Exhibit 10.1


 


SEPARATION AGREEMENT


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1.     Separation
Date.  Upon
delivery to Employee of this Agreement, executed on behalf of Employer on the
date hereof (the “Separation Date”), Employee will resign as an employee and as
Chief Executive Officer of Employer and shall resign from Employer’s board of
directors and as Chairman of the board of directors effective upon the
expiration of the seven (7) day period described in Section 12 below and
Employee’s receipt of the severance payment described in Section 2(a) below (the
date on which such seven day period expires and such payment is received is
hereinafter referred to as the “Effective Date”).  Employee shall receive his regular compensation and business
expense reimbursements through June 16, 2003 and his regular benefits
through June 30, 2003.  Payment of
Employee’s regular compensation through the Separation Date shall be made on
the earlier to occur of (i) Employer’s regularly scheduled  payroll date for its executive employees and
(ii) the Effective Date.  Upon the Effective
Date, the Employment Agreement shall be terminated in all respects and
Employee’s rights to wage continuation and benefits entitlements thereafter
shall 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 release
announcing Employee’s resignation substantially in the form attached as Exhibit
A hereto.  Other than through the
press release attached as Exhibit A, or in Employer’s public filings
with the Securities and Exchange


 


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Commission (in which this
Agreement may be attached as an exhibit and which may include a fair and
accurate 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 such
press release or public filings, and except to members of Employee’s immediate
family, employees who have a need to know and directors of Employer, a party’s
attorney, accountant and/or tax consultant, state and federal tax authorities
or other persons as may be required by court order, by the proper inquiry of a
governmental agency, or any other applicable law, including securities laws, or
as necessary or advisable to seek to enforce or challenge the terms of this
Agreement.


 


2.     Transition
Benefits. 
Employer will provide Employee with the following benefits for the time
periods described below:


 


a.     Severance
Payment.  On the business day
following the Effective Date, Employer shall pay to Employee by wire transfer
to an account designated by Employee a severance payment in a single sum of two
hundred and ninety-five thousand dollars ($295,000), subject only to the
deductions and withholdings as required by law, including with respect to
forgiveness of the Note and Pledge Agreement as described in Section 4 below
and without any deductions for 401(k) or FSA contributions.  The cost, if any, of the wire transfer to be
paid by Employer.


 


b.     Health
Care and Dental Coverage.  Upon
termination of Employee’s health and dental benefits, Employee will be eligible
to extend the health care and dental coverage in effect at the time in
accordance with the provisions of COBRA, 29 U.S.C. §§ 1161 et seq.


 


c.     Business
Expenses.  Employee will continue
with his scheduled activities on behalf of Employer through July 3, 2003
and he will be reimbursed for his regular business expenses incurred through
that date and Employer will pay his business related charges on his corporate
American Express card through July 3, 2003 or the date of cancellation if
later.  Employee will turn his corporate
American Express card into Employer immediately after July 3, 2003 and
Employer will promptly pay the remaining balance on and close this account to
ensure that the account is closed while in good standing.


 


d.     Miscellaneous
Transition Matters.  Employer will
arrange to have Employee’s personal items from his office (e.g. books, personal
photographs, office furniture, files etc.) packed and delivered to a single
address in the United States as designated by Employee, insured for a minimum
value, 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 of
the University of Pennsylvania in Employee’s office (collectively, the
“Separate Items”).  Employee agrees that
within fourteen (14) days of the Effective Date, Employee will or will arrange
for 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 safe
and secure from damage (without specific insurance on the Separate Items) and
upon prior reasonable notice of the schedule of the pick-up, Employer will
provide access to Employee or his designated third party upon arrival to pick
up and remove the Separate Items.  The
ownership of the personal


 


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computer and related equipment
that has been assigned to Employee will be transferred automatically to
Employee upon the execution of this Agreement. 
Employer will arrange to terminate Employee’s current business cell
phone (215-287-3550) after July 3, 2003 with Employer being responsible
for costs through July 3, 2003 and any residual phone contract
obligations.  Employer will arrange to
have a forwarding message from all calls to 215-287-3550 to a number provided
by 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 providing
Employee’s new contact information. 
Employer will promptly forward to Employee all letters, calls, e-mails
and other communications intended for Employee, without limitation, through
December 31, 2003, including requests for new contact information for
Employee.  To the extent any persons
that so contact Employee after such forwarding by Employer of such
communications intended for Employee make requests for or inquiries regarding
services rendered or to be rendered by Employer, Employee will promptly refer
back to Employer all such communications.


 


3.     Accrued
and 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.


 


4.     Purchase
Agreement and Note and Pledge Agreement. On the
Effective Date, Employer will forgive any and all amounts due to Employer under
the Purchase Agreement and Note and Pledge Agreement effective on the
Separation Date and promptly, but in no event more than two (2) business days
following the Effective Date, deliver to Employee certificates representing
free and clear ownership of and marketable title to the shares purchased under
the Purchase Agreement (subject to the restrictive legend required by the
Securities Act of 1933 as amended and the applicable securities laws).


