SALARY CONTINUATION AGREEMENT
Parties to this Agreement: PHYSICIAN CORPORATION OF AMERICA, A DELAWARE
CORPORATION ("PCA")
E. XXXXXXX XXXXXXXXX, M.D. ("Employee")
Initial Benefit Period: 18 MONTHS
Effective Date: MAY 19, 1997
P R E L I M I N A R Y S T A T E M E N T
This Salary Continuation Agreement (the "Agreement") describes the basis on
which PCA will compensate the Employee if, after a change in control of PCA, the
Employee's employment is terminated without cause or the Employee is demoted
without cause. The purpose of this Agreement is to encourage the continued
beneficial employment relationship between PCA and the Employee. However, this
Agreement is not an employment agreement.
A G R E E M E N T
In consideration of the premises and mutual covenants set forth herein, PCA
and the Employee agree as follows:
1. CONTINUATION BENEFIT UPON A CHANGE IN CONTROL. If on or after a Change
in Control of PCA, the Employee's employment by PCA is terminated without Good
Cause, or if the Employee resigns from employment by PCA due to his or her
Demotion without Good Cause, then the Employee shall be entitled to the
Continuation Benefit described in Section 2 of this Agreement.
(a) DEFINITION OF CHANGE IN CONTROL. A "Change in Control of PCA"
means any of the following occurring on or after the Effective Date of this
Agreement:
(i) the acquisition by a person or an entity or a group of
persons and/or entities, directly or indirectly, of more than 50% of PCA's
outstanding common stock in a single transaction or a series of related
transactions;
(ii) a merger, consolidation or other form of corporate
reorganization that results in the acquisition by a person or an entity or a
group of persons and/or entities, directly or indirectly, of more than 50%
percent of PCA's outstanding common stock in a single transaction or a series of
related transactions;
(iii) the sale of all or substantially all of the assets of PCA;
or
(iv) the failure of Applicable Directors to constitute a
majority of the Board of Directors of PCA. "Applicable Directors" means (A)
those individuals who are members of the Board of Directors of PCA on the
Effective Date of this Agreement; and (B) any new director whose election to the
Board or nomination for election to the Board was approved (prior to any vote
thereon by the shareholders) by a vote of at least two-thirds of the directors
then still in office who either (1) were directors on the
Effective Date of this Agreement, or (2) whose election or nomination for
election during was previously approved by a vote of at least two-thirds of the
directors described in clause (A) or B(1) of this Section 1(a)(iv).
(b) DEFINITION OF "EMPLOYMENT BY PCA." For the purposes of this
Agreement, "employment by PCA" means employment by PCA or a majority-owned
(direct or indirect) subsidiary of PCA ("Subsidiary").
(c) DEFINITION OF "DEMOTION." For the purposes of this Agreement, a
Demotion of the Employee means (i) the reassignment of the Employee to any
position, duties or responsibilities that are materially diminished when
compared with the position, duties or responsibilities of the Employee
immediately prior to the announcement of a Change in Control of PCA; (ii) any
10% or greater reduction in the Employee's aggregate salary and other cash
compensation (not including performance bonuses) from his or her aggregate
salary and other cash compensation in effect immediately prior to the
announcement of a Change in Control of PCA (whether in one reduction or a series
of cumulative reductions); (iii) any material reduction or diminution of the
fringe benefits of the Employee in effect immediately prior to the announcement
of a Change in Control of PCA; or (iv) a requirement that the Employee transfer
his or her principal workplace to a location more than 25 miles from his or her
principal workplace in effect immediately prior to the announcement of a Change
in Control of PCA. A transfer of the employment of the Employee from PCA to a
Subsidiary, or from a Subsidiary to PCA, or from one Subsidiary to another
Subsidiary, shall not, in and of itself, constitute a Demotion, provided none of
the other events described in this Section 1(c) occur in connection with such
transfer.
(d) DEFINITION OF "GOOD CAUSE." For the purposes of this Agreement,
Good Cause means an act of the Employee or any failure to act on the part of the
Employee that constitutes: (i) the wilful and knowing failure or refusal of the
Employee to perform his normal and customary employment duties; (ii) a breach by
the Employee of any material fiduciary duty to PCA or a Subsidiary; (iii) a
material malfeasance by the Employee in connection with the performance of his
duties as an employee of PCA or a Subsidiary; (iv) the commission by the
Employee of material fraud or embezzlement in connection with PCA or a
Subsidiary; or (v) the conviction of the Employee in connection with a felony or
his or her submission to a consent decree for a violation of the securities laws
of any jurisdiction, which conviction or submission has had or, in the
reasonable opinion of the Board of Directors of PCA may have, a material adverse
effect upon the business or operations of PCA.
(e) DEFINITION OF TERMINATION DATE. For the purposes of this
Agreement, the Employee's Termination Date means the effective date of the
Employee's termination of employment by PCA without Good Cause, or the
Employee's resignation due to a Demotion without Good Cause.
