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EXHIBIT (10)-4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 18,
1998, between MEDPARTNERS, INC., a Delaware corporation (together with any
successor corporation, "MedPartners"), and E. XXX XXXXXXXX ("Executive").
WITNESSETH:
WHEREAS, MedPartners and its subsidiaries and affiliates are
engaged in providing physician practice management services, pharmacy benefit
management services, disease management services and hospital-based physician
services (collectively, "Healthcare Services") throughout the United States; and
WHEREAS, MedPartners desires to avail itself of Executive's
talents and expertise in management of the Healthcare Services business of
MedPartners, and to employ him as the President and Chief Executive Officer of
MedPartners, and Executive is willing to accept such employment.
NOW THEREFORE, in consideration of the premises, and other
mutual promises and covenants hereinafter contained, MedPartners and Executive
do hereby agree, for their mutual benefit, as follows:
SECTION 1. EMPLOYMENT.
Executive shall be employed by MedPartners under this
Agreement, effective on the date hereof, and Executive accepts such employment
upon the terms and conditions hereinafter set forth.
SECTION 2. TERM.
The term of employment provided for in this Agreement shall
commence on March 18, 1998 (the "Commencement Date"), and shall remain in
full force and effect for a period of five years thereafter. Such term shall be
automatically extended for an additional year on each anniversary of the
Commencement Date, unless written notice of non-extension is provided by
MedPartners to Executive at least 30 days prior to such anniversary.
SECTION 3. POWERS AND DUTIES.
Executive shall be employed by MedPartners during the term of
employment under this Agreement as the President and Chief Executive Officer of
MedPartners. As soon as practicable following the Commencement Date, MedPartners
shall cause Executive to become a member of the Board of Directors of
MedPartners ("Board of Directors"). In addition, Executive shall perform such
duties as may be assigned to him from time to time by and shall report to the
Board of Directors, provided that such duties are consistent with Executive's
title and position.
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In carrying out his duties under this Agreement, Executive
shall have such powers and duties usually incident to the offices of President
and Chief Executive Officer and shall have general responsibility for the
overall development, expansion and operations of MedPartners and its
subsidiaries and affiliates.
Executive shall devote substantially all of his time and
energies during business hours to the supervision and conduct, faithfully and to
the best of his ability, of the business and affairs of MedPartners; provided
that it shall not be a violation of this Agreement for the Executive to serve on
the Board of Directors of First Union National Bank of Georgia, Integrated
Health Services, Inc. and MaterniCare, Inc. The Executive shall not be
restricted, subject to Section 12 hereof, from investing his assets in such form
or manner as will not require any services on his part in the operation of the
affairs of the companies in which such investments are made.
SECTION 4. PLACE OF PERFORMANCE.
The Executive shall perform his duties at the principal
offices of MedPartners located in Birmingham, Alabama, but from time to time
Executive shall be required to travel to MedPartners' other locations in the
proper conduct of his responsibilities under this Agreement. Due to the national
scope of MedPartners' business, MedPartners may require Executive to spend a
reasonable amount of time traveling, as his duties and the business of
MedPartners and its subsidiaries and affiliates may require.
SECTION 5. COMPENSATION.
For all services rendered by Executive pursuant to this
Agreement:
(a) MedPartners shall pay Executive a base salary at the rate
of no less than $1,000,000 per annum, such salary to be paid semi-monthly. Such
salary shall be reviewed annually by the Compensation Committee of the Board of
Directors (the "Compensation Committee") with a view to consideration of
appropriate merit increases in such salary, and once increased, the base salary
shall not be decreased during the term hereof.
(b) On the Commencement Date, MedPartners shall pay Executive
a sign-on bonus of $1,000,000. In the event that the Executive voluntarily
terminates his employment with MedPartners other than for Good Reason prior to
the second anniversary of the Commencement Date, the Executive shall repay to
MedPartners one-twenty-fourth (1/24) of such sign-on bonus for each full
calendar month such termination precedes the second anniversary of the
Commencement Date.
(c) For each year of the term of this Agreement, Executive
shall be eligible to receive an annual target bonus (the "Bonus") of at least
two (2) times the base salary in effect for the year to which the Bonus relates
based upon MedPartners' achievement of its target performance goals for such
year (the "Annual Target"). In the event MedPartners achieves 90%, but less than
100%, of its Annual Target for any year, the Bonus for such year shall equal one
and one-half (1.5) times the Executive's base
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salary for such year, with interpolation of results for achievement between 90%
and 100% of its Annual Target for any year (with such achievement measured as a
percent to the nearest two decimal points, e.g., 94.52%, to the extent capable
of precise measurement). At the sole discretion of the Board of Directors, a
payment in excess of 2 times base salary may be made. An advance amount of
$50,000 shall be payable for each month of the applicable year, to the extent
that a pro-rata portion of the applicable Annual Target has been achieved for
each such month. The establishment of Annual Targets shall be mutually agreed
upon by the Executive and the Chairman of the Board of Directors of MedPartners
(the "Chairman") within 90 days of the Commencement Date for the Bonus for the
1998 calendar year, and, for Bonuses for subsequent years, by the March 31 of
such years. The determination of whether and to what extent the Annual Target,
and the monthly pro-rata portion of the Annual Target, have been achieved shall
be mutually agreed upon by the Executive and the Chairman. In the event that the
Executive and the Chairman do not reach an agreement regarding the establishment
of the Annual Target by the applicable date in any calendar year, the Annual
Target shall be the consensus estimate for earnings per share of MedPartners as
published by Xxxxxx Publications as of such date. Notwithstanding the
Executive's commencement of employment hereunder after the beginning the 1998
calendar year, the Executive's target bonus opportunity with respect to the
Bonus for the 1998 calendar year shall be $2,000,000, without pro-ration.
