Document:

exv10w72

 

EXHIBIT 10.72

EMPLOYMENT AGREEMENT

          This EMPLOYMENT AGREEMENT is made and entered into this ___day of ___, 2005,
between COLUMBIA EQUITY TRUST, INC., a Maryland corporation (the “Company”) and John M. Novack (the
“Executive”).

RECITALS

          WHEREAS, the Company desires to employ the Executive, and the Executive desires to be employed
by the Company, all on the terms and subject to the conditions set forth herein; and

          WHEREAS, the Executive is willing to enter into this Agreement in consideration of the
benefits which the Executive will receive under the terms hereof.

          NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good
and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties
agree as follows:

          1. Term. The employment of the Executive by the Company under this Agreement will
commence on the date that the initial public offering of the Company’s common stock is completed
(the “Effective Date”) and end on December 31, 2006 (the “Employment Period”). Notwithstanding the
preceding sentence, the Employment Period shall be extended automatically for successive one (1)
year periods unless the Company or the Executive delivers written notice to the other party, at
least sixty (60) days prior to the then-scheduled expiration of the Employment Period that the
Employment Period will not be extended.

          2. Position and Duties. The Executive shall be employed by the Company and during the
Employment Period the Executive shall serve as the Company’s Senior Vice President and Chief
Account Officer. The Executive shall also serve without additional compensation in such offices of
subsidiaries of the Company to which the Executive may be elected or appointed by the Company.

          3. Extent of Services.

              (a) During the Employment Period, the Executive shall fulfill the duties of his position
hereunder in a manner that will faithfully and diligently further the business and interests of the
Company. In addition, the Executive may (i) make any investment where he is not obligated or
required to, and shall not in fact, devote significant managerial efforts, (ii) participate in
charitable, academic or community activities, and in trade or professional organizations, or (iii)
hold directorships in other companies consistent with the Company’s conflict of interest policies
and corporate governance guidelines as in effect from time to time.

              (b) Corporate Opportunities. The Executive agrees that he will not take personal
advantage of any business opportunity which arises during his employment with the Company and which
may be of benefit to the Company unless all material facts regarding such opportunity are promptly
reported by the Executive to the Board of Directors of the

 

 

Company (the “Board”) for consideration by the Company and the disinterested members of the
Board decide to reject the opportunity.

          4. Compensation and Related Matters.

              (a) Annual Base Salary. During calendar year 2005 the Company shall pay to the
Executive an annual base salary at the rate of $150,000 per year, less all applicable deductions
(the “Base Salary”) for all services rendered by the Executive to the Company. At least annually
the Compensation Committee of the Board (the “Committee”) shall review the Executive’s performance
and compensation and may increase the Base Salary. The Base Salary shall be payable in equal
installments in accordance with the practice of the Company in effect from time to time for the
payment of salaries to officers of the Company.

              (b) Annual Bonuses. The Executive shall be eligible for an annual bonus (“Annual
Bonus”) for each calendar year in the Employment Period, payable no later than March 31 of the
following calendar year, based on his performance and the performance of the Company during such
period as determined by the Committee.

              (c) Expenses. The Company shall pay or reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive during the Employment Period in the performance
of the Executive’s duties under this Agreement in accordance with the Company’s employee business
expense reimbursement policies in effect from time to time.

              (d) Other Benefits. During the Employment Period, the Executive shall be eligible to
receive such employee benefits including, without limitation, participation in any stock option or
other equity benefit plan and any retirement and welfare plans maintained by the Company, as the
Company may provide from time to time to similarly situated employees, and such other benefits as
the Board or the Committee may from time to time establish for the Company’s executive officers.

              (e) Vacations. The Executive shall be entitled to at least four (4) weeks’ vacation
in each calendar year, together with leave of absence and leave for illness or temporary disability
in accordance with the policies of the Company in effect from time to time; provided, however, in
no event shall the Executive be permitted to carryover unused vacation time from year to year.

          5. Termination. Each party shall have the right to terminate the Executive’s
employment hereunder before the Employment Period expires to the extent, and subject to the
provisions, set forth in this Section 5:

              (a) Death. The Executive’s employment hereunder shall terminate upon his death.

              (b) Disability. The Company shall have the right to terminate the Executive’s
employment if the Board determines that the Executive is unable to perform his duties by reason of
Disability. As used herein, “Disability” shall mean a disability as such term or a similar term is
defined under a disability insurance policy maintained by the Company covering the Executive or, if
there is no such policy, “Disability” shall mean the inability of the

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Executive, due to physical or mental illness or injury, to perform his duties hereunder for
any period of 180 consecutive days and the return of the Executive to his duties for periods of 15
days or less shall not interrupt such 180 day period.

              (c) Cause. The Company shall have the right to terminate the Executive’s employment
at any time upon delivery of a Notice of Termination (as defined in subsection (f) below) for Cause
(as defined below) to Executive, such employment to terminate upon a date specified in the Notice
of Termination which shall not be earlier than thirty (30) days after delivery of such notice to
the Executive if the stated reason for termination is described in clause (i) of the following
sentence. For purposes of this Agreement, the term “Cause” means (i) intentional and continued
failure by the Executive (other than for reason of mental or physical illness) to perform
reasonably assigned material duties if such failure has a materially and demonstrably detrimental
effect on the business operations of the Company and has continued for at least 30 days; (ii)
willful misconduct in the performance of the Executive’s duties; (iii) conviction of, or a plea of
guilty or nolo contendre to, a felony; or (iv) the Executive’s breach of any non-competition,
non-disclosure or non-solicitation agreement with the Company. If the Company desires to terminate
the Executive for a reason described in clause (i) of the preceding sentence, the Executive shall
have thirty (30) days after receipt of the Notice of Termination in which to cure the failure,
breach or infraction described in the Notice of Termination and shall be afforded an opportunity to
present his position or defense to the Board. If the failure, breach or infraction is timely cured
by the Executive or the Board determines that Cause for the Executive’s termination does not exist,
the Notice of Termination shall become null and void.

              (d) Without Cause. The Company may at any time terminate the Executive’s employment
hereunder other than for Cause.

              (e) Termination by the Executive.

                   (i) The Executive may terminate his employment hereunder (A) for Good Reason, or (B) without
Good Reason at any time after the date hereof upon delivery of a Notice of Termination (as defined
in subsection (f) below).

                   (ii) For purposes of this Agreement, the term “Good Reason” shall mean

                        (A) a demotion of the Executive or a material diminution in the Executive’s duties, functions
and responsibilities with respect to the Company without the Executive’s consent;

                        (B) the Company’s causing Executive to relocate his employment more than fifty (50) miles from
the location of the Executive’s principal office on the Effective Date, without the consent of the
Executive; or

                        (C) a substantial reduction of the Executive’s Base Salary, as such may be increased from time
to time after the date of this Agreement.

If the Executive desires to terminate his employment for Good Reason, the Company shall have thirty
(30) days after its receipt of the Executive’s Notice of Termination in which to cure or

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remedy the grounds identified as Good Reason in the Notice of Termination. If the grounds for Good
Reason are timely cured or remedied by the Company, the Executive’s Notice of Termination shall
become null and void.

              (f) Notice of Termination. Any termination of the Executive’s employment by the
Company or by the Executive (other than termination pursuant to subsection (a) hereof) shall be
communicated by written Notice of Termination to the other party hereto in accordance with Section
14(a). 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 the
Executive’s employment under the provision so indicated.

              (g) Date of Termination. The “Date of Termination” shall mean (i) if the Executive’s
employment is terminated by his death, the date of his death, (ii) if the Executive’s employment is
terminated pursuant to subsection (b) or clause (ii), (iii) or (iv) of subsection (c) above, upon
delivery of the Notice of Termination unless otherwise specified in such notice, and (iii) if the
Executive’s employment is terminated for any other reason, the date thirty (30) days following the
date on which a Notice of Termination is given.

          6. Compensation Upon Termination, Death or During Disability.

              (a) Death. If the Executive’s employment is terminated by his death, the Company
shall, within ten (10) days following the Date of Termination, pay any earned and accrued but
unpaid installment of Base Salary through the Date of Termination at the rate then in effect, any
accrued but unused vacation benefit and any other accrued and unpaid amounts due to the Executive
under Section 4, together with any other amounts to which the Executive is entitled pursuant to
employee benefit or death benefit plans, programs and policies. In addition, subject to compliance
with Section 6(f), upon the Executive’s termination, (i) the Executive’s estate shall be paid a Pro
Rata Portion of the Executive’s Maximum Bonus (each as defined below), (ii) the Executive’s estate
shall be paid an amount equal to one-half (1/2) of the Executive’s annual Base Salary and (iii) all
of the Executive’s outstanding options, restricted stock awards and any other equity rights granted
by the Company to the Executive shall be vested or exercisable, as applicable, and any such awards
that include an exercise period shall remain exercisable until the earlier of the expiration date
of such award or the third anniversary of the Executive’s death. For purposes of this Agreement,
“Maximum Bonus” means the greater of (i) the highest aggregate Annual Bonus or incentive payment
paid by the Company (or any predecessor of the Company paid for 2004 as disclosed in the prospectus
for the initial public offering of the Company’s common stock) to the Executive for any of the
three calendar years prior to the year that includes the Date of Termination or (ii) the highest
aggregate Annual Bonus or incentive payment that the Executive was eligible to receive for the
calendar year that includes the Date of Termination. For purposes of this Agreement, the “Pro Rata
Portion” of the Executive’s Maximum Bonus shall be calculated by multiplying the Maximum Bonus by a
fraction, the numerator of which shall be the number of calendar days elapsed in the year in which
the Date of Termination occurs, up to and including the Date of Termination, and the denominator of
which shall be 365.

