Document:

ex10-11.htm

  
Exhibit 10.11

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT dated as of March 8, 2011 (the “Agreement”), is by and between Healthways, Inc., a Delaware corporation (the “Company”), and James W. Elrod (the “Executive”).

WHEREAS, the Company desires that the Executive serve or continue to serve as Vice President and General Counsel (“VP and General Counsel”) and the Executive desires to hold such position under the terms and conditions of this Agreement; and

 

 

WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions of the employment relationship of the Executive with the Company.

NOW, THEREFORE, intending to be legally bound hereby, the parties agree as follows:

	
I.

	
EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company, upon the terms and subject to the conditions set forth herein.

	
II.

	
TERM. Subject to termination as stated in Section VI, the term of employment of the Executive pursuant to this Agreement (as the same may be extended, the “Term”) shall commence on February 21, 2011 (the “Effective Date”), and shall have a continuous term of two (2) years thereafter.

	
III.

	
POSITION. During the Term, the Executive shall serve as VP and General Counsel of the Company performing duties commensurate with the position and such additional duties as the Company shall determine. If asked, the Executive agrees to serve, without any additional compensation, as a director on the Board of Directors of the Company (the “Board”) and/or the board of directors of any subsidiary of the Company, and/or in one or more officer positions with the Company and/or any subsidiary of the Company. If the Executive’s employment is terminated for any reason, whether such termination is voluntary or involuntary, the Executive shall resign as a director and officer of the Company (and any of its subsidiaries), such resignation to be effective no later than the date of termination of the Executive’s employment with the Company.

	
IV.

	
DUTIES. During the Term, the Executive shall devote his full time and attention during normal business hours to the business and affairs of the Company; provided, however, that it shall not be a violation of this Agreement for the Executive with the approval of the Company to devote reasonable periods of time to charitable and community activities and industry or professional activities, and/or to manage personal investments, so long as such activities do not interfere with the performance of the Executive’s responsibilities under this Agreement.

V.           COMPENSATION

	
  

	
A.

	
Base Salary. The Executive’s initial base salary as of the Effective Date is $375,000.08. Effective January 1 of each calendar year after the Effective Date during the Term of this Agreement, upon the recommendation of the Chief Executive Officer (“CEO”), the Board (or a committee of the Board) shall review the Executive’s base salary and may increase such amount if and as it may deem advisable. Such initial base salary, as it may be increased during the Term, is defined as the “Base Salary.” The Base Salary shall be payable in substantially equal installments in accordance with the Company’s normal payroll practices, and is subject to all proper taxes and withholding. The Base Salary rate at which the Executive is being compensated on the Date of Termination (as defined below) shall be the Base Salary rate used in determining all severance amounts payable to the Executive hereunder.

	
  

	
B.

	
Bonus Plan. Such bonus, if any, as shall be determined upon the recommendation of the CEO by the Board (or any designated Committee of the Board comprised solely of independent directors), shall be paid in accordance with the terms and conditions of the bonus plan established for the Company (“Bonus Plan”).

	
  

	
C.

	
Long Term Incentive Awards. During the Term, upon the recommendation of the CEO, the Board (or any designated committee of the Board comprised solely of independent directors) will consider, in its sole discretion, long term incentive awards to the Executive pursuant to the Company’s equity incentive plans.

	
  

	
D.

	
Other Benefits. In addition to the benefits specifically provided for herein, during the Term the Executive shall be entitled to participate in all benefit plans maintained by the Company for officers generally according to the terms of such plans.

	
VI.

	
TERMINATION OF AGREEMENT. The Executive’s employment under this Agreement shall not be terminated except as set forth in this Section. Any reference to the date of delivery of a notice of termination or resignation by either the Company or the Executive in this Section VI shall constitute the “Date of Termination,” unless otherwise set forth herein.  For purposes of this Agreement, the Executive will be deemed to have terminated employment when the Executive has a “separation from service” from the Company as determined in accordance with Treasury Regulation 1.409A-1(h).

	
  

	
A.

	
By Mutual Consent. The Executive’s employment pursuant to this Agreement may be terminated at any time by the mutual written agreement of the Company and the Executive upon such terms as are agreed upon between the parties.

	
  

	
B.

	
Death. If Executive dies during the Term of this Agreement, the Company shall pay his Base Salary due through the date of his death to the Executive’s designated beneficiary plus a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the time of his death, which Bonus Plan amount will be determined and paid after the end of the fiscal year for which the Bonus Plan was in place.  The amount of Base Salary due through the date of the Executive’s death shall be paid to his designated beneficiary within thirty (30) days of the Executive’s death, with the date of such payment chosen by the Company in its sole discretion. Any bonus shall be paid at such time as is designated in the Bonus Plan. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties at the time of his death. In addition, all amounts contributed by the Company to the Capital Accumulation Plan (“CAP”) for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect at the time of the Executive’s death. The Company shall then have no further obligations to the Executive or any representative of his estate or his heirs except that Executive’s estate or beneficiaries, as the case may be, shall be paid such amounts as may be payable under the Company’s life insurance policies and other plans as they relate to benefits following death then in effect.

