CHAIRMAN'S AGREEMENT

Exhibit 10.1

 

CHAIRMAN’S AGREEMENT

 

This Chairman’s Agreement (this “Agreement”) is made and entered into as of the 28th day of November, 2005 (the “Effective Date”), between Concentra Inc., a Delaware corporation (the “Company”), and Norman C. Payson, M.D. (“Dr. Payson”).

 

WITNESSETH:

 

WHEREAS , it is the desire of the Board of Directors of the Company to assure itself of the services of Dr. Payson by engaging Dr. Payson to serve as the non-executive Chairman of the Board of Directors of the Company as set forth herein; and

 

WHEREAS , Dr. Payson is desirous of committing himself to serve the Company on the terms set forth herein.

 

NOW, THEREFORE , in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto agree as follows:

 

1. Engagement and Term . The Company hereby engages Dr. Payson to serve as the non-executive Chairman (“Chairman”) of the Board of Directors of the Company (the “Board”), and Dr. Payson hereby agrees to accept such engagement, on the terms and conditions set forth herein, for the period commencing on the Effective Date and expiring as of 11:59 p.m. on the first anniversary of the Effective Date (unless sooner terminated as hereinafter set forth) (the “Term”); provided , however , that commencing on such anniversary date, and each anniversary of the date hereof thereafter, the Term of this Agreement shall automatically be renewed for one (1) additional year unless at least sixty (60) days prior to any such anniversary date, the Company or Dr. Payson shall have given notice of nonrenewal.

 

2. Duties and Restrictions .

 

(a) Duties . Dr. Payson shall serve on the Board as its Chairman, with all such powers as may be set forth in the Company’s Bylaws with respect to, and/or are reasonably incident to, such office. Dr. Payson’s responsibilities as Chairman will consist of (i) overseeing the Company’s (and its operating divisions’) strategic direction, (ii) developing the Company’s senior management, including providing guidance and advice to the President and Chief Executive Officer and other members of senior management, (iii) assisting with investor relations, (iv) organizing meetings of the Board of Directors; and (v) such other responsibilities as are incidental to the foregoing. During the Term, Dr. Payson shall have direct access to the senior management of the Company, including senior management of the Company’s operating divisions. It is anticipated that Dr. Payson’s duties will require his business time and attention for an average of approximately eight (8) days per month during the entire Term, it being understood that the number of days will vary from month to month. Notwithstanding the foregoing, it is anticipated that Dr. Payson’s duties will require his business time and attention for an average of approximately ten (10) days per month for the first six (6) months after the Effective Date. Subject to Section 2(b), Dr. Payson may engage in other business and charitable activities,

 

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including, without limitation business and charitable activities in the health care and health care financing industries, to the extent that such activities do not prevent Dr. Payson from performing his duties pursuant to this Agreement and do not otherwise cause Dr. Payson to violate his fiduciary duties as an officer and/or director of the Company.

 

(b) Noncompetition . Dr. Payson agrees that during the Term he will not (i) solicit the employment or engagement of, employ or engage, or endeavor to entice away from the Company or its subsidiaries or affiliates, any person who is an employee of the Company or any of its subsidiaries or affiliates, or (ii) be employed by, associated with, or have any interest in, directly or indirectly (whether as principal, director, officer, employee, consultant, partner, stockholder, member, trustee, manager, or otherwise), any occupational healthcare company, or healthcare network services company that primarily is in the business of providing review (including fee negotiation), repricing, and reduction of medical bills, which has a principal line of business that is directly competitive with the Company or its subsidiaries or affiliates in any geographical area in which the Company or its subsidiaries or affiliates engage in business. This noncompetition provision does not preclude Dr. Payson from being employed by or associated with or having any interest, directly or indirectly (whether as a principal, director, officer, employee, consultant, partner, stockholder, member trustee, manager or otherwise), in the health insurance or health plan “payor” business regardless of the benefit designs or cost containment techniques utilized by that payor or payors. Further, notwithstanding the foregoing, Dr. Payson shall not be prohibited from owning five percent (5%) or less of the outstanding equity securities of any entity whose equity securities are listed on a national securities exchange or publicly traded in any over-the-counter market.