(d) Prior to the Commencement Date, MedPartners shall grant to
Executive an option (the "Option") to purchase 3,250,000 shares of the common
stock of MedPartners (the "Common Stock"). As soon as practicable after the
Commencement Date, MedPartners shall file and keep effective a registration
statement on Form S-8, including a Form S-3 Reoffer Prospectus (an S-3) (or
other applicable registration statement) with respect to the shares of Common
Stock subject to the Option; provided that (i) such S-3 need not be filed until
an S-3 is filed with respect to any shares of Common Stock subject to stock
options granted to the senior-most executives of MedPartners and (ii)
MedPartners agrees to use its best efforts to file the S-3 referenced in clause
(i) with respect to any of its senior-most executives as soon as practicable
following the Commencement Date. The Option shall have a ten (10) year term and,
subject to the vesting requirements described below, shall remain exercisable
for the full term notwithstanding the employment status of the Executive. The
exercise price per share of the Option shall be equal to the lowest fair market
value (determined in accordance with the MedPartners' 1997 Long Term Incentive
Compensation Plan (the "1997 Plan")) of the Common Stock for the period from
February 17, 1998 through April 18, 1998, provided that the exercise price per
share of the Option shall not be greater than $10. The Option shall vest based
on the continued employment of the Executive in increments of 1,250,000 shares
on the date of grant and 1,000,000 shares each on the first and second
anniversaries of the date of grant. The Option shall be granted outside the
terms of the 1997 Plan, however, except as stated in this Agreement, the Option
shall have terms and conditions substantially similar to options granted under
the 1997 Plan. Upon a Change in Control, as defined in Section 8(b) hereof, the
Option will immediately become 100% vested. The Option shall be subject to a
stock option agreement entered into between the parties hereto on terms
consistent with the foregoing; provided that the Option shall be effective as of
the date of grant in accordance with the terms and
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conditions contained herein, irrespective of whether a stock option agreement
has been executed by the parties.
(e) In the event that MedPartners' Annual Target is met with
respect to the 1998 calendar year, MedPartners shall grant Executive an option
(the "Performance Option") to purchase an additional 500,000 shares of Common
Stock. The determination as to whether such Annual Target has been met shall be
mutually agreed upon by the Executive and the Chairman. Such grant shall be made
as soon as practicable following the determination by the Executive and the
Chairman as to the achievement of the applicable Annual Target. The Performance
Option shall have a ten (10) year term and, subject to the vesting requirements
described below, shall remain exercisable for the full term notwithstanding the
employment status of the Executive. The exercise price per share of the
Performance Option shall be equal to the fair market value of Common Stock on
the date of grant of the Performance Option (determined in accordance with the
1997 Plan). The Performance Option shall vest based on the continued employment
of the Executive in increments of 166,667 shares on the date of grant and
166,666 shares each on the first and second anniversaries of the date of grant.
The Performance Option shall be granted under the terms of the 1997 Plan, but
the granting of the Performance Option shall be conditioned upon the approval by
the stockholders of MedPartners of an amendment to the 1997 Plan to increase the
number of authorized shares available for issuance under the 1997 Plan (which
approval MedPartners shall use its best efforts to obtain). Upon a Change in
Control of MedPartners, as defined in Section 8(b) hereof, the Performance
Option will immediately become 100% vested. MedPartners shall make such other
amendments to the 1997 Plan as may be necessary to allow the Performance Option
to have the terms and conditions described in this Agreement. The Performance
Option shall be subject to a stock option agreement entered into between the
parties hereto on terms consistent with the foregoing; provided that the
Performance Option shall be effective as of the date of grant in accordance with
the terms and conditions contained herein, irrespective of whether a stock
option agreement has been executed by the parties.
(f) Upon the occurrence of a Change in Control pursuant to
Section 8(b)(v) hereof, the number and kind of shares subject to the Option and
the Performance Option shall be adjusted and/or substituted for in such manner,
if any, that the shares of the Common Stock generally are adjusted and/or
substituted for in connection with such transaction, provided that the Executive
may agree to such other treatment of the Option and the Performance Option in
this regard that may be proposed by the Compensation Committee. All or a portion
of the Option or the Performance Option shall be transferable by the Executive,
without consideration, to or for the benefit of immediate family members,
including but not limited to a partnership or trust with respect to which
immediate family members are the sole partners or beneficiaries, respectively.
