**Exhibit 10.1**

 

**SEPARATION AGREEMENT**

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This Separation Agreement (the “Agreement”)is entered into between CareScience, Inc. Corporation, a Pennsylvaniacorporation (“Employer”) and David J. Brailer, M.D., Ph.D. (“Employee”) as ofthis 24th day of June, 2003.

 

WHEREAS, Employee is employed by Employer asa salaried executive holding the title of Employer’s Chief Executive Officer;

 

WHEREAS, Employee is a member of and Chairmanof the board of directors of Employer and a shareholder of Employer;

 

WHEREAS, Employee is currently employed byEmployer pursuant to an Employment Agreement entered into between CareManagement Science Corporation and Employee dated as of December 23, 1998,which had attached to it a Non-Competition Agreement (collectively the “EmploymentAgreement”);

 

WHEREAS, Employee and Employer entered into aPurchase Agreement and a Note and Pledge Agreement, both dated as ofJune 15, 2001, under which Employee purchased 21,605 shares of Employerstock;

 

WHEREAS, Employer and Employee wish to alter thenature of their relationship and have reached an agreement under which Employeewill cease his employment with Employer and the parties will release claimsagainst one another;

 

NOW, THEREFORE, Employee and Employer, eachintending to be legally bound hereby, agree as follows:

 

# **1.     SeparationDate.**  Upondelivery to Employee of this Agreement, executed on behalf of Employer on thedate hereof (the “Separation Date”), Employee will resign as an employee and asChief Executive Officer of Employer and shall resign from Employer’s board ofdirectors and as Chairman of the board of directors effective upon theexpiration of the seven (7) day period described in Section 12 below andEmployee’s receipt of the severance payment described in Section 2(a) below (thedate on which such seven day period expires and such payment is received ishereinafter referred to as the “Effective Date”).  Employee shall receive his regular compensation and businessexpense reimbursements through June 16, 2003 and his regular benefitsthrough June 30, 2003.  Payment ofEmployee’s regular compensation through the Separation Date shall be made onthe earlier to occur of (i) Employer’s regularly scheduled  payroll date for its executive employees and(ii) the Effective Date.  Upon the EffectiveDate, the Employment Agreement shall be terminated in all respects andEmployee’s rights to wage continuation and benefits entitlements thereaftershall be governed solely by this Agreement. Employee’s resignation letter will state that he is resigning due to“differences over the strategic direction of the Company.”  Employer will issue a press releaseannouncing Employee’s resignation substantially in the form attached as ExhibitA hereto.  Other than through thepress release attached as Exhibit A, or in Employer’s public filingswith the Securities and Exchange

 

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Commission (in which thisAgreement may be attached as an exhibit and which may include a fair andaccurate summary thereof without any embellishing comments or other remarks)neither party shall communicate or disclose the terms of this Agreement  to any persons except as described in suchpress release or public filings, and except to members of Employee’s immediatefamily, employees who have a need to know and directors of Employer, a party’sattorney, accountant and/or tax consultant, state and federal tax authoritiesor other persons as may be required by court order, by the proper inquiry of agovernmental agency, or any other applicable law, including securities laws, oras necessary or advisable to seek to enforce or challenge the terms of thisAgreement.

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# **2.     TransitionBenefits**. Employer will provide Employee with the following benefits for the timeperiods described below:

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## **a.    **SeverancePayment.  On the business dayfollowing the Effective Date, Employer shall pay to Employee by wire transferto an account designated by Employee a severance payment in a single sum of twohundred and ninety-five thousand dollars ($295,000), subject only to thedeductions and withholdings as required by law, including with respect toforgiveness of the Note and Pledge Agreement as described in Section 4 belowand without any deductions for 401(k) or FSA contributions.  The cost, if any, of the wire transfer to bepaid by Employer.

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## **b.    **HealthCare and Dental Coverage.  Upontermination of Employee’s health and dental benefits, Employee will be eligibleto extend the health care and dental coverage in effect at the time inaccordance with the provisions of COBRA, 29 U.S.C. §§ 1161 *et seq*.

