
taxes, and deductions authorized by Officer. Such salary shall be subject to
review and adjustment by Employer's Chief Executive Officer and Board of
Directors from time to time consistent with past practice and consistent with
other officers at his level.
(b) TIME DEVOTED. Officer's travel and other work assignments
associated with the services he performs on behalf of Green Springs shall be
included in determining the part-time travel and duties he performs under
this Agreement.
5. BENEFITS.
(a) BENEFITS. In addition to the compensation provided for in
Section (4), Officer shall be entitled during the term of this Agreement to
such other benefits of employment with Employer as are now or may later be in
effect for part-time Exempt Employees. Additionally, Officer shall be
entitled to participate in Employer's Executive Benefit Plan except as to any
insurance policies which require full-time status for eligibility.
(b) EXPENSES. During the term of this Agreement, Employer shall
reimburse Officer promptly for all reasonable travel, entertainment, parking,
business meeting and similar expenditures in pursuance and furtherance of
Employer's business upon receipt of reasonably supporting documentation as
required by Employer's policies applicable on its Officers generally. Officer
may elect and be reimbursed for first class air travel due to Officer's
medical condition.
6. TERMINATION.
(a) TERMINATION DUE TO RESIGNATION AND TERMINATION WITH CAUSE.
Officer's employment under this Agreement and all of his rights to receive
the salary and benefits, set forth in Section 4 and 5, will cease upon the
occurrence of any of the following events: (i) The effective date of
Officer's resignation, or (ii) termination for cause at the discretion of
Employer under the following circumstances: (A) Officer shall be guilty of
fraud or dishonesty involving his duties on behalf of Employer; (B) Officer
shall have deliberately and intentionally failed or
2
refused to faithfully and diligently perform significant duties assigned to
Officer pursuant to the terms of this Agreement, or otherwise to have breached
any material term under this Agreement; (C) Officer shall have willfully
failed or refused to abide by Employer's policies, rules, procedures or
directives; or (D) Officer shall be convicted of a felony or a misdemeanor
involving moral turpitude.
For the events in subsections (B) and (C), Employer shall give Officer
written notice of such event and an opportunity to cure such situation for a
period of thirty (30) days. Provided, however, such opportunity to cure must
only be given once for the same or related events arising from the same
factual circumstances.
(b) Termination without Cause. Employer and/or Officer may
terminate this Agreement without cause at any time upon the giving of thirty
(30) days prior written notice to the other party. If Employer terminates
this Agreement without cause, Employer may direct Officer to immediately
cease from providing services. If Employer terminates this Agreement without
cause, Employer shall continue to pay Officer the base salary and automobile
allowance compensation provided for pursuant to Section 4 of this Agreement
for the remaining balance of the period of employment set forth in Section 1
or for a period of one (1) year, whichever is greater in length of time upon
the effective termination date. No other compensation or benefits set forth
in Sections 4 and 5 of this Agreement, shall be paid, unless otherwise
provided in the terms of the applicable plan or benefit.
(c) Automatic Termination. This Agreement shall automatically
terminate upon death or permanent disability of Officer. Officer shall be
deemed to be "Disabled" or to suffer from a "Disability" within the meaning
of this Agreement if Officer is deemed to be permanently disabled within the
meaning of any disability insurance policy maintained by Employer for Officer
or, in the absence of such policy, if Officer is, by reason of any medically
determinable physical or mental condition, unable to perform a substantial
portion of his essential duties on a part-time basis pursuant to this
Agreement for a period of six (6) consecutive months. The term "essential
duties" is defined as the ability to consistently perform his assigned
part-time duties, including travel requirements, with or without reasonable
accommodation.
(d) Effect of Termination. Upon termination of this
Agreement, all rights and obligations under this Agreement shall cease except
for the rights and obligations under paragraphs 4 and 5 of this Agreement to
the extent Officer has not been compensated for services performed prior to
termination (the amount to be prorated for the portion of the pay period
prior to termination), and the rights and obligations under paragraphs 6(b),
7, 8 and 9 and all procedural and remedial provisions of this Agreement. A
termination of this Agreement shall constitute a termination of Officer's
employment with Employer for all purposes of this Agreement.