 


5.     Consulting
Arrangement. 
Effective immediately after the expiration of the seven (7) day
revocation period described in Section 12 hereof, and continuing through
December 31, 2003, Employee will serve as a consultant to Employer for up
to thirty-two (32) hours per month [amount of hours intended to cover four
eight-hour working days during the month] with regard to developing potential
business relationships between Employer and any for-profit hospital system
containing more than 75 hospitals and Employer and potential purchasers of the
Care Data Exchange.  For his consulting
activities, Employer shall pay Employee on a monthly basis on the first of each
month (except that the June and July payments shall be made at the
same time as the severance payment provided for in Section 2(a) above) the following
amounts: June -$5,000; July - $15,000; August - $10,000;
September - $10,000; October - $10,000; November - $10,000; and
December - $10,000.  In addition,
Employer shall pay Employee five percent (5%) of the total contract value for
each contract that is signed by Employer with any for-profit hospital system
containing more than 75 hospitals or for any Care Data Exchange services or
technologies 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 customer
following contract signing.  In
addition, Employer will reimburse Employee for his business expenses incurred
in connection with his consulting services (e.g. travel, cell phone, other
usual and reasonable expenses) within ten (10) business days of their
submission to Employer.  Employer also
will maintain Employee’s current e-mail address at Employer through


 


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the end of the consulting
arrangement.  Employer need not provide
an office or a secretarial assistant to Employee during the consulting
arrangement.  Employer may terminate the
consulting arrangement at any time upon ten (10) days written notice to
Employee but will pay the full amount of all consulting fees through
December immediately upon any such termination, except that no future
consulting fees will be due if Employer terminates the consulting arrangement
during 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 any
such termination by Employee.  To the
extent Employee has not previously provided the ten (10) days written notice of
termination as described above prior to beginning full-time employment with
another employer, Employer’s obligation to pay future consulting fees and
Employee’s obligation to provide consulting services will immediately and
automatically terminate upon Employee’s commencement of full-time employment
with another employer.


 


6.     Agreement
Not To Compete. 
Employee hereby agrees that during the consulting arrangement described
above 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 agreed
that the business of Employer is “the commercial sales and delivery of products
that are used to measure the quality and efficiency of inpatient care
throughout the United States or the exchange or sharing of clinical data
throughout the world.”  Notwithstanding
any restriction contained in the Agreement, it is understood and agreed that
Employee may continue activities in the nature of the activities permitted by
paragraph 1(b) of the Employment Agreement.


 


7.     Agreement
Not to Interfere with Customers.  Employee hereby agrees that from the
Separation Date and through May 31, 2004, 
Employee will not request or cause any customer with whom Employer has a
business relationship to cancel or terminate any such business relationship
with Employer.  Notwithstanding the
foregoing, Employer acknowledges that some customers may terminate their
business relationship with Employer due to Employee’s resignation, or after
having had a conversation with Employee, even though Employee fully complies
with his obligations under this Agreement.


 


8.     Agreement
Not to Solicit Employees.  Employee hereby agrees that from the Separation
Date through May 31, 2004, he will not solicit, hire, offer to hire,
persuade or induce any person who is an employee of Employer to discontinue
his/her relationship with Employer.


 


9.     Return
of Corporate Property.  Employee acknowledges and agrees that, on or before the
Separation Date and except as stated above, he will return to Employer or
destroy all corporate property and copies thereof in his possession or under
his custody or control.  Employee will
deliver to Employer any entry pass cards or keys to Employer’s facilities
within two (2) business days of the Effective Date, by delivering them in
person or via overnight delivery to Robb Tretter, the Employer’s General
Counsel, at the Employer’s principal address.


 


10.  General
Release 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 agree
not to file a lawsuit to assert any such Claim.  This release covers all Claims


 


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arising from the beginning of
time up to and including the date of this Agreement.  This release does not cover Claims relating to the validity or
enforcement of this Agreement or for Employee’s accrued benefits due from
Employer 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 of
capital stock of Employer that he owns as of the date hereof.  Further, Employee is not releasing any claim
for indemnity or legal defense available to him due to his service as a board
member, officer, employee or director of Employer as provided by Employer’s
articles of incorporation, bylaws, insurance policies or general corporate law
and the parties expressly incorporate by reference paragraph 10 of the
Employment Agreement, nor does this release cover claims that either party may have
against the other based on intentional misconduct or fraud, though each party
represents that they are not aware of any such claims as of the date of this
Agreement (collectively, all such claims that Employee is retaining are
hereinafter referred to as “Employee’s Retained Rights” and all such claims
that Employer is retaining are hereinafter referred to as “Employer’s Retained
Rights”).


 


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


 


a.     Definition
of “Claims”.  “Claims” include
without limitation all actions or demands of any kind that Employee or Employer
now have, or may have or claim to have in the future based on actions through
the date of this Agreement.  More
specifically, Claims include rights, causes of action, damages, penalties,
losses, attorneys’ fees, costs, expenses, obligations, agreements, judgments
and all other liabilities of any kind or description whatsoever, either in law
or in equity, whether known or unknown, suspected or unsuspected.