SECTION 6. EMPLOYEE BENEFITS.
Subject to the terms and eligibility requirements of any such
plans, Executive will be entitled to participate in any employee retirement,
benefit or welfare plans provided generally by MedPartners to its employees
and/or to its senior executives, such as life insurance, health and dental,
retirement (qualified and non-qualified), savings
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and disability plans which MedPartners has in effect or may adopt from time to
time. Without limiting the generality of the foregoing, MedPartners shall
provide Executive the following during the term of this Agreement:
(a) health coverage for the Executive and his dependants on
terms and conditions no less favorable than that provided any other executive of
MedPartners, its subsidiaries or affiliates, with no pre-existing condition
exclusions and no waiting periods for coverage;
(b) four weeks vacation during each year of this Agreement;
(c) a $1,000 per month car allowance for an automobile owned
or leased by Executive for use by Executive in connection with the performance
of his duties under this Agreement;
(d) disability insurance coverage paying benefits equal to 60%
of Executive's base salary, either through a corporate group disability
insurance plan or otherwise;
(e) payment of initiation fees and dues for one country club
of Executive's choice and such professional societies and associations of which
Executive is a member in furtherance of his duties hereunder;
(f) personal use of MedPartners' corporate aircraft, with such
use to be determined in accordance with MedPartners' policy for security of
executives;
(g) payment of the Executive's reasonable relocation expenses
from the Atlanta, Georgia area to the Birmingham, Alabama area, as described in
Section 23 hereof;
(h) payment directly to Executive's counsel and/or accountant
not to exceed $5,000 per annum for estate and tax planning services for the
benefit of Executive;
(i) reimbursement of the Executive's reasonable legal and
other expenses incurred in connection with the Executive entering into this
Agreement; and
(j) consideration, at least annually, by the Board of
Directors for the grant to Executive of options to purchase Common Stock in
addition to the Option and the Performance Option.
SECTION 7. EXPENSES.
Executive is authorized to incur reasonable expenses in
promoting the business of MedPartners and its subsidiaries and affiliates,
including expenses, to the extent used for business purposes, for entertainment,
travel and similar items. MedPartners will reimburse Executive for all such
expenses, upon the presentation by
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him of an itemized account of such expenditures in accordance with the
MedPartners expense reimbursement procedures.
SECTION 8. DEFINITIONS.
As used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "CAUSE" shall mean (i) repeated violations by Executive of
Executive's obligations under Section 3 of this Agreement (other than as a
result of failure to meet the Annual Target or other personal or corporate
performance targets and other than as a result of incapacity due to physical or
mental illness) which violations (A) are demonstrably willful and deliberate on
Executive's part, (B) are committed in bad faith or without reasonable belief
that such violations are in the best interests of MedPartners, and (C) are not
remedied in a reasonable period of time after receipt of written notice from
MedPartners specifying such violations (as more fully described below), or (ii)
the conviction of Executive of a felony involving moral turpitude.
Notwithstanding the foregoing, termination by MedPartners for Cause shall not be
effective until and unless (a) notice of intention to terminate for Cause has
been given by MedPartners to the Executive within four (4) months after any
member of the Board of Directors learns of the act, failure or event
constituting "Cause", (b) the Board of Directors has voted (at a meeting of the
Board of Directors duly called and held as to which termination of the Executive
is an agenda item) by a majority vote to terminate the Executive for Cause after
Executive has been given notice of particular acts or circumstances which are
the basis for the termination for Cause and the Executive has been afforded at
least 20 days notice of the meeting and an opportunity to present his position
in writing and the Board of Directors has given notice of termination to the
Executive within three (3) days after such meeting (and the Executive's
termination of employment shall be effective immediately upon receipt of such
notice but shall not be deemed a termination of employment for Cause unless and
until all of the conditions set forth in clauses (a) through (c) hereof have
occurred), and (c) if the Executive has commenced an expedited arbitration
within 15 days after such notice of termination, disputing MedPartners' right
under this Agreement to terminate for Cause, the Arbitrator shall thereafter
have determined that the Executive was terminated for Cause; provided, however,
that (x) MedPartners may suspend the Executive with full compensation and
benefits at any time during the period commencing with the giving of notice to
the Executive under clause (a) above until final notice of termination is given
in clause (b) above and (y) regardless of whether the Executive's employment is
suspended during the period described in clause (x) above, MedPartners shall
continue to pay the Executive his full compensation and benefits under this
Agreement pending the Arbitrator's decision. If the Executive or his
representative fails to file a demand for arbitration with the American
Arbitration Association ("AAA") and file the requisite fees pursuant to Rule 4
of the National Rules for the Resolution of Employment Disputes effective June
1, 1996 (the "National Rules") within 15 days of receipt of notice of
termination from the Board of Directors, and diligently pursue such proceeding
in accordance with the procedures set forth in Section 15 hereof, such
termination shall be conclusively presumed to have been
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for Cause. If the Arbitrator declines to rule that the Executive was terminated
for Cause, the Executive shall be treated as having been terminated without
Cause and the Executive shall have the rights provided under Section 10(b)
hereof with respect to a termination without Cause.