(e) Termination Upon a Change of Control. Officer shall be
entitled to terminate his employment upon a change of control and shall be
entitled to all of the salary,
3
benefits and other rights provided in this Agreement as though the
termination had been initiated by Employer without cause upon the occurrence
of any of the following events: (a) the acquisition after the beginning of
the Term or any renewal term in one or more transactions, of beneficial
ownership (within the meaning of Rule 13d-3(a)(1) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) by any person or
entity (other than Officer or E. Mac Crawford) or any group of person or
entities (other than Officer) who constitute a group (within the meaning of
Section 13d-5 of the Exchange Act) of any securities of Employer such that as
a result of such acquisition such person or entity or group beneficially owns
(within the meaning of Rule 13d-3(a)(1) under the Exchange Act) more than 50%
of Employer's then outstanding voting securities entitled to vote on a
regular basis for a majority of the Board of Directors of Employer; or (b)
the sale of all or substantially all of the assets of Employer (including,
without limitation, by way of merger, consolidation, lease or transfer) in a
transaction (except for a sale-leaseback transaction) where Employer or the
holders of common stock of Employer do not receive (i) voting securities
representing a majority of the voting power entitled to vote on a regular
basis for the Board of Directors of the acquiring entity or of an affiliate
which ocntrols the acquiring entity, or (ii) securities representing a
majority of the equity interest in the acquiring entity or of an affiliate
that controls the acquiring entity, if other than a corporation; provided,
that if Officer becomes entitled to any payments (whether hereunder or
otherwise) by reason of an event described in Internal Revenue Code Section
280G (a "Parachute Event") that would constitute "excess parachute payments"
(as defined in Internal Revenue Code Section 280G) if paid then Officer's
entitlement to such payments shall be reduced by such amount as will cause
none of such payments to constitute excess parachute payments, if, and only
if, the net amount received by Officer by reason of the Parachute Event,
after imposition of all applicable taxes (including taxes under Internal
Revenue Code Section 4099), would be greater after such reduction than if
such reduction were not made. This provision specifically does not apply to
any change in control which may result from the transactions set forth in the
Real Estate Purchase and Sale Agreement, dated January 29, 1997, between
Magellan Health Services, Inc. and Crescent Real Estate Equities Limited
Partnership currently scheduled to close in May 1997.
7. Protection of Confidential Information/Non-Solicitation.
Officer covenants and agrees as follows:
(a) During the period beginning upon the execution of this
Agreement and continuing for a period of two (2) years after the term or
termination for any reason, Officer shall not use or disclose, directly or
indirectly, for any reason whatsoever or in any way, other than at the
direction of Employer during the course of Officer's employment or after
receipt of the prior written consent of Employer, any confidential
information or other information of Employer deemed to be trade secrets of
Employer, including, but not limited to, information with respect to Employer
and its Subsidiaries as follows: the lists of past, current or potential
customers of Employer and it Subsidiaries, all systems, manuals, materials,
processes and other intellectual property of any type used by Employer or its
Subsidiaries in connection with their respective business operations;
financial statements, cost reports and other financial information; contract
4
proposals and bidding information; rate and fee structures; policies and
procedures developed as part of a confidential business plan; and management
systems and procedures, including manuals and supplements (collectively, the
"Confidential Information"). The obligation not to use or disclose any of the
Confidential Information shall not apply, to: (i) any Confidential
Information known by Officer before commencing employment with Employer; or
(ii) Confidential Information which Officer obtains from a third party,
provided, Officer did not himself provide the third party the Confidential
Information by wrongful or inappropriate means; or (iii) any information that
is or becomes public knowledge, through no fault of Officer, and that may be
utilized by the public without any direct or indirect obligation to Employer,
but the termination of the obligation for non-use or nondisclosure by reason
of such information becoming public shall be only from the date such
information becomes public knowledge; or (iv) as may be required by judicial
process or as a matter of law. The above shall be without prejudice to any
rights or remedies of Employer under any state law protecting trade secrets
or information.
(b) During Employer's employment of Officer and for a period of
one (1) year following the termination of Officer's employment with Employer
for any reason, Officer shall not solicit for employment or employ, directly
or indirectly, any Officer of Employer or any of its Subsidiaries who was
employed with Employer or its Subsidiaries within the one (1) year period
immediately prior to such solicitation or employment.
9. Work Made for Hire. Officer agrees that any written program
materials, protocols, research papers and all other writings (the "Work"),
which Officer develops for Employer's use during the term of this Agreement,
will be considered "work made for hire" within the meaning of the United
States Copyright Act, Title 17, United States Code, which vests all copyright
interest in and to the Work in the Employer. In the event, however, that any
court of competent jurisdiction finally declares that the Work is not or was
not a work made for hire as agreed, Officer agrees to assign, convey, and
transfer to the Employer all right, title and interest Officer may presently
have or may have or be deemed to have in and to any such Work and in the
copyright of such work, including but not limited to, all rights of
reproduction, distribution, publication, public performance, public display
and preparation of derivative works, and all rights of ownership and
possession of the original fixation of the Work and any and all copies.
