EX-10.1 3 g75534ex10-1.txt EMPLOYMENT AGREEMENT EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement is entered into this 10th day of February, 2002, by and between American Healthways, Inc., a Delaware corporation ("Company") and Donald B. Taylor ("Officer"). W I T N E S S E T H I. Employment. In consideration of the mutual promises and agreements contained herein, the Company employs Officer and Officer hereby accepts employment under the terms and conditions hereinafter set forth. II. Duties. Officer is engaged as an Executive Vice President of the Company. During the terms of this Agreement, Officer shall also serve without additional compensation in such other offices of the Company or its subsidiaries or affiliates to which he may be elected or appointed by the Board of Directors or by the Chief Executive Officer of the Company. III. Term. Subject to the terms and conditions set forth herein, Officer shall be employed hereunder for a term beginning on February 10, 2002 and terminating on February 10, 2003 (the "Expiration Date") unless sooner terminated or further extended as hereinafter set forth. The Expiration Date shall be automatically extended for one additional year at the end of the first term of this Agreement and at the end of each year thereafter (so that the term of this Agreement shall be extended automatically for one year and no more), unless the Company notifies Officer in writing (the "Termination Notice") on or before sixty (60) days prior to the Expiration Date that this automatic extension provision is canceled and is of no further force and effect. Officer will continue to be paid full pay and benefits during this sixty (60) day period. Notwithstanding the automatic extension of the Expiration Date or any other provisions herein, this Agreement shall expire on the date that Officer becomes 65 years of age. IV. Compensation. For all duties rendered by Officer, the Company shall pay Officer a salary of $240,000 per year ("Base Salary"), payable in equal monthly installments at the end of each month. All compensation payable hereunder shall be subject to withholding for federal income taxes, FICA and all other applicable federal, state and local withholding requirements. V. Extent of Service. Officer shall devote substantially all of his working time, attention and energies to the business of the Company and shall not during the term of this Agreement take directly or indirectly an active role in any other business activity without the prior written consent of the Chief Executive Officer of the Company; but this Section shall not prevent Officer from making real estate or other investments of a passive nature or from participating without compensation in the activities of a nonprofit charitable organization where such participation does not require a substantial amount of time and does not adversely affect his ability to perform his duties under this -1- Agreement. Officer shall not serve on the board of directors of an entity outside of the Company and its affiliates without the prior approval of the Chief Executive Officer of the Company. VI. Disability. During any period in which Officer fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Officer shall continue to receive his Base Salary until his employment is terminated hereunder. In the case of incapacity due to physical or mental illness resulting in Officer being absent from his duties hereunder on a full time basis for more than ninety (90) consecutive days or for more than one hundred and twenty (120) days in any consecutive six (6) month period or in the case of a determination by the Board of Directors that Officer is permanently and totally disabled from performing his duties hereunder, the Company may terminate Officer's employment hereunder by the delivery of written notice of termination. In the event the Company so terminates Officer under this Section, such termination shall be considered termination without just cause and the Company shall pay Officer such amounts and provide such benefits as are required by Section VIII hereof, reduced by the benefits payable to Officer under the Company's disability insurance policies. For purposes of this Section, the determination of whether Officer is incapacitated due to physical or mental illness and therefore disabled shall be made by the Chief Executive Officer of the Company upon advice of a licensed physician. Any dispute which shall arise between the parties hereto regarding whether the Officer is disabled as contemplated in this Section shall be settled by arbitration as provided in Section XV. In the event of Officer's incapacity due to physical or mental illness, Officer shall be entitled to participate in the Company's health insurance and life insurance programs so long as is permitted under the provisions of these coverages. If Officer is no longer eligible for coverage in the Company's health insurance plan, the Company shall pay the difference between the cost of COBRA medical insurance coverage (available after active eligibility has ended) and Officer's contribution to the plan immediately preceding the disability but in no event shall the Company pay this difference for any period beyond the unexpired term of this Agreement or beyond the period of Officer's eligibility to participate in COBRA health insurance benefits. Following Officer's termination for disability, Officer's benefits for past participation in the Company's bonus, capital accumulation and stock option plans shall be determined in accordance with the provisions of those plans and Officer shall not be eligible for further participation in these plans beyond the date of termination. VII. Termination for Just Cause. For purposes of this Agreement, the Company shall have the right to terminate Officer for "just cause" if, in the good faith opinion of the Chief Executive Officer of the Company, Officer is guilty of (i) intoxication while on duty, (ii) theft or dishonesty, (iii) conviction of a crime involving