(f) DEFINITION OF MONTHLY GROSS SALARY. For the purposes of this
Agreement, the Employee's "Monthly Gross Salary" shall mean the average of the
monthly gross salary and other cash compensation of the Employee (including
performance bonuses) during the two-year period preceding the Termination Date
(but in no event less than the Employee's monthly gross salary in effect
immediately prior to the announcement of the Change in Control).
2
2. DESCRIPTION OF CONTINUATION BENEFIT.
(a) DEFINITION OF BENEFIT PERIOD. The Employee's Benefit Period shall
be calculated as of the Employee's Termination Date. The Benefit Period shall
equal the number of months in the Initial Benefit Period set forth on the first
page of this Agreement, less the number of complete months which have elapsed
subsequent to the second anniversary of the Change in Control of PCA.
(b) CONTINUATION BENEFIT. The Employee's Continuation Benefit shall
consist of all of the following:
(i) Within 5 days of the Termination Date, PCA or the
Subsidiary formerly employing the Employee shall pay the Employee a lump sum
cash payment equal to (A) the Employee's Monthly Gross Salary in effect
MULTIPLIED BY (B) the number of months in the Benefit Period.
(ii) During the Benefit Period, the Employee and his or her
dependents shall be eligible for participation in and shall receive all benefits
under all welfare benefit plans, practices, policies and programs provided by
PCA to its employees (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs), to the extent applicable generally to
the employees and officers of PCA similarly situated with the Employee.
(iii) In addition to the foregoing, and in the event that the
entity succeeding to all or substantially all of the business and/or assets of
PCA (the "Successor Entity") effects the Change-in-Control as a pooling of
interests, the Successor Entity shall: (a) assume the Employee's vested stock
options under a plan containing substantially similar terms and conditions as
PCA's employee stock option plan; and (b) issue to the Employee certain
shares (which have a current registration on file with the Securities and
Exchange Commission and are listed with a national securities exchange or
NASDAQ) (the "Bonus Shares") in exchange for its unvested stock options. The
number of Bonus Shares to be issued to the Employee will be determined as
follows:
(A) The value of the Employee's unvested options (the
"Option Value") will be established as of the
effective date of the Change-in-Control of PCA (the
"Change-in-Control Date") using the Black-Scholes
Option Pricing Model (with the assumptions listed on
Exhibit A hereto).
(B) The Option Value will be divided by the closing price
of PCA's Common Stock on the last trading date before
the Change-in-Control Date and the resulting number is
the number of Bonus Shares that will be issued to the
Employee. Notwithstanding the above, if the resulting
number of Bonus Shares includes fractional shares, the
value of such fractional shares will be paid in cash
to the Employee.
(C) Within 30 days of the Termination Date, PCA shall
deliver the Bonus Shares to the Employee in shares of
the common stock of the Successor Entity using the
exchange ratios applicable to the merger.
3
(iv) In all cases of a Change-in-Control where the Change-in-
Control transaction is NOT effected as a pooling of interests, the Employee
shall be entitled to receive the cash value of his or her stock options (whether
vested or unvested) (the "Cash Value"), as follows:
(A) The Cash Value will be established as of the Change-
in-Control Date using the Black-Scholes Option Pricing
Model (with the assumptions listed on Exhibit A
hereto).
(B) Within 30 days of the Termination Date, PCA shall pay
the Cash Value in a lump sum to the Employee.
(c) NO REQUIREMENT OF MITIGATION. The Employee shall not be required
to mitigate the Continuation Benefit by seeking other employment, nor shall the
Continuation Benefit be reduced by any compensation earned by the Employee as
the result of employment by another employer after the Termination Date.
3. TERM AND TERMINATION. The initial term of this Agreement shall
commence on the later of January 1, 1996 or the hiring date of the Employee and
shall expire on December 31, 1997 (the "Initial Term"); PROVIDED, HOWEVER, that
commencing on December 31, 1997 and each December 31 thereafter, the Initial
Term of this Agreement shall automatically be extended for additional,
successive two-year terms (each a "Renewal Term") unless at least 90 days prior
to such December 31 date, the Applicable Directors shall have affirmatively
voted to terminate this Agreement and PCA shall have delivered to the Employee
written notice that the term of this Agreement will not be extended as of such
December 31 date. Notwithstanding the foregoing, the termination or expiration
of this Agreement shall in no way terminate or affect the Employee's entitlement
to the Continuation Benefit otherwise due the Employee hereunder if a Change in
Control of PCA has occurred prior to the termination or expiration of this
Agreement.
4. SUCCESSORS; BINDING AGREEMENT.
(a) SUCCESSORS. PCA shall require any Successor Entity to expressly
assume and agree in writing to perform this Agreement in the same manner and to
the same extent that PCA would be required to perform it if no such succession
had taken place. PCA shall deliver a copy of such writing to the Employee.