Additionally, Officer agrees to execute any documents necessary for Employer
to record and/or perfect its ownership of the Work and the applicable
copyright. The foregoing will not apply to any writings Officer develop which
are not for Employer's use or are in each instance specifically excluded in
advance of publication from the coverage of the foregoing by Employer's Board
of Directors.
10. Property of Employer. Officer agrees that, upon the termination of
Officer's employment with Employer, Officer will immediately surrender to
Employer all property, equipment, funds, lists, books, records and other
materials of Employer in the possession of or provided to Officer.
5
10. Governing Law. This Agreement and all issues relating to the
validity, interpretation and performance shall be governed by and interpreted
under the laws of the State of Georgia.
11. Remedies. With respect to each and every breach, violation or
threatened breach or violation by Officer or any of the covenants set forth
in this Agreement, Employer, in addition to all other remedies available at
law or in equity, including specific performance of the Agreement's
provisions, shall be entitled to enjoin the commencement or continuance of
such conduct and may apply for entry of an immediate restraining order or
injunction, subject to Section 12 of this Agreement. Employer may pursue any
of the remedies described in this paragraph 11 concurrently or consecutively,
in any order, as to any such breach or violation, and the pursuit of one of
such remedies at any time will not be deemed an election of remedies or
waiver of the rights to pursue any of the other such remedies.
12. Arbitration. Except for an action for injunctive relief, any
disputes or controversies arising under this Agreement shall be settled by
arbitration in Atlanta, Georgia, by a panel of three Arbitrators, in
accordance with the rules of the American Arbitration Association relating to
the arbitration of commercial disputes. The determination and findings of
such arbitrators shall be final and binding on all parties and may be
enforced, if necessary, in the courts of the State of Georgia.
13. Notices. Any notice or request required or permitted to be given
to any party shall be given in writing and shall be personally delivered or
sent to such party by United States mail at the address set forth below or at
such other address as such other address as such party may designate by
written communication to the other party to this Agreement:
To Officer: Paul G. Shoffeitt
2640 Jennings Chapel Road
Woodbine, Maryland 21797
To Employer: Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Attention: Chief Executive Officer
With a copy to: Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Attention: Vice President of
Administrative Services
6
Each notice given in accordance with this paragraph shall be deemed to have
been given, if personally delivered, on the date personally delivered, if
delivered by facsimile transmission, be deemed given when sent and
confirmation of receipt is received, or, if mailed, on the third (3rd) day
following the day on which it is deposited in the United States mail,
certified or registered mail, return receipt requested, with postage prepaid,
to the address last given in accordance with this paragraph.
14. Headings. The headings of the paragraphs of this Agreement have
been inserted for convenience of reference only and shall not be construed or
interpreted to restrict or modify any of the terms or provisions of this
Agreement.
15. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable
and this Agreement and each separate provision shall be construed and enforced
as if such illegal, invalid or unenforceable provision had never comprised a
part of this Agreement, and the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
In addition, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically, as a part of this Agreement, a provision
as similar in terms to such illegal, invalid or unenforceable provision as
may be possible and be legal, valid and enforceable, if such reformation is
allowable under applicable law.
16. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of each party and each party's respective successors,
heirs, personal representatives, assigns and legal representatives.
17. Employer Policies, Regulations and Guidelines for Officers.
Employer may issue policies, rules, regulations, guidelines, procedures or
other informational material, whether in the form of handbooks, memoranda, or
otherwise, relating to its Officers. These materials are general guidelines
for Officer's information and shall not be construed to alter, modify or
amend this Agreement for any purpose whatsoever.
18. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties with respect to the subject matter and
supersedes all prior agreements and understandings, whether written or oral,
relating to the subject matter, unless expressly provided otherwise within
this Agreement. No amendment, modification or termination of this Agreement,
unless expressly provided otherwise, shall be valid unless made in writing
and signed by each of the parties whose rights, duties or obligations would
in any way be affected by an amendment, modification or termination. No
representations, inducements or agreements have been made to induce either
Officer or Employer to enter into this Agreement which are not expressly set
forth within this Agreement. This Agreement is the sole source of rights and
duties as between Employer and Officer relating to the subject matter of this
Agreement.
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 1st day of April, 1997.
PAUL G. SHOFFEITT MAGELLAN HEALTH SERVICES, INC.
"Officer" "Employer"
/s/ Paul G. Shoffeitt /s/ E. Mac Crawford
- ------------------------- ---------------------
E. MAC CRAWFORD
CEO, PRESIDENT, and
CHAIRMAN