 

(c) Confidentiality . Dr. Payson agrees that he shall not, directly or indirectly, at any time during the Term or following the termination of this Agreement with the Company (other than in connection with his performance of services to the Company), reveal, divulge, or make known to any person or entity, or use for his personal benefit (including, without limitation, for the purpose of soliciting business, whether or not competitive with any business of the Company or any of its subsidiaries or affiliates), any nonpublic, proprietary, or confidential information (“Confidential Information”) acquired during the course of his engagement hereunder with regard to the financial, business, or other affairs of the Company or any of its subsidiaries or affiliates (including, without limitation, any list or record of persons or entities with which the Company or any of its subsidiaries or affiliates has any dealings). Confidential Information shall not include (without limitation) (i) material then in the public domain, (ii) information of a type not considered confidential by persons engaged in the same business or a similar business to that conducted by the Company, and (iii) material that Dr. Payson discloses under the following circumstances: (A) in the performance of his duties and responsibilities hereunder, (B) reasonably necessary or appropriate disclosure to an employee of the Company or to representatives or agents of the Company (such as independent public accountants and legal counsel); (C) at the express direction of any authorized governmental entity; (D) pursuant to a subpoena or other legal process; (E) as otherwise required by law or the rules, regulations, or orders of any applicable regulatory body; (F) as otherwise necessary or appropriate to be disclosed in connection with the prosecution or the defense of any legal action or similar

 

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proceeding; or (G) disclosure to Dr. Payson’s legal counsel or other advisers on a confidential basis.

 

3. Compensation, Expenses, and Benefits .

 

(a) Compensation . In consideration of Dr. Payson’s performance of services pursuant to this Agreement, the Company shall compensate Dr. Payson by granting him (i) non-qualified options to acquire shares of the Company’s common stock, par value $.01 per share (“Common Stock”), (ii) restricted shares of Common Stock, and (iii) the right to purchase shares of Common Stock, all as more fully described on Exhibit A hereto. Any additional compensation by the Company to Dr. Payson for such services shall be in the sole discretion of the Compensation Committee of the Company’s Board of Directors. The Company makes no representation or warranty with respect to the tax consequences of any compensatory awards granted to Dr. Payson. Dr. Payson is responsible for the payment, if applicable, of (X) any and all local, state, and federal taxes (including but not limited to any taxes imposed pursuant to section 409A of the Internal Revenue Code of 1986, as amended), (Y) estimated payment obligations, and (Z) any penalties or assessments arising from such compensatory awards. It is the Company’s good faith belief that, as of the Effective Date, the fair market value of the Common Stock is not greater than $18 per share.

 

(b) Expenses . Dr. Payson shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him during the Term (in accordance with the policies and procedures established by the Board of Directors for its senior executive officers) in performing services hereunder, provided that Dr. Payson properly accounts therefor in accordance with Company policy. Without limiting the generality of the foregoing, the Company shall reimburse Dr. Payson for his use of private aircraft for Company business during the Term, up to a maximum of Five Hundred Thousand Dollars ($500,000) during each 12-month period commencing with the Effective Date.

 

(c) Other Benefits . Dr. Payson shall be entitled to participate in or receive benefits under any employee benefit plan or other arrangement made available by the Company now or in the future to non-employee members of the Board, subject to and on a basis consistent with the eligibility requirements and other terms, conditions, and overall administration of such plan or arrangement. The Company shall not make any changes in any such employee benefit plans or other arrangements in effect on the date hereof or subsequently in effect in which Dr. Payson currently or in the future participates that would adversely affect Dr. Payson’s rights or benefits thereunder, unless such change is applicable to all non-employee members of the Company’s Board of Directors and does not result in a proportionately greater reduction in the rights of or benefits to Dr. Payson as compared with any non-employee member of the Company’s Board of Directors.

 

4. Indemnification . The Company and Dr. Payson shall enter into the Company’s standard Indemnification Agreement for directors and executive officers of the Company, substantially in the form of Exhibit B hereto.

 

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5. Office Location . Dr. Payson shall primarily perform his duties and responsibilities hereunder based out of his personal office and/or Company’s principal executive office located at 5080 Spectrum Drive, Addison, Texas, except for reasonable required travel on the Company’s business.

 

6. Termination . This Agreement may be terminated by the Company or Dr. Payson, as applicable, without any breach of this Agreement, only under the following circumstances and subject to the provisions of Section 8.

 

(a) Death . This Agreement shall terminate upon Dr. Payson’s death.