(b) BENEFIT. This Agreement and all rights of the Employee under this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to him under this Agreement if he had continued
to live, all such amounts shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee, or other designee or, if there is
no such designee, the Employee's estate.
5. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect (except to
the extent that the procedures outlined below differ from such rules). Within 7
days after receipt of written notice from either party that a dispute exists and
that arbitration is required, both parties must within 7 business days agree on
an acceptable arbitrator. If the
4
parties cannot agree on an arbitrator, then the parties shall list the "Big Six"
accounting firms (other than PCA's auditors) in alphabetical order and the first
firm that does not have a conflict of interest and is willing to serve will be
selected as the arbitrator. The parties agree to act as expeditiously as
possible to select an arbitrator and conclude the dispute. The arbitrator must
render his decision in writing within 30 days of his or its appointment. The
cost and expenses of the arbitration and of legal counsel to the prevailing
party shall be borne by the non-prevailing party. PCA shall advance the
estimated fees and expenses of the arbitrator. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles to the extent that such principles would require the
application of laws other than the laws of the State of Florida.
7. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail by registered or
certified mail, return receipt requested, postage prepaid, addressed, if to PCA,
to Physician Corporation of America, 0000 Xxxx Xxxxxx Xxxxx, Xxxxx, Xxxxxxx
00000, attention: President; and if to the Employee, to the most current address
of the Employee in the records of PCA, or to such other addresses as either
party hereto may from time to time give notice of to the other in the aforesaid
manner.
8. WAIVERS. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
9. BOARD APPROVAL; AGREEMENT. PCA warrants and represents to the Employee
that this Agreement has been approved and authorized by the Board of Directors
of PCA. No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing signed
by the Employee and the officer of PCA which is specifically designated by the
Board.
10. NO EMPLOYMENT AGREEMENT CREATED. Nothing herein shall be deemed to
constitute an employment agreement between the Employee and PCA or any
Subsidiary. The Employee acknowledges and agrees that the sole purpose of this
document is to confirm the Continuation Benefit that PCA will pay to the
Employee if on or after a Change in Control of PCA, the Employee's employment by
PCA is terminated without Good Cause, or if the Employee resigns from employment
by PCA due to his or her Demotion without Good Cause. The Employee further
acknowledges and agrees that his or her employment by PCA is employment at will,
and that PCA may terminate such employment at any time without the payment of
any severance compensation or other benefit to the Employee, other than that
required by law or as specifically provided in this Agreement.
11. ENTIRE AGREEMENT. This Agreement and all attachments, riders and
addenda hereto together constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes and replaces in its entirety
any salary continuation agreement, severance agreement, change-in-control
agreement or other similar agreement executed between the Employee and PCA
executed prior to the effective date hereof.
5
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PCA:
PHYSICIAN CORPORATION OF AMERICA
By:
---------------------------------
EMPLOYEE:
--------------------------------------
E. Xxxxxxx Xxxxxxxxx, M.D.
EXHIBIT A
Black-Scholes Option Pricing Model assumptions:
1. The Pricing Model will use the volatility of PCAM stock during
the trading days occurring within the 90 day period immediately
prior to the date of announcement of the Change-in-Control.
2. The expiration length used in the Pricing Model will equal the
Initial Benefit Period (as such term is defined in this
Agreement).
3. The strike price will be the existing option exercise price.
4. The risk free rate will be the one (1) year T-Xxxx yield on the
Change-in-Control Date.
5. PCAM stock will be valued at its last trade price prior to the
Change-in-Control Date.
SALARY CONTINUATION AGREEMENT
Parties to this Agreement: PHYSICIAN CORPORATION OF AMERICA, A
DELAWARE CORPORATION ("PCA")
XXXXX X. XXXXXXXXXX ("Employee")
Initial Benefit Period: 18 MONTHS
Effective Date: MAY 19, 1997
P R E L I M I N A R Y S T A T E M E N T
This Salary Continuation Agreement (the "Agreement") describes the basis on
which PCA will compensate the Employee if, after a change in control of PCA, the
Employee's employment is terminated without cause or the Employee is demoted
without cause. The purpose of this Agreement is to encourage the continued
beneficial employment relationship between PCA and the Employee. However, this
Agreement is not an employment agreement.
A G R E E M E N T
In consideration of the premises and mutual covenants set forth herein, PCA
and the Employee agree as follows:
1. CONTINUATION BENEFIT UPON A CHANGE IN CONTROL. If on or after a Change
in Control of PCA, the Employee's employment by PCA is terminated without Good
Cause, or if the Employee resigns from employment by PCA due to his or her
Demotion without Good Cause, then the Employee shall be entitled to the
Continuation Benefit described in Section 2 of this Agreement.