(b) "CHANGE IN CONTROL" shall mean:
(i) The acquisition, whether by open market or private
purchase, tender offer or any other means, by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (a "Person") of beneficial
ownership (within the meaning of Rule l3d-3 promulgated under the Exchange Act)
of 20% or more of either (A) the then outstanding shares of Common Stock (the
"Outstanding MedPartners Common Stock") or (B) the combined voting power of the
then outstanding voting securities of MedPartners entitled to vote generally in
the election of directors (the "Outstanding MedPartners Voting Securities");
provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control: (1) any acquisition by
one or more underwriter directly from MedPartners pursuant to a firm commitment
underwritten offering to the public of shares of Common Stock, (2) any
acquisition by MedPartners, provided that immediately following such acquisition
no person other than MedPartners or a subsidiary of MedPartners is such a 20%
beneficial owner, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by MedPartners or any corporation controlled by
MedPartners, provided that immediately following such acquisition no person
other than any such benefit plan (or related trust) is such a 20% beneficial
owner, or (4) any acquisition by any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) below;
(ii) Cessation, for any reason, of the individuals who
constitute the Board of Directors as of the date hereof (the "Incumbent Board")
to constitute at least a majority of the Board of Directors; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by MedPartners' stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors;
(iii) Consummation of a reorganization, merger or
consolidation of MedPartners or sale or other disposition of all or
substantially all of the assets of MedPartners (a "Business Combination"), in
each case, unless, following such Business Combination, (1) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding MedPartners Common Stock and Outstanding
MedPartners Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then
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outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns MedPartners or all or substantially all of MedPartners'
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding MedPartners Common Stock and Outstanding
MedPartners Voting Securities, as the case may be, (2) no party (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of MedPartners or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (3) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Board of Directors at the
time of the execution of the initial agreement or of the action of the Board of
Directors, providing for such Business Combination;
(iv) Approval by the stockholders of MedPartners of a
complete liquidation or dissolution of MedPartners;
(v) The sale, transfer or other disposition, in a
transaction or series of related transactions, of the majority of the assets of
one of MedPartners' three major lines of business as of the Commencement Date
(consisting of its physician practice management services, pharmacy benefit
management services and contracts management services); or
(vi) The making of a recommendation by the Board of
Directors, pursuant to Rule 14e-2 under the Exchange Act or otherwise, in
connection with a tender offer pursuant to which any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) seeks
to obtain beneficial ownership (within the meaning of Rule 13(d)-3 under the
Exchange Act) of 20% or more of either the Outstanding MedPartners Common Stock
or the Outstanding MedPartners Voting Securities, other than a recommendation
that the holders of shares of such securities (i) not accept the offer and (ii)
not tender Outstanding MedPartners Common Stock or Outstanding MedPartners
Voting Securities.
(c) "DISABILITY" shall be deemed to have occurred if Executive
makes application for or is otherwise eligible for disability benefits under any
MedPartners-sponsored long-term disability program covering Executive, and
Executive qualifies for such benefits. In the absence of a MedPartners-sponsored
long-term disability program covering Executive, Executive shall be presumed
totally and permanently disabled if so determined by the Board of Directors
following reasonable review of a medical opinion certifying that Executive will
be unable to perform his duties under this Agreement for at least 90 consecutive
days due to a physical or mental condition.
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(d) "GOOD REASON" shall mean:
(i) A breach by MedPartners of the compensation
provisions of Section 5 hereof;
(ii) A termination by MedPartners of any compensation,
retirement, benefit or welfare plan in which Executive is participating, without
substituting plans providing Executive with substantially similar benefits, or
the taking of any action by MedPartners which would adversely affect Executive's
participation in or materially reduce Executive's benefits under any of such
plans or deprive Executive of any material fringe benefit enjoyed by Executive;
(iii) the failure to appoint or elect the Executive to be
a member of the Board of Directors within 30 days of the Commencement Date;
(iv) the failure to continue the Executive as President
and Chief Executive Officer of MedPartners;
(v) once appointed or elected, as the case may be, the
Executive is thereafter removed as a member of the Board of Directors or there
is a failure to reelect or reappoint the Executive to such position;
(vi) the assignment to the Executive of duties
inconsistent with his position, duties, responsibilities or status with
MedPartners;
(vii) any material reduction in the Executive's duties,
responsibilities or status with MedPartners, including the appointment of anyone
to an executive position at MedPartners or any of its subsidiaries or affiliates
that is senior to that of the Executive, except for such a reduction with
respect to, or appointment at, any subsidiary, affiliate or line of business of
MedPartners that is in connection with a Change in Control as defined in Section
8(b)(v) hereof;
(viii) the relocation of MedPartners' principal executive
office to a location more than 40 miles from Birmingham, Alabama, or the
location of the Executive's own office to other than MedPartners' principal
executive office without Executive's prior written consent; or
(ix) the failure of MedPartners to obtain the assumption
