EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of ________________, 1996, by and between
SPECIALTY CARE NETWORK, INC., a Delaware corporation (the "Company"), and XXXXX
X. XXXXX (the "Executive").
WHEREAS, the Company is engaged in the business of managing physician
practices in the musculoskeletal specialty and operating surgery centers serving
that medical specialty; and
WHEREAS, the Company desires to employ the Executive to devote full time
to the business of the Company (including, without limitation, executive
management of the Company) and to serve as the President and Chief Executive
Officer of the Company; and
WHEREAS, the Executive desires to be so employed on the terms and subject
to the conditions hereinafter stated.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereby agree as follows:
SECTION 1
POSITION AND RESPONSIBILITIES
During the Term of this Employment Agreement, the Executive agrees to
serve as President and Chief Executive Officer of the Company, performing such
duties during the Term of this Agreement for such compensation and subject to
such terms and conditions as are hereinafter set forth.
SECTION 2
TERM AND DUTIES
2.1 Term; Extension. The term of this Employment Agreement (the "Term of
this Employment Agreement") will commence as of April 1, 1996, and shall
continue through March 31, 2001. On the fifth and each successive anniversary of
the effective date of this Employment Agreement as set forth in the first
paragraph hereof, the Term of this Employment Agreement shall be extended for an
additional one (1) year period, unless either party gives the other party ninety
(90) days prior written notice of such party's intent not to extend the Term of
this Employment Agreement. Termination of the Executive's employment pursuant to
this Employment Agreement shall be governed by Section 5 of this Employment
Agreement.
2.2 Duties. The Executive shall devote substantially all of his time and
attention and best efforts during normal business hours to the Company's
affairs. Specifically, the Executive shall have complete senior management
authority and responsibility, commensurate with and customary for the person
holding the office and position to which the Executive has contracted in this
Agreement, with respect to the day to day operations and long term management of
the Company, as well as implementation of the long range growth strategy of the
Company, consistent with directions from the Board of Directors. He shall have
full authority and responsibility, subject to the general direction, approval
and control of the Board of Directors, for formulating policies and
administering the Company in all respects. He shall have the authority to hire
and fire Company personnel, to retain consultants when he deems necessary to
implement the Company policies, to execute contracts on behalf of the Company in
the ordinary course of business and to effect the growth strategy of the Company
at the direction of the Board of Directors.
2.3 Location. The duties of Executive shall be performed at such locations
and places as may be directed by the Board.
SECTION 3
COMPENSATION AND BENEFITS
3.1 Base Compensation. The Company shall pay the Executive an annual base
salary ("Base Salary") of $187,500 for the first year of this Agreement,
$215,000 for the second year of this Agreement and $250,000 for the third year
of this Agreement. The Base Salary for the fourth and fifth years of this
Agreement shall be increased, but not decreased, to take into account increases
in the cost of living from the third to fourth year of this Agreement and the
fourth to fifth year of this Agreement. For purposes of determining such cost of
living increases, the Company shall use the "All Urban Consumers - New Series"
index for the respective years ended December 31, 1997, 1998 and 1999,
respectively, and shall use $250,000 as the base level of compensation which
shall be indexed. Base Salary shall be payable according to the customary
payroll practices of the Company, subject to normal withholding, but in no event
less frequently than once each month.
3.2 Annual Incentive Awards. The Company will pay the Executive annual
incentive compensation of up to 100% of his Base Salary based on performance
targets established annually by the Board of Directors (the "Annual Incentive
Compensation").
3.3 Additional Benefits. The Executive will be entitled to participate in
all compensation or employee benefit plans or programs and receive all benefits
and perquisites to which any salaried employees are eligible under any existing
or future plan or program established by the Company for salaried employees. The
Executive will participate to the extent permissible under the terms and
provisions of such plans or programs in accordance with program provisions.
These may include group hospitalization, health, dental care, life or
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other insurance, tax qualified pension, car allowance, savings, thrift and
profit sharing plans, termination pay programs, sick leave plans, travel or
accident insurance, disability insurance, and contingent compensation plans
including capital accumulation programs, restricted stock programs, stock
purchase programs and stock option plans. Nothing in this Agreement will
preclude the Company from amending or terminating any of the plans or programs
applicable to salaried or senior executives as long as such amendment or
termination is applicable to all salaried employees or senior executives. The
Executive will be entitled to an annual paid vacation as established by the
Board.
3.4 Business Expenses. The Company will reimburse the Executive for all
reasonable travel and other expenses incurred by the Executive in connection
with the performance of his duties and obligations under this Agreement.
3.5 Withholding. The Company may directly or indirectly withhold from any
payments under this Agreement all federal, state, city or other taxes that shall
be required pursuant to any law or governmental regulation.
SECTION 4
DEATH BENEFIT; DISABILITY COMPENSATION; KEY MAN INSURANCE
4.1 Payment in Event of Death. In the event of the death of the Executive
during the Term of this Employment Agreement, the Company's obligation to make
payments under this Agreement shall cease as of the date of death, except for
earned but unpaid Base Salary and incentive compensation which will be paid on a
pro-rated basis for that year. The Executive's designated beneficiary will be
entitled to receive the proceeds of any life or other insurance or other death
benefit programs provided in this Agreement, other than "key man" life insurance
benefits.
4.2 Disability Compensation. In the event of disability of the Executive
during the Term of this Employment Agreement, the Company will continue to pay
the Executive according to the Compensation provisions of this Agreement during
the period of his disability. In the event the disability continues for a period
of three (3) months, the Company may terminate the employment of the Executive.
Following such termination, the Company will continue to pay Executive's Base
Salary for a period of six (6) months. In such case, all other compensation will
cease except for earned but unpaid incentive compensation awards which would be
payable on a pro-rated basis for the year in which the disability occurred,
through the date of termination.
4.3 Responsibilities in the Event of Disability. During the period the
Executive is receiving the payments described in this Agreement and as long as
he is physically and mentally able to do so, the Executive will furnish
information and assistance to the Company
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and from time to time will make himself available to the Company to undertake
assignments consistent with his prior position with the Company and his physical
and mental health. If the Company fails to make a payment or provide a benefit
required as part of the Agreement, the Executive's obligation to provide
information and assistance will end.
4.4 Definition of Disability. The term "disability" will have the standard
meaning as determined in the reasonable discretion of the Board.
4.5 Key-Man Life Insurance. Upon request by the Company, the Executive
agrees to cooperate with the Company in obtaining "key man" life insurance on
the life of the Executive, with death benefits payable to the Company. Such
cooperation shall include the submission by Executive to a medical examination
and medical history.
SECTION 5
TERMINATION OF EMPLOYMENT
5.1 Termination Without Cause; Constructive Termination.
(a) Without a Change in Control. If the Executive suffers a
Termination Without Cause (hereinafter defined) or Constructive Termination
(hereinafter defined) and there has not been a Change in Control (hereinafter
defined) the Company will continue to pay the Executive his Base Salary as in
effect at the time of the Termination Without Cause or Constructive Termination
for the remaining term of this Employment Agreement after such termination.
Earned but unpaid Base Salary and incentive compensation through the date of
termination will be paid in a lump sum at such time. For six (6) months
following such Termination Without Cause or Constructive Termination, the
Company shall reimburse Executive for the cost of the Executive's major medical
health insurance premiums as in effect at the date of termination. The
exercisability of stock options granted to Executive shall be governed by any
applicable stock option agreements and the terms of the respective stock option
plans.
(b) Upon a Change in Control. If Executive suffers a Termination
Without Cause or Constructive Termination upon a Change in Control, the Company
will pay to the Executive in a lump sum upon such termination an amount equal to
300% of Executive's Base Salary as in effect at the time of the termination plus
300% of Executive's prior year Annual Incentive Compensation (the "Change in
Control Severance Amount"), less the aggregate amount of all other payments or
value received by the Executive on account of the Change in Control to the
extent such additional payments or value would be considered in the computation
of "Excess Parachute Payments" pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended, and regulations thereunder. In addition to the
foregoing, earned but unpaid Base Salary and incentive compensation awards
through the date of termination will be paid in a lump sum at the time of such
termination. For six (6) months
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following such Termination Without Cause or Constructive Termination, the
Company shall reimburse Executive for the cost of the Executive's major medical
health insurance premiums as in effect at the date of termination. The
exercisability of stock options granted to Executive shall be governed by any
applicable stock option agreements and the terms of the respective stock option
plans.
5.2 Termination With Cause. If the Executive suffers a Termination With
Cause, whether or not there has been a Change in Control, the Company will
continue to pay the Executive his Base Salary as in effect at the time of the
Termination With Cause for a period of sixty (60) days following the date of
such Termination with Cause. No incentive compensation or other benefits will be
paid or provided to the Executive after such Termination With Cause.
5.3 Voluntary Termination. In the event of a Voluntary Termination by the
Executive of his employment, the Company shall have no further obligation for
salary or incentive compensation or benefits hereunder.
5.4 Reimbursement of Excess Payment. In the event that all or any portion
of the Change in Control Severance Amount paid to Executive is disallowed by the
Internal Revenue Service as a deductible expense of the Company on grounds that
it does not constitute a "reasonable allowance," Executive agrees to reimburse
the Company to the extent of the disallowed amount within thirty (30) days after
the Company has notified Executive of the disallowed amount. Any amounts owed to
the Company by Executive pursuant to this Section 5.4 but unpaid after the
aforementioned thirty day period shall bear interest at a rate equal to the
commercial base rate of interest established from time to time by First
Tennessee Bank, N.A., Memphis, Tennessee.
5.5 Definitions. For this Agreement, the following terms have the
following meanings:
(a) "Change in Control" means any transaction pursuant to which (a) the
Company merges with another corporation or other entity and is not the
surviving entity, (b) substantially all of the Company's assets are sold
to persons or entities not affiliated with the Company, (c) shares of
Common Stock of the Company are issued or acquired by persons or entities
not affiliated with the Company, who, acting as a group, have the voting
power to change the composition of the Board of Directors of the Company,
or (d) any other transaction of a similar nature to the foregoing. For
purposes of determining whether or not any termination of the Executive's
employment was upon a Change in Control, it shall be presumed that any
termination within 12 months after consummation of any transaction
described above was "upon a Change in Control."
(b) "Constructive Termination" means termination of the Executive's
employment by the Executive (i) from a declined reassignment of a job that
is not the equivalent of his
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then current position as set forth herein (in responsibility, compensation
or geographic area of service, or (ii) on account of conduct by the
Company or the Board that constitutes continuous and material interference
by the Company or the Board with the Executive's performance of his duties
as set forth in Section 2 hereof or the intentional or material breach by
the Company of this Agreement. The Executive shall have a period of one
(1) year after termination of his employment to assert against the Company
that he suffered a Constructive Termination, and after the expiration of
such one year period, the Executive shall be deemed to have irrevocable
waived the right to such assertion.
(c) "Termination With Cause" means (a) any illegal or dishonest conduct
which adversely affects or may adversely affect the reputation, goodwill,
or business position of the Company or which involves Company funds or
assets; (b) any intentional or material damage to property or business of
the Company; (c) theft embezzlement or misappropriation of Company
property; or (d) the willful failure of employee to carry out his duties
as an employee of the Company.
(d) "Termination Without Cause" means termination of the Executive's
employment by the Company (a) other than due to resignation by Executive,
death, disability, Termination With Cause or (b) upon expiration of the
Term of this Employment Agreement as a result of the giving of notice by
the Company of its intent not to extend the Term of this Employment
Agreement as provided in Section 2.1.
SECTION 6
OTHER DUTIES OF THE EXECUTIVE DURING
AND AFTER THE TERM OF THIS EMPLOYMENT AGREEMENT
6.1 Additional Information. The Executive will, with reasonable notice
during or after the Term of this Employment Agreement, furnish information as
may be in his possession and cooperate with the Company as may reasonably be
requested in connection with any claims or legal actions in which the Company is
or may become a party.
6.2 Confidentiality. The Executive recognizes and acknowledges that all
information pertaining to the affairs, business, clients, customers or other
relationships of the Company, as hereinafter defined, is confidential and is a
unique and valuable asset of the Company. Access to and knowledge of this
information are essential to the performance of the Executive's duties under
this Agreement. The Executive will not during the Term of this Employment
Agreement or after, except to the extent reasonably necessary in performance of
the duties under this Agreement, give to any person, firm, association,
corporation or governmental agency any information concerning the affairs,
business, clients, customers or other relationships of the Company except as
required by law. The Executive will not make use of this type of information for
his own purposes or for the benefit of any person or
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organization other than the Company. The Executive will also use his best
efforts to prevent the disclosure of this information by others. All records,
memoranda, etc. relating to the business of the Company whether made by the
Executive or otherwise coming into his possession are confidential and will
remain the property of the Company.
6.3 Noncompetition.
(a) Voluntary Termination; Termination With Cause. In the event the
Executive suffers a Voluntary Termination or a Termination With Cause and there
has not been a Change in Control, the Executive will not Compete (hereinafter
defined) with the Company for a period of time equal to the then remaining Term
of this Employment Agreement (as if this Agreement had not been terminated). If
the Executive suffers a Voluntary Termination or a Termination With Cause and
there has been a Change in Control, the Executive will not Compete with the
Company for a period of one (1) year after the date of such termination.
(b) Termination Without Cause; Constructive Termination. In the
event the Executive suffers a Termination Without Cause or a Constructive
Termination and there has not been a Change in Control, the Executive will not
Compete with the Company for a period of time equal to the remaining Term of
this Employment Agreement (as if this Employment Agreement had not been
terminated). If the Executive suffers a Termination Without Cause or a
Constructive Termination and there has been a Change in Control, then the
provisions in this Section 6 restraining competition shall not apply and the
Executive shall be free to Compete with the Company immediately after such
termination.
(c) Definition of "Compete" with the Company. For the purposes of
this Section 6, the term "Compete with the Company" means action by the
Executive, direct or indirect, for his own account or for the account of others,
either as an officer, director, stockholder, owner, partner, member, promoter,
employee, consultant, advisor, agent, manager, creditor or in any other
capacity, resulting in the Executive having any pecuniary interest, legal or
equitable ownership, or other financial or non-financial interest, in any
corporation, business trust, partnership, limited liability company,
proprietorship or other business or professional enterprise that provides
management services to medical practices within the musculoskeletal specialty or
such other specialties practiced by any medical practice contracted to provide
management services at the time of termination of employment; provided, however,
that the term "Compete with the Company" shall not include ownership (without
any more extensive relationship) of a less than 5% interest in any publicly-held
corporation or other business entity.
(d) Reasonableness of Scope and Duration; Remedies. The Executive
acknowledges that the covenants contained herein are reasonable as to geographic
and temporal scope. The Executive acknowledges that his breach or threatened or
attempted breach of any provision of Section 6 would cause irreparable harm to
the Company not
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compensable in monetary damages and that the Company shall be entitled, in
addition to all other applicable remedies, to a temporary and permanent
injunction and a decree for specific performance of the terms of Section 6
without being required to prove damages or furnish any bond or other security.
SECTION 7
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation which assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a Consolidation, Merger or Sale
of Assets, the term "the Company" as used will mean the other corporation and
this Agreement shall continue in full force and effect. This Section 7 is not
intended to modify or limit the rights of the Executive hereunder.
SECTION 8
MISCELLANEOUS
8.1 Entire Agreement. This Agreement contains the entire understanding
between the Company and the Executive with respect to the subject matter and
supersedes any prior employment or severance agreements between the Company and
its affiliates, and the Executive.
8.2 Amendment; Waiver. This Agreement may not be modified or amended
except in writing signed by the parties. No term or condition of this Agreement
will be deemed to have been waived except in writing by the party charged with
waiver. A waiver shall operate only as to the specific term or condition waived
and will not constitute a waiver for the future or act on anything other than
that which is specifically waived.
8.3 Severability; Modification of Covenant. Should any part of this
Agreement be declared invalid for any reason, such invalidity shall not affect
the validity of any remaining portion hereof and such remaining portion shall
continue in full force and effect as if this Agreement has been originally
executed without including the invalid part. Should any covenant of this
Agreement be unenforceable because of its geographic scope or term, its
geographic scope or term shall be modified to such extent as may be necessary to
render such covenant enforceable.
8.4 Effect of Captions. Titles and captions in no way define, limit,
extend or describe the scope of this Agreement nor the intent of any provision
thereof.
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8.5 Counterpart Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 Governing Law; Arbitration. This Agreement has been executed and
delivered in the State of Colorado and its validity, interpretation, performance
and enforcement shall be governed by the laws of that state. Any dispute among
the parties hereto shall be settled by arbitration in Denver, Colorado in
accordance with the rules then obtaining of the American Arbitration Association
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof. All provisions hereof are for the protection and are
intended to be for the benefit of the parties hereto and enforceable directly by
and binding upon each party. Each party hereto agrees that the remedy at law of
the other for any actual or threatened breach of this Agreement would be
inadequate and that the other party shall be entitled to specific performance
hereof or injunctive relief or both, by temporary or permanent injunction or
such other appropriate judicial remedy, writ or order as may be decided by a
court of competent jurisdiction in addition to any damages which the complaining
party may be legally entitled to recover together with reasonable expenses of
litigation, including attorney's fees incurred in connection therewith, as may
be approved by such court.
8.7 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first-class postage prepaid by registered mail, return
receipt requested, or when delivered if by hand, overnight delivery service or
confirmed facsimile transmission, to the following:
(i) If to the Company, at its headquarters, or at such other address as
may have been furnished to the Executive by the Company in writing; or
(ii) If to the Executive, at his personal residence, or such other address
as may have been furnished to the Company by the Executive in writing.
8.8 Binding Agreement. This Agreement shall be binding on the parties'
successors, heirs and assigns.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SPECIALTY CARE NETWORK, INC.
By:___________________________________
Xxxxxxx X. Xxxxxxx, Executive Vice
President of Finance/Development
EXECUTIVE:
______________________________________
XXXXX X. XXXXX
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