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## **c.    **BusinessExpenses.  Employee will continuewith his scheduled activities on behalf of Employer through July 3, 2003and he will be reimbursed for his regular business expenses incurred throughthat date and Employer will pay his business related charges on his corporateAmerican Express card through July 3, 2003 or the date of cancellation iflater.  Employee will turn his corporateAmerican Express card into Employer immediately after July 3, 2003 andEmployer will promptly pay the remaining balance on and close this account toensure that the account is closed while in good standing.

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## **d.    **MiscellaneousTransition Matters.  Employer willarrange to have Employee’s personal items from his office (e.g. books, personalphotographs, office furniture, files etc.) packed and delivered to a singleaddress in the United States as designated by Employee, insured for a minimumvalue, all at Employer’s expense, within seven (7) days of the Effective Date,other than three (3) wall hangings and a side chair with the coat of arms ofthe University of Pennsylvania in Employee’s office (collectively, the“Separate Items”).  Employee agrees thatwithin fourteen (14) days of the Effective Date, Employee will or will arrangefor a third party to pick up and remove the Separate Items.  Until pick-up of the Separate Items,Employer agrees to store the Separate Items in a location on its premises safeand secure from damage (without specific insurance on the Separate Items) andupon prior reasonable notice of the schedule of the pick-up, Employer willprovide access to Employee or his designated third party upon arrival to pickup and remove the Separate Items.  Theownership of the personal

 

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computer and related equipmentthat has been assigned to Employee will be transferred automatically toEmployee upon the execution of this Agreement. Employer will arrange to terminate Employee’s current business cellphone (215-287-3550) after July 3, 2003 with Employer being responsiblefor costs through July 3, 2003 and any residual phone contractobligations.  Employer will arrange tohave a forwarding message from all calls to 215-287-3550 to a number providedby Employee through September 30, 2003. Employer will arrange so that Employee’s telephone at Employer’s offices(215-689-2201) will contain a message through December 31, 2003 providingEmployee’s new contact information. Employer will promptly forward to Employee all letters, calls, e-mailsand other communications intended for Employee, without limitation, throughDecember 31, 2003, including requests for new contact information forEmployee.  To the extent any personsthat so contact Employee after such forwarding by Employer of suchcommunications intended for Employee make requests for or inquiries regardingservices rendered or to be rendered by Employer, Employee will promptly referback to Employer all such communications.

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# **3.     Accruedand Unused Vacation**.  It is agreed that the severance payment described in Section 2(a)hereof includes payment for all of Employee’s accrued and unused vacation time.

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# **4.     PurchaseAgreement and Note and Pledge Agreement**. On theEffective Date, Employer will forgive any and all amounts due to Employer underthe Purchase Agreement and Note and Pledge Agreement effective on theSeparation Date and promptly, but in no event more than two (2) business daysfollowing the Effective Date, deliver to Employee certificates representingfree and clear ownership of and marketable title to the shares purchased underthe Purchase Agreement (subject to the restrictive legend required by theSecurities Act of 1933 as amended and the applicable securities laws).

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# **5.     ConsultingArrangement**. Effective immediately after the expiration of the seven (7) dayrevocation period described in Section 12 hereof, and continuing throughDecember 31, 2003, Employee will serve as a consultant to Employer for upto thirty-two (32) hours per month [amount of hours intended to cover foureight-hour working days during the month] with regard to developing potentialbusiness relationships between Employer and any for-profit hospital systemcontaining more than 75 hospitals and Employer and potential purchasers of theCare Data Exchange.  For his consultingactivities, Employer shall pay Employee on a monthly basis on the first of eachmonth (except that the June and July payments shall be made at thesame time as the severance payment provided for in Section 2(a) above) the followingamounts: June -$5,000; July - $15,000; August - $10,000;September - $10,000; October - $10,000; November - $10,000; andDecember - $10,000.  In addition,Employer shall pay Employee five percent (5%) of the total contract value foreach contract that is signed by Employer with any for-profit hospital systemcontaining more than 75 hospitals or for any Care Data Exchange services ortechnologies during the time (but not for any contracts signed after the time)that Employee is serving as a consultant to Employer.  These payments will be made in multiple payments within ten (10)days of Employer’s receipt of the applicable payment from the relevant customerfollowing contract signing.  Inaddition, Employer will reimburse Employee for his business expenses incurredin connection with his consulting services (e.g. travel, cell phone, otherusual and reasonable expenses) within ten (10) business days of theirsubmission to Employer.  Employer alsowill maintain Employee’s current e-mail address at Employer through