in writing of its obligation to perform this Agreement by any successor to all
or substantially all of the assets of MedPartners within 15 days after a merger,
consolidation, sale or similar transaction;
provided, however, that (a) "Good Reason" shall not include acts which are cured
by MedPartners within 30 days from receipt by MedPartners of a written notice
from the Executive (the "Preliminary Notice of Good Reason") identifying in
reasonable detail the act or acts constituting "Good Reason", (b) "Good Reason"
shall not exist unless the Preliminary Notice of Good Reason shall have been
given by the Executive within 60 days after learning of the act, failure or
events (or, in the case of a series of related acts,
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failures or events, within 120 days of the first such act, failure or event)
which the Executive alleges constitutes "Good Reason" hereunder, (c) if
MedPartners has failed to cure as provided above, "Good Reason" shall not exist
unless the Executive shall have given notice of termination hereunder for Good
Reason (which termination shall be effective 30 days from the giving of such
notice), and (d) if MedPartners has commenced an expedited arbitration within 15
days after receipt of the Executive's notice of termination, the Executive shall
continue to perform his obligations hereunder, and MedPartners shall continue to
provide the Executive with full compensation and benefits, pending the
Arbitrator's determination as to whether or not the Executive has terminated his
employment for Good Reason. If the Arbitrator determines that the Executive does
not have Good Reason for termination, the Executive's employment shall continue
for the remainder of the term hereof unless earlier terminated by MedPartners
pursuant to Section 9 hereof. If MedPartners fails to file a demand for
arbitration with the AAA and file the requisite fees pursuant to Rule 4 of the
National Rules within 15 days after receipt of notice of termination from the
Executive, and diligently pursue such proceeding in accordance with the
procedures set forth in Section 15 hereof, the Executive's termination of
employment from MedPartners shall be conclusively presumed to have been for Good
Reason and the Executive shall have the rights provided under Section 10(b)
hereof with respect to a termination for Good Reason.
SECTION 9. TERMINATION
This Agreement shall terminate upon the occurrence of any of
the following termination events:
(a) Executive gives written notice to MedPartners that
Executive wishes to terminate this Agreement for any reason other than Good
Reason, such termination to be effective on the date specified in such notice;
(b) Executive gives notice to MedPartners that Executive
wishes to terminate this Agreement for Good Reason, such termination to be
effective as specified in Section 8(d) hereof;
(c) MedPartners gives notice to Executive that MedPartners
wishes to terminate this Agreement for Cause, such termination to be effective
as specified in Section 8(a) hereof;
(d) The Executive's death, such termination to be effective
immediately upon such death;
(e) MedPartners gives notice to Executive that MedPartners
wishes to terminate this Agreement on account of Executive ceasing to be able to
perform his duties hereunder due to Disability, such termination to be effective
on the date specified in such notice; or
(f) MedPartners gives notice to Executive that MedPartners
wishes to terminate this Agreement for any reason other than for Cause, such
termination to be
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effective upon receipt by Executive of such notice (or such later date as may be
agreed to by Executive and MedPartners).
SECTION 10. TERMINATION BENEFITS.
(a) Upon the occurrence of an event of termination described
in Section 9(a)(resignation other than for Good Reason) or 9(c)(termination for
Cause) hereof, Executive shall be entitled to receive the following as severance
compensation:
(i) payment of any previously unpaid base salary through
the date of termination; and
(ii) payment of amounts due to the Executive under the
terms of MedPartners' employee retirement, benefit and welfare plans at the time
of termination(or thereafter, to the extent required by law or the terms of any
such plans).
Payment of amounts in clause (i) shall be made no later than 10 days following
the effective date of Executive's termination.
(b) Upon the occurrence of an event of termination described
in Section 9(b)(resignation for Good Reason), or 9(f)(termination other than for
Cause) hereof, Executive shall be entitled to receive the following as severance
compensation:
(i) payment of any previously unpaid base salary, and a
pro-rata payment of the Bonus (based on the then-current target amount of Bonus)
for any partial year of service through the date of termination;
(ii) lump-sum payment equal to the sum of (a) Executive's
then-current base salary for the then-remaining term of this Agreement (but in
no event less than three (3) years), and (b) Executive's then-current target
amount of the Bonus for the then-remaining term of this Agreement, pro-rated for
any partial calendar years during such remaining term (but in no event less than
three (3) years);
(iii) payment of amounts due to the Executive under the
terms of MedPartners' employee retirement, benefit and welfare plans at the time
of termination (or thereafter, to the extent required by law or the terms of any
such plans);
(iv) subject to the terms and eligibility requirements of
any such plan, continued coverage for the then-remaining term of this Agreement
(but in no event less than three (3) years) under any medical, dental, life
insurance and disability plans of MedPartners for which Executive is eligible at
the time of termination; provided that, (A) if Executive's participation in any
such plan is not permitted under the terms thereof, MedPartners will use
reasonable best efforts to provide or arrange comparable coverage for Executive,
and (B) MedPartners' obligation under this paragraph (iv) will terminate with
respect to any plan on the date Executive first becomes eligible for the same
type of coverage under another employer's plan; and
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(v) immediate 100% vesting of the Option and the
Performance Option. Payment of amounts in clauses (i) and (ii) shall be made no
later than 10 days following the effective date of Executive's termination.