	
  

	
C.

	
Disability

	
  

	
1.

	
The Executive’s employment may be terminated by written notice by either party to the other party, when:

	
  

	
a.

	
the Executive suffers a physical or mental disability entitling the Executive to long-term disability benefits under the Company’s long-term disability plan, if any, or

	
  

	
b.

	
in the absence of a Company long-term disability plan, the Executive is unable, as determined by the Board (or any designated Committee of the Board), to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months.

	
  

	
2.

	
If the Executive’s employment is terminated under this Section (C), the Executive shall be entitled to receive:

	
  

	
a.

	
all Base Salary and benefits due to the Executive through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

	
  

	
b.

	
an amount equal to the Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

	
  

	
c.

	
if permitted under the Company’s group medical insurance, group medical benefits at the same rate as then in effect for the Company’s employees for two (2) years after the Date of Termination; provided, that if the Executive instead elects continuation of group benefits under COBRA, the Company shall pay the full cost of the premiums for two (2) years following the Date of Termination.  The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

	
  

	
3.

	
The amounts in clause 2(b) above shall be reduced by any disability insurance payments the Executive receives as a result of his disability, and shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company.  Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

	
  

	
D.

	
By the Company for Cause

	
  

	
1.

	
The Executive’s employment may be terminated by the Board upon recommendation of the CEO, both acting in good faith, by written notice to the Executive specifying the event(s) relied upon for such termination upon the occurrence of any of the following events (each of which shall constitute “Cause” for termination):

	
  

	
a.

	
the continued failure by the Executive to substantially perform his duties after written notice and failure to cure within sixty (60) days;

	
  

	
b.

	
conviction of a felony or engaging in misconduct which is materially injurious to the Company, monetarily or to its reputation or otherwise, or which would damage Executive’s ability to effectively perform his duties;

	
  

	
c.

	
theft or dishonesty by the Executive;

	
  

	
d.

	
intoxication while on duty; or

	
  

	
e.

	
willful violation of Company policies or procedures after written notice and failure to cure within thirty (30) days.

	
  

	
2.

	
If the Executive’s employment is terminated under this Section (D), the Executive shall be entitled to receive all Base Salary and benefits to be paid or provided to the Executive under this Agreement through the Date of Termination, and no more.

	
  

	
3.

	
In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other vested equity incentives shall remain exercisable solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. All unvested equity incentives shall terminate on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive that have vested shall be paid out in accordance with the terms of the CAP as in effect on the Date of Termination. The Executive shall not be entitled to receive any unvested Company contributions to the CAP.

	
  

	
E.

	
By the Company Without Cause

	
  

	
1.

	
The Executive’s employment may be terminated by the Board upon recommendation of the CEO at any time without Cause by delivery of a written notice of termination to the Executive. If the Executive’s employment is terminated under this Section (E), the Executive shall be entitled to receive:

	
  

	
a.

	
all Base Salary and benefits due to the Executive through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

	
  

	
b.

	
an amount equal to the Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

	
  

	
c.

	
group medical benefits for eighteen (18) months after the Date of Termination. The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

	
  

	
2.

	
The amount in clause 1(b) above shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof.  In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

	
  

	
F.

	
By the Executive for Good Reason

	
  

	
1.

	
The Executive’s employment may be terminated by the Executive by written notice of his resignation delivered within sixty (60) days after the occurrence of any of the following events, each of which shall constitute “Good Reason” for resignation:

	
  

	
a.

	
a material reduction in the Executive’s Base Salary (unless such reduction is part of an across the board reduction affecting all Company executives with a comparable title);

	
  

	
b.

	
a requirement by the Company to relocate the Executive to a location that is greater than twenty-five (25) miles from the location of the office in which the Executive performs his duties hereunder at the time of such relocation;

	
  

	
c.

	
in connection with a Change in Control, a failure by the successor person or entity, or the Board, either to honor this Agreement or to present the Executive with an employment agreement containing provisions substantially similar to this Agreement or otherwise satisfactory to the Executive and which is executed by the Executive; or

	
  

	
d.

	
a material reduction in the Executive’s title, or a material and adverse change in Executive’s status and responsibilities, or the assignment to Executive of duties or responsibilities which are materially inconsistent with Executive’s status and responsibilities.

	
  

	
2.