 


The nature of Claims covered by this release
and covenant not to sue includes without limitation all actions or demands in
any way based on Employee’s employment, or service as an officer or board
member with Employer, the terms and conditions of such employment or Employee’s
separation from employment (except as included in Employee’s Retained Rights or
Employer’s Retained Rights).  More
specifically, all of the following are among the types of Claims which will be
barred by this release and covenant not to sue (except as included in
Employee’s Retained Rights and Employer’s Retained Rights):


 


•                                          contract
claims (whether express or implied);


 


•                                          tort
claims, such as for defamation or emotional distress;


 


•                                          claims
under federal, state and municipal laws, regulations, ordinance or court
decisions of any kind;


 


•                                          claims
of 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;


 


•                                          claims
under the Age Discrimination in Employment Act, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act and similar state
statutes and municipal ordinances;


 


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•                                          claims
under the Employee Retirement Income Security Act, the Fair Labor Standards
Act, state wage payment laws and state wage and hour laws;


 


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


 


•                                          claims
for wrongful discharge; and


 


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


 


This enumeration of the Claims covered by
this release is not intended to be, and shall not be construed as, an
exhaustive list.


 


b.     Definition
of Employer.  For purposes of these
release 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 and
future managers, directors, officers, partners, agents, members, employees,
attorneys, representatives, consultants, associates, fiduciaries, plan
sponsors, administrators and trustees of each of the foregoing.


 


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


 


11.  Consideration
Period. 
Employee acknowledges that he has been provided with a period of
twenty-one (21) days to consider the terms of this offer from the date this
Agreement was first presented to him. 
Employee understands that he may take the entire 21-day period to
consider entering into this agreement, and he acknowledges that if he chooses
to sign and return the Agreement before the end of the full 21 days, his
decision to shorten the consideration period is knowing and voluntary and was
not induced in any way by Employer.


 


12.  Revocation
Period. 
Employee acknowledges that he shall have seven (7) days after signing
this Agreement to revoke it if he chooses to do so.  If Employee elects to revoke this Agreement, he shall give
written notice of such revocation to Employer in such a manner that it is
actually received within the seven (7) day period.  The Agreement shall not become effective or enforceable until the
expiration of that seven (7) day period.


 


13.  Consultation
with Legal Counsel.  Employee acknowledges that he has been advised to consult with
independent legal counsel of his choosing regarding the meaning and binding
effect of this Agreement and each and every term hereof prior to executing
it.  Employer hereby agrees to pay
Employee’s legal counsel directly for the attorneys’ fees and costs so incurred
in connection with the negotiation and preparation of this Agreement, such
amount to


 


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


 


14.  Representations
and Warranties of Enforceability.  Employee
hereby represents and warrants to the Employer that upon the execution and
delivery 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 the
valid and binding obligation of Employee, enforceable in accordance with its
terms.  Employer hereby represents and
warrants to the Employee that the execution and delivery by Employer of this
Agreement and the performance by Employer of its obligations hereunder have
been duly authorized by all requisite corporate board and any other required
action and, upon the execution and deliver of this Agreement by the Employee
and the expiration of the seven (7) day revocation period described in Section
12 above, this Agreement will be the valid and binding obligation of Employer,
enforceable in accordance with its terms.


 


15.  Non-Admission.  Employee and Employer agree and acknowledge
that the Agreement between them is not and shall not be construed to be an
admission of any violation of any federal, state or local statute, ordinance or
regulation, or of any duty owed by one to the other and that this Agreement and
their execution of this Agreement are made voluntarily to bring an amicable
conclusion of Employee is employment relationship with Employer.


 


16.  Previous
Agreements. Employee hereby acknowledges his
execution of the  Assignment of Rights
Agreement dated November 3, 1992 and Data Security and Data
Confidentiality Agreement dated January 12, 1996 signed previously by
Employee and reaffirms his obligations thereunder.


 


17.  Integration.  Except as expressly provided herein, this
Agreement contains the entire understanding of the parties and supersedes all
verbal and written agreements, and there are no other agreements,
representations or warranties between the parties not referenced or set forth
in this Agreement.


 


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18.  Counterparts.  This Agreement may be executed in
counterparts, each of which will be deemed an original, but all of which shall
constitute one and the same agreement. 
Each party shall execute this Agreement twice and each party shall
retain an original.


 


IN WITNESS WHEREOF, the parties have executed
this 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 that
David J. Brailer, M.D., Ph.D., resigned today as Chairman, CEO and Director of
CareScience and that Ronald A. Paulus, M.D., M.B.A., currently president and
Director of CareScience, has been appointed CEO.  The Company also announced that Mr. Edward Antoian has been
elected interim non-executive Chairman of the Board of Directors.  The Company and Dr. Brailer each cited
differences over the strategic direction of the Company for his resignation.  Dr. Brailer has agreed to provide
transitional support to the Company.


 


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


 


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


 


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