(a) DEFINITION OF CHANGE IN CONTROL. A "Change in Control of PCA"
means any of the following occurring on or after the Effective Date of this
Agreement:
(i) the acquisition by a person or an entity or a group of
persons and/or entities, directly or indirectly, of more than 50% of PCA's
outstanding common stock in a single transaction or a series of related
transactions;
(ii) a merger, consolidation or other form of corporate
reorganization that results in the acquisition by a person or an entity or a
group of persons and/or entities, directly or indirectly, of more than 50%
percent of PCA's outstanding common stock in a single transaction or a series of
related transactions;
(iii) the sale of all or substantially all of the assets of PCA;
or
(iv) the failure of Applicable Directors to constitute a
majority of the Board of Directors of PCA. "Applicable Directors" means (A)
those individuals who are members of the Board of Directors of PCA on the
Effective Date of this Agreement; and (B) any new director whose election to the
Board or nomination for election to the Board was approved (prior to any vote
thereon by the shareholders) by a vote of at least two-thirds of the directors
then still in office who either (1) were directors on the Effective Date of this
Agreement, or (2) whose election or nomination for election during was
previously approved by a vote of at least two-thirds of the directors described
in clause (A) or B(1) of this Section
1(a)(iv).
(b) DEFINITION OF "EMPLOYMENT BY PCA." For the purposes of this
Agreement, "employment by PCA" means employment by PCA or a majority-owned
(direct or indirect) subsidiary of PCA ("Subsidiary").
(c) DEFINITION OF "DEMOTION." For the purposes of this Agreement, a
Demotion of the Employee means (i) the reassignment of the Employee to any
position, duties or responsibilities that are materially diminished when
compared with the position, duties or responsibilities of the Employee
immediately prior to the announcement of a Change in Control of PCA; (ii) any
10% or greater reduction in the Employee's aggregate salary and other cash
compensation (not including performance bonuses) from his or her aggregate
salary and other cash compensation in effect immediately prior to the
announcement of a Change in Control of PCA (whether in one reduction or a series
of cumulative reductions); (iii) any material reduction or diminution of the
fringe benefits of the Employee in effect immediately prior to the announcement
of a Change in Control of PCA; or (iv) a requirement that the Employee transfer
his or her principal workplace to a location more than 25 miles from his or her
principal workplace in effect immediately prior to the announcement of a Change
in Control of PCA. A transfer of the employment of the Employee from PCA to a
Subsidiary, or from a Subsidiary to PCA, or from one Subsidiary to another
Subsidiary, shall not, in and of itself, constitute a Demotion, provided none of
the other events described in this Section 1(c) occur in connection with such
transfer.
(d) DEFINITION OF "GOOD CAUSE." For the purposes of this Agreement,
Good Cause means an act of the Employee or any failure to act on the part of the
Employee that constitutes: (i) the wilful and knowing failure or refusal of the
Employee to perform his normal and customary employment duties; (ii) a breach by
the Employee of any material fiduciary duty to PCA or a Subsidiary; (iii) a
material malfeasance by the Employee in connection with the performance of his
duties as an employee of PCA or a Subsidiary; (iv) the commission by the
Employee of material fraud or embezzlement in connection with PCA or a
Subsidiary; or (v) the conviction of the Employee in connection with a felony or
his or her submission to a consent decree for a violation of the securities laws
of any jurisdiction, which conviction or submission has had or, in the
reasonable opinion of the Board of Directors of PCA may have, a material adverse
effect upon the business or operations of PCA.
(e) DEFINITION OF TERMINATION DATE. For the purposes of this
Agreement, the Employee's Termination Date means the effective date of the
Employee's termination of employment by PCA without Good Cause, or the
Employee's resignation due to a Demotion without Good Cause.
(f) DEFINITION OF MONTHLY GROSS SALARY. For the purposes of this
Agreement, the Employee's "Monthly Gross Salary" shall mean the average of the
monthly gross salary and other cash compensation of the Employee (including
performance bonuses) during the two-year period preceding the Termination Date
(but in no event less than the Employee's monthly gross salary in effect
immediately prior to the announcement of the Change in Control).
2. DESCRIPTION OF CONTINUATION BENEFIT.
(a) DEFINITION OF BENEFIT PERIOD. The Employee's Benefit Period shall
be calculated as of the Employee's Termination Date. The Benefit Period shall
equal the number of months in the Initial Benefit Period set forth on the first
page of this Agreement, less the number of complete months which have
2
elapsed subsequent to the second anniversary of the Change in Control of PCA.
(b) CONTINUATION BENEFIT. The Employee's Continuation Benefit shall
consist of all of the following:
(i) Within 5 days of the Termination Date, PCA or the
Subsidiary formerly employing the Employee shall pay the Employee a lump sum
cash payment equal to (A) the Employee's Monthly Gross Salary in effect
MULTIPLIED BY (B) the number of months in the Benefit Period.