 

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the end of the consultingarrangement.  Employer need not providean office or a secretarial assistant to Employee during the consultingarrangement.  Employer may terminate theconsulting arrangement at any time upon ten (10) days written notice toEmployee but will pay the full amount of all consulting fees throughDecember immediately upon any such termination, except that no futureconsulting fees will be due if Employer terminates the consulting arrangementduring October, November or December. Employee may terminate the consulting arrangement at any time upon ten(10) days written notice to Employer and the monthly payments will end upon anysuch termination by Employee.  To theextent Employee has not previously provided the ten (10) days written notice oftermination as described above prior to beginning full-time employment withanother employer, Employer’s obligation to pay future consulting fees andEmployee’s obligation to provide consulting services will immediately andautomatically terminate upon Employee’s commencement of full-time employmentwith another employer.

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# **6.     AgreementNot To Compete**. Employee hereby agrees that during the consulting arrangement describedabove and for so long as Employer continues to make the consulting payments,Employee will not engage in competition with Employer.  For purposes of this paragraph, it is agreedthat the business of Employer is “the commercial sales and delivery of productsthat are used to measure the quality and efficiency of inpatient carethroughout the United States or the exchange or sharing of clinical datathroughout the world.”  Notwithstandingany restriction contained in the Agreement, it is understood and agreed thatEmployee may continue activities in the nature of the activities permitted byparagraph 1(b) of the Employment Agreement.

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# **7.     AgreementNot to Interfere with Customers**.  Employee hereby agrees that from theSeparation Date and through May 31, 2004, Employee will not request or cause any customer with whom Employer has abusiness relationship to cancel or terminate any such business relationshipwith Employer.  Notwithstanding theforegoing, Employer acknowledges that some customers may terminate theirbusiness relationship with Employer due to Employee’s resignation, or afterhaving had a conversation with Employee, even though Employee fully complieswith his obligations under this Agreement.

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# **8.     AgreementNot to Solicit Employees**.  Employee hereby agrees that from the SeparationDate through May 31, 2004, he will not solicit, hire, offer to hire,persuade or induce any person who is an employee of Employer to discontinuehis/her relationship with Employer.

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# **9.     Returnof Corporate Property**.  Employee acknowledges and agrees that, on or before theSeparation Date and except as stated above, he will return to Employer ordestroy all corporate property and copies thereof in his possession or underhis custody or control.  Employee willdeliver to Employer any entry pass cards or keys to Employer’s facilitieswithin two (2) business days of the Effective Date, by delivering them inperson or via overnight delivery to Robb Tretter, the Employer’s GeneralCounsel, at the Employer’s principal address.

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# **10.  GeneralRelease of Claims**.  Employee for himself and his respective administrators,executors, agents, beneficiaries and assigns, and Employer (as defined below)do waive, release and forever discharge each other of and from any and all“Claims” (as defined below).  Both agreenot to file a lawsuit to assert any such Claim.  This release covers all Claims

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arising from the beginning oftime up to and including the date of this Agreement.  This release does not cover Claims relating to the validity orenforcement of this Agreement or for Employee’s accrued benefits due fromEmployer under Company sponsored benefit plans, including, without limitation,his rights under Employer’s 401(k) plan. Nor is Employee releasing any claim of ownership of the shares ofcapital stock of Employer that he owns as of the date hereof.  Further, Employee is not releasing any claimfor indemnity or legal defense available to him due to his service as a boardmember, officer, employee or director of Employer as provided by Employer’sarticles of incorporation, bylaws, insurance policies or general corporate lawand the parties expressly incorporate by reference paragraph 10 of theEmployment Agreement, nor does this release cover claims that either party may haveagainst the other based on intentional misconduct or fraud, though each partyrepresents that they are not aware of any such claims as of the date of thisAgreement (collectively, all such claims that Employee is retaining arehereinafter referred to as “Employee’s Retained Rights” and all such claimsthat Employer is retaining are hereinafter referred to as “Employer’s RetainedRights”).