(c) Upon the occurrence of an event of termination described
in Section 9(e)(disability) hereof, Executive shall be entitled to receive the
following as severance compensation:
(i) payment of any previously unpaid base salary, and a
pro-rata payment of the Bonus (based on the then-current target amount of Bonus)
for any partial year of service through the date of termination;
(ii) payment of amounts due to the Executive under the
terms of MedPartners' employee retirement, benefit and welfare plans at the time
of termination (or thereafter, to the extent required by law or the terms of any
such plans); and
(iii) immediate 100% vesting of the Option and the
Performance Option.
Payment of amounts in clause (i) shall be made no later than 10 days following
the effective date of Executive's termination.
(d) Upon the occurrence of an event of termination described
in Section 9(d)(death) hereof, Executive's representative's or estate shall be
entitled to receive the following as severance compensation:
(i) payment of any previously unpaid base salary, and a
pro-rata payment of the Bonus (based on the then-current target amount of Bonus)
for any partial year of service through the date of termination;
(ii) lump-sum payment equal to the sum of (a) Executive's
then-current base salary for the then-remaining term of this Agreement (but in
no event less than three (3) years), and (b) Executive's then-current target
amount of the Bonus for the then-remaining term of this Agreement, pro-rated for
any partial calendar years during such remaining term (but in no event less than
three (3) years), where such lump-sum payment is offset by any amount payable to
Executive's beneficiaries under any life insurance policy paid for by
MedPartners;
(iii) payment of amounts due to the Executive under the
terms of MedPartners' employee retirement, benefit and welfare plans at the time
of termination (or thereafter, to the extent required by law or the terms of any
such plans); and
(iv) immediate 100% vesting of the Option and the
Performance Option.
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Payment of amounts in clauses (i) and (ii) shall be made no later than 10 days
following the effective date of Executive's termination.
SECTION 11. CERTAIN ADDITIONAL PAYMENTS BY MEDPARTNERS.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, if it shall be determined that any amount paid,
distributed or treated as paid or distributed by MedPartners to or for
Executive's benefit (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 11) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
Notwithstanding the foregoing provision of this Section 11, if
it shall be determined that Executive is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount that could be paid
to Executive such that the receipt of Payments would not give rise to any Excise
Tax (the "Reduced Amount"), then no Gross-Up Payment shall be made to Executive
and Payments, in the aggregate, shall be reduced to the Reduced Amount.
All determinations required to be made under this Section 11,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm as may
be designated by Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to MedPartners and Executive within 15 business
days of the receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by MedPartners. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne by
MedPartners. Any Gross-Up Payment, as determined pursuant to this Section 11,
shall be paid by MedPartners to Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon MedPartners and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by MedPartners should have been made ("Underpayment"),
consistent with the calculations
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required to be made hereunder. In the event that MedPartners exhausts its
remedies pursuant to Section 11(b) and Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by MedPartners to or for Executive's benefit.
(b) Executive shall notify MedPartners in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by MedPartners of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later then ten business days after Executive is informed
in writing of such claim and shall apprise MedPartners of the nature of such
claim and the date on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to MedPartners (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
MedPartners notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i) give MedPartners any information reasonably
requested by MedPartners relating to such claim,
(ii) take such action in connection with contesting such
claim as MedPartners shall reasonably request In writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by MedPartners,
(iii) cooperate with MedPartners in good faith in order
effectively to contest such claim, and
(iv) permit MedPartners to participate in any proceeding
relating to such claim;
provided, however, that MedPartners shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expense. Without limitation on the foregoing provisions of
this Section 11, MedPartners shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as MedPartners shall
determine; provided, however, that if MedPartners directs Executive to pay such
claim and xxx for a refund, MedPartners shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or
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penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for Executive's taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore,
MedPartners' control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(c) If, after Executive's receipt of an amount advanced by
MedPartners pursuant to Section 11(b), Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to MedPartners'
complying with the requirements of this Section 11(b)) promptly pay to
MedPartners the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after Executive's receipt
of an amount advanced by MedPartners pursuant to Section 11(b), a determination
is made that Executive shall not be entitled to any refund with respect to such
claim and MedPartners does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
SECTION 12. NON-COMPETITION, CONFIDENTIALITY AND NON-SOLICITATION
(a) During the period Executive is employed by MedPartners
hereunder and for the longer of (i) one year or, (ii) if Executive is entitled
to severance payments under Section 10(b) hereof, the then-remaining term of
this Agreement, Executive shall not directly or indirectly, own, operate, be
employed by, be a director of, act as a consultant for, be associated with, or
be a partner or have a proprietary interest in, any enterprise, partnership,
association, corporation, joint venture or other entity, which is competitive
with the Healthcare Services business of MedPartners, or any subsidiary or
affiliate thereof, in any county in a state where MedPartners or its
subsidiaries or affiliates are conducting such business at the time of such
termination.