moral turpitude, or (iv) upon written notice to Officer, there is failure to cure within 30 days any willful and continued neglect or negligence by Officer in the performance of his duties as an officer -2- or (v) upon written notice to Officer, there is failure to cure within 30 days any violation of Company Policy or Code of Conduct. For purposes of this Section VII, the Chief Executive Officer of the Company shall make determination of a violation. In making such determination, the Chief Executive Officer of the Company shall not act unreasonably or arbitrarily. Any dispute which shall arise between the parties hereto regarding whether Officer has committed any act which could give Company "cause" to terminate this Agreement shall be settled by arbitration as provided in Section XV. Upon such termination by the Company, the Company shall have no further obligation to the Officer under this Agreement. VIII. Termination Without Just Cause. Officer's employment under this Agreement may be terminated (i) by the Company at any time "without just cause" by providing Officer with written notice, (ii) by the Company by providing Officer with Termination Notice (as defined in Section III), or (iii) by Officer at any time within twelve (12) months following the occurrence of a Change In Control (as defined in Section XIX herein). Officer's termination date shall be deemed the date Officer receives his written notice of termination or Termination Notice from the Company or the date the Company receives notice from the Officer of his termination in accordance with Section IX herein. In the event of such termination: a. Subject to compliance by Officer with the provisions of Section VIII herein, the Company shall pay Officer monthly from the termination date for a total of one (1) year or the remaining term of this Agreement, whichever is greater. In addition, Officer will be paid any unpaid vacation pay earned by him, up to and including the date of termination, on the termination date. b. Officer shall cease as of the termination date his further participation in the Company's stock option plans, capital accumulation plans, bonus plans, monthly automobile allowance and any other benefit or compensation plan in which Officer participated or was eligible to participate except as set forth in Section VIII(c) below. The Officer's termination date shall be utilized for any vesting provisions of the plans listed above in this subparagraph (b). c. Following termination by the Company without just cause, Officer shall be eligible to obtain COBRA health insurance coverage under the Company's health insurance plan for a period of time generally available to other participants eligible for such coverage. If the Officer elects this COBRA health insurance coverage, Officer's contribution to such coverage will continue at rates contributed by the Company's other officers as may be in effect from time to time while the Officer's COBRA health insurance coverage is in place. While life and disability insurance coverage cannot be provided following the Officer's termination under the terms of these group insurance plans, the Company will pay to Officer the equivalent amount of the Company's contribution to the premiums for these -3- coverage's for the remaining payment term of this contract in an amount equal to the amount contributed by the Company for these coverage's for other officers of the Company in effect while Officer's coverage following termination is in place. If Officer maintains COBRA health coverage with the Company upon new employment following termination from the Company, the full cost of the COBRA health insurance coverage shall be the responsibility of the Officer. In addition, upon new employment following termination from the Company, the Company's reimbursement of life and disability insurance premium contributions will also terminate. d. No payments of Base Salary or of any other type of compensation shall be made to Officer after Officer becomes sixty five (65) years of age. e. All payments hereunder will cease upon the death of Officer. IX. Termination by Officer. Officer may terminate his employment hereunder at any time upon sixty (60) days written notice. Upon such termination by Officer, other than termination in accordance with Section VIII.(iii), the Company shall pay the Officer his Base Salary due through the date on which his employment is terminated at the rate in effect at the time of notice of termination. The Company shall then have no further obligation to Officer under this Agreement. X. Termination Upon Death. If Officer dies during the term of this Agreement, the Company shall pay his Base Salary due through the date of his death at the rate in effect at the time of his death. The Company shall then have no further obligations to Officer or any representative of his estate or his heirs except that Officer's estate or beneficiaries as the case may be shall be paid such amounts as may be payable under the Company's life insurance policies and other plans as they relate to benefits following death then in effect for the benefit of Officer. XI. Restrictive Covenants. (a) Confidential Information. During the term of employment provided hereunder and continuing during the period while any amounts are being paid to Officer pursuant to the terms of the Agreement, and for a period of one (1) year thereafter, Officer agrees not to disclose to any person other than a person to whom disclosure is necessary in connection with the performance of his duties or to any person specifically authorized by the Chief Executive Officer of the Company any material confidential information concerning the Company, including, but not limited to identities of customers and prospective customers identities of individual contacts at customers, information about Company colleagues, models and strategies, contract formats, business plans and related operation methodologies, financial information or measures, data bases, -4- computer programs, treatment