 

(b) Disability . If, as a result of Dr. Payson’s incapacity due to physical or mental illness or injury, Dr. Payson shall have been unable, with reasonable accommodation, to perform the essential functions of his duties and responsibilities hereunder or shall otherwise become disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, for one hundred eighty (180) consecutive calendar days (“Disabled”), and within thirty (30) days after written notice of termination is given (which may occur before or after the end of such one hundred eighty (180) day period) Dr. Payson shall not have returned to the performance of his material duties and responsibilities hereunder, the Company may terminate this Agreement. Dr. Payson may also terminate this Agreement in the event that he becomes Disabled.

 

(c) Termination by the Company for Cause . Subject to the provisions of Section 8(c), the Company may terminate this Agreement upon Dr. Payson’s removal as a member of the Company’s Board of Directors by the Company’s stockholders in accordance with the Company’s Bylaws either with or without “Cause.” For purposes of this Agreement (but subject to Section 8(c)), such removal shall be deemed to have been for “Cause” only if it occurs upon:

 

(i) Dr. Payson’s willful or intentional failure to perform his material duties and responsibilities hereunder (other than any such failure resulting from Dr. Payson’s incapacity due to physical or mental illness or any such failure after the issuance of a Notice of Termination for Good Reason (as hereinafter defined) by Dr. Payson);

 

(ii) Dr. Payson’s commission of an act of dishonesty or fraud of a material nature in connection with the performance of his duties hereunder, or his willful or intentional misconduct of a material nature in connection with the performance of his duties hereunder; or

 

(iii) Dr. Payson’s conviction of, or entering of a plea of nolo contendere with respect to, a felony.

 

(d) Termination by Dr. Payson for Good Reason . Subject to the provisions of Section 8(d), and at his option, Dr. Payson may terminate his employment hereunder for Good Reason. For purposes of this Agreement, the termination of this Agreement by Dr. Payson

 

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because of the occurrence of any one or more of the following events shall be deemed to have occurred for “Good Reason”:

 

(i) a material adverse change or diminution in the nature or scope of Dr. Payson’s authorities, status, powers, functions, duties, or responsibilities from those set forth in Section 2 of this Agreement;

 

(ii) any removal by the Company of Dr. Payson from, or any failure to appoint or reelect Dr. Payson to, the position indicated in Section 1 of this Agreement except in connection with the Company’s termination of this Agreement for Cause or Disability;

 

(iii) a failure by the Company to comply with any other material term or provision hereof or of any other written agreement between Dr. Payson and the Company;

 

(iv) delivery by the Company of notice of non-renewal pursuant to Section 1 of this Agreement; or

 

(v) the occurrence of a Change in Control, as defined in Exhibit C hereto.

 

(e) Termination by Dr. Payson Without Good Reason . Dr. Payson may terminate this Agreement at any time, without Good Reason, upon thirty (30) days prior written notice to the Company.

 

7. Effect of Expiration or Termination . Upon the expiration or earlier termination of this Agreement, Dr. Payson shall be deemed to have resigned as Chairman and from all other officerships and directorships he then holds with the Company and/or any of its subsidiaries or affiliates.

 

8. Other Provisions Relating to Termination .

 

(a) Notice of Termination . Any termination of this Agreement by the Company or by Dr. Payson (other than termination because of the death of Dr. Payson) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of this Agreement under the provision so indicated.

 

(b) Date of Termination . For purposes of this Agreement, “Date of Termination” shall mean: (1) if this Agreement is terminated by Dr. Payson’s death, the date of his death; (2) if this Agreement is terminated because of a Disability pursuant to Section 6(b), then thirty (30) days after Notice of Termination is given (provided that Dr. Payson shall not have returned to the performance of his duties during such thirty (30) day period); (3) if this Agreement is terminated by Dr. Payson for Good Reason, then, subject to Section 8(d), the date

 

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specified in the Notice of Termination; (4) if either party timely gives notice of nonrenewal pursuant to Section 1, the date upon which the Term expires; and (5) if this Agreement is terminated by Dr. Payson pursuant to Section 6(e) or by the Company without Cause pursuant to Section 6(c), then thirty (30) days after Notice of Termination is given.