(b) Executive acknowledges that, by reason of this employment
with MedPartners, he may learn trade secrets and obtain other confidential
information concerning the business and policies of MedPartners, or any
subsidiary or affiliate thereof. Executive agrees that he will not, during the
term of this Agreement or at any time thereafter, voluntarily divulge or
otherwise disclose, directly or indirectly, any such trade secrets or other
confidential information concerning the business or policies of MedPartners, or
any subsidiary or affiliate thereof, that he may learn as a result of his
employment during the term of this Agreement or may have learned prior to the
term of this Agreement, except to the extent such information is lawfully
obtained from public sources or such use or disclosure is (i) necessary to the
performance of this Agreement and in furtherance of MedPartners' best interests,
(ii) required by applicable law, or (iii) authorized by MedPartners.
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(c) During the period Executive is employed by MedPartners
hereunder and for the longer of (i) one year or, (ii) if Executive is entitled
to severance payments under Section 10(b) hereof, the then-remaining term of
this Agreement, Executive agrees to refrain from interfering with the
relationships between MedPartners, or any subsidiary or affiliate thereof, and
their respective employees or affiliated physicians by soliciting any such
individuals to terminate their relationship with MedPartners, or any subsidiary
or affiliate thereof.
(d) The parties have entered into this Section 12 of this
Agreement in good faith and for the reasons set forth in the recitals hereto and
assume that this Agreement is legally binding. If, for any reason, this Section
12 is not binding because of its geographical scope or because of its term, then
the parties agree that this Agreement shall be deemed effective to the widest
geographical area and/or the longest period of time as may be legally
enforceable.
(e) Executive acknowledges that the rights and privileges
granted to MedPartners in this Section 12 are of special and unique character,
which gives them a peculiar value, the loss of which may not be reasonably or
adequately compensated for by damages in an action of law, and that a breach
thereof by Executive of this Section 12 will cause MedPartners great and
irreparable injury and damage. Accordingly, Executive hereby agrees that
MedPartners shall be entitled to remedies of injunction, specific performance or
other equitable relief to prevent a breach of this Section 12 of this Agreement
by Executive. This provision shall not be construed as a waiver of any other
rights or remedies MedPartners may have for damages or otherwise.
SECTION 13. NO MITIGATION OR OFFSET.
The Executive shall not be required to seek other employment
or to reduce any severance benefit payable to him under this Agreement, and,
except for Section 10(b)(iv) hereof, no such severance benefit shall be reduced
on account of any compensation received by the Executive from other employment.
MedPartners' obligation to pay severance benefits under this Agreement shall not
be reduced by any amount owed by Executive to MedPartners.
SECTION 14. NON-ASSIGNABILITY.
Except as stated in the last sentence of Section 5(f) hereof,
Executive shall not have the right to assign, transfer, pledge, hypothecate or
dispose of any right to receive payments hereunder or any rights, privileges or
interest hereunder, all of which are hereby expressly declared to be
non-assignable and non-transferable, except after termination of his employment
hereunder. In the event of a violation of the provisions of this Section 14, no
further sums shall hereafter become due or payable by MedPartners or its
subsidiaries and affiliates to Executive or his assignee, transferee, pledgee or
to any other person whatsoever, and MedPartners shall have no further liability
under this Agreement to Executive.
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SECTION 15. CLAIMS; ARBITRATION.
(a) All claims by Executive for compensation and benefits
under this Agreement shall be directed to and determined by the Board of
Directors and shall be in writing. Any denial by the Board of Directors of a
claim for benefits under this Agreement shall be delivered to Executive in
writing and shall set forth the specific reasons for the denial and specific
provisions of this Agreement relied upon. The Board of Directors shall afford a
reasonable opportunity to Executive for a review of a decision denying a claim
and shall further allow Executive to appeal to the Board of Directors a decision
of the Board of Directors within 60 days after notification by the Board of
Directors that Executive's claim has been denied.
(b) To the extent permitted by applicable law, any dispute in
connection with clause (a) above or any other dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in New York, New York, in accordance with the rules of the AAA then
in effect. The agreement set forth herein to arbitrate shall be specifically
enforceable under the prevailing arbitration law.
(c) By initialing below, the parties hereto (i) acknowledge
that they have read and understood the provisions of this Section regarding
arbitration and (ii) that performance of this Agreement will be an interstate
commerce as that term is used in the Federal Arbitration Act, 9 U.S.C. ss. 1 et
seq., and the parties contemplated substantial interstate activity in the
performance of this Agreement including, but not limited to, interstate travel,
the use of interstate phone lines, the use of the U.S. mail services and other
interstate courier services.
E. Xxx Xxxxxxxx For MedPartners:
/s/ EMC
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(d) Notice of the demand for arbitration shall be filed in
writing with the other party to this Agreement and with the AAA. The demand for
arbitration shall be made within a reasonable time after the claim, dispute or
other matter in question has arisen, and in no event shall it be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statute of
limitations.