protocols, operating procedures and organization structures. (b) Non-Competition. During the term of employment provided hereunder and continuing during the period while any amounts are being paid to Officer pursuant to the terms of the Agreement, and for a period of one (1) year thereafter, Officer will not (a) directly or indirectly own, manage, operate, control or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner, director or otherwise with, or any have financial interest in, or aid or assist anyone else in the conduct of, any business which is in competition with any business conducted by the Company or which Officer knew or had reason to know the Company was actively evaluating for possible entry, provided that ownership of five (5) percent or less of the voting stock of any public corporation shall not constitute a violation hereof. (c) Non-Solicitation. During the term of employment provided for hereunder and continuing during the period while any amounts are being paid to Officer pursuant to the terms of this Agreement, and for a period of one (1) year thereafter, Officer will not (a) directly or indirectly solicit business which could reasonably be expected to conflict with the Company's interest from any entity, organization or person which has contracted with the Company, which has been doing business with the Company, from which the Company was soliciting business at the time of the termination of employment or from which Officer knew or had reason to know that Company was going to solicit business at the time of termination of employment, or (b) employ, solicit for employment, or advise or recommend to any other persons that they employ or solicit for employment, any employee of the Company. (d) Consultation. Officer shall, at the Company's written request, during the period he is receiving any payment from the Company hereunder, cooperate with the Company in concluding any matters in which Officer was involved during the term of his employment and will make herself available for consultation with the Company on other matters otherwise of interest to the Company. The Company agrees that such requests shall be reasonable in number and will consider Officer's time required for other employment and/or employment search. (e) Enforcement. Officer and the Company acknowledge and agree that any of the covenants contained in this Section XI may be specifically enforced through injunctive relief but such right to -5- injunctive relief shall not preclude the Company from other remedies, which may be available to it. (f) Continuing Obligation. Notwithstanding any provision to the contrary or otherwise contained in this Agreement, the Agreement and covenants contained in this Section XI shall not terminate upon Officer's termination of his employment with the Company or upon the termination of this Agreement under any other provision of this Agreement. XII. Vacation. During each year of this Agreement, Officer shall be entitled to vacation in accordance with Company policy in effect from time to time, but in any event not less than 4 weeks per year. XIII. Benefits. In addition to the benefits specifically provided for herein, Officer shall be entitled to participate while employed by the Company in all benefit plans maintained by the Company for officers generally according to the terms of such plans. XIV. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by registered or certified mail to his residence in the case of Officer, or to its principal office in the case of the Company and the date of mailing shall be deemed the date which such notice has been provided. XV. Arbitration. Any dispute between the parties hereto shall be settled by final and binding arbitration in Nashville, Tennessee, in accordance with the then effective rules of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. XVI. Waiver of Breach. The waiver by either party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by the other party. XVII. Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. The Officer acknowledges that the services to be rendered by him are unique and personal, and Officer may not assign any of his rights or delegate any of his duties or obligations under this Agreement. XVIII. Entire Agreement. This instrument contains the entire agreement of the parties and supersedes all other prior agreement, employment contracts and understandings, both written and oral, express or implied with respect to the subject matter of this Agreement and may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The laws of the State of Tennessee shall govern this Agreement. -6- XIX. Headings. The sections, subjects and headings of this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. XX. Definitions. For purposes of this Agreement, a "Change of Control" shall be deemed to mean: (a) a transaction or series of transactions (occurring within 24 months of each other) in which all or any substantial (defined as more than fifty percent (50%) of the assets of American Healthways, Inc.) portion of Company assets have been acquired through a merger, business combination, purchase or similar transaction by any entity or person, other than an entity controlled by American Healthways, Inc. or (b) a transfer or series of transfers (occurring within 24 months of each other) in which securities representing control of American Healthways, Inc. ("control" being defined as greater than fifty percent (50%) of the outstanding voting power of the outstanding securities of American Healthways, Inc.) are acquired by or otherwise are beneficially owned, directly or indirectly, by any corporation, person or "group" (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934). IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first written. /s/ Donald B. Taylor ------------------------------------------- Donald B. Taylor AMERICAN HEALTHWAYS, INC. By: /s/ Thomas G. Cigarran --------------------------------------- Title: Chairman and Chief Executive Officer -7-