(ii) During the Benefit Period, the Employee and his or her
dependents shall be eligible for participation in and shall receive all benefits
under all welfare benefit plans, practices, policies and programs provided by
PCA to its employees (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs), to the extent applicable generally to
the employees and officers of PCA similarly situated with the Employee.
(iii) In addition to the foregoing, and in the event that the
entity succeeding to all or substantially all of the business and/or assets of
PCA (the "Successor Entity") effects the Change-in-Control as a pooling of
interests, the Successor Entity shall: (a) assume the Employee's vested stock
options under a plan containing substantially similar terms and conditions as
PCA's employee stock option plan; and (b) issue to the Employee certain
shares (which have a current registration on file with the Securities and
Exchange Commission and are listed with a national securities exchange or
NASDAQ) (the "Bonus Shares") in exchange for its unvested stock options. The
number of Bonus Shares to be issued to the Employee will be determined as
follows:
(A) The value of the Employee's unvested options (the
"Option Value") will be established as of the
effective date of the Change-in-Control of PCA (the
"Change-in-Control Date") using the Black-Scholes
Option Pricing Model (with the assumptions listed on
Exhibit A hereto).
(B) The Option Value will be divided by the closing price
of PCA's Common Stock on the last trading date before
the Change-in-Control Date and the resulting number is
the number of Bonus Shares that will be issued to the
Employee. Notwithstanding the above, if the resulting
number of Bonus Shares includes fractional shares, the
value of such fractional shares will be paid in cash
to the Employee.
(C) Within 30 days of the Termination Date, PCA shall
deliver the Bonus Shares to the Employee in shares of
the common stock of the Successor Entity using the
exchange ratios applicable to the merger.
(iv) In all cases of a Change-in-Control where the Change-in-
Control transaction is NOT effected as a pooling of interests, the Employee
shall be entitled to receive the cash value of his or her stock options (whether
vested or unvested) (the "Cash Value"), as follows:
(A) The Cash Value will be established as of the Change-
in-Control Date using
3
the Black-Scholes Option Pricing Model (with the
assumptions listed on Exhibit A hereto).
(B) Within 30 days of the Termination Date, PCA shall pay
the Cash Value in a lump sum to the Employee.
(c) NO REQUIREMENT OF MITIGATION. The Employee shall not be required
to mitigate the Continuation Benefit by seeking other employment, nor shall the
Continuation Benefit be reduced by any compensation earned by the Employee as
the result of employment by another employer after the Termination Date.
3. TERM AND TERMINATION. The initial term of this Agreement shall
commence on the later of January 1, 1996 or the hiring date of the Employee and
shall expire on December 31, 1997 (the "Initial Term"); PROVIDED, HOWEVER, that
commencing on December 31, 1997 and each December 31 thereafter, the Initial
Term of this Agreement shall automatically be extended for additional,
successive two-year terms (each a "Renewal Term") unless at least 90 days prior
to such December 31 date, the Applicable Directors shall have affirmatively
voted to terminate this Agreement and PCA shall have delivered to the Employee
written notice that the term of this Agreement will not be extended as of such
December 31 date. Notwithstanding the foregoing, the termination or expiration
of this Agreement shall in no way terminate or affect the Employee's entitlement
to the Continuation Benefit otherwise due the Employee hereunder if a Change in
Control of PCA has occurred prior to the termination or expiration of this
Agreement.
4. SUCCESSORS; BINDING AGREEMENT.
(a) SUCCESSORS. PCA shall require any Successor Entity to expressly
assume and agree in writing to perform this Agreement in the same manner and to
the same extent that PCA would be required to perform it if no such succession
had taken place. PCA shall deliver a copy of such writing to the Employee.
(b) BENEFIT. This Agreement and all rights of the Employee under this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to him under this Agreement if he had continued
to live, all such amounts shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee, or other designee or, if there is
no such designee, the Employee's estate.
5. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect (except to
the extent that the procedures outlined below differ from such rules). Within 7
days after receipt of written notice from either party that a dispute exists and
that arbitration is required, both parties must within 7 business days agree on
an acceptable arbitrator. If the parties cannot agree on an arbitrator, then the
parties shall list the "Big Six" accounting firms (other than PCA's auditors) in
alphabetical order and the first firm that does not have a conflict of interest
and is willing to serve will be selected as the arbitrator. The parties agree to
act as expeditiously as possible to select an arbitrator and conclude the
dispute. The arbitrator must render his decision in writing within 30 days of
his or its appointment. The cost and expenses of the arbitration and of legal
counsel to the
4
prevailing party shall be borne by the non-prevailing party. PCA shall advance
the estimated fees and expenses of the arbitrator. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles to the extent that such principles would require the
application of laws other than the laws of the State of Florida.
7. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail by registered or
certified mail, return receipt requested, postage prepaid, addressed, if to PCA,
to Physician Corporation of America, 0000 Xxxx Xxxxxx Xxxxx, Xxxxx, Xxxxxxx
00000, attention: President; and if to the Employee, to the most current address
of the Employee in the records of PCA, or to such other addresses as either
party hereto may from time to time give notice of to the other in the aforesaid
manner.
8. WAIVERS. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
9. BOARD APPROVAL; AGREEMENT. PCA warrants and represents to the Employee
that this Agreement has been approved and authorized by the Board of Directors
of PCA. No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing signed
by the Employee and the officer of PCA which is specifically designated by the
Board.
10. NO EMPLOYMENT AGREEMENT CREATED. Nothing herein shall be deemed to
constitute an employment agreement between the Employee and PCA or any
Subsidiary. The Employee acknowledges and agrees that the sole purpose of this
document is to confirm the Continuation Benefit that PCA will pay to the
Employee if on or after a Change in Control of PCA, the Employee's employment by
PCA is terminated without Good Cause, or if the Employee resigns from employment
by PCA due to his or her Demotion without Good Cause. The Employee further
acknowledges and agrees that his or her employment by PCA is employment at will,
and that PCA may terminate such employment at any time without the payment of
any severance compensation or other benefit to the Employee, other than that
required by law or as specifically provided in this Agreement.
11. ENTIRE AGREEMENT. This Agreement and all attachments, riders and
addenda hereto together constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes and replaces in its entirety
any salary continuation agreement, severance agreement, change-in-control
agreement or other similar agreement executed between the Employee and PCA
executed prior to the effective date hereof.
5
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PCA:
PHYSICIAN CORPORATION OF AMERICA
By:
---------------------------------
EMPLOYEE:
--------------------------------------
Xxxxx X. Xxxxxxxxxx
EXHIBIT A
Black-Scholes Option Pricing Model assumptions:
1. The Pricing Model will use the volatility of PCAM stock during
the trading days occurring within the 90 day period immediately
prior to the date of announcement of the Change-in-Control.
2. The expiration length used in the Pricing Model will equal the
Initial Benefit Period (as such term is defined in this
Agreement).
3. The strike price will be the existing option exercise price.
4. The risk free rate will be the one (1) year T-Xxxx yield on the
Change-in-Control Date.
5. PCAM stock will be valued at its last trade price prior to the
Change-in-Control Date.
SALARY CONTINUATION AGREEMENT
Parties to this Agreement: PHYSICIAN CORPORATION OF AMERICA, A DELAWARE
CORPORATION ("PCA")
XXXXXXXX X. XXXXXXXX ("Employee")
Initial Benefit Period: 18 MONTHS
Effective Date: MAY 19, 1997
P R E L I M I N A R Y S T A T E M E N T
This Salary Continuation Agreement (the "Agreement") describes the basis on
which PCA will compensate the Employee if, after a change in control of PCA, the
Employee's employment is terminated without cause or the Employee is demoted
without cause. The purpose of this Agreement is to encourage the continued
beneficial employment relationship between PCA and the Employee. However, this
Agreement is not an employment agreement.
A G R E E M E N T
In consideration of the premises and mutual covenants set forth herein, PCA
and the Employee agree as follows:
1. CONTINUATION BENEFIT UPON A CHANGE IN CONTROL. If on or after a Change
in Control of PCA, the Employee's employment by PCA is terminated without Good
Cause, or if the Employee resigns from employment by PCA due to his or her
Demotion without Good Cause, then the Employee shall be entitled to the
Continuation Benefit described in Section 2 of this Agreement.
(a) DEFINITION OF CHANGE IN CONTROL. A "Change in Control of PCA"
means any of the following occurring on or after the Effective Date of this
Agreement:
(i) the acquisition by a person or an entity or a group of
persons and/or entities, directly or indirectly, of more than 50% of PCA's
outstanding common stock in a single transaction or a series of related
transactions;
(ii) a merger, consolidation or other form of corporate
reorganization that results in the acquisition by a person or an entity or a
group of persons and/or entities, directly or indirectly, of more than 50%
percent of PCA's outstanding common stock in a single transaction or a series of
related transactions;
(iii) the sale of all or substantially all of the assets of PCA;
or
(iv) the failure of Applicable Directors to constitute a
majority of the Board of Directors of PCA. "Applicable Directors" means (A)
those individuals who are members of the Board of Directors of PCA on the
Effective Date of this Agreement; and (B) any new director whose election to the
Board or nomination for election to the Board was approved (prior to any vote
thereon by the shareholders) by a vote of at least two-thirds of the directors
then still in office who either (1) were directors on the Effective Date of this
Agreement, or (2) whose election or nomination for election during was
previously approved by a vote of at least two-thirds of the directors described
in clause (A) or B(1) of this Section
1(a)(iv).