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              (b) Disability. During any period that the Executive fails to perform his duties
hereunder as a result of his incapacity due to a physical or mental illness, the Executive shall
continue to receive his Base Salary at the rate then in effect for such period (without reduction
for any disability insurance benefits for which the Executive paid the premium (on a pre-tax or
after-tax basis) and the Executive shall not receive during such period any disability insurance
benefits for which he did not pay the premium) until his employment is terminated pursuant to
Section 5(b) hereof, and upon the Date of Termination, the Company shall, within ten (10) days of
such termination, pay the Executive any earned and accrued but unpaid installment of Base Salary
through the Date of Termination at the rate then in effect, any accrued but unused vacation
benefit and any other accrued and unpaid amounts due to the Executive under Section 4. Subject to
compliance with Section 6(f), (i) the Executive shall be paid a Pro Rata Portion of his Maximum
Bonus which will be paid on the Date of Termination if the Executive is “disabled” for purposes of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or the Company
determines that such payment is not deferred compensation that is subject to Section 409A of the
Code, or otherwise will be paid on the date that is six months after the Date of Termination and
(ii) all of the Executive’s outstanding options, restricted share awards and any other equity
rights granted by the Company to the Executive shall be vested or exercisable, as applicable, and
any such awards that include an exercise period shall remain exercisable until the earlier of the
expiration date of such award or the third anniversary of the Date of Termination.

              (c) Cause or other than Good Reason. If the Executive’s employment shall be
terminated by the Company for Cause or by the Executive for other than Good Reason, the Company
shall, within ten (10) days following the Date of Termination, pay the Executive any earned and
accrued but unpaid installment of Base Salary through the Date of Termination at the rate then in
effect at the time Notice of Termination is given, any accrued but unused vacation benefit and any
other accrued and unpaid amounts due to the Executive under Section 4, excluding any Annual Bonus
that is not due and payable on the Date of Termination, and the Company shall have no further
obligations to the Executive under this Agreement. All of the outstanding options, restricted
share awards and any other equity rights granted by the Company to the Executive shall continue to
be governed by the applicable grant agreement and related plan.

              (d) Termination by the Company without Cause or by the Executive for Good Reason. If
the Company shall terminate the Executive’s employment before a Change in Control (as defined in
Section 6(e)) other than for death, Disability pursuant to Section 5(b) or Cause, or if the
Executive terminates his employment before a Change in Control for Good Reason, then the Company
shall, within ten (10) days of the Date of Termination, pay the Executive any earned but unpaid
installment of Base Salary through the Date of Termination at the rate then in effect, any accrued
but unused vacation benefit and any other accrued and unpaid amounts due to the Executive under
Section 4. In addition, subject to compliance with Section 6(f), upon the Executive’s termination,
the Executive shall be entitled to receive:

                   (i) a severance benefit equal to the product of one (1) and the Executive’s Base Salary at the
rate then in effect; such benefit to be paid in equal or nearly equal installments, in accordance
with the Company’s regular payroll practices, for twelve (12) months beginning on the first day of
the month coincident with or next following the date that is six

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months after the Date of Termination; provided, however, that such installments shall begin on
the first day of the month coincident with or next following the Date of Termination if the Company
determines that such payments are not deferred compensation that is subject to Section 409A of the
Code;

                   (ii) a lump sum payment equal to the Pro Rata Portion of the Executive’s Maximum Bonus (as
such terms are defined in Section 6(a)); such payment to be made on the first day of the month
coincident with or next following the date that is six months after the Date of Termination;
provided, however, that such payment shall be made on the first day of the month coincident with or
next following the Date of Termination if the Company determines that such payment is not deferred
compensation that is subject to Section 409A of the Code;

                   (iii) continued participation of the Executive and his dependents in Company-provided medical
or health insurance of benefit plans, at no cost to the Executive, for twelve (12) months after the
Date of Termination; provided, however, that if applicable law or the terms of such plan prohibits
the continued participation of the Executive of his dependents for all or part of such period, the
Company shall make a cash payment to the Executive that is sufficient, on an after-tax basis, to
allow the Executive to obtain insurance that provides substantially the same benefits as the
Company-provided medical or health insurance or benefit plan; and

                   (iv) all of the Executive’s outstanding options, restricted stock awards and any other equity
rights granted by the Company to the Executive shall be vested or exercisable, as applicable, and
any such awards that include an exercise period shall remain exercisable until the earlier of the
expiration date of such award or the third anniversary of the Date of Termination.

              (e) Change in Control Benefits. If a Change in Control occurs during the Employment
Period, all of the Executive’s outstanding options, restricted stock awards and any other equity
rights granted by the Company to the Executive shall be vested or exercisable, as applicable. If
the Company terminates the Executive’s employment on or after a Change in Control (and without
regard to any expiration of the Employment Period) other than for death, Disability pursuant to
Section 5(b) or Cause, or if the Executive terminates his employment on or after a Change in
Control (and without regard to any expiration of the Employment Period), then the Executive shall
be entitled to receive:

                   (i) Any earned but unpaid installment of Base Salary through the Date of Termination at the
rate then in effect, any accrued but unused vacation benefit and any other accrued and unpaid
amounts due to the Executive under Section 4, such payments to be made within ten (10) days of the
Date of Termination;

                   (ii) A lump sum payment equal to the product of one and one-half (11/2) times the sum of the
Executive’s Base Salary at the rate then in effect plus the Executive’s Maximum Bonus (as defined
in Section 6(a)); such payment to be made on the first day of the month coincident with or next
following the date that is six months after the Date of Termination (except that the payment shall
be made within ten (10) days after the Date of

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Termination if the Company determines that such payment is not deferred compensation that is
subject to Section 409A of the Code);

                   (iii) Outstanding options and other equity awards that include an exercise period shall remain
exercisable until the earlier of the expiration date of such award or the third anniversary of the
Date of Termination; provided, however, that such option and other equity awards and the
Executive’s rights thereunder otherwise shall remain subject to the terms of the applicable grant
agreement and related plan; and

                   (iv) Continued participation of the Executive and his dependents in Company-provided medical
or health insurance or benefit plans, at no cost to the Executive, for eighteen (18) months after
the Date of Termination; provided, however, that if applicable law or the terms of such plan
prohibits the continued participation of the Executive of his dependents for all or part of such
period, the Company shall make a cash payment to the Executive that is sufficient, on an after-tax
basis, to allow the Executive to obtain insurance that provides substantially the same benefits as
the Company-provided medical or health insurance or benefit plan.

The amount payable under the preceding paragraphs (ii), (iii) and (iv) shall be subject to
compliance with Section 6(f). For purposes of this Agreement, “Change in Control” shall have the
meaning given the term in the Columbia Equity Trust, Inc. 2005 Equity Compensation Plan.

              (f) Release. Payments by the Company required under this Section 6 following
termination or expiration of the Executive’s employment for any reason (other than payments of
accrued but unpaid amounts) shall be conditioned on and shall not be payable until receipt by the
Company of a written release from the Executive (or, in the event of his death, his estate) in form
and substance reasonably acceptable to the Company of any and all past, present or future claims
that the Executive (or, in the event of his death, his estate) may have against the Company or any
of its affiliates and any of their respective officers, directors, members or managers. The
Executive agrees to provide the Company with the release within 15 days of (i) the Date of
Termination or (ii) the last day of the Employment Period.

          7. Excise Tax Indemnification.  If any amount payable to or other benefit receivable
by the Executive pursuant to this Agreement is deemed to constitute a Parachute Payment (as defined
below), alone or when added to any other amount payable or paid to or other benefit receivable or
received by the Executive which is deemed to constitute a Parachute Payment (whether or not under
an existing plan, arrangement or other agreement), and would result in the imposition on the
Executive of an excise tax under Section 4999 of the Code, then, in addition to any other benefits
to which the Executive is entitled under this Agreement, the Executive shall be paid by the Company
an amount in cash equal to the sum of the excise taxes payable by the Executive by reason of
receiving Parachute Payments plus the amount necessary to put the Executive in the same after-tax
position (taking into account any and all applicable federal, state and local excise, income or
other taxes at the highest applicable rates on such Parachute Payments and on any payments under
this Section 7 as if no excise taxes had been imposed with respect to Parachute Payments).
“Parachute Payment” shall mean a “parachute payment” as defined in Section 280G of the Code. The
calculation under this Section 7 shall be as determined by the Company’s accountants.