	
The Executive shall give the Company written notice of his intention to resign for Good Reason (stating the reason therefor) within sixty (60) days after the occurrence of one of the events stated in subparagraphs (a), (b), (c) or (d) above (the “Good Reason Events”) and the Company shall have sixty (60) days (the “Cure Period”) thereafter to rescind the Good Reason Event(s), in which event the Executive no longer shall have the right to resign for Good Reason. If the Company fails to rescind the Good Reason Event(s) before the expiration of the Cure Period, then the Executive may resign for Good Reason and receive the benefits described below so long as the resignation for Good Reason occurs within thirty (30) days following the expiration of the Cure Period, otherwise the right to resign on the basis of that Good Reason Event(s) shall be deemed to have been waived.   If the Executive resigns for Good Reason as defined in this Section (F), the Executive shall be entitled to receive:

	
  

	
a.

	
all Base Salary and benefits due to the Executive under this Agreement through the Date of Termination (payable within thirty (30) days of the Date of Termination, with the date of such payment determined by the Company in its sole discretion) and a pro-rata portion of any Bonus Plan or other compensation to which he is otherwise entitled as of the Date of Termination, which Bonus Plan amount will be determined after the end of the fiscal year for which the Bonus Plan was in place and paid in accordance with the terms of such Bonus Plan;

	
  

	
b.

	
an amount equal to Executive’s Base Salary for a total of eighteen (18) months following the Date of Termination; and

	
  

	
c.

	
group medical benefits for eighteen (18) months after the Date of Termination.  The costs of the Company’s portion of any premiums due under this clause (c) shall be included in the Executive’s gross income to the extent the provision of such benefits is deemed to be discriminatory under Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”).

	
  

	
3.

	
The amount in clause 2(b) above shall be paid to the Executive periodically at the regular payroll dates commencing as of the Date of Termination and for the remaining term of the non-compete covenant in Section IX hereof. In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll intervals) upon his or her execution of a full release of claims in favor of the Company.  Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

	
  

	
G.

	
By the Executive Without Good Reason

	
  

	
1.

	
The Executive may terminate his employment at any time by delivery of a written notice of resignation to the Company no less than sixty (60) days and no more than ninety (90) days prior to the effective date of the Executive’s resignation. The Executive shall receive all Base Salary and benefits due under this Agreement through the next payroll date following the Date of Termination, and no more.

	
  

	
2.

	
Although the Executive is not entitled to any severance amount in the event of termination pursuant to this Section (G), the Executive may reduce the term of the non-compete and non-solicitation covenants in Section IX hereof, from twenty-four (24) months to eighteen (18) months, upon execution of a full release of claims in favor of the Company. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other vested equity incentives shall remain exercisable solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. All unvested equity incentives shall terminate on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive that have vested shall be paid out in accordance with the terms of the CAP as in effect on the Date of Termination. The Executive shall not be entitled to receive any unvested Company contributions to the CAP.

	
  

	
H.

	
Following a Change in Control

	
  

	
1.

	
If the Executive’s termination of employment without Cause (pursuant to Section VI(E)) or for Good Reason (pursuant to Section VI(F)) occurs within twelve (12) months following a Change in Control, then the amounts payable pursuant to Section VI(E) or Section VI(F) above, as the case may be, shall be referred to as the “Change in Control Severance Amount,” and shall be paid to Executive in a lump sum no later than sixty (60) days following the Date of Termination, with the date of such payment determined by the Company in its sole discretion.  In addition, the Executive will receive an enhanced severance amount consisting of six (6) additional months of the Executive’s Base Salary (payable periodically at regular payroll dates) upon his or her execution of a full release of claims in favor of the Company. Payments pursuant to this Section VI(H) shall be made in lieu of, but not in addition to, any payment under any other paragraph of this Section VI. Furthermore, all outstanding stock options, restricted stock, restricted stock units and any other unvested equity incentives shall vest and/or remain exercisable for their stated terms solely in accordance with the terms of the award agreements to which the Company and the Executive are parties on the Date of Termination. In addition, all amounts contributed by the Company to the CAP for the benefit of the Executive shall vest and thereafter be paid out in accordance with the terms of the CAP as in effect on the Date of Termination.

	
  

	
2.

	
For the purposes of this Agreement, a “Change in Control” shall mean any of the following events:

	
  

	
a.

	
any person or entity, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Company or a wholly-owned subsidiary thereof or any employee benefit plan of the Company or any of its subsidiaries, becomes the beneficial owner of the Company’s securities having 35% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business);

	
  

	
b.

	
as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sales of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction are held in the aggregate by the holders of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction; or

	
  

	
c.

	
during any period of two (2) consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period.

	
  

	
3.

	
Excise Tax Payment. If, in connection with a Change in Control, the Internal Revenue Service asserts, or if the Executive or the Company is advised in writing by an established accounting firm, that any payment in the nature of compensation to, or for the benefit of, the Executive from the Company (or any successor in interest) constitutes an “excess parachute payment” under Section 280G of the Code, whether paid pursuant to this Agreement or any other agreement, and including property transfers pursuant to securities and other employee benefits that vest upon a Change in Control (collectively, the “Excess Parachute Payments”) the Company shall pay to the Executive, on demand, a cash sum equal to the amount of excise tax due under Section 4999 of the Code on the entire amount of the Excess Parachute Payments (excluding any payment pursuant to this Section VI(H)(3)) (the “Gross-up Amount”).  The payment of the ”Gross-up Amount“ due to the Executive under this Section VI(H)(3) shall be paid as soon as reasonably possible following demand of payment by the Executive, but in no event later than December 31 of the year following the year (A) any tax is paid to the Internal Revenue Service regarding this Section VI(H)(3) or (B) any tax audit or litigation brought by the Internal Revenue Service or other relevant taxing authority related to this Section VI(H)(3) is completed or resolved.

 

	
  

	
I.

	
Delay of Payments Pursuant to Section 409A.  It is intended that (1) each installment of the payments provided under this Agreement is a separate “payment” for purposes of Section 409A of the Code and (2) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(9)(iii), and 1.409A-1(b)(9)(v).  Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date the Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, the Executive is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)) of the Company and (ii) that any payments to be provided to the Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code if provided at the time otherwise required under this Agreement then such payments shall be delayed until the date that is six months after the date of the Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)) with the Company, or, if earlier, the date of the Executive’s death.  Any payments delayed pursuant to this Section VI(I) shall be made in a lump sum on the first day of the seventh month following the Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)), or, if earlier, the date of the Executive’s death. In addition, to the extent that any reimbursement, fringe benefit or other, similar plan or arrangement in which the Executive participates during the term of Executive’s employment under this Agreement or thereafter provides for a "deferral of compensation" within the meaning of Section 409A of the Code, (i) the amount eligible for reimbursement or payment under such plan or arrangement in one calendar year may not affect the amount eligible for reimbursement or payment in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid), and (ii) subject to any shorter time periods provided herein or the applicable plans or arrangements, any reimbursement or payment of an expense under such plan or arrangement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred.

	
VII.

	
REPRESENTATIONS. The Executive represents and warrants that he is not a party to any agreement or instrument which would prevent him from entering into or performing his duties in any way under this Agreement.

	
VIII.

	
ASSIGNMENT, BINDING AGREEMENT. This Agreement is a personal contract and the rights and interests of the Executive hereunder may not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him, except as otherwise expressly permitted by the provisions of this Agreement. This Agreement shall inure to the benefit of and be enforceable by the Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to him hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.

IX.           CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION

	
  

	
A.

	
The Executive acknowledges that:

	
  

	
1.

	
the business of providing care support services and health support services in which the Company is engaged (the “Business”) is intensely competitive and that the Executive’s employment by the Company will require that the Executive have access to and knowledge of confidential information of the Company relating to its business plans, financial data, marketing programs, client information, contracts and other trade secrets, in each case other than as and to the extent such information is generally known or publicly available through no violation of this Agreement by the Executive;

	
  

	
2.

	
the use or disclosure of such information other than in furtherance of the Business may place the Company at a competitive disadvantage and may do damage, monetary or otherwise, to the Business; and

	
  

	
3.

	
the engaging by the Executive in any of the activities prohibited by this Section shall constitute improper appropriation and/or use of such information. The Executive expressly acknowledges the trade secret status of the Company’s confidential information and that the confidential information constitutes a protectable business interest of the Company. Other than as may be required in the performance of his duties, Executive expressly agrees not to divulge such confidential information to anyone outside the Company without prior permission.

	
  

	
B.

	
The “Company” (which shall be construed to include the Company, its subsidiaries and their respective affiliates) and the Executive agree that for a period of eighteen (18) months after the Date of Termination if the Executive’s employment is terminated under Sections VI(C), (D), (E), (F) or (H), and for a period of twenty-four (24) months after the Date of Termination if the Executive’s employment is terminated under Section VI(G), the Executive shall not:

	
  

	
1.

	
engage in Competition, as defined below, with the Company or its subsidiaries within any market where the Company is conducting the Business at the time of termination of the Executive’s employment hereunder. For purposes of this Agreement, “Competition” by the Executive shall mean the Executive’s being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting his name to be used in connection with the activities of any entity engaged in the Business, provided that, it shall not be a violation of this sub-paragraph for the Executive to become the registered or beneficial owner of less than five percent (5%) of any class of the capital stock of any one or more competing corporations registered under the 1934 Act, provided that, the Executive does not participate in the business of such corporation until such time as this covenant expires; and

	
  

	
2.

	
The Executive further agrees that he will not, directly or indirectly, for his benefit or for the benefit of any other person or entity, do any of the following:

	
  

	
a.

	
solicit from any customer, doing business with the Company as of the Executive’s termination, business of the same or of a similar nature to the Business of the Company with such customer;

	
  

	
b.

	
solicit from any known potential customer of the Company business of the same or of a similar nature to that which, to the knowledge of the Executive, has been the subject of a written or oral bid, offer or proposal by the Company, or of substantial preparation with a view to making such a bid, proposal or offer, within eighteen (18) months prior to the Executive’s termination; or

	
  

	
c.

	
recruit or solicit the employment or services of any person who was employed by the Company upon termination of the Executive’s employment and is employed by the Company at the time of such recruitment or solicitation.

	
  

	
3.

	
The Executive acknowledges that the services to be rendered by him to the Company are of a special and unique character, which causes this Agreement to be of significant value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a breach or threatened breach by him of any of the provisions contained in this Section will cause the Company irreparable injury. The Executive therefore agrees that the Company will be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining the Executive from any such violation or threatened violations. The Executive acknowledges that the terms of this Section IX and its obligations are reasonable and will not prohibit him from being employed or employable in the health care industry.

	
  

	
C.

	
If any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the fullest extent permitted by law.

	
X.

	
ENTIRE AGREEMENT. This Agreement, together with Exhibit A attached hereto, contains all the understandings between the parties pertaining to the matters referred to herein, and supersedes any other undertakings and agreements, whether oral or written, previously entered into by them with respect thereto. The Executive represents that, in executing this Agreement, he does not rely and has not relied upon any representation or statement not set forth herein made by the Company with regard to the subject matter or effect of this Agreement or otherwise and that Executive has had the opportunity to be represented by counsel of his choosing.

	
XI.

	
AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement may be amended or waived, unless such amendment or waiver is agreed to in writing, signed by the Executive and by a duly authorized officer of the Company. No waiver by any party hereto of any breach by another party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.

	
XII.

	
NOTICES. Any notice to be given hereunder shall be in writing and shall be deemed given when delivered personally, sent by courier, facsimile or registered or certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or to such other address as such party may subsequently give notice in writing:

           To the Executive at:                                                                           To the Company at:

James Elrod                                                                               Chief Executive Officer

                                                                             Healthways, Inc.

                                                                                     701 Cool Springs Boulevard

                            Franklin, TN 37067

	 	
Any notice delivered personally or by courier shall be deemed given on the date delivered. Any notice sent by facsimile, registered or certified mail, postage prepaid, return receipt requested, shall be deemed given on the date transmitted by facsimile or mailed.

	
XIII.

	
SEVERABILITY. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be validated and shall be enforced to the fullest extent permitted by law.

	
XIV.

	
SURVIVORSHIP. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

	
XV.

	
GOVERNING LAW; VENUE. This Agreement will be governed by and construed in accordance with the laws of the State of Tennessee, without regard to the principles of conflicts of law thereof, and venue shall be the United States District Court for the Middle District of Tennessee.

	
XVI.

	
HEADINGS. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.

	
XVII.

	
COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement effective as of date set forth above.

                          HEALTHWAYS, INC.

By:  /s/ Ben R. Leedle, Jr.      

Name:  Ben R. Leedle, Jr.      

Title:   CEO          

EXECUTIVE

/s/ James W. Elrod        

                           James Elrod

 

 

  

  

  

EXHIBIT A

Exceptions

Notwithstanding anything in the Agreement to the contrary, the following terms are also part of the Agreement and supersede any contradictory term contained therein:exhibit_10-115.htm

 

 

EXHIBIT 10.115

 

EXCLUSIVE PATENT LICENSE  

                                                              

             THIS LICENSE AGREEMENT made and entered into this 2nd day of June 1998 by and between Imaging Diagnostic Systems, Inc., a Florida Corporation "LICENSEE") and Richard Grable, an Individual ("GRABLE").

WHEREAS, GRABLE, is the owner of the following described patents:

Patent number 5,692,511, issued on December 2, 1987, as more fully described on Exhibit A hereto and incorporated herein (the "Patent").

WHEREAS, LICENSEE is a medical technology company that has developed a Computed Tomography Laser Mammography (system for detecting breast cancer through the skin in a non-invasive and objective procedure, which incorporates the use of the Patent (the "CTLM").

WHEREAS, GRABLE and LICENSEE had previously entered into an oral agreement, which was to be set forth in, written form by LICENSEE's former general counsel, whereby LICENSEE was to receive an exclusive License for the use of the Patent.

WHEREAS, LICENSEE's former general counsel did not provide the required License Agreement.

WHEREAS, LICENSEE has expended substantial funds, time and effort in developing the CTLM.

WHEREAS, GRABLE has expended substantial funds, time and effort in developing the Patent.

WHEREAS, GRABLE and LICENSEE wish to enter into a formal, written licensing agreement granting LICENSEE the exclusive License to use the patent, upon the terms and conditions contained herein.

NOW THEREFORE, the parties hereto in consideration of $10.00 and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and the promises and covenants contained herein, agree as follows:

1.           GRANT.       GRABLE grants to LICENSEE the exclusive right to modify, customize, maintain, incorporate, manufacture, sell, and otherwise utilize and practice the above stated Patent, all improvements thereto and all technology related to the process, throughout the world.  This license shall apply to any extension or re-issue of the Patent.

2.           TERM.         This License shall be for the life of the Patent and any renewal thereof, subject to termination as provided for herein.

 

 

  

  

  

 

3.           CONSIDERATION.

(a)            Common Stock       As consideration for the License granted hereunder LICENSEE shall issue to GRABLE, 7,000,000 shares of the LICENSEE's Common Stock (the "Shares") as follows:

1.           3,500,000 shares upon execution of this Agreement;

2.           3,500,000 shares one year from the date of this Agreement.

The Shares shall be valued at fair market value as of the date of this Agreement,

 

(b)           Protection Against Dilution.        Upon the occurrence of any stock dividend, stock split, combination or exchange of shares, reclassification or recapitalization of the Company's common stock, reorganization of the Company, consolidation with or merger into or sale or conveyance of all or substantially all of the Company's assets to another corporation or any other similar event which serves to decrease the number of Shares issued pursuant to this Agreement (the "Event"), Grable shall receive, as additional consideration, that number of shares equal to the difference between the 7,000,000 Shares issued hereunder and the number of Shares Grable has remaining subsequent to the event.

(c)           In addition, the LICENSEE shall pay to Grable a royalty based upon the net selling price of all products and goods in which the Patent is used, before taxes and after deducting the direct cost of the product and commissions or discounts paid (the "Royalty").  The Royalty shall be as follows:

GROSS SALES                                                                           PERCENTAGE

$0 to $1,999,999 in gross sales                                                              10%

$2,000,000 to $3,999,999 in gross sales                                                 9%

$4,000,000 to $6,999,999 in gross sales                                                 8%

$7,000,000 to $9,999,999 in gross sales                                                 7%

Greater than $10,000,000 in gross sales                                                   6%

 

  

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For purposes of this paragraph Net Sales shall mean the dollar amount earned from the sale by the Company, both international and domestic, before taxes minus the cost of the goods sold and commissions or discounts paid.

(1)           In the event that such products are used by the LICENSEE directly, or are disposed of in another manner than sale, the royalty shall be calculated on the customary price for similar goods.  In the event that any products made under the license are sold to a corporation, which is controlled by or is a subsidiary of LICENSEE, the royalty shall be determined by the re-sale price.

  (2)           Beginning the second year of this Agreement the minimum annual Royalty shall be $250,000.  In the event that the minimum is not paid in the first three quarterly payments in each year, sufficient funds shall be paid in the final quarter's payment.  Sums shall not carry over from year to year.

(3)           Royalties shall be paid on a quarterly basis, with a report of sales and payment due no later than 15 days after the end of the quarter.  LICENSEE shall permit GRABLE, and GRABLE's agents reasonable access to any and all of the records of LICENSEE related to the use of the patent and to Royalties.  Such accountings shall be deemed to be final if no objection or request for audit is received by LICENSEE within 1 year following receipt of such accounting.  In the event of a dispute, the parties shall appoint a disinterested certified public accountant to conduct an audit.  Each party may present argument or materials to the certified public accountant.  The decision of the certified public accountant shall be final and may be entered as a judgment in any court with jurisdiction.  The prevailing party shall pay the cost of the audit.  In the event that the parties cannot agree on a disinterested certified public accountant, each party shall appoint a certified public accountant and the two shall appoint a third certified public accountant, and the majority of those persons shall appoint the single disinterested Certified Public Accountant.  The expense of the panel of appointment shall be borne by each party equally.  Interest at the highest legal rate shall accrue on any unpaid royalties.

(4)           LICENSEE shall have this Agreement ratified by its Shareholders at its next special or annual meeting of Shareholders.  Upon obtaining such ratification, the Royalties set forth above shall take the place of the Development Royalties set forth in the Amendment to Grable's Employment Agreement dated February 23, 1995, and such Amendment shall become void and have no effect.

5.           IMPROVEMENTS.     In the event of any improvement of the Patent, these improvements shall be disclosed to the LICENSEE by GRABLE, and the LICENSEE shall have the right to use and practice the improvements.

6.           ASSISTANCE.           GRABLE shall provide reasonable cooperation and assistance to LICENSEE as to the practice and use of the patent.

 

  

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7.           ACKNOWLEDGEMENTS

(a)           LICENSEE acknowledges and agrees that GRABLE is the sole owner of the Patent and all proprietary information in connection with the Patent and that such information constitutes trade secrets of GRABLE's, which are revealed to the LICENSEE in confidence and that no right is given to or acquired by the LICENSEE to disclose, duplicate, license, sell or reveal any portion thereof, except as contemplated by this Agreement.

(b)           GRABLE acknowledges and agrees that, except for the Patent and the proprietary information set forth in 7(a) above, the LICENSEE is the sole owner of all present and future patents and proprietary information in connection with the CTLM( and that such proprietary information constitutes trade secrets of the LICENSEE which are revealed to GRABLE in confidence and that no right is given to or acquired by GRABLE to disclose, duplicate, license, sell or reveal any portion thereof, except as contemplated in this Agreement.

8.           BOOKS AND RECORDS.  LICENSEE shall maintain full and accurate books and records showing production and sales of the CTLM( and shall furnish weekly reports with respect thereto in a form that may be reasonably specified from time to time by GRABLE, LICENSEE shall afford GRABLE or its representatives a reasonable opportunity once every week, during business hours and on at least 24 hours' prior notice, to conduct an examination of LICENSEE's books and records relating to this Agreement in order to ensure that LICENSEE is meeting its obligations to GRABLE as provided in this Agreement.  In the event that any review of the books and records of LICENSEE indicates that it has failed to properly account to GRABLE and the amount due GRABLE is in excess of 5% of the total amount due, LICENSEE shall promptly pay to GRABLE the sum due together with 18% per annum interest calculated on a 360 day year and any costs including professional fees incurred by GRABLE in reviewing the books and records of LICENSEE.

9.           CONFIDENTIALITY.          It is understood and agreed that any of GRABLE trade secrets or Proprietary Information that may from time to time be made available to become known to LICENSEE are to be treated as confidential, are to be used solely in connection with LICENSEE's performance under the terms of this Agreement and are not to be disclosed to any persons other than employees of LICENSEE who have a reasonable need for access thereto in connection with LICENSEE's performance of its duties hereunder.  Reasonable measures shall be taken to protect the confidentiality of GRABLE's trade secrets, Proprietary Information and any memoranda or papers containing trade secrets or Proprietary Information of GRABLE that LICENSEE may receive in connection herewith are to be returned to GRABLE upon request.  LICENSEE's obligations and duties under this section shall survive any termination of this Agreement.  If this LICENSEE is a corporation or other legal entity, LICENSEE shall have all officers, directors, partners and beneficial owners of any equity interest to execute such agreement as may be prepared by GRABLE agreeing to be bound by paragraphs 10, 11 and 12 of this Agreement.

10.           INDEMNIFICATION OF GRABLE       LICENSEE shall indemnify and save harmless GRABLE and his employees and agents from and against any 

 

  

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loss, claim or damage including reasonable attorney's fees, resulting from any negligence or breach of warranty by LICENSEE in connection with the preparation, packaging, sale or distribution of the CTLM (or other product of LICENSEE.  With respect to the risks thus assumed, LICENSEE shall maintain a policy of contractual liability insurance in the minimum amount of $1,000,000 single unit coverage with an insurer satisfactory to GRABLE, and shall cause this insurer to provide GRABLE within 15 days after the date of this Agreement with an appropriate certificate of insurance evidencing this contractual liability insurance coverage, which may not be materially modified or canceled on less than 30 days prior written notice to GRABLE.  At the request of GRABLE, LICENSEE will defend GRABLE and his employees and agents in connection with any claim, suit, action or proceeding covered by this indemnification.

11.           TRADE SECRETS AND PROPRIETARY INFORMATION.    Subject to the foregoing, LICENSEE acknowledges the validity of and ownership by GRABLE of the trade secrets and Proprietary Information in connection with the sale of the CTLM (and agrees to take no action that would prejudice or interfere with the validity or ownership.  All use of the trade secrets and Proprietary Information by LICENSEE under this Agreement shall inure to the exclusive benefit of GRABLE.

12.           INJUNCTIVE RELIEF.    GRABLE shall have the right to injunctive relief to enforce the covenants of paragraphs 10 and 11 of this Agreement, without having to plead or prove irreparable harm or lack of adequate remedy at law in addition to any other relief to which it may be entitled at law or in equity.

13.           ABSOLUTE RESTRICTION ON TRANSFER WITHOUT GRABLE'S CONSENT.  The grant of the license hereunder is unique to LICENSEE and may not be transferred, or in effect transferred in whole or in part, whether by independent agreement, acquisition by another party of LICENSEE's capital stock or assets, mortgage pledge, lease or other assignment as security, merger, consolidation or other reorganization, the succession by another party to LICENSEE's business by operation of law, as a consequence of any transaction that results in a change in the ownership or right of control of LICENSEE or otherwise unless GRABLE has expressly consented in writing thereto.

In the event that there is an acquisition by another party of LICENSEE's capital stock or assets, mortgage pledge, lease or other assignment as security, merger, consolidation or other reorganization, the succession by another party to LICENSEE's business by operation of law, as a consequence of any transaction that results in a change in the ownership or right of control of LICENSEE or otherwise, without Grable's specific written consent as to that event or occurrence, Grable, at his sole option may immediately terminate this Agreement.

This Agreement shall immediately terminate, without further action on the part of any party, in the event that insolvency proceedings of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, designating LICENSEE as the bankrupt or insolvent, are instituted, pending or threatened or if LICENSEE makes an assignment for the benefit of creditors or takes any action with a view to, or that would constitute the basis for, the institution of any such insolvency proceedings.

 

  

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14.           TERMINATION BY GRABLE UPON NOTICE.  This Agreement may be terminated at any time by GRABLE in the event that LICENSEE shall fail to perform any of the covenants and obligations herein.  Upon written notice of termination delivered to LICENSEE by GRABLE, stating the nature and character of the breach and allowing LICENSEE an opportunity to cure such failure within 15 days after giving notice, if the failure has not been corrected by LICENSEE within the 15 day period GRABLE may terminate this Agreement forthwith without the requirement of any additional notice to LICENSEE to that effect.  Notwithstanding the above, GRABLE is not required to give LICENSEE the opportunity to correct a default that is a repetition within any 12 month period of a prior default for the same cause and may terminate this Agreement forthwith by written notice.

15.           WAIVER.  The failure of either party to give notice of nonperformance or termination shall not constitute a waiver of the covenants, terms or conditions herein or of the rights of either party thereafter to enforce those covenants, terms or conditions or to terminate this Agreement upon any subsequent occurrence or date.

16.           ACTIONS TO BE TAKEN UPON TERMINATION OF LICENSE.  Upon the termination of this Agreement, except as may otherwise be provided herein, the license and all rights and privileges granted to LICENSEE under this Agreement shall immediately cease and terminate and LICENSEE in the absence of a renewal agreement shall thereupon immediately discontinue forever (i) the production and sale of the CTLM( and  (ii) the use of the Patent trade secrets and Proprietary Information in connection with LICENSEE's business.

17.           ASSIGNMENT AND TRANSFER.   This License may not be assigned or transferred by LICENSEE except with the prior approval of GRABLE, which shall be at his sole discretion.

18.           FURTHER ASSURANCES.  The parties agree to execute and deliver from time to time at the request of any of the other parties to this Agreement and without further consideration, such additional documents and to take such other action necessary to consummate the transactions contemplated herein.

19.           NOTICES.  All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by Federal Express or similar receipted delivery, by facsimile delivery or, if mailed, postage prepaid, by certified mail, return receipt requested, as follows:

LICENSEE                                                       Imaging Diagnostic Systems, Inc.

6531 NW 18th Court

 Plantation Florida 33313

GRABLE                                                          Richard J. Grable

 12000 NW 11th Court

                                                                     Plantation Florida 33323

 

  

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or to such other address as either of them, by written notice to the other may designate from time to time.  The transmission confirmation receipt from the sender's facsimile machine shall be conclusive evidence of successful facsimile delivery.  Time shall be counted to, or from, as the case may be, the delivery in person or by mailing.

20.           GOVERNING LAW.  This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be brought in a court of competent jurisdiction in Broward County, Florida and governed or interpreted according to the internal laws of the State of Florida.

21.           ENTIRE AGREEMENT.  This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral or written agreements regarding the same subject matter.

22.           SEVERABILITY CLAUSE.  In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.

23.           SUCCESSORS.  Subject to the provisions of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

24.           SECTION AND PARAGRAPH HEADINGS.  The section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

25.           AMENDMENT.  This Agreement may be amended only by an instrument in writing executed by all parties hereto.

26.           COUNTERPARTS.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  The execution of this Agreement may be by actual or facsimile signature, provided however that original signatures must be provided within five business days from the date of signing.

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

/s/ Richard J. Grable 

Richard J. Grable, Individually

 

Imaging Diagnostic Systems, Inc

 

By: /s/ Allan L. Schwartz

Allan L. Schwartz, Executive Vice President

 

7

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