(e) The award rendered by the arbitrator shall be final and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
(f) Unless otherwise agreed in writing, MedPartners shall
continue to make payments and provide benefits in accordance with this
Agreement, and Executive shall continue to perform his obligations hereunder
during any arbitration proceedings.
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(g) In the event Executive incurs legal fees and other
expenses in seeking to obtain or to enforce any rights or benefits provided by
this Agreement and is successful, in whole or in part, in obtaining or enforcing
any such rights or benefits through settlement, arbitration, or otherwise,
MedPartners shall promptly pay Executive's reasonable legal fees and expenses
incurred in enforcing this Agreement and the fees of the arbitrator or
arbitrators. Except to the extent provided in the preceding sentence, each party
shall pay its own legal fees and other expenses associated with any dispute.
SECTION 16. EMPLOYMENT TAXES.
All compensation paid pursuant to this Agreement, including
compensation paid pursuant to Section 5, Section 6, as applicable, and Section
10 of this Agreement, shall be subject to reduction by all applicable
withholding, social security and other federal, state and local taxes and
deductions.
SECTION 17. BINDING EFFECT.
The rights and obligations of MedPartners and its subsidiaries
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of MedPartners.
SECTION 18. WAIVER OF BREACH.
The waiver by either party to this Agreement of a breach of
any provision thereof by the other party shall not operate or be construed as a
waiver of any subsequent breach of such party.
SECTION 19. NOTICES.
Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified or
registered mail to Executive's residence (if such notice is addressed to
Executive), or to the principal executive offices of MedPartners in Birmingham,
Alabama (if such notice is addressed to MedPartners).
SECTION 20. ENTIRE AGREEMENT.
This instrument shall be governed by the laws of the State of
Alabama and contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes any other agreements, whether written or
oral, between the parties.
This Agreement may not be changed orally, but only by an
instrument in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
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SECTION 21. COUNTERPARTS.
This Agreement may be executed in two or more counterparts,
each of which shall for all purposes be deemed to be an original, but each of
which, when so executed, shall constitute but one and the same instrument.
SECTION 22. REPRESENTATION.
(a) Executive hereby represents and warrants to MedPartners
that the Executive is not aware of any presently existing fact, circumstance or
event (including, without limitation, any contractual or other legal constraint)
which would preclude or restrict him from entering into this Agreement or
providing to MedPartners the services contemplated by this Agreement, or which
would give rise to any breach of any term or provision hereof, or which could
otherwise result in the termination of his employment hereunder for Cause. In
the event of any breach of this representation, this Agreement shall be null and
void.
(b) MedPartners hereby represents and warrants to the
Executive that (i) it has received all authorizations necessary for the
execution of this Agreement on the terms and conditions set forth herein and for
the grant of the Option as set forth in Section 5(d) hereof, and that it has
taken all actions necessary to make such grants, (ii) there are no regulatory
approvals that are necessary for the execution and performance of this Agreement
by MedPartners, and (iii) its entering this Agreement and the performance of its
obligations under this Agreement will not violate any agreement between
MedPartners and any other person, firm or organization or any law or
governmental regulation.
SECTION 23. RELOCATION.
(a) Sale of Old Residence. MedPartners shall provide the
Executive with reimbursement of: (i) all expenses connected with the sale of the
Atlanta, Georgia home, including, among other things, broker's fee, real estate
transfer taxes and stamps, recording fees and legal expenses; and (ii) duplicate
home ownership expenses in respect of the Atlanta, Georgia home, pending
relocation of the Executive's family by June 30, 1998, or if later, until sale
to the Relocation Firm (as defined below) is concluded. As soon as reasonably
practicable after the date hereof, the Executive and MedPartners shall each
obtain an independent appraisal of the fair market value of the Executive's
current residence in Atlanta, Georgia (an "Appraisal"), each from a residential
appraisal firm of national prominence. As soon as reasonably practicable after
delivery by MedPartners and the Executive to the other of the Appraisal,
MedPartners shall arrange to have a third party relocation firm (the "Relocation
Firm) offer to purchase the Executive's Atlanta, Georgia home from the Executive
for a purchase price equal to the average of the fair market value thereof
specified in each Appraisal (the "Appraisal Value").
(b) Finding of New Residence. MedPartners shall provide the
Executive with reimbursement of: (i) travel, meals, lodging and related expenses
incurred by the Executive and his spouse in connection with the relocation; (ii)
closing costs,
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including, among other things, title insurance, legal fees, survey, inspections,
service charges, mortgage points, recording fees, transfer taxes and stamps; and
(iii) temporary living expenses, pending purchase and occupation of new
residence, for a period of up to six months following the Commencement Date.
(c) The Physical Move. MedPartners shall provide the Executive
with (i) payment for the cost of moving household effects from the Executive's
Atlanta, Georgia property, including, among other things, packing, unpacking,
transportation, appliance disconnect and re-connect, and (ii) reimbursement of
transportation, meals, etc, for the move to the Executive's new residence in
Birmingham, Alabama.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
MEDPARTNERS, INC. EXECUTIVE
By: /s/ X. X. Xxxxxxxx
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Name: Name: E. Xxx Xxxxxxxx
Title:
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