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          8. Confidentiality.

              (a) Definition of Proprietary Information. The Executive acknowledges that he may be
furnished or may otherwise receive or have access to confidential information which relates to the
Company’s and its affiliates’ past, present or future business activities, strategies, services or
products, research and development; financial analysis and data; improvements, inventions,
processes, techniques, designs or other technical data; profit margins and other financial
information; fee arrangements; terms and contents of loans, leases, asset management agreements
and other contracts; borrower, tenant and vendor lists or other compilations for marketing or
development; confidential personnel and payroll information; or other information regarding
administrative, management, financial, marketing, lending, leasing or sales activities of the
Company, or an affiliate of the Company or of a third party which provided proprietary information
to the Company or an affiliate of the Company on a confidential basis. All such information,
including any materials or documents containing such information, shall be considered by the
Company and the Executive as proprietary and confidential (the “Proprietary Information”).

              (b) Exclusions. Notwithstanding the foregoing, Proprietary Information shall not
include information in the public domain not as a result of a breach of any duty by the Executive
or any other person.

              (c) Obligations. Both during and after the Employment Period, the Executive agrees to
preserve and protect the confidentiality of the Proprietary Information and all physical forms
thereof, whether disclosed to him before this Agreement is signed or afterward. In addition, both
during and after the Employment Period, the Executive shall not (i) disclose or disseminate the
Proprietary Information to any third party, including employees of the Company (or their
affiliates) without a legitimate business need to know, (ii) remove the Proprietary Information
from the Company’s premises without a valid business purpose, or (iii) use the Proprietary
Information for his own benefit or for the benefit of any third party.

              (d) Return of Proprietary Information. The Executive acknowledges and agrees that all
the Proprietary Information used or generated during the course of working for the Company is the
property of the Company. The Executive agrees to deliver to the Company all documents and other
tangibles (including diskettes and other storage media) containing the Proprietary Information at
any time upon request by the General Partner during his employment and immediately upon termination
of his employment.

          9. Non-Competition.

              (a) Restriction on Competition. During the Restricted Period, the Executive agrees
not to engage, directly or indirectly, as an owner, director, trustee, manager, member, employee,
consultant, partner, principal, agent, representative, stockholder, or in any other individual,
corporate or representative capacity, in the acquisition, operation or development of office
properties in any city, town or county in which the Company, on the Date of Termination, has made
an investment in office properties or is engaged in the development or operation of office
properties. Notwithstanding the foregoing, the Executive shall not be deemed to have violated this
Section 9(a) solely by reason of his passive ownership of 1% or less of the

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outstanding stock of any publicly traded REIT, corporation or other entity. The “Restricted
Period” is the period of the Executive’s employment hereunder and the twelve (12) month period
following the Date of Termination. Notwithstanding the preceding sentences, this Section 9(a)
shall not apply (i) if the Company terminates the Executive’s employment without Cause or the
Executive resigns his employment for Good Reason or (ii) on or after a Change in Control.

              (b) Non-Solicitation of Clients. During the Restricted Period, the Executive agrees
not to solicit, directly or indirectly, on his own behalf or on behalf of any other Person, any
Client (as defined below) of the Company to whom the Company or its affiliates had provided
services at any time during the Executive’s employment with the Company in any line of business
that the Company conducts as of the termination of such Executive’s employment or that the Company
is actively soliciting, for the purpose of marketing or providing any service competitive with any
service then offered by the Company. In addition, during the Restricted Period, the Executive
agrees not to encourage any client of the Company as of the termination of such Executive’s
employment to reduce its patronage to the Company. For purposes of this Agreement the term
“Client” includes, but shall not be limited to, any tenant, seller or developer of properties to
the Company or a client of the design or construction management services of the Company or an
affiliate of the Company.

              (c) Non-Solicitation of Employees. During the Restricted Period, the Executive agrees
that he will not, directly or indirectly, hire or attempt to hire or cause any person or entity or
business, other than an affiliate of the Company, to hire any person who is then or was at any time
during the preceding six (6) months an employee of the Company or an affiliate of the Company.

              (d) Acknowledgement. The Executive acknowledges that he will acquire much Proprietary
Information concerning the past, present and future business of the Company as the result of his
employment, as well as access to the relationships between the Company and its clients and
employees. The Executive further acknowledges that the business of the Company is very competitive
and that competition by him in that business during his employment, or after his employment
terminates, would severely injure the Company. The Executive understands and agrees that the
restrictions contained in this Section 9 are reasonable and are required for the Company’s
legitimate protection, and do not unduly limit his ability to earn a livelihood.

              (e)  Rights and Remedies upon Breach. The Executive acknowledges and agrees that any
breach by him of any of the provisions of Sections 7, 8 and 9 (the “Restrictive Covenants”) would
result in irreparable injury and damage for which money damages would not provide an adequate
remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the
provisions of the Restrictive Covenants, the Company and its affiliates shall have the following
rights and remedies, each of which rights and remedies shall be independent of the other and
severally enforceable, and all of which rights and remedies shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company and its affiliates, under law or in
equity (including, without limitation, the recovery of damages):

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                   (i) the right and remedy to have the Restrictive Covenants specifically enforced (without
posting bond and without the need to prove damages) by any court of competent jurisdiction,
including, without limitation, the right to an entry against the Executive of restraining orders
and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or
actual, and whether or not then continuing, of such covenants; and

                   (ii) the right and remedy to require the Executive to account for and pay over to the Company
and its affiliates all compensation, profits, monies, accruals, increments or other benefits
(collectively, “Benefits”) derived or received by him as the result of any transactions
constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay
over such Benefits to the Company and, if applicable, its affected affiliates.

              (f) If any court or other decision-maker of competent jurisdiction determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the duration, scope of
activities or geographical scope of such provision, then, after such determination has become final
and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so
that such provision becomes enforceable and, in its reduced form, such provision shall then be
enforceable and shall be enforced.

          10. Continued Performance. Provisions of this Agreement shall survive any termination
or expiration of this Agreement if so provided herein or if necessary or desirable fully to
accomplish the purposes of such provisions, including, without limitation, the obligations of the
Executive under the terms and conditions of Sections 8 and 9. Any obligation of the Company to
make payments to or on behalf of the Executive under Section 6 is expressly conditioned upon the
Executive’s continued performance of the Executive’s obligations under Sections 8 and 9 for the
time periods stated in Sections 8 and 9. The Executive recognizes that, except to the extent, if
any, provided in Section 6, the Executive will earn no compensation from the Company after the Date
of Termination or expiration of this Agreement.

          11. Consultation With Counsel. The Executive acknowledges that he has had a full and
complete opportunity to consult with counsel or other advisers of his own choosing concerning the
terms, enforceability and implications of this Agreement, and that the Company has not made any
representations or warranties to the Executive concerning the terms, enforceability and
implications of this Agreement other than as are reflected in this Agreement.

          12. Miscellaneous.

              (a) Notices. Any notice or other communication required, permitted, or desirable
hereunder shall be hand delivered (including delivery by a commercial courier service) or sent by
United States registered or certified mail, postage prepaid, addressed as follows:

     If to the Executive:

	 	 	 
	 

	 	John M. Novack
	 

	 	5508 Atlee Place
	 

	 	Springfield, Virginia 22151

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     If to the Company:

	 	 	 
	 

	 	Columbia Equity Trust, Inc.
	 

	 	1750 H Street, N.W., Suite 500
	 

	 	Washington, D.C. 20006

or such other addresses as shall be furnished in writing by the parties. Any such notice or
communication shall be deemed to have been given as of the date so delivered in person or three
business days after so mailed.

              (b) Applicable Law. This Agreement shall be construed and interpreted according to
the laws of the State of Maryland, other than its choice of law provisions to the extent that they
would require the application of the laws of a State other than the State of Maryland.

              (c) Assigns. This Agreement shall be binding upon and inure to the benefit of the
Company’s successors and the Executive’s personal or legal representatives, executors,
administrators, heirs, distributees, devisees and legatees. This Agreement shall not be assignable
by the Executive, it being understood and agreed that this is a contract for the Executive’s
personal services. This Agreement shall not be assignable by the Company except that the Company
shall require any successor to all or substantially all of the Company’s respective business or
assets (whether direct or indirect, by purchase, merger, consolidation or otherwise), to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to resign from the employ of the
Company and to receive the Termination Benefits and other benefits under this Agreement in the same
amount and on the same terms as Executive would be entitled to hereunder if he terminated his
employment for Good Reason. References in this Agreement to the “Company” include the Company as
hereinbefore defined and any successor to the Company’s business, assets or both which assumes and
agrees to perform this Agreement by operation of law or otherwise.