(b) DEFINITION OF "EMPLOYMENT BY PCA." For the purposes of this
Agreement, "employment by PCA" means employment by PCA or a majority-owned
(direct or indirect) subsidiary of PCA ("Subsidiary").
(c) DEFINITION OF "DEMOTION." For the purposes of this Agreement, a
Demotion of the Employee means (i) the reassignment of the Employee to any
position, duties or responsibilities that are materially diminished when
compared with the position, duties or responsibilities of the Employee
immediately prior to the announcement of a Change in Control of PCA; (ii) any
10% or greater reduction in the Employee's aggregate salary and other cash
compensation (not including performance bonuses) from his or her aggregate
salary and other cash compensation in effect immediately prior to the
announcement of a Change in Control of PCA (whether in one reduction or a series
of cumulative reductions); (iii) any material reduction or diminution of the
fringe benefits of the Employee in effect immediately prior to the announcement
of a Change in Control of PCA; or (iv) a requirement that the Employee transfer
his or her principal workplace to a location more than 25 miles from his or her
principal workplace in effect immediately prior to the announcement of a Change
in Control of PCA. A transfer of the employment of the Employee from PCA to a
Subsidiary, or from a Subsidiary to PCA, or from one Subsidiary to another
Subsidiary, shall not, in and of itself, constitute a Demotion, provided none of
the other events described in this Section 1(c) occur in connection with such
transfer.
(d) DEFINITION OF "GOOD CAUSE." For the purposes of this Agreement,
Good Cause means an act of the Employee or any failure to act on the part of the
Employee that constitutes: (i) the wilful and knowing failure or refusal of the
Employee to perform his normal and customary employment duties; (ii) a breach by
the Employee of any material fiduciary duty to PCA or a Subsidiary; (iii) a
material malfeasance by the Employee in connection with the performance of his
duties as an employee of PCA or a Subsidiary; (iv) the commission by the
Employee of material fraud or embezzlement in connection with PCA or a
Subsidiary; or (v) the conviction of the Employee in connection with a felony or
his or her submission to a consent decree for a violation of the securities laws
of any jurisdiction, which conviction or submission has had or, in the
reasonable opinion of the Board of Directors of PCA may have, a material adverse
effect upon the business or operations of PCA.
(e) DEFINITION OF TERMINATION DATE. For the purposes of this
Agreement, the Employee's Termination Date means the effective date of the
Employee's termination of employment by PCA without Good Cause, or the
Employee's resignation due to a Demotion without Good Cause.
(f) DEFINITION OF MONTHLY GROSS SALARY. For the purposes of this
Agreement, the Employee's "Monthly Gross Salary" shall mean the average of the
monthly gross salary and other cash compensation of the Employee (including
performance bonuses) during the two-year period preceding the Termination Date
(but in no event less than the Employee's monthly gross salary in effect
immediately prior to the announcement of the Change in Control).
2. DESCRIPTION OF CONTINUATION BENEFIT.
(a) DEFINITION OF BENEFIT PERIOD. The Employee's Benefit Period shall
be calculated as of the Employee's Termination Date. The Benefit Period shall
equal the number of months in the Initial Benefit Period set forth on the first
page of this Agreement, less the number of complete months which have
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elapsed subsequent to the second anniversary of the Change in Control of PCA.
(b) CONTINUATION BENEFIT. The Employee's Continuation Benefit shall
consist of all of the following:
(i) Within 5 days of the Termination Date, PCA or the
Subsidiary formerly employing the Employee shall pay the Employee a lump sum
cash payment equal to (A) the Employee's Monthly Gross Salary in effect
MULTIPLIED BY (B) the number of months in the Benefit Period.
(ii) During the Benefit Period, the Employee and his or her
dependents shall be eligible for participation in and shall receive all benefits
under all welfare benefit plans, practices, policies and programs provided by
PCA to its employees (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs), to the extent applicable generally to
the employees and officers of PCA similarly situated with the Employee.
(iii) In addition to the foregoing, and in the event that the
entity succeeding to all or substantially all of the business and/or assets of
PCA (the "Successor Entity") effects the Change-in-Control as a pooling of
interests, the Successor Entity shall: (a) assume the Employee's vested stock
options under a plan containing substantially similar terms and conditions as
PCA's employee stock option plan; and (b) issue to the Employee certain
shares (which have a current registration on file with the Securities and
Exchange Commission and are listed with a national securities exchange or
NASDAQ) (the "Bonus Shares") in exchange for its unvested stock options. The
number of Bonus Shares to be issued to the Employee will be determined as
follows:
(A) The value of the Employee's unvested options (the
"Option Value") will be established as of the
effective date of the Change-in-Control of PCA (the
"Change-in-Control Date") using the Black-Scholes
Option Pricing Model (with the assumptions listed on
Exhibit A hereto).