 

(c) Cause . In the case of any potential termination of this Agreement for Cause, the Company will give Dr. Payson a Notice of Termination describing in reasonable detail, the facts or circumstances giving rise to such termination (and, if applicable, the action required to cure same) and will permit Dr. Payson thirty (30) days to cure such facts or circumstances. Cause for termination will not be deemed to exist until the expiration of the foregoing cure period. If after thirty (30) days following Dr. Payson’s receipt of a Notice of Termination for Cause, Dr. Payson has not cured the facts or circumstances giving rise to termination for Cause, then a subsequent termination pursuant to Section 6(c) may be deemed to be a termination for Cause. Further, no termination shall be treated as a termination for Cause unless the Board has adopted a resolution by the affirmative vote of not less than two-thirds (2/3) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Dr. Payson and an opportunity for Dr. Payson, together with the Dr. Payson ‘s counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i), (ii) or (iii) of the definition of Section 6(c), and specifying the particulars thereof in detail. Any such determination by the Board shall not be given deference in any subsequent proceeding challenging the existence of Cause.

 

(d) Good Reason . Upon the occurrence of an event described in the definition of “Good Reason” in Section 6(d), Dr. Payson may terminate this Agreement for Good Reason by giving a Notice of Termination to the Company to that effect. If the effect of the occurrence of the event giving rise to Good Reason under Section 6(d) may be cured, the Company shall have the opportunity to cure any such effect for a period of thirty (30) days following receipt of Dr. Payson’s Notice of Termination. If the Company fails to cure any such effect, the termination for Good Reason shall become effective on the date specified in Dr. Payson’s Notice of Termination. If Dr. Payson does not give such Notice of Termination to the Company, then this Agreement will remain in effect; provided , however , that the failure of Dr. Payson to terminate this Agreement for Good Reason shall not be deemed a waiver of Dr. Payson’s right to terminate this Agreement for Good Reason, with respect to a prior or subsequent event.

 

9. Independent Contractor . In the performance of services hereunder, Dr. Payson is serving as a director of and not an employee of the Company. This Agreement in no way creates, nor shall Dr. Payson’s performance of services hereunder be interpreted as creating, an employment relationship between Dr. Payson and the Company.

 

10. Successors; Binding Agreement . This Agreement shall be binding upon, and inure to the benefit of, the Company, Dr. Payson, and their respective successors, assigns, personal and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. The Company hereby represents, as a material inducement for Dr.

 

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Payson to execute this Agreement, that the Board has authorized the execution of this Agreement in this form.

 

11. Notice . For purposes of this Agreement, all notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered personally, (b) sent by facsimile or similar electronic device and confirmed, (c) delivered by overnight express, or (d) if sent by any other means, upon receipt. Notices and all other communications provided for in this Agreement shall be addressed as follows:

 

 

or to such other address as either party may have furnished to the other in writing in accordance herewith.

 

12. Miscellaneous . No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a written instrument signed by Dr. Payson and the Company. No waiver by either party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Delaware, excluding any choice-of-law provisions thereof.

 

13. Dispute Resolution . Any controversy or claim arising out of or related to this Agreement or Dr. Payson’s service to the Company shall be settled by binding arbitration in Boston, Massachusetts, before a single arbitrator administered by the American Arbitration Association, and the arbitrator’s written decision shall include findings of fact and conclusions of law and may be entered in any court having jurisdiction thereof. The arbitrator shall be chosen jointly by Dr. Payson and the Company or, if no arbitrator is acceptable to both parties, shall be chosen jointly by an arbitrator nominated by each such party.

 

14. Validity . The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

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15. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same agreement.

 

16. Entire Agreement . No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement, including, without limitation, the Exhibits hereto). This Agreement, including the Exhibits hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes in all respects any and all prior agreements, understandings, or arrangements, written or oral, between the parties, which prior agreements, understanding, and arrangements, if any, are hereby superseded, cancelled, and of no further force or effect.

 

IN WITNESS WHEREOF , the parties have executed this Agreement as of the date and year first above written.

 

 

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EXHIBIT A

DESCRIPTION OF EQUITY COMPENSATION

 

Subject only to the execution and delivery of a definitive Option Award Agreement, Restricted Stock Award Agreement, and Stock Purchase Agreement incorporating the following terms:

 

1.	Stock Options and Restricted Stock .

 

(a)

