EXHIBIT 10.37
EMPLOYMENT AGREEMENT
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Employment Agreement (the "Agreement"), dated April ___, 1995, by and
between Physicians Resource Group, Inc., a Delaware corporation (the "Company"),
and Xxxx Xxxxxxxx ("Employee").
In consideration of the mutual premises and conditions contained herein,
the parties hereto agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ Employee, and
Employee hereby accepts employment by the Company, upon the terms and subject to
the conditions hereinafter set forth.
Section 2. DUTIES. Employee shall serve as the Chief Development Officer
of the Company. Except as otherwise provided pursuant to Section 11 hereof,
Employee agrees to devote his full time and best efforts to the performance of
his duties to the Company. Employee acknowledges that the executive offices of
the Company will be located in Houston, Texas. Employee recognizes that
fulfillment of his duties hereunder will require his presence at the Company's
executive offices. The Employee's failure to relocate his personal residence to
the Houston, Texas metropolitan area shall not constitute grounds for
termination for "Cause" pursuant to Section 6(b) hereof.
Section 3. TERM. Except as otherwise provided in Section 6 hereof, the
term of this Agreement shall be for five years, commencing on the date that the
registration statement on Form S-1, relating to an underwritten initial public
offering of the Company's Common Stock (the "IPO"), is filed initially with the
Securities and Exchange Commission (the "Commencement Date"), and shall be
automatically renewed thereafter for successive one year terms unless either
party gives to the other written notice of termination no fewer than thirty (30)
days prior to the expiration of any such term that it does not wish to extend
this Agreement.
Section 4. COMPENSATION AND BENEFITS. In consideration for the services
of the Employee hereunder, the Company will compensate Employee as follows:
(a) Base Salary. Commencing on the date of consummation of the IPO,
Employee shall be entitled to receive a base salary of $100,000 per annum or as
increased from time to time by the Board of Directors of the Company.
(b) Bonus. Employee shall be eligible to receive an annual cash bonus in
an amount equal to up to 50% of his base salary in the event that the Company
experiences at least 20% or greater growth in earnings per share on a year to
year basis (calculated on a pro forma basis for the calendar year prior to the
Company's first fiscal year of operations) in accordance with the following
schedule:
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Percentage Increase Bonus as a Percentage
in Earnings Per Share of Annual Base Salary
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20.0 - 22.5% 10%
Over 22.5 - 25.0% 20%
Over 25.0 - 27.5% 30%
Over 27.5 - 30.0% 40%
Over 30.0% 50%
Employee will be entitled to draw in advance against 75% of his maximum
"projected" annual bonus, on a quarterly basis, as determined based on Company
projections, and actual quarterly results, of operations. For purposes of this
Section 6(a), calculations of earnings per share for 1995 and 1996 shall be made
in accordance with Exhibit A attached hereto.
(c) Benefits. The Company shall grant Employee options to purchase shares
of the Company's Common Stock at the initial public offering price for the
Company's Common Stock on terms and in a quantity to be agreed upon following
good faith negotiations between the Company's management team and the
underwriters of the IPO, which terms shall be consistent with the terms of the
stock option plans adopted by the Company pursuant to which the options are
granted and the provisions of Section 7 hereof. It currently is contemplated
that such options will vest over a period of five years. In addition, during
the term of this Agreement, Employee shall be entitled to participate in and
receive benefits under any and all employee benefit plans and programs which are
from time to time generally made available to the executive employees of the
Company, subject to approval and grant by the appropriate Company committee with
respect to programs calling for such approvals or grants.
Section 5. EXPENSES.
(a) General. It is acknowledged by the parties that Employee, in
connection with the services to be performed by him pursuant to the terms of
this Agreement, will be required to make payments for travel, entertainment of
business associates and similar expenses. The Company will reimburse Employee
for all reasonable expenses of types authorized by the Company and incurred by
Employee in the performance of his duties hereunder. Employee will comply with
such budget limitations and approval and reporting requirements with respect to
expenses as the Company may establish from time to time.
(b) Moving Expenses. The Company shall (i) reimburse Employee for any
reasonable, out-of-pocket and adequately documented moving expenses incurred by
Employee in connection with the transfer of his residence to Houston, Texas and
pay to Employee an amount of cash reasonably calculated by the Company to negate
adverse
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income tax consequences of Employee of the foregoing reimbursement and (ii) pay
to Employee an amount equal to two months' salary (less required federal income
tax withholding) for miscellaneous relocation expense.
Section 6. TERMINATION. Employee's employment hereunder will commence on
the Commencement Date and continue until the end of the term specified in
Section 3 hereof and any renewals of such term, except that the employment of
Employee hereunder will terminate earlier in the following manner:
(a) Death or Disability. Immediately upon the death of Employee during the
term of his employment hereunder or, at the option of the Company, in the event
of Employee's disability, upon 30 days notice to Employee. Employee will be
deemed disabled if, as a result of Employee's incapacity due to physical or
mental illness, Employee shall have been absent from his duties with the Company
on a full-time basis for 120 consecutive business days;
(b) For Cause. For "Cause" immediately upon written notice by the Company
to Employee. For purposes of this Agreement, a termination will be for Cause
if: (i) Employee willfully and continuously fails to perform his duties with the
Company (other than any such failure resulting from incapacity due to physical
or mental illness), (ii) Employee willfully engages in gross misconduct
materially and demonstrably injurious to the Company or (iii) Employee has been
convicted of a felony;
(c) Failure of IPO. Automatically in the event that the IPO is not
consummated on or before June 30, 1995; or
(d) Termination Upon Anniversary. Upon the occurrence of any annual
anniversary of the date of this Agreement, in the event that one party has
provided to the other 60 days prior written notice of its election to terminate
this Agreement.
Employee will not be entitled to any severance pay or other compensation
upon termination of his employment pursuant to Subsections (a)-(c) or Section 3
or in the event that Employee voluntarily leaves the employment of the Company
except for any portion of his base salary accrued but unpaid from the last
monthly payment date to the date of termination and expense reimbursements under
Section 5 hereof for expenses incurred in the performance of his duties
hereunder prior to termination. In the event Employee's employment with the
Company is terminated by the Company for reasons other than any of the reasons
enumerated in Subsections 6(a)-(c) above, the Company will pay Employee, as
Employee's sole remedy in connection with such termination, severance pay in the
amount of Employee's monthly base salary at the rate in effect immediately
preceding the termination of Employee's employment for 12 months after the
termination of Employee's employment (the "Separation Payment Period"), which
severance pay will be paid by the Company in equal monthly payments in arrears.
The Company will also pay Employee the portion of his base salary accrued but
unpaid from the last monthly payment date
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to the date of termination and expense reimbursements under Section 5 hereof for
expenses incurred in the performance of his duties hereunder prior to
termination.
Section 7. Effect of Termination on Options. Options held by the Employee
will automatically expire if the Employee's employment with the Company is
terminated for Cause as defined in Section 6(b) or if the Employee voluntarily
leaves the employment of the Company in breach of this Agreement. If Employee's
employment with the Company ends for any other reason than termination for
Cause, voluntary departure in breach of this Agreement, due to death or pursuant
to Section 6(d) above, such Employee's options will remain exercisable and will
vest and expire in accordance with the terms of the applicable option
agreements. If the Employee dies while employed by the Company his options shall
become fully exercisable on the date of his death and shall expire twelve months
thereafter. If this Agreement is terminated by the Company pursuant to Section
6(d) above, (i) the options that are vested as of the date of termination shall
remain exercisable for a period of twelve months after the date of termination
and shall expire at the end of such twelve month period and (ii) the options
that would have vested during the twelve months following termination shall vest
upon termination, remain exercisable for a period of twelve months after the
date of termination and expire at the end of such twelve month period. If this
Agreement is terminated by the Employee pursuant to Section 6(d) above, the
options that are vested as of the date of termination shall remain exercisable
for a period of twelve months after the date of termination and shall expire at
the end of such twelve month period.
Section 8. CHANGE IN CONTROL TERMINATION PAYMENT.
(a) Termination Payment.
(i) Amount. Notwithstanding anything to the contrary contained
in Section 6 hereof, in the event Employee's employment with the
Company terminates for any reason (other than death) within the
twelve month period following a Change In Control (as defined in
subsection 8(b) hereof) occurring after consummation of the IPO,
the Company will pay Employee a lump sum payment (the "Termination
Payment") in cash equal to 2.99 times the sum of the items in the
following subsections (I) through (VI):
(I) Employee's annual base compensation determined by
reference to his base salary in effect immediately prior to
the Change In Control;
(II) the maximum bonus that Employee could receive under
any management incentive bonus plan of the Company for the
year in which the Change In Control occurs, assuming all
incentives and financial targets were achieved that are
necessary to require payment of the largest bonus amount by
the Company to Employee; provided that the maximum bonus
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under this subsection 8(a)(i)(II) will not be less than 60% of
the amount specified under subsection 8(a)(i)(I) hereof;
(III) the amount of Employee's base salary accrued but
unpaid from the last monthly payment date to the date of
termination;
(IV) expense reimbursement under Section 5 hereof for
expenses incurred in the performance of his duties hereunder
prior to the termination of his employment with the Company;
(V) any other benefit accrued but unpaid as of the date
of such termination; and
(VI) the estimated cost to Employee of obtaining medical,
dental, life and disability insurance coverage for a period of
eighteen months after the expiration of his continuation
(COBRA) rights; provided that such coverage will be
substantially similar to the coverage provided to Employee by
Employer immediately prior to the Change In Control; and
provided further that this subsection 8(a)(i)(VI) will be
applied without regard to, and the amount payable under this
subsection 8(a)(i)(VI) is in addition to, any continuation
(COBRA) rights or conversion rights under any plan provided by
Employer, which rights are not affected by any provision
hereof.