(B) The Option Value will be divided by the closing price
of PCA's Common Stock on the last trading date before
the Change-in-Control Date and the resulting number is
the number of Bonus Shares that will be issued to the
Employee. Notwithstanding the above, if the resulting
number of Bonus Shares includes fractional shares, the
value of such fractional shares will be paid in cash
to the Employee.
(C) Within 30 days of the Termination Date, PCA shall
deliver the Bonus Shares to the Employee in shares of
the common stock of the Successor Entity using the
exchange ratios applicable to the merger.
(iv) In all cases of a Change-in-Control where the Change-in-
Control transaction is NOT effected as a pooling of interests, the Employee
shall be entitled to receive the cash value of his or her stock options (whether
vested or unvested) (the "Cash Value"), as follows:
(A) The Cash Value will be established as of the Change-
in-Control Date using
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the Black-Scholes Option Pricing Model (with the
assumptions listed on Exhibit A hereto).
(B) Within 30 days of the Termination Date, PCA shall pay
the Cash Value in a lump sum to the Employee.
(c) NO REQUIREMENT OF MITIGATION. The Employee shall not be required
to mitigate the Continuation Benefit by seeking other employment, nor shall the
Continuation Benefit be reduced by any compensation earned by the Employee as
the result of employment by another employer after the Termination Date.
3. DESCRIPTION OF BONUS BENEFIT.
(a) In the event that either (i) the Employee resigns from his
employment with PCA effective at any time after August 31, 1997; or (ii) the
Employee is terminated by PCA at any time without Good Cause (in either case,
the Employee's last date of employment being referred to in this Section 3 as
the "Resignation Date"); and (iii) a Change-in-Control has not occurred on or
before the Resignation Date; the Employee shall receive all of the following:
(A) the cash value of any vacation time which the
Employee has accrued as of the Resignation Date, payable on the Resignation
Date;
(B) a cash payment equal to two-thirds (2/3) of the
Employee's cuurent (i.e., 1997 salary, plus an additinal one-twelfth (1/12)
of such salary for every complete month subsequent to August 31, 1997 that
the Employee is employed by PCA; provided, however, that this benefit shall
not extend beyond December 31, 1997 (i.e., up to a maximum of twelve (12)
months of additional salary). Such payment shall be paid in equal monthly
installments commencing one (1) month after the Resignation Date;
(C) a cash payment equal to the INCREASE in PCA's
Common Stock from (i) Three Dollars and Seventy-Five Cents ($3.75) to (ii)
the last trading price of PCA's Common Stock prior to the Resignation Date;
MULTIPLIED BY (iii) Forty Thousand (40,000). Such amount sahll be paid to
the Employee within five (5) business days after the Resignation Date.
(b) In the event that a Change-in-Control occurs during the term
of the Employee's employment, the Emplyee shall be entitled to receive, in
addition to any other benefit described in this Agreement (other than the
benefits described in Section 3(a) above), a cash payment equal to the
INCREASE in PCA's Common Stock from (i) Three Dollars and Seventy-Five Cents
($3.75) to (ii) the last trading price of PCA's Common Stock prior to the
Change-in-Control Date; MULTIPLIED BY (iii) Forty Thousand (40,000). Such
amount shall be paid to the Employee within five (5) days after the
Change-in-Control Date.
(c) Employee agrees that during the period following his
Resignation Date and ending on March 31, 1998, the Employee shall be
available, upon request, to provide consulting services to PCA at a rate of
$1,500 per day plus expenses. Such consulting services shall include, but
not be limited to, traveling to PCA's office locations on mutually agrred
upon days.
4. TERM AND TERMINATION. The initial term of this Agreement shall
commence on the later of January 1, 1996 or the hiring date of the Employee and
shall expire on December 31, 1997 (the "Initial Term"); PROVIDED, HOWEVER, that
commencing on December 31, 1997 and each December 31 thereafter, the Initial
Term of this Agreement shall automatically be extended for additional,
successive two-year terms (each a "Renewal Term") unless at least 90 days prior
to such December 31 date, the Applicable Directors shall have affirmatively
voted to terminate this Agreement and PCA shall have delivered to the Employee
written notice that the term of this Agreement will not be extended as of such
December 31 date. Notwithstanding the foregoing, the termination or expiration
of this Agreement shall in no way terminate or affect the Employee's entitlement
to the Continuation Benefit otherwise due the Employee hereunder if a Change in
Control of PCA has occurred prior to the termination or expiration of this
Agreement.
5. SUCCESSORS; BINDING AGREEMENT.
(a) SUCCESSORS. PCA shall require any Successor Entity to expressly
assume and agree in writing to perform this Agreement in the same manner and to
the same extent that PCA would be required to perform it if no such succession
had taken place. PCA shall deliver a copy of such writing to the Employee.
(b) BENEFIT. This Agreement and all rights of the Employee under this
Agreement shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Employee should die while any
amounts would still be payