EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), is made and entered into as of the 19th day
of September, 1996, by and between Physician Partners, Inc., a Delaware
corporation (the "Company"), and Xxxxx Xxxxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive and the Company deem it to be in their respective
best interests to enter into an agreement providing for the Company's employment
of Executive pursuant to the terms herein stated.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, it is hereby agreed as follows:
1. DUTIES. The Company hereby agrees to employ Executive as its Senior
Vice President for the "Term of Employment" (as herein defined). Executive in
this capacity agrees to use his best efforts during the Term of Employment to
protect, encourage, and promote the interests of the Company. During the Term
of Employment, Executive shall also perform such other duties consistent with
the office held by Executive as may be reasonably assigned to him from time to
time by the Chief Executive Officer of the Company, and will devote substantial
time and attention to such duties, except while on sick leave, reasonable
vacations, and excused leaves of absence. During such period, Executive may
also be required to perform services for one or more affiliates of the Company.
2. COMPENSATION.
(a) BASE SALARY. Effective on the date (the "Merger Date") of the
merger of the Company with the Corvallis Clinic, P.C., HealthFirst Medical
Group, P.C. and Medford Clinic, P.C. (the "Merger"), the Company agrees to pay
to Executive a minimum base salary during the Term of Employment equal to one
hundred seventy five thousand dollars ($175,000) per year ("Base Salary"),
payable in regular installments in accordance with the Company's normal payroll
procedures. Executive's Base Salary shall be increased at the discretion of the
Compensation Committee of the Board of Directors of the Company (the
"Committee") to maintain or bring Executive to the 35th percentile of peer
companies selected by the Committee.
(b) ANNUAL INCENTIVE. Effective on the Merger Date, Executive will
be eligible to participate in the Company's annual management incentive plan (or
such other incentive plan established in place of the Company's annual
management incentive plan) at a
target bonus equal to such percentage of Base Salary as determined each year by
the Committee in its discretion. The actual amount of the annual bonus award,
if any, for a fiscal year shall be dependent upon the achievement of certain
financial standards of performance for the operations of the Company, the
achievement of certain non-financial objectives mutually agreed upon by
Executive and the Company at the beginning of the fiscal year and a
discretionary component for performance above targets. For the 1997 fiscal
year, the incentive standards and target goals for Executive shall be mutually
agreed upon by Executive and the Company within sixty (60) days after the Merger
Date and Executive shall be entitled to receive a bonus award not less than
fifty thousand dollars ($50,000) assuming achievement of the financial standards
of performance and 100% of the agreed upon non-financial objectives. No bonus
award for the 1997 fiscal year shall be awarded if Executive fails to achieve at
least 85% of the agreed upon non-financial objectives. The Committee will
review Executive's performance from time to time and assuming satisfactory
performance, additional bonus awards as the Committee may determine in its sole
discretion shall be made sufficient to maintain Executive's short-term
compensation package (i.e, Base Salary plus annual bonus awards) at a level
equal to the 60th percentile of peer companies selected by the Committee.
(c) LONG-TERM INCENTIVES. Executive shall not be entitled to any
long-term incentive for any period prior to the Merger. However, effective on
the Merger Date, Executive shall be granted an option to purchase 35,000 shares
of the Common Stock of the Company at the fair market value of a share of the
common stock, par value $0.01 per share (the "Common Stock"), of the Company as
of the date such option is granted. The option shall vest and become
exercisable with respect to twenty percent (20%) of the shares subject to the
option on each anniversary of the date the option is granted. The option grant
specified above shall be subject to such other terms and conditions as may be
specified in a separate agreement providing for the award or grant as the case
may be. The Committee will review Executive's performance from time to time and
assuming satisfactory performance, additional awards of long term incentives in
such form and in such amounts as the Committee may determine in its sole
discretion, shall be made sufficient to maintain Executive's total compensation
(i.e., Base Salary, annual bonus awards and long-term incentives) at a level
that is within the 60th to 70th percentile of compensation ranges for peer
companies selected by the Committee.
3. BENEFITS. During the Term of Employment:
(a) The Company shall furnish Executive with, and Executive shall be
allowed full use of, office facilities, automobiles, secretarial and clerical
assistance, and other Company property and services of a quality, nature and to
the extent made
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available to senior executive employees of the Company from time to time;
(b) Executive shall be eligible to participate in life, health, long-
term disability insurance and severance programs, stock purchase programs, stock
option plans, qualified and non-qualified pension and retirement plans,
incentive compensation programs and other fringe benefit programs, if any,
available to other senior executive employees of the Company and physicians
employed by medical clinics that are party to a practice management
agreement with the Company or any Subsidiary thereof;
(c) Executive shall be allowed 4 weeks of vacation and paid leaves of
absence on the same basis as other senior executive employees of the Company;
and
(d) Company will reimburse Executive for reasonable business expenses
in performing Executive's duties and promoting the business of Company,
including, without limitation, reasonable entertaining expenses, automobile
expenses, and travel and lodging, when incurred. The cost of these items shall
be borne by the Company upon presentation of an itemized expense voucher.
4. TERM OF EMPLOYMENT. As used herein, the phrase "Term of Employment"
shall mean the period commencing on the Merger Date and ending three (3) years
from the Merger Date. Company shall provide Executive with at least ninety (90)
days notice of its intent not to renew this Agreement. Notwithstanding the
foregoing, the Term of Employment shall expire on the first to occur of the
following:
(a) TERMINATION WITHOUT CAUSE. Notwithstanding anything to the
contrary in this Agreement, whether express or implied, the Company may at any
time terminate Executive's employment with the Company by giving Executive at
least sixty (60) days prior written notice of the effective date of termination.
In the event of such termination, Executive shall be entitled to receive his
Base Salary (at the rate in effect immediately prior to such notice) during the
period commencing on the effective date of such termination and ending on the
first anniversary of such date (the "Severance Period") as though Executive's
employment had continued. Executive shall also be entitled to continue to be
covered by all medical, health and accident and disability insurance, at the
same coverage level maintained for Executive's benefit immediately prior to the
date of Executive's termination, until the end of the Severance Period. In the
event Executive is ineligible under the terms of such insurance to continue to
be so covered, the Company shall provide Executive with substantially equivalent
coverage through other sources or will provide the Executive with a lump sum
payment equal to the agreed upon present value of the continuation of such
insurance coverages to which Executive is entitled under this Section 4(a).
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(b) TERMINATION FOR CAUSE. Company shall have the right to terminate
Executive's employment at any time for Cause by giving Executive written notice
of the effective date of termination (which effective date may, except as
otherwise provided below, be the date of such notice). For purposes of this
Agreement, Cause shall mean:
(i) fraud, misappropriation, embezzlement or other act of
material misconduct against the Company or any of its affiliates thereof or an
act contrary to their best interests;
(ii) substantial and willful failure to render services in
accordance with the terms of this Agreement, provided that (A) a demand for
performance of services had been delivered to the Executive by the Chief
Executive Officer of the Company at least thirty (30) days prior to termination
identifying the manner in which such Chief Executive Officer believes that the
Executive has failed to perform and (B) the Executive has thereafter failed to
remedy such failure to perform;
(iii) willful and knowing violation of any rules or regulations
of any governmental or regulatory body material to the business of the Company;
or
(iv) conviction of or plea of guilty or nolo contendere to a
felony.
If Company terminates Executive's employment for any of the reasons set forth in
this Section 4(b), Company shall have no further obligations hereunder from and
after the effective date of termination and shall have all other rights and
remedies available under this or any other agreement and at law or in equity.
If Executive's employment is terminated for Cause (as defined above) and
Executive does not consent to such termination, such termination shall not be
considered effective and Executive's rights under this Agreement during the Term
of Employment (including, without limitation, the provisions of Sections 2 and 3
hereof) shall continue until the existence of such Cause has been determined by
an independent arbitrator appointed by the American Arbitration Association and
either party's rights to petition a court of law for a decision in the matter
have been exhausted. In connection with the appointment of an arbitrator, both
parties agree to submit the question to final and binding arbitration by an
appointee of the American Arbitration Association and to cooperate with the
arbitrator, with all costs of arbitration paid by the Company. If the
arbitrator determines that the Executive's termination was for Cause, then the
Executive shall repay to the Company all compensation received pursuant to
Section 2 during the period commencing upon the Executive's termination and
ending upon the arbitrator's final determination. The Executive shall also
repay to the Company all amounts that it paid or reimbursed the Executive
pursuant to Section 6.
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(c) TERMINATION ON ACCOUNT OF DEATH. In the event of Executive's
death while in the employ of the Company, the Company shall pay to the
Executive's Designated Beneficiaries (as defined below) one hundred percent
(100%) of Executive's Base Salary as in effect immediately prior to Executive's
death, payable to Executive's Designated Beneficiary at the beginning of each
month for a period of twelve (12) months following Executive's death or until
the end of the Term of Employment, whichever is sooner. In addition,
Executive's surviving spouse, if any, shall continue to be covered by all
medical, health and accident insurance, and for the same coverage, maintained
for Executive's benefit immediately prior to the date of Executive's death, for
a period of twelve (12) months thereafter. In the event Executive's surviving
spouse is ineligible under the terms of such insurance to continue to be so
covered, the Company shall provide substantially equivalent coverage through
other sources or will provide the Executive's surviving spouse with a lump sum
payment equal to the agreed upon present value of the continuation of such
insurance coverages under this Section 4(c).
(d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that
Executive's employment with the Company is voluntarily terminated by Executive,
the Company shall have no further obligations hereunder from and after the
effective date of such termination and shall have all other rights and remedies
available under this or any other agreement and at law or in equity.
5. CHANGE IN CONTROL. In the event of a Change in Control of the
Company, Executive shall be entitled to benefits provided under the Company's
Change in Control Plan and the agreement Employee has executed pursuant to that
plan.
6. EXPENSES. Company will pay or reimburse the Executive for all costs
and expenses (including court costs and reasonable attorneys' fees) incurred by
the Executive as a result of any claim, action or proceeding arising out of, or
challenging the validity or enforceability of, this Agreement or any provision
hereof.
7. MITIGATION. In the event of a termination of Executive's employment
for any reason, Executive shall not be required to seek other employment; in
addition, no amount payable under Section 4 of this Agreement shall be reduced
by any compensation earned by Executive as a result of employment by another
employer after such termination of employment with the Company.
8. DESIGNATED BENEFICIARY. In the event of the death of Executive while
in the employ of the Company, or at any time thereafter during which amounts
remain payable to the Executive under Section 4(a) or (c) hereof, such payments
shall thereafter be made to such person or persons as the Executive may
specifically designate (successively or contingently) to receive payments under
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this Agreement following the Executive's death by filing a written beneficiary
designation with the Company during the Executive's lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Company and may be
amended from time to time or may be revoked by the Executive pursuant to written
instruments filed with the Company during his lifetime. Beneficiaries
designated by Executive may be any natural or legal person or persons, including
a fiduciary, such as a trustee or a trust or the legal representative of an
estate. Unless otherwise provided by the beneficiary designation filed by
Executive, if all of the persons so designated die before Executive on the
occurrence of a contingency not contemplated in such beneficiary designation,
then the amount payable under this Agreement shall be paid to the Executive's
estate.
9. MISCELLANEOUS. This Agreement shall also be subject to the following
miscellaneous considerations:
(a) The Company represents and warrants to Executive that it has the
authorization, power and right to deliver, execute and fully perform its
obligations under this Agreement in accordance with its terms.
(b) Except as provided in Section 5, this Agreement contains a
complete statement of all the arrangements between the parties with respect to
Executive's employment by the Company, this Agreement supersedes all prior and
existing negotiations and agreements between them concerning the Executive's
employment, and this Agreement can only be changed or modified pursuant to a
written instrument executed by each of the parties hereto.
(c) If any provisions of this Agreement or any portion hereof is
declared invalid, illegal or incapable of being enforced by any court of
competent jurisdiction, the remainder of such provisions and all of the
remaining provisions of this Agreement shall continue in full force and effect.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Oregon, except to the extent governed by federal
law.
(e) All compensation payable hereunder shall be subject to such
withholding taxes as may be required by law.
(f) This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Company will require any successor,
whether direct or indirect, by purchase, merger, consolidation or otherwise, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Except as expressly provided
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herein, Executive may not sell, transfer, assign, or pledge any of his rights or
interests pursuant to this Agreement.
(g) Except as otherwise provided in Section 4(b) hereof, in the event
of any dispute between the Company and the Executive with respect to any of the
provisions of this Agreement, the Company and the Executive agree that either
party may request that the dispute be resolved by submitting the issue to
arbitration or such other form of alternative dispute resolution as the parties
may agree upon (collectively, "Alternative Dispute Resolution"). The parties
expressly agree and acknowledge, however, that except as otherwise provided in
Section 4(b) hereof, nothing in this Agreement (whether express or implied)
shall under any circumstances require either party to consent to Alternative
Dispute Resolution.