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The following provisions further explain thisgeneral release and covenant not to sue:

 

## **a.    **Definitionof “Claims”.  “Claims” includewithout limitation all actions or demands of any kind that Employee or Employernow have, or may have or claim to have in the future based on actions throughthe date of this Agreement.  Morespecifically, Claims include rights, causes of action, damages, penalties,losses, attorneys’ fees, costs, expenses, obligations, agreements, judgmentsand all other liabilities of any kind or description whatsoever, either in lawor in equity, whether known or unknown, suspected or unsuspected.

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The nature of Claims covered by this releaseand covenant not to sue includes without limitation all actions or demands inany way based on Employee’s employment, or service as an officer or boardmember with Employer, the terms and conditions of such employment or Employee’sseparation from employment (except as included in Employee’s Retained Rights orEmployer’s Retained Rights).  Morespecifically, all of the following are among the types of Claims which will bebarred by this release and covenant not to sue (except as included inEmployee’s Retained Rights and Employer’s Retained Rights):

 

•                                          contractclaims (whether express or implied);

 

•                                          tortclaims, such as for defamation or emotional distress;

 

•                                          claimsunder federal, state and municipal laws, regulations, ordinance or courtdecisions of any kind;

 

•                                          claimsof discrimination, harassment or retaliation, whether based on race, color,religion, gender, sex, age, sexual orientation, handicap and/or disability,national origin or any other legally protected class;

 

•                                          claimsunder the Age Discrimination in Employment Act, Title VII of the Civil RightsAct of 1964, as amended, the Americans with Disabilities Act and similar statestatutes and municipal ordinances;

 

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•                                          claimsunder the Employee Retirement Income Security Act, the Fair Labor StandardsAct, state wage payment laws and state wage and hour laws;

 

•                                          claimsunder the Family and Medical Leave Act and similar state leave laws;

 

•                                          claimsfor wrongful discharge; and

 

•                                          claimsfor attorneys’ fees, litigation costs and expert fees of any kind.

 

This enumeration of the Claims covered bythis release is not intended to be, and shall not be construed as, anexhaustive list.

 

## **b.    **Definitionof Employer.  For purposes of theserelease provisions “Employer” includes without limitation CareScience, Inc.,and its past, present and future parents, affiliates, subsidiaries, divisions,predecessors, successors, assigns, employee benefit plans and trusts.  It also includes all past, present andfuture managers, directors, officers, partners, agents, members, employees,attorneys, representatives, consultants, associates, fiduciaries, plansponsors, administrators and trustees of each of the foregoing.

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## **c.    **Effectof Release and Covenant Not to Sue**.** If Employee or Employer does commence, joinin, continue or in any other manner attempt to assert a Claim in violation ofthis release and covenant not to sue, or otherwise breach any promise made inthis Agreement, the applicable party agrees to indemnify and hold harmless theother party from and against all losses incurred, including without limitation,costs and attorneys’ and expert fees, in defending such Claim or pursuing itsrights hereunder.  (The provisions ofthis indemnification provision do not apply with respect to a claim under theAge Discrimination in Employment Act.)

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# **11.  ConsiderationPeriod**. Employee acknowledges that he has been provided with a period oftwenty-one (21) days to consider the terms of this offer from the date thisAgreement was first presented to him. Employee understands that he may take the entire 21-day period toconsider entering into this agreement, and he acknowledges that if he choosesto sign and return the Agreement before the end of the full 21 days, hisdecision to shorten the consideration period is knowing and voluntary and wasnot induced in any way by Employer.

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# **12.  RevocationPeriod**. Employee acknowledges that he shall have seven (7) days after signingthis Agreement to revoke it if he chooses to do so.  If Employee elects to revoke this Agreement, he shall givewritten notice of such revocation to Employer in such a manner that it isactually received within the seven (7) day period.  The Agreement shall not become effective or enforceable until theexpiration of that seven (7) day period.

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# **13.  Consultationwith Legal Counsel**.  Employee acknowledges that he has been advised to consult withindependent legal counsel of his choosing regarding the meaning and bindingeffect of this Agreement and each and every term hereof prior to executingit.  Employer hereby agrees to payEmployee’s legal counsel directly for the attorneys’ fees and costs so incurredin connection with the negotiation and preparation of this Agreement, suchamount to

 

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be paid within one (1) businessday of the execution of this Agreement. Employee hereby certifies and warrants that he had read carefully thisAgreement and has executed it voluntarily and with full knowledge andunderstanding of its significance, meaning and binding effect.