Stock Options . Pursuant to and subject to the terms and conditions of the Concentra Inc. 2005 Stock Option and Restricted Stock Purchase Plan for Non-Executive Chairman (the “Incentive Plan”), the Company will award to Dr. Payson, on the Effective Date, a ten-year non-qualified option to acquire 603,205 shares of Common Stock (the “Option”) at an exercise price of $18.00 per share. Subject to Dr. Payson’s continued service pursuant to the Chairman’s Agreement and except as otherwise provided in Section 1(c) or Section 1(d), the Option will vest and become exercisable as to 1/12 th of the total number of shares subject to the Option on February 28, 2006, and with respect to an additional 1/12 th of such shares on each three month anniversary subsequent to February 28, 2006 ( i.e. , May 28, 2006, August 28, 2006, etc.) until the Option is completely vested and exercisable. To the extent vested, the Option shall remain exercisable for the remainder of its ten-year term. The Option shall be further subject to the terms of Section 1(e) hereof, and the terms of the Option shall permit Dr. Payson to exercise an applicable portion of the Option (to the extent vested) by delivering to the Company a number of unencumbered shares of Common Stock then held by Dr. Payson for at least six (6) months, and otherwise qualifying as mature shares pursuant to then-applicable accounting standards, having an aggregate fair market value as of the applicable exercise date equal to the exercise price of such Option. Dr. Payson shall also have the right to sell to the Company a number of shares of Common Stock then held by Dr. Payson for at least six (6) months, and otherwise qualifying as mature shares pursuant to then-applicable accounting standards, having a fair market value equal to the amount of income and other taxes payable by Dr. Payson in connection with such exercise.

 

(b)

Initial Stock Award and Restricted Stock Award . Pursuant to and subject to the terms and conditions of the Incentive Plan:

 

(i)

Initial Stock Award . The Company will award to Dr. Payson on the Effective Date 138,890 fully-vested shares of Common Stock.

 

(ii)

Restricted Stock Award . The Company will award to Dr. Payson, on the Effective Date, 402,137 restricted shares of Common Stock (the “Restricted Stock”) under the Incentive Plan. Subject to Dr. Payson’s continued service pursuant to the Chairman’s Agreement and except as otherwise provided in Section 1(c) or Section 1(d), the Restricted Stock will vest and become free from forfeiture restrictions as to 1/12 th of the total number of shares of Restricted Stock on February 28, 2006, and with

 

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respect to an additional 1/12 th of such shares on each three month anniversary subsequent to February 28, 2006 ( i.e. , May 28, 2006, August 28, 2006, etc.) until the Restricted Stock is completely vested. On each vesting date, Dr. Payson may sell to the Company a number of unencumbered shares of Common Stock then held by Dr. Payson for at least six (6) months, and otherwise qualifying as mature shares pursuant to then-applicable accounting standards, having a fair market value equal to the amount of income and other taxes payable by Dr. Payson in connection with such vesting. The Restricted Stock shall be further subject to the terms of Section 1(e) hereof.

 

(c)

Change in Control, Partial Divestiture, and Purchase Option Exercise Vesting; Lock-Up .

 

(i)

The Option shall become immediately and fully vested and exercisable for the remainder of its term, and the Restricted Stock shall become immediately and fully vested and free from forfeiture restrictions, (A) immediately prior to the occurrence during the Term of the Chairman’s Agreement of a Change in Control (as defined on Exhibit C to the Chairman’s Agreement) or an Initial Public Offering, or (B) upon the Company’s sale during the Term of the Chairman’s Agreement of all of substantially all of one or more of its operating divisions representing in the aggregate twenty-five percent (25%) or more or the Company’s Consolidated EBITDA. “Initial Public Offering” shall mean an underwritten public offering of the Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended.

 

(ii)

In the event that Dr. Payson exercises the Purchase Option (as defined in Section 2(b) below) in full, the Option shall vest and be exercisable for the remainder of its term, and the Restricted Stock shall vest and be free of forfeiture restrictions, as follows: 1/8 th of the total number of shares subject to the Option and 1/8 th of the total number of shares of Restricted Stock on February 28 th , 2006,; an additional 1/8 th of such shares on each three month anniversary subsequent to February 28th, 2006 (i.e., May 28th, 2006; August 28th, 2006; etc.) until the Option is completely vested and exercisable and the Restricted Stock is completely vested and free from forfeiture restrictions. If applicable, the vesting schedule described in this clause (ii) shall be applied retroactively to the Effective Date.

 

(iii)

Dr. Payson agrees to be bound to a customary lock-up provision for up to 180 days if required by the Company’s underwriters in connection with an initial public offering of the Company’s Common Stock

 

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(d)

Effect of Termination of Chairman’s Agreement .

 

(i)

In the event of