(ii) Time for Payment; Interest. The Company will pay the Termination
Payment to Employee concurrent with Employee's termination of employment.
Employer's obligation to pay to Employee any amounts under this Section 8,
including without limitation the Termination Payment and any Gross Up
Payment due under subsection (c), will bear interest at the maximum rate
allowed by law until paid by the Company, and all accrued and unpaid
interest will bear interest at the same rate, all of which interest will be
compounded daily.
(iii) Payment Authority. Any officer of the Company (other than
Employee) is authorized to issue and execute a check, initiate a wire
transfer or otherwise effect payment on behalf of the Company to satisfy
the Company's obligations to pay all amounts due to Employee under this
Section 8.
(iv) Termination. The Company's obligation to pay the Termination
Payment will not be affected by the manner in which Employee's employment
with the Company is terminated. Without limiting the generality of the
foregoing, the Company will be obligated to pay the Termination Payment and
any Gross Up Payment regardless of whether Employee's termination of
employment is voluntary, involuntary, for cause, without cause, in
violation of any employment agreement or other agreement in effect at the
time of the Change In Control, or due
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to Employee's retirement or disability. Employee's notice of his
termination of employment in connection with a Change In Control may be
made by any means.
(b) Change In Control. A Change In Control will be deemed to have occurred
for purposes hereof (i) when a change of stock ownership of the Company of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any successor Item of a similar nature
has occurred; or (ii) upon the acquisition of beneficial ownership,
directly or indirectly, by any person (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) of securities of the Company
representing 33% or more of the combined voting power of the Company's then
outstanding securities; or (iii) a change during any period of two
consecutive years of a majority of the members of the Board of Directors of
the Company for any reason, unless the election, or the nomination for
election by the Company's shareholders, of each director was approved by a
vote of a majority of the directors then still in office who were directors
at the beginning of the period; provided that a Change In Control will not
be deemed to have occurred for purposes hereof with respect to any person
meeting the requirements of clauses (i) and (ii) of Rule 13d-1(b)(1)
promulgated under the Securities Exchange Act of 1934, as amended.
(c) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Employee an amount (the
"Gross Up Payment") such that the net amount retained by Employee, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income tax (together with penalties and interest)
and Excise Tax upon the payment provided for by this subsection (c)(i),
will be equal to the amount of the excess parachute payment.
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Employee will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year
in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Employee's residence on the date of his termination of employment, net
of the maximum reduction in federal income taxes that could be obtained
from deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Employee. If such opinion is not
finally
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accepted by the Internal Revenue Service (or state and local taxing
authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this subsection (c).
(iv) Time For Payment. The Company will pay the estimated amount
of the Gross Up Payment in cash to Employee concurrent with Employee's
termination of employment. Employee and the Company agree to
reasonably cooperate in the determination of the actual amount of the
Gross Up Payment. Further, Employee and the Company agree to make such
adjustments to the estimated amount of the Gross Up Payment as may be
necessary to equal the actual amount of the Gross Up Payment, which in
the case of Employee will refer to refunds of prior overpayments and
in the case of the Company will refer to makeup of prior
underpayments.
(d) Arbitration. Any controversy or claim arising out of or relating to
this Section 8, or the breach thereof, will be settled exclusively by
arbitration in Dallas, Texas, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in
effect. Judgment upon the award rendered by the arbitrator(s) may be
entered in, and enforced by, any court having jurisdiction thereof.
(f) No Right To Continued Employment. This Section 8 will not give
Employee any right of continued employment or any right to compensation
or benefits from the Company except the rights specifically stated
herein.
(g) Exercise of Stock Options. Notwithstanding anything to the contrary
contained herein, all of Employee's options to purchase the Company's
Common Stock will become immediately exercisable upon a Change In
Control.
Section 9. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges
that certain assets of Employer and its affiliates, including without limitation
information regarding customers, pricing policies, methods of operation,
proprietary computer programs, sales, products, profits, costs, markets, key
personnel, formulae, product applications, technical processes, and trade
secrets (hereinafter called "Confidential Information") are valuable, special
and unique assets of Employer and its affiliates. Employee will not, during or
after his term of employment, disclose any of the Confidential Information to
any person, firm, corporation, association, or any other entity for any reason
or purpose whatsoever, directly or indirectly, except as may be required
pursuant to his employment hereunder, unless and until such Confidential
Information becomes publicly available other than as a consequence of the breach
by Employee of his confidentiality obligations hereunder. In the event of the
termination of his employment, whether voluntary or involuntary and whether by
the Company or Employee, Employee will deliver to the Company all documents and
data pertaining to the Confidential Information and will not take with him any
documents or data of any kind or any reproductions (in whole or in part) of any
items relating to the Confidential Information.