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# **14.  Representationsand Warranties of Enforceability. **Employeehereby represents and warrants to the Employer that upon the execution anddelivery of this Agreement by the Employer and the expiration of the seven (7)day revocation period described in Section 12 above, this Agreement will be thevalid and binding obligation of Employee, enforceable in accordance with itsterms.  Employer hereby represents andwarrants to the Employee that the execution and delivery by Employer of thisAgreement and the performance by Employer of its obligations hereunder havebeen duly authorized by all requisite corporate board and any other requiredaction and, upon the execution and deliver of this Agreement by the Employeeand the expiration of the seven (7) day revocation period described in Section12 above, this Agreement will be the valid and binding obligation of Employer,enforceable in accordance with its terms.

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# **15.  Non-Admission.**  Employee and Employer agree and acknowledgethat the Agreement between them is not and shall not be construed to be anadmission of any violation of any federal, state or local statute, ordinance orregulation, or of any duty owed by one to the other and that this Agreement andtheir execution of this Agreement are made voluntarily to bring an amicableconclusion of Employee is employment relationship with Employer.

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# **16.  PreviousAgreements**. Employee hereby acknowledges hisexecution of the  Assignment of RightsAgreement dated November 3, 1992 and Data Security and DataConfidentiality Agreement dated January 12, 1996 signed previously byEmployee and reaffirms his obligations thereunder.

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# **17.  Integration**.  Except as expressly provided herein, thisAgreement contains the entire understanding of the parties and supersedes allverbal and written agreements, and there are no other agreements,representations or warranties between the parties not referenced or set forthin this Agreement.

 

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# **18.  Counterparts**.  This Agreement may be executed incounterparts, each of which will be deemed an original, but all of which shallconstitute one and the same agreement. Each party shall execute this Agreement twice and each party shallretain an original.

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IN WITNESS WHEREOF, the parties have executedthis Agreement.

 

 
|   | /s/ David J. Brailer                 |                |
|--------|--------------------------------------|---------------------|
|   | David J. Brailer, M.D., Ph.D         |                |
|   | Date: 6/24/2003                      |                |
|   |                                 |                |
|   |                                 |                |
|   | CARESCIENCE, INC.                    |                |
|   |                                 |                |
|   |                                 |                |
|   | By:                                  | /s/ Robb L. Tretter |   |
|   | Name: Robb L. Tretter                |                |
|   | Title: General Counsel and Secretary |                |
|   | Date: 6/24/2003                      |                |
|        |                                      |                     |  |

 

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**Exhibit A**

**CareScience Announces New Leadership**

 

Philadelphia, PA – CareScience, Inc. (NASDAQ:  CARE), a leading care management company, announced today thatDavid J. Brailer, M.D., Ph.D., resigned today as Chairman, CEO and Director ofCareScience and that Ronald A. Paulus, M.D., M.B.A., currently president andDirector of CareScience, has been appointed CEO.  The Company also announced that Mr. Edward Antoian has beenelected interim non-executive Chairman of the Board of Directors.  The Company and Dr. Brailer each citeddifferences over the strategic direction of the Company for his resignation.  Dr. Brailer has agreed to providetransitional support to the Company.

 

“I want to thank David for all of the positive things that he has doneover the past decade as founder and CEO of CareScience,” said Dr. Paulus.  “During that time, the Company added morethan 150 clients, licensed groundbreaking research from the University ofPennsylvania, developed one of the nation’s first healthcare ASPs, developedthe first peer-to-peer clinical data exchange technology and established thefirst care management business process outsourcing partnership.  I look forward to building upon thatfoundation by aggressively supporting our growing customer base in theirclinical transformation efforts, and by delivering substantial value to bothcustomers and shareholders.”

 

“CareScience’s efforts to improve quality and efficiency are importantand will continue to be so in the future,” said Dr. Brailer.  “As a significant shareholder, I wish theCompany future success.”

 

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