              (d) Construction; Headings. The language used in this Agreement shall be deemed to be
the language chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. The headings of sections of this Agreement are
for convenience of reference only and shall not affect its meaning or construction.

              (e) Entire Agreement; Amendments. This Agreement sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof, and there are no other
contemporaneous written or oral agreements, undertakings, promises, warranties, or covenants not
specifically referred to or contained herein. This Agreement specifically supersedes any and all
prior agreements and understandings of the parties with respect to the subject matter hereof, all
of which prior agreements and understandings (if any) are

11

 

hereby terminated and of no further force and effect. This Agreement may be amended,
modified, or terminated only by a written instrument signed by the parties hereto.

              (f) Severability. If any provision, clause or part of this Agreement, or the
applications thereof under certain circumstances, is held invalid or unenforceable for any reason,
the remainder of this Agreement, or the application of such provision, clause or part under other
circumstances, shall not be affected thereby.

              (g) Waivers. No delay or omission by either party hereto in exercising any right,
power or privilege hereunder shall impair such right, power or privilege, nor shall any single or
partial exercise of any such right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.

              (h) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall deemed an original but all of which together will constitute one and the same
instrument.

              (i) Action By General Partner. Any action or decision to be taken or made by the
Company under this Agreement shall be pursuant to a resolution adopted by the Board or the
Committee, as appropriate.

              (j) Legal Fees and Expenses. The prevailing party shall be entitled to recover from
the opposing party any legal fees that the prevailing party incurs in connection with the
enforcement or defense of any provision of this Agreement.

              (k) D&O Insurance. Unless otherwise determined by the Board, the Company shall
maintain directors and officers liability insurance for the benefit of the Executive, in an amount
not less than the amount of coverage in effect on the Effective Date, during his employment
hereunder and shall continue to provide such coverage after his termination with respect to acts or
omissions during the Executive’s employment hereunder.

          IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement on the date and
year first above written.

	 	 	 	 	 	 
	 	COLUMBIA EQUITY TRUST, INC.

 	 
	 	By:  	 	 
	 	 	Name: 	       

	 	 	Title: 	       

	 

	 	 	 	 	 
	 	EXECUTIVE

	 	       

	 	John M. Novack
	 
	 	 	 
	 	 	 
	 	 	 
	 

12exv10w91

 

EXHIBIT 10.91

Contract Period July 1, 2005 to December 31, 2005

Contract with Eligible Medicare+Choice (M+C) Organization Pursuant to

sections 1851 through 1859 of the Social Security Act for the operation

of a Medicare+Choice coordinated care plan(s)

CONTRACT (P01456)

Between

Centers for Medicare & Medicaid Services (hereinafter referred to as CMS)

And

WellCare of Georgia, Inc.

(Hereinafter referred to as the M+C Organization)

CMS and the M+C Organization, an entity which has been determined to be an eligible Medicare+Choice
Organization by the Administrator of the Centers for Medicare & Medicaid Services under 42 CFR
422.501, agree to the following for the purposes of sections 1851 through 1859 of the Social
Security Act (hereinafter referred to as the Act):

(NOTE: Citations indicated in brackets are placed in the text of this contract to note the
authority for certain contract provisions in the regulations promulgated pursuant to the Balanced
Budget Act of 1997, as amended. All references to part 422 are to 42 CFR part 422.)

 

 

Article I

Term of Contract

The term of this contract shall be from July 1, 2005 through December 31, 2005, after which the
contract may be renewed for successive one-year periods in accordance with 42 CFR 422.504(c).
[422.504]

This contract governs the respective rights and obligations of the parties as of the effective date
set forth above, and supercedes any prior agreements between the M+C Organization and CMS as of
such date.

Article II

Coordinated Care Plan

The Medicare+Choice Organization agrees to operate coordinated care plans (as defined in 42 CFR
422.4(a)(1)), as described in its Adjusted Community Rate (ACR) proposal as approved annually by
CMS, in compliance with the requirements of this contract and applicable Federal statutes,
regulations, and policies. This contract is deemed to incorporate any changes that are required by
statute to be implemented during the term of the contract and any regulations or policies
implementing or interpreting such statutory provisions. However, CMS agrees that any regulation or
policy statement it issues later than 30 days prior to the date by which M+C Organizations are
required to submit ACR proposals to CMS, and which creates significant new operational costs of
which the M+C Organization did not have reasonable notice prior to such date, shall not take effect
in the next calendar year unless implementation during the next calendar year is required by
statute or in connection with litigation challenging CMS’ policies. CMS retains the authority to
issue, with an effective date during the term of this contract, policies to implement the statutory
requirement that M+C Organizations provide their enrollees those items and services for which
benefits are available under Medicare Parts A and B. Clarifications or explanations of M+C
operational requirements issued prior to 30 days prior to the date by which M+C Organizations are
required to submit ACR proposals are not considered to create new operational costs of which the
M+C organization did not have notice.

Article III

Functions To Be Performed By Medicare+Choice Organization

A. PROVISION OF BENEFITS

The M+C Organization agrees to provide enrollees in each of its M+C plans the basic benefits as
required under §422.101 and, to the extent applicable, supplemental benefits under §422.102 and as
established in the M+C Organization’s adjusted community rate (ACR) proposal as approved by CMS.
The M+C Organization agrees to provide access to such benefits as required under subpart C in a
manner consistent with professionally recognized standards of health care and according to the
access standards stated in § 422.112. The M+C Organization agrees to provide

1

 

post-hospital extended care services, should an M+C enrollee elect such coverage, through a home
skilled nursing facility according to the requirements of section 1852(l) of the Act. A home
skilled nursing facility is a facility in which an M+C enrollee resided at the time of admission to
the hospital, a facility that provides services through a continuing care retirement community, or
a facility in which the spouse of the enrollee is residing at the time of the enrollee’s discharge
from the hospital. [422.502(a)(3)]

B. ENROLLMENT REQUIREMENTS

1. The M+C Organization agrees to accept new enrollments, make enrollments effective,
process voluntary disenrollments, and limit involuntary disenrollments, as provided in subpart B of
part 422.

2. The M+C Organization shall comply with the provisions of § 422.110 concerning prohibitions
against discrimination in beneficiary enrollment.

     [422.502(a)(2)]

C. BENEFICIARY PROTECTIONS

1. The Medicare+Choice Organization agrees to comply with all requirements in subpart M of part
422 governing coverage determinations, grievances, and appeals. [422.502(a)(7)]

2. The Medicare+Choice Organization agrees to comply with the enrollee notice and appeal
procedures for the termination of provider services in § 422.624 and § 422.626.

3. The Medicare+Choice Organization agrees to comply with the confidentiality and enrollee record
accuracy requirements in § 422.118.

4. Beneficiary Financial Protection. The M+C Organization agrees to comply with the
following requirements:

     (a) Each M+C Organization must adopt and maintain arrangements satisfactory to CMS to protect
its enrollees from incurring liability for payment of any fees that are the legal obligation of the
M+C Organization. To meet this requirement the M+C Organization must—

     (i) Ensure that all contractual or other written arrangements with providers prohibit the
Organization’s providers from holding any beneficiary enrollee liable for payment of any fees that
are the legal obligation of the M+C Organization; and

     (ii) Indemnify the beneficiary enrollee for payment of any fees that are the legal obligation
of the M+C Organization for services furnished by providers that do not contract, or that have not
otherwise entered into an agreement with the M+C Organization, to provide services to the
organization’s beneficiary enrollees. [422.502(g)(1)]

(b) The M+C Organization must provide for continuation of enrollee health care benefits-

     (i) For all enrollees, for the duration of the contract period for which CMS payments have
been made; and

     (ii) For enrollees who are hospitalized on the date its contract with CMS terminates, or, in
the event of an insolvency, through the date of discharge. [422.502(g)(2)]

     (c) In meeting the requirements of this section (C), other than the provider contract
requirements specified in paragraph (C)(3)(a) of this Article, the M+C Organization may use—

     (i) Contractual arrangements;

     (ii) Insurance acceptable to CMS;

     (iii) Financial reserves acceptable to CMS; or

     (iv) Any other arrangement acceptable to CMS. [422.502(g)(3)]

2

 

D. PROVIDER PROTECTIONS

1. The M+C Organization agrees to comply with all applicable provider requirements in subpart E of
part 422, including provider certification requirements, anti-discrimination requirements, provider
participation and consultation requirements, the prohibition on interference with provider advice,
limits on provider indemnification, rules governing payments to providers, and limits on physician
incentive plans. [422.502(a)(6)]

2. Prompt Payment.

     (a) The M+C Organization must pay 95 percent of the “clean claims” within 30 days of
receipt if they are claims for covered services that are not furnished under a written agreement
between the organization and the provider.

     (i) The M+C Organization must pay interest on clean claims that are not paid within 30 days in
accordance with sections 1816(c)(2)(B) and 1842(c)(2)(B) of the Act.