(h) Any rights of Executive hereunder shall be in addition to any
rights Executive may otherwise have under benefit plans or agreements of the
Company to which he is a party or in which he is a participant, including,
without limitation, any Company sponsored employee benefit plans. Provisions of
this Agreement shall not in any way abrogate Executive's rights under such other
plans and agreements.
(i) The Company shall, to the maximum extent permitted by law,
indemnify Executive against expenses (including, without limitation, reasonable
attorneys' fees), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceedings arising by reason of the
fact that Executive is or was an employee, officer, or agent of the Company.
Company shall advance to Executive expenses incurred in defending any such
proceedings to the maximum extent permitted by law. Company's obligations under
this provision shall not cease upon termination of this Agreement.
(j) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, or prevent that party thereafter from enforcing each
and every other provision of this Agreement.
10. GUARANTEE BY CLINICS. Each of The Corvallis Clinic, P.C., HealthFirst
Medical Group, P.C. and Medford Clinic, P.C., by signing this Agreement in the
space provided below, hereby agrees to guarantee in favor of the Executive its
pro rata share of the aggregate value of compensation and benefits provided to
the Executive under this Agreement, such pro rata shares of The Corvallis
Clinic, P.C., HealthFirst Medical Group, P.C. and Medford Clinic, P.C. being
33.8%, 42.6% and 23.6%, respectively.
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IN WITNESS WHEREOF, the parties hereto have read, understood, and
voluntarily executed this Agreement as of the day and year first above written.
PHYSICIAN PARTNERS, INC.
/s/ Xxxxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------- --------------------------------
XXXXX XXXXXXXXX Title: President, Chief
Executive Officer and
Director
AGREED AND ACKNOWLEDGED:
THE CORVALLIS CLINIC, P.C.
By: /s/ Xxxxx X. Xxxxxxxxx, Xx.
----------------------------
Title: President
HEALTHFIRST MEDICAL GROUP, P.C.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------
Title: President
MEDFORD CLINIC, P.C.
By: /s/ Xxxxx X. Xxx Xxx
---------------------------
Title: President
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EXECUTION COPY
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment, dated as of December 31, 1996, is entered into by and
between Physician Partners, Inc., a Delaware corporation (the "Company"), and
Xxxxx Xxxxxxxxx (the "Executive").
RECITALS
A. The Company and the Executive have entered into the Employment
Agreement, dated as of September 19, 1996 (the "Employment Agreement").
Capitalized terms used but not defined herein shall be used herein as defined in
the Employment Agreement.
B. PPI and the Companies have agreed to amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, it is hereby agreed as follows:
SECTION 1. AMENDMENT TO EMPLOYMENT AGREEMENT. Section 2(a) of the
Employment Agreement is, effective as of the date hereof, hereby amended in full
to read as follows:
"2. COMPENSATION.
(a) BASE SALARY. Effective on the date (the 'Merger Date') of
the merger of the Company with The Corvallis Clinic, P.C., HealthFirst
Medical Group, P.C. and Medford Clinic, P.C. (the 'Merger'), the Company
agrees to pay to Executive a minimum base salary during the Term of
Employment equal to one hundred thirty-two thousand dollars ($132,000) per
year ('Base Salary'), payable in regular installments in accordance with
the Company's normal payroll procedures. Executive's Base Salary shall be
increased at the discretion of the Compensation Committee of the Board of
Directors of the Company (the 'Committee') to maintain or bring Executive
to the 35th percentile of peer companies selected by the Committee."
SECTION 2. REFERENCE TO AND EFFECT ON THE EMPLOYMENT AGREEMENT. On and
after the date hereof, each reference in the Employment Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import shall mean
and be a reference to the Employment Agreement as amended hereby. Except as
hereby expressly amended, the Employment Agreement shall remain in full
force and effect, and is hereby ratified and confirmed in all respects on and as
of the date hereof.
SECTION 3. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Oregon.
SECTION 4. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when executed shall be deemed to be an original and
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have read, understood, and
voluntarily executed this Amendment as of the day and year first above written.
PHYSICIAN PARTNERS, INC.
---------------------------- By: ---------------------------
XXXXX XXXXXXXXX Title:
AGREED AND ACKNOWLEDGED:
THE CORVALLIS CLINIC, P.C.
By:
----------------------
Title:
HEALTHFIRST MEDICAL GROUP, P.C.
By:
----------------------
Title:
MEDFORD CLINIC, P.C.
By:
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Title:
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