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Section 10. NONCOMPETITION. Until two years after termination of
Employee's employment hereunder, Employee will not (i) engage directly or
indirectly, alone or as a shareholder, partner, officer, director, employee or
consultant of any other business organization, in any business activities which
(A) relate to the acquisition and consolidation of medical practices (the
"Designated Industry") and (B) were either conducted by the Company prior to
Employee's termination or proposed to be conducted by the Company at the time of
such termination, (ii) divert to any competitor of the Company in the Designated
Industry any customer of Employee, or (iii) solicit or encourage any officer,
employee, or consultant of the Company to leave its employ for employment by or
with any competitor of the Company in the Designated Industry. The parties
hereto acknowledge that Employee's noncompetition obligations hereunder will not
preclude Employee from (i) owning less than 5% of the common stock of any
publicly traded corporation conducting business activities in the Designated
Industry or (ii) serving as an officer of an entity engaged in the healthcare
industry whose business operations are not competitive with those of the
Company. Employee will continue to be bound by the provisions of this Section
10 until their expiration and will not be entitled to any compensation from the
Company with respect thereto. If at any time the provisions of this Section 10
are determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10 will be
considered divisible and will become and be immediately amended to only such
area, duration and scope of activity as will be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
Employee agrees that this Section 10 as so amended will be valid and binding as
though any invalid or unenforceable provision had not been included herein.
Section 11. GENERAL.
(a) Notices. Except as provided in Section 8(a) hereof, all notices and
other communications hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested or by
written telecommunication, to the relevant address set forth below, or to such
other address as the recipient of such notice or communication will have
specified to the other party hereto in accordance with this Section 11(a):
If to Employer, to: with a copy to:
Physicians Resource Group, Inc. Xxxxxxx & Xxxxxx, L.L.P.
One Woodway Building 000 Xxxx Xxxxxx, Xxxxx 0000
0000 Xxxxxxx Xx. Xxxxxx, Xxxxx 00000
Suite 300 East Attn: Xxxxx X. Xxxx, III
Xxxxxxx, Xxxxx 00000 Fax No.: (000) 000-0000
Attn: Chief Executive Officer
Fax No.: (000) 000-0000
If to Employee, to:
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Xxxx Xxxxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
(b) Withholding; No Offset. All payments required to be made by Employer
under this Agreement to Employee will be subject to the withholding of such
amounts, if any, relating to federal, state and local taxes as may be required
by law. No payment under this Agreement will be subject to offset or reduction
attributable to any amount Employee may owe to the Company or any other person.
(c) Equitable Remedies. Each of the parties hereto acknowledges and agrees
that upon any breach by Employee of his obligations under any of Sections 9 and
10 hereof, the Company will have no adequate remedy at law, and accordingly will
be entitled to specific performance and other appropriate injunctive and
equitable relief.
(d) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision will be fully severable and
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof will remain in full force and effect and will not be affected
by the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
will be added automatically as part of this Agreement a provision as similar in
its terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
(f) Waivers. No delay or omission by either party hereto in exercising any
right, power or privilege hereunder will impair such right, power or privilege,
nor will 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.
(g) Counterparts. This Agreement may be executed in multiple counterparts,
each of which will be deemed an original, and all of which together will
constitute one and the same instrument.
(h) Captions. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
(i) Reference to Agreement. Use of the words "herein," "hereof," "hereto"
and the like in this Agreement refer to this Agreement only as a whole and not
to any particular subsection or provision of this Agreement, unless otherwise
noted.
(j) Binding Agreement. This Agreement will be binding upon and inure to
the benefit of the parties and will be enforceable by the personal
representatives and heirs of Employee
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and the successors of Employer. If Employee dies while any amounts would still
be payable to him hereunder, such amounts will be paid to Employee's estate.
This Agreement is not otherwise assignable by Employee.
(k) Entire Agreement. This Agreement contains the entire understanding of
the parties, supersedes all prior agreements and understandings relating to the
subject matter hereof and may not be amended except by a written instrument
hereafter signed by each of the parties hereto.
(l) Governing Law. This Agreement and the performance hereof will be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
EXECUTED as of the date and year first above written.
PHYSICIANS RESOURCE GROUP, INC.
By: ___________________________________
Its: __________________________________
_______________________________________
Xxxx Xxxxxxxx
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