     (ii) All other claims must be paid or denied within 60 calendar days from the date of the
request. [422.520(a)]

     (b) Contracts or other written agreements between the M+C Organization and its providers must
contain a prompt payment provision, the terms of which are developed and agreed to by both the M+C
Organization and the relevant provider. [422.520(b)]

     (c) If CMS determines, after giving notice and opportunity for hearing, that the M+C
Organization has failed to make payments in accordance with paragraph (2)(a) of this section, CMS
may provide—

     (i) For direct payment of the sums owed to providers; and

     (ii) For appropriate reduction in the amounts that would otherwise be paid to the M+C
Organization, to reflect the amounts of the direct payments and the cost of making those payments.
[422.520(c)]

E. QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM

1. The M+C Organization agrees to operate an ongoing quality assessment and performance
improvement program (as stated in 422.152 of subpart D).

2. Quality Assessment and Performance Improvement Projects: The M+C Organization agrees
to:

     (a) conduct quality assessment and performance improvement (QAPI) projects as directed
annually by CMS. These projects must be outcomes-oriented and targeted at achieving demonstrable,
sustained improvement in significant aspects of specified clinical and non-clinical areas which can
be expected to have a favorable effect on enrollees’ health outcomes and satisfaction. CMS shall
establish the obligations of the M+C Organization for the number and distribution of projects among
the required clinical and non-clinical areas.

     (b) In those years when CMS establishes a national improvement project for the Medicare+Choice
program, the M+C Organization shall participate in the CMS-sponsored national QAPI initiative,
unless the M+C Organization meets the requirements for an exemption from the initiative.

3. Performance Measurement and Reporting: The M+C Organization shall measure performance
under its M+C plans using standard measures required by CMS, and report (at the organization level)
its performance to CMS. The standard measures required by CMS during the term of this contract
will be uniform data collection and reporting instruments, to include the

3

 

Health Plan and Employer Data Information Set (HEDIS), Consumer Assessment of Health Plan
Satisfaction (CAHPS) survey, and Health Outcomes Survey (HOS). These measures will address
clinical areas, including effectiveness of care, enrollee perception of care and use of services;
and non-clinical areas including access to and availability of services, appeals and grievances,
and organizational characteristics. [422.152(c)(1)&(2)].

4. Utilization Review: If the M+C Organization uses written protocols for utilization
review, those policies and procedures must reflect current standards of medical practice in
processing requests for initial or continued authorization of services.[422.152(b)(3)]. The M+C
Organization must also have in effect mechanisms to detect both underutilization and
overutilization of services.[422.152(b)(4)] .

5. Information Systems:

     (a) The M+C Organization must make available to CMS information on quality and outcomes
measures that will enable beneficiaries to compare health coverage options and select among them,
as provided in § 422.64(c)(10). [422.152(b)(5)].

     (b) The M+C Organization must maintain a health information system that:

     (i) collects, analyzes and integrates the data necessary to implement its quality assessment
and performance improvement program, and

     (ii) assures that the information entered into the system (particularly that received from
providers) is reliable and complete.

     (c) The M+C Organization must make all collected data, including information on quality and
outcome measures, available to CMS to enable beneficiaries to compare health coverage options and
select among them, as provided in § 422.64(c)(10). [422.152(b)(5)]

6. External Review: The M+C Organization will have an agreement with an independent
quality review and improvement organization (review organization) approved by CMS. [422.154(a)]

     (a) The agreement will be consistent with CMS guidelines and will:

     (i) Require that the M+C Organization allocate adequate space for use of the review
organization whenever it is conducting review activities and provide all pertinent data, including
patient care data, at the time the review organization needs the data to carry out the reviews and
make its determinations, and

     (ii) Except in the case of complaints about quality, exclude review activities that CMS
determines would duplicate review activities conducted as part of an accreditation process or as
part of CMS monitoring. [422.154(b)]

F. COMPLIANCE PLAN

The M+C Organization agrees to implement a compliance plan in accordance with the requirements of
§ 422.501(b)(3)(vi).

     [422.501(b)(3)(vi)]

G. COMPLIANCE DEEMED ON THE BASIS OF ACCREDITATION: CMS may deem the M+C Organization to have met
the quality assessment and performance improvement requirements of § 422.152, the confidentiality
and accuracy of enrollee records requirements of § 422.118, the anti-discrimination requirements of
§1852(b) of the Act, the access to services requirements of §1852(d) of the Act, the advance
directives requirements of § 422.128, and/or the provider participation requirements of §1852(j) of
the Act if the M+C Organization is fully

4

 

accredited (and periodically reaccredited) by a private, national accreditation organization
approved by CMS and the accreditation organization used the standards approved by CMS for the
purposes of assessing the M+C Organization’s compliance with Medicare requirements. The provisions
of § 422.156 shall govern the M+C Organization’s use of deemed status to meet M+C program
requirements.

Article IV

CMS Payment to M+C Organization

A. The M+C Organization agrees to develop its annual adjusted community rate (ACR) proposal and
submit to CMS all required information on premiums, benefits, and cost sharing, as required under
42 CFR 422, subpart G. [422.502(a)(10)]

B. Methodology. CMS agrees to pay the M+C Organization under this contract in
accordance with the provisions of section 1853 of the Act and subpart F of part 422.
[422.502(a)(9)]

C. Attestation of payment data (Attachments A, B, and C).

1. As a condition for receiving a monthly payment under paragraph B of this article, subpart F of
part 422, the M+C Organization agrees that its chief executive officer (CEO), chief financial
officer (CFO), or an individual delegated with the authority to sign on behalf of one of these
officers, and who reports directly to such officer, must request payment under the contract on the
forms attached as Attachment A (enrollment attestation), Attachment B (risk adjustment data), and
Attachment C (adjusted community rate (ACR) proposal information attestation), hereto which attest
to (based on best knowledge, information and belief, as of the date specified on the attestation
form) the accuracy, completeness, and truthfulness of the data identified on these attachments.
Attachment A requires attestation based on best knowledge, information, and belief, that each
enrollee for whom the M+C Organization is requesting payment is validly enrolled, or was validly
enrolled during the period for which payment is requested, in an M+C plan offered by the M+C
Organization. The M+C Organization shall submit completed enrollment attestation forms to CMS, or
its contractor, on a monthly basis. (NOTE: The forms included as attachments to this contract are
for reference only. CMS will provide instructions for the completion and submission of the forms
in separate documents. M+C Organizations should not take any action on the forms until appropriate
CMS instructions become available.)

2. Attachment B requires that the CEO, CFO, or an individual delegated with the authority to sign
on behalf of one of these officers, and who reports directly to such officer, must attest to (based
on best knowledge, information and belief, as of the date specified on the attestation form) that
the risk adjustment data it submits to CMS under § 422.257 are accurate, complete, and truthful.
The M+C Organization shall make annual attestations of risk adjustment data on Attachment B and
according to a schedule to be published by CMS. If such risk adjustment data are generated by a
related entity, contractor, or subcontractor of an M+CO, such entity, contractor, or subcontractor
must similarly attest to (based on best knowledge, information, and belief, as of the date
specified on the attestation form) the accuracy, completeness, and truthfulness of the data.
[422.502(l)]

5

 

     3. The CEO, CFO, or an individual delegated with the authority to sign on behalf of one
of these officers, and who reports directly to such officer, must attest (based on best knowledge,
information and belief, as of the date specified on the attestation form) that the information and
documentation comprising the ACR proposal is accurate, complete, and truthful and fully conforms to
the ACRP requirements; and that the benefits described in the CMS-approved ACR proposal agree with
the benefit package the M+C Organization will offer during the period covered by the ACR proposal.
[422.502(l)]

Article V

     M+C Organization Relationship with Related Entities, Contractors, and Subcontractors

A. Notwithstanding any relationship(s) that the M+C Organization may have with related entities,
contractors, or subcontractors, the M+C Organization maintains full responsibility for adhering to
and otherwise fully complying with all terms and conditions of its contract with CMS.
[422.502(i)(1)]

B. The M+C Organization agrees to require all related entities, contractors, or subcontractors to
agree that—

     (1) HHS, the Comptroller General, or their designees have the right to inspect, evaluate, and
audit any pertinent contracts, books, documents, papers, and records of the related entity(s),
contractor(s), or subcontractor(s) involving transactions related to the contract; and

     (2) HHS’s, the Comptroller General’s, or their designee’s right to inspect, evaluate, and
audit any pertinent information for any particular contract period will exist through 6 years from
the final date of the contract period or from the date of completion of any audit, whichever is
later. [422.502(i)(2)]

C. The M+C Organization agrees that all contracts or written arrangements into which the M+C
Organization enters with providers, related entities, contractors, or subcontractors shall contain
the following elements:

     (1) Enrollee protection provisions that provide—

     (a) Consistent with Article III(C), arrangements that prohibit providers from holding an
enrollee liable for payment of any fees that are the legal obligation of the M+C Organization; and

     (b) Consistent with Article III(C), provision for the continuation of benefits.

     (2) Accountability provisions that indicate that—

     (a) The M+C Organization oversees and is accountable to CMS for any functions or
responsibilities that are described in these standards; and

     (b) The M+C Organization may only delegate activities or functions to a provider, related
entity, contractor, or subcontractor in a manner consistent with requirements set forth at
paragraph D of this article.

     (3) A provision requiring that any services or other activity performed by a related entity,
contractor or subcontractor in accordance with a contract or written agreement between the

6

 

related entity, contractor, or subcontractor and the M+C Organization will be consistent and
comply with the M+C Organization’s contractual obligations to CMS.

     [422.502(i)(3)]

D. If any of the M+C Organization’s activities or responsibilities under this contract with CMS
are delegated to other parties, the following requirements apply to any related entity, contractor,
subcontractor, or provider:

     (1) Written arrangements must specify delegated activities and reporting responsibilities.

     (2) Written arrangements must either provide for revocation of the delegation
activities and reporting requirements or specify other remedies in instances where CMS or the M+C
Organization determine that such parties have not performed satisfactorily.

     (3) Written arrangements must specify that the performance of the parties is monitored by the
M+C Organization on an ongoing basis.

     (4) Written arrangements must specify that either—

     (a) The credentials of medical professionals affiliated with the party or parties will be
either reviewed by the M+C Organization; or

     (b) The credentialing process will be reviewed and approved by the M+C Organization and the
M+C Organization must audit the credentialing process on an ongoing basis.

     (5) All contracts or written arrangements must specify that the related entity, contractor, or
subcontractor must comply with all applicable Medicare laws, regulations, and CMS instructions.
[422.502(i)(4)]

E. If the M+C Organization delegates selection of the providers, contractors, or subcontractors to
another organization, the M+C Organization’s written arrangements with that organization must state
that the M+C Organization retains the right to approve, suspend, or terminate any such arrangement.
[422.502(i)(5)]

Article VI

Records Requirements

A. MAINTENANCE OF RECORDS

1. The M+C Organization agrees to maintain for 6 years books, records, documents, and other
evidence of accounting procedures and practices that—

     (a) Are sufficient to do the following:

     (i) Accommodate periodic auditing of the financial records (including data related to Medicare
utilization, costs, and computation of the ACR) of the M+C Organization.

     (ii) Enable CMS to inspect or otherwise evaluate the quality, appropriateness and timeliness
of services performed under the contract, and the facilities of the M+C Organization.

     (iii) Enable CMS to audit and inspect any books and records of the M+C Organization that
pertain to the ability of the organization to bear the risk of potential financial losses, or to
services performed or determinations of amounts payable under the contract.

     (iv) Properly reflect all direct and indirect costs claimed to have been incurred and used in
the preparation of the ACR proposal.

7

 

     (v) Establish component rates of the ACR for determining additional and supplementary
benefits.

     (vi) Determine the rates utilized in setting premiums for State insurance agency purposes and
for other government and private purchasers; and

     (b) Include at least records of the following:

     (i) Ownership and operation of the M+C Organization’s financial, medical, and other
record keeping systems.

     (ii) Financial statements for the current contract period and six prior periods.

     (iii) Federal income tax or informational returns for the current contract period and six
prior periods.

     (iv) Asset acquisition, lease, sale, or other action.

     (v) Agreements, contracts, and subcontracts.

     (vi) Franchise, marketing, and management agreements.

     (vii) Schedules of charges for the M+C Organization’s fee-for-service patients.

     (viii) Matters pertaining to costs of operations.

     (ix) Amounts of income received, by source and payment.

     (x) Cash flow statements.

     (xi) Any financial reports filed with other Federal programs or State authorities.
[422.502(d)]

2. Access to facilities and records. The M+C Organization agrees to the following:

     (a) The Department of Health and Human Services (HHS), the Comptroller General, or their
designee may evaluate, through inspection or other means—

     (i) The quality, appropriateness, and timeliness of services furnished to Medicare enrollees
under the contract;

     (ii) The facilities of the M+C Organization; and

     (iii) The enrollment and disenrollment records for the current contract period and six prior
periods.

     (b) HHS, the Comptroller General, or their designees may audit, evaluate, or inspect any
books, contracts, medical records, documents, papers, patient care documentation, and other records
of the M+C Organization, related entity, contractor, subcontractor, or its transferee that pertain
to any aspect of services performed, reconciliation of benefit liabilities, and determination of
amounts payable under the contract, or as the Secretary may deem necessary to enforce the contract.

     (c) The M+C Organization agrees to make available, for the purposes specified in section (A)
of this article, its premises, physical facilities and equipment, records relating to its Medicare
enrollees, and any additional relevant information that CMS may require, in a manner that meets CMS
record maintenance requirements.

     (d) HHS, the Comptroller General, or their designee’s right to inspect, evaluate, and audit
extends through 6 years from the final date of the contract period or completion of audit,
whichever is later unless-

     (i) CMS determines there is a special need to retain a particular record or group of records
for a longer period and notifies the M+C Organization at least 30 days before the normal
disposition date;

8

 

     (ii) There has been a termination, dispute, or fraud or similar fault by the M+C Organization,
in which case the retention may be extended to 6 years from the date of any resulting final
resolution of the termination, dispute, or fraud or similar fault; or

     (iii) HHS, the Comptroller General, or their designee determine that there is a reasonable
possibility of fraud, in which case they may inspect, evaluate, and audit the M+C Organization at
any time. [422.502(e)]

B. REPORTING REQUIREMENTS

1. The M+C Organization shall have an effective procedure to develop, compile, evaluate, and
report to CMS, to its enrollees, and to the general public, at the times and in the manner that CMS
requires, and while safeguarding the confidentiality of the doctor-patient relationship, statistics
and other information as described in the remainder of this section (B). [422.516(a)]

2. The M+C Organization agrees to submit to CMS certified financial information that must include
the following:

     (a) Such information as CMS may require demonstrating that the organization has a fiscally
sound operation, including:

     (i) The cost of its operations;

     (ii) A description, submitted to CMS annually and within 120 days of the end of the fiscal
year, of significant business transactions (as defined in § 422.500) between the M+C Organization
and a party in interest showing that the costs of the transactions listed in paragraph (2)(a)(v) of
this section do not exceed the costs that would be incurred if these transactions were with someone
who is not a party in interest; or

     (iii) If they do exceed, a justification that the higher costs are consistent with prudent
management and fiscal soundness requirements.

     (iv) A combined financial statement for the M+C Organization and a party in interest if either
of the following conditions is met:

     (aa) Thirty-five percent or more of the costs of operation of the M+C Organization go to a
party in interest.

     (bb) Thirty-five percent or more of the revenue of a party in interest is from the M+C
Organization. [422.516(b)]

     (v)Requirements for combined financial statements.

     (aa) The combined financial statements required by paragraph (2)(a)(iv) must display in
separate columns the financial information for the M+C Organization and each of the parties in
interest.

     (bb) Inter-entity transactions must be eliminated in the consolidated column.

     (cc) The statements must have been examined by an independent auditor in accordance with
generally accepted accounting principles and must include appropriate opinions and notes.

     (dd) Upon written request from the M+C Organization showing good cause, CMS may waive the
requirement that the organization’s combined financial statement include the financial information
required in paragraph (2)(a)(v) with respect to a particular entity. [422.516(c)]

     (vi) A description of any loans or other special financial arrangements the M+C Organization
makes with contractors, subcontractors, and related entities.

     (b) Such information as CMS may require pertaining to the disclosure of ownership and control
of the M+C Organization. [422.502(f)(1)(ii)]

     (c) Patterns of utilization of the M+C Organization’s services.

9

 

3. The M+C Organization agrees to participate in surveys required by CMS and to submit to CMS all
information that is necessary for CMS to administer and evaluate the program and to simultaneously
establish and facilitate a process for current and prospective beneficiaries to exercise choice in
obtaining Medicare services. This information includes, but is not limited to:

     (a) The benefits covered under the M+C plan;

     (b) The M+C monthly basic beneficiary premium and M+C monthly supplemental beneficiary
premium, if any, for the plan.

     (c) The service area and continuation area, if any, of each plan and the enrollment capacity
of each plan;

     (d) Plan quality and performance indicators for the benefits under the plan including —

     (i) Disenrollment rates for Medicare enrollees electing to receive benefits through the plan
for the previous 2 years;

     (ii) Information on Medicare enrollee satisfaction;

     (iii) The patterns of utilization of plan services;

     (iv) The availability, accessibility, and acceptability of the plan’s services;

     (v) Information on health outcomes and other performance measures required by CMS;

     (vi) The recent record regarding compliance of the plan with requirements of this part, as
determined by CMS; and

     (vii) Other information determined by CMS to be necessary to assist beneficiaries in making an
informed choice among M+C plans and traditional Medicare;

     (e) Information about beneficiary appeals and their disposition;

     (f) Information regarding all formal actions, reviews, findings, or other similar actions by
States, other regulatory bodies, or any other certifying or accrediting organization;

     (g) Any other information deemed necessary by CMS for the administration or evaluation of the
Medicare program. [422.502(f)(2)]

4. The M+C Organization agrees to provide to its enrollees and upon request, to any individual
eligible to elect an M+C plan, all informational requirements under § 422.64 and, upon an
enrollee’s, request, the financial disclosure information required under § 422.516. [422.502(f)(3)]

5. Reporting and disclosure under ERISA.

     (a) For any employees’ health benefits plan that includes an M+C Organization in its
offerings, the M+C Organization must furnish, upon request, the information the plan needs to
fulfill its reporting and disclosure obligations (with respect to the M+C Organization) under the
Employee Retirement Income Security Act of 1974 (ERISA).

     (b) The M+C Organization must furnish the information to the employer or the employer’s
designee, or to the plan administrator, as the term “administrator” is defined in ERISA.
[422.516(d)]

6. Electronic communication. The M+C Organization must have the capacity to communicate
with CMS electronically. [422.502(b)]

7. Risk Adjustment  data. The M+C Organization agrees to comply with the requirements in
§ 422.257 for submitting risk adjustment data to CMS. [422.502(a)(8)]

10

 

Article VII

Renewal of the M+C Contract

A. Renewal of contract: In accordance with § 422.506, the contract is renewable annually
only if-

     (1) CMS informs the M+C Organization that it authorizes a renewal; and

     (2) The M+C Organization has not provided CMS with a notice of intention not to renew.
[422.504(c)]

B. Nonrenewal of contract:

     (1) Nonrenewal by the Organization.

     (a) In accordance with § 422.506, the M+C Organization may elect not to renew its contract
with CMS as of the end of the term of the contract for any reason, provided it meets the time
frames for doing so set forth in paragraphs (b) and (c) of this paragraph.

     (b) If the M+C Organization does not intend to renew its contract, it must notify—

     (i) CMS in writing, by the date established pursuant to § 422.506 or by the date established
through statute.

     (ii) Each Medicare enrollee, at least 90 days before the date on which the nonrenewal is
effective. This notice must include a written description of all alternatives available for
obtaining Medicare services within the service area of the M+C plans that the M+C Organization
offers, including alternative M+C plans, original Medicare, and Medigap options and must receive
CMS approval.

     (iii) The general public, at least 90 days before the end of the current calendar year, by
publishing a CMS-approved notice in one or more newspapers of general circulation in each community
located in the M+C Organization’s service area.

     (c) CMS may accept a nonrenewal notice submitted after the applicable annual non-renewal
notice deadline if —

     (i) The M+C Organization notifies its Medicare enrollees and the public in accordance with
paragraph (1)(b)(ii) and (1)(b)(iii) of this section; and

     (ii) Acceptance is not inconsistent with the effective and efficient administration of the
Medicare program.

     (d) If the M+C Organization does not renew a contract under this paragraph (1), CMS will not
enter into a contract with the Organization for 2 years from the date of contract separation unless
there are special circumstances that warrant special consideration, as determined by CMS. This
provision shall not apply when statutory or regulatory changes are made to the M+C program within
six (6) months of the M+C Organization’s notice of withdrawal that would increase payments for the
service area from which the M+C Organization had withdrawn. [422.506(a)]

     (2) CMS decision not to renew.

     (a) CMS may elect not to authorize renewal of a contract for any of the following reasons:

     (i) The M+C Organization has not fully implemented or shown discernable progress in
implementing quality assessment and performance improvement projects as defined in Article III,
section (E)(2) of this contract.

11

 

     (ii) For any of the reasons listed in § 422.510(a) [Article VIII, section (B)(1)(a) of this
contract], which would also permit CMS to terminate the contract.

     (iii) The M+C Organization has committed any of the acts in § 422.752(a) that would
support the imposition of intermediate sanctions or civil money penalties under subpart O of part
422.

     (b) Notice. CMS shall provide notice of its decision whether to authorize renewal of
the contract as follows:

     (i) To the M+C Organization by May 1 of the contract year.

     (ii) To the M+C Organization’s Medicare enrollees by mail at least 90 days before the end of
the current calendar year.

     (iii) To the general public at least 90 days before the end of the current calendar year, by
publishing a notice in one or more newspapers of general circulation in each community or county
located in the M+C Organization’s service area.

     (c) Notice of appeal rights. CMS shall give the M+C Organization written notice of
its right to reconsideration of the decision not to renew in accordance with § 422.644.

     [422.506(b)]

Article VIII

Modification or Termination of the Contract

A. Modification or Termination of Contract by Mutual Consent

1. This contract may be modified or terminated at any time by written mutual consent.

     (a) If the contract is terminated by mutual consent, except as provided in section (B)(1)(c)
of this article, the M+C Organization must provide notice to its Medicare enrollees and the general
public as provided in § 422.512(b)(2) and (b)(3) [Article VIII, section B(2)(b) of this contract].

     (b) If the contract is modified by mutual consent, the M+C Organization must notify its
Medicare enrollees of any changes that CMS determines are appropriate for notification within time
frames specified by CMS.

2. If this contract is terminated by mutual consent and replaced the day following such
termination by a new M+C contract, the M+C Organization is not required to provide the notice
specified in section B of this article.

     [422.508]

B. Termination of the Contract by CMS or the M+C Organization

1. Termination by CMS.

     (a) CMS may terminate a contract for any of the following reasons:

     (i) The M+C Organization has failed substantially to carry out the terms of its contract with
CMS.

     (ii) The M+C Organization is carrying out its contract with CMS in a manner that is
inconsistent with the effective and efficient implementation of 42 CFR part 422.

     (iii) CMS determines that the M+C Organization no longer meets the requirements of this part
for being a contracting organization.

12

 

     (iv) The M+C Organization commits or participates in fraudulent or abusive activities
affecting the Medicare program, including submission of fraudulent data.

     (v) The M+C Organization experiences financial difficulties so severe that its ability to make
necessary health services available is impaired to the point of posing an imminent and serious risk
to the health of its enrollees, or otherwise fails to make services available to the extent that
such a risk to health exists.

     (vi) The M+C Organization substantially fails to comply with the requirements in subpart M of
this part relating to grievances and appeals.

     (vii) The M+C Organization fails to provide CMS with valid risk adjustment data as required
under § 422.257.

     (viii) The M+C Organization fails to implement an acceptable quality assessment and
performance improvement program as required under subpart D of part 422.

     (ix) The M+C Organization substantially fails to comply with the prompt payment requirements
in § 422.520.

     (x) The M+C Organization substantially fails to comply with the service access requirements in
§ 422.112 or § 422.114.

     (xi) The M+C Organization fails to comply with the requirements of § 422.208 regarding
physician incentive plans.

     (xii) The M+CO substantially fails to comply with the marketing requirements in 422.80.

     (b) Notice. If CMS decides to terminate a contract for reasons other than the grounds
specified in section (B)(1)(a) above, it will give notice of the termination as follows:

     (i) CMS will notify the M+C Organization in writing 90 days before the intended date of the
termination.

     (ii) The M+C Organization will notify its Medicare enrollees of the termination by mail at
least 30 days before the effective date of the termination.

     (iii) The M+C Organization will notify the general public of the termination at least 30 days
before the effective date of the termination by publishing a notice in one or more newspapers of
general circulation in each community or county located in the M+C Organization’s service area.

     (c) Immediate termination of contract by CMS.

     (i) For terminations based on violations prescribed in paragraph (B)(1)(a)(v) of this article,
CMS will notify the M+C Organization in writing that its contract has been terminated effective the
date of notice of the termination decision by CMS. If termination is effective in the middle of a
month, CMS has the right to recover the prorated share of the capitation payments made to the M+C
Organization covering the period of the month following the contract termination.

     (ii) CMS will notify the M+C Organization’s Medicare enrollees in writing of CMS’ decision to
terminate the M+C Organization’s contract. This notice will occur no later than 30 days after CMS
notifies the plan of its decision to terminate this contract. CMS will simultaneously inform the
Medicare enrollees of alternative options for obtaining Medicare services, including alternative
M+C Organizations in a similar geographic area and original Medicare.

     (iii) CMS will notify the general public of the termination no later than 30 days after
notifying the M+C Organization of CMS’ decision to terminate this contract. This notice will be

13

 

published in one or more newspapers of general circulation in each community or county located
in the M+C Organization’s service area.

     (d) Corrective action plan

     (i) General. Before terminating a contract for reasons other than the grounds
specified in section (B)(1)(a)(v) of this article, CMS will provide the M+C Organization with
reasonable opportunity, not to exceed time frames specified at subpart N of part 422, to develop
and receive CMS approval of a corrective action plan to correct the deficiencies that are the basis
of the proposed termination.

     (ii) Exception. If a contract is terminated under section (B)(1)(a)(v) of this
article, the M+C Organization will not have the opportunity to submit a corrective action plan.

     (e) Appeal rights. If CMS decides to terminate this contract, it will send written
notice to the M+C Organization informing it of its termination appeal rights in accordance with
subpart N of part 422.

     [422.510]

2. Termination by the M+C Organization

     (a) Cause for termination. The M+C Organization may terminate this contract if CMS
fails to substantially carry out the terms of the contract.

     (b) Notice. The M+C Organization must give advance notice as follows:

     (i) To CMS, at least 90 days before the intended date of termination. This notice must
specify the reasons why the M+C Organization is requesting contract termination.

     (ii) To its Medicare enrollees, at least 60 days before the termination effective date. This
notice must include a written description of alternatives available for obtaining Medicare services
within the service area, including alternative M+C plans, Medigap options, and original Medicare
and must receive CMS approval.

     (iii) To the general public at least 60 days before the termination effective date by
publishing a CMS-approved notice in one or more newspapers of general circulation in each community
or county located in the M+C Organization’s geographic area.

     (c) Effective date of termination. The effective date of the termination will be
determined by CMS and will be at least 90 days after the date CMS receives the M+C Organization’s
notice of intent to terminate.

     (d) CMS’ liability. CMS’ liability for payment to the M+C Organization ends as of the
first day of the month after the last month for which the contract is in effect, but CMS shall make
payments for amounts owed prior to termination but not yet paid.

     (e) Effect of termination by the organization. CMS will not enter into an agreement
with the M+C Organization for a period of two years from the date the Organization has terminated
this contract, unless there are circumstances that warrant special consideration, as determined by
CMS. [422.512]

Article IX

Requirements of Other Laws and Regulations

A. The M+C Organization agrees to comply with—

14

 

	(1)	 	Title VI of the Civil Rights Act of 1964 as implemented by regulations at 45 CFR part 84;
	 
	(2)	 	The Age Discrimination Act of 1975 as implemented by regulations at 45 CFR part 91;
	 
	(3)	 	The Americans With Disabilities Act;
	 
	(4)	 	The Rehabilitation Act of 1973 ;
	 
	(5)	 	The Health Insurance Portability and Accountability Act;
	 
	(6)	 	Other laws applicable to recipients of Federal funds; and
	 
	(7)	 	All other applicable laws, regulations, and rules.
	 
	 	 	[422.502(h)(1)]

B. The M+C Organization is receiving Federal payments under this contract, and related entities,
contractors, and subcontractors paid by the M+C Organization to fulfill its obligations under this
contract are subject to certain laws that are applicable to individuals and entities receiving
Federal funds. The M+C Organization agrees to inform all related entities, contractors and
subcontractors that payments that they receive are, in whole or in part, from Federal funds.

     [422.502(h)(2)]

C. In the event that any provision of this contract conflicts with the provisions of any statute
or regulation applicable to an M+C Organization, the provisions of the statute or regulation shall
have full force and effect.

Article X

Severability

The M+C Organization agrees that, upon CMS’ request, this contract will be amended to exclude any
M+C plan or State-licensed entity specified by CMS, and a separate contract for any such excluded
plan or entity will be deemed to be in place when such a request is made.

     [422.502(k)]

15

 

     In witness whereof, the parties hereby execute this contract.

FOR THE M+C ORGANIZATION

	 	 	 
	Todd Farha

	 	President and CEO
	 

	 	 
	Printed Name

	 	Title
	 
	 	 
	/s/ Todd Farha

	 	3/17/05
	 

	 	 
	Signature

	 	Date
	 
	 	 
	WellCare of Georgia

	 	2265 Roswell Road, Suite 100, Marietta, GA 30062
	 

	 	 
	Organization

	 	Address

FOR THE CENTERS FOR MEDICARE & MEDICAID SERVICES

	 	 	 
	/s/ Patricia P. Smith

	 	6/17/05
	 

	 	 
	Patricia P. Smith

	 	Date
	Director
	 	 
	Medicare Advantage Group
	 	 
	Center for Beneficiary Choices
	 	 

16

 

ATTACHMENT A

ATTESTATION OF ENROLLMENT INFORMATION

RELATING TO CMS PAYMENT

TO A MEDICARE+CHOICE ORGANIZATION

     Pursuant to the contract(s) between the Centers for Medicare & Medicaid Services (CMS) and
WellCare of Georgia, Inc., hereafter referred to as the M+C Organization, governing the operation
of the following Medicare +Choice plans H1112/P01456, the M+C Organization hereby requests payment
under the contract, and in doing so, makes the following attestation concerning CMS payments to the
M+C Organization. The M+C Organization acknowledges that the information described below directly
affects the calculation of CMS payments to the M+C Organization and that misrepresentations to CMS
about the accuracy of such information may result in Federal civil action and/or criminal
prosecution. This attestation shall not be considered a waiver of the M+C Organization’s right to
seek payment adjustments from CMS based on information or data which does not become available
until after the date the M+C Organization submits this attestation.

     1. The M+C Organization has reported to CMS for the month of (INDICATE MONTH AND YEAR)
all new enrollments, disenrollments, and changes in enrollees’ institutional status with respect to
the above-stated M+C plans. Based on best knowledge, information, and belief as of the date
indicated below, all information submitted to CMS in this report is accurate, complete, and
truthful.

     2. The M+C Organization has reviewed the CMS monthly membership report and reply listing for
the month of (INDICATE MONTH AND YEAR) for the above-stated M+C plans and has reported to
CMS any discrepancies between the report and the M+C Organization’s records. For those portions of
the monthly membership report and the reply listing to which the M+C Organization raises no
objection, the M+C Organization, through the certifying CEO/CFO, will be deemed to have attested,
based on best knowledge, information, and belief as of the date indicated below, to their accuracy,
completeness, and truthfulness.

	 	 	 
	 
	 	 
	 

	 	 
	 

	 	(INDICATE TITLE [CEO, CFO, or delegate])

on behalf of
	 
	 	 
	 

	 	(INDICATE M+C ORGANIZATION)
	 
	 	 
	 

	 	 
	 

	 	DATE

17

 

ATTACHMENT B

ATTESTATION OF RISK ADJUSTMENT DATA INFORMATION RELATING TO

CMS PAYMENT TO A MEDICARE+CHOICE ORGANIZATION

     Pursuant to the contract(s) between the Centers for Medicare & Medicaid Services (CMS) and
WellCare of Georgia, Inc., hereafter referred to as the M+C Organization, governing the operation
of the following Medicare +Choice plans H1112/P01456, the M+C Organization hereby requests payment
under the contract, and in doing so, makes the following attestation concerning CMS payments to the
M+C Organization. The M+C Organization acknowledges that the information described below directly
affects the calculation of CMS payments to the M+C Organization or additional benefit obligations
of the M+C Organization and that misrepresentations to CMS about the accuracy of such information
may result in Federal civil action and/or criminal prosecution.

     The M+C Organization has reported to CMS for the period of (INDICATE DATES) all
(INDICATE TYPE OF DATA – INPATIENT HOSPITAL, OUTPATIENT HOSPITAL, OR PHYSICIAN) risk
adjustment data available to the M+C Organization with respect to the above-stated M+C plans.
Based on best knowledge, information, and belief as of the date indicated below, all information
submitted to CMS in this report is accurate, complete, and truthful.

	 	 	 
	 

	 	 
	 

	 	(INDICATE TITLE [CEO, CFO, or delegate])

on behalf of
	 
	 	 
	 

	 	(INDICATE M+C ORGANIZATION)
	 
	 	 
	 

	 	 
	 

	 	DATE

18

 

ATTACHMENT C

ATTESTATION OF ADJUSTED COMMUNITY RATE INFORMATION RELATING

TO CMS PAYMENT TO A MEDICARE+CHOICE ORGANIZATION

     Pursuant to the contract(s) between the Centers for Medicare & Medicaid Services (CMS) and
WellCare of Georgia, Inc., hereafter referred to as the M+C Organization, governing the operation
of the following Medicare +Choice plans H1112/P01456, the M+C Organization hereby requests payment
under the contract, and in doing so, makes the following attestation concerning CMS payments to the
M+C Organization. The M+C Organization acknowledges that the information described below directly
affects the calculation of CMS payments to the M+C Organization or additional benefit obligations
of the M+C Organization and that misrepresentations to CMS about the accuracy of such information
may result in Federal civil action and/or criminal prosecution.

     The M+C Organization has submitted to CMS an adjusted community rate (ACR) proposal for the
period (June 1, 2005 – December 31, 2005). Based on best knowledge, information, and
belief as of the date indicated below, all of the information submitted to CMS in this ACR proposal
is accurate, complete, and truthful, and the benefit package the M+C Organization will offer during
the above-stated period agrees with the CMS-approved ACR proposal.

	 	 	 
	 

	 	/s/ Todd Farha
	 

	 	 
	 

	 	President and CEO
	 
	 	 
	 

	 	WellCare of Georgia, Inc.
	 

	 	 
	 
	 	 
	 

	 	3/17/05
	 

	 	 
	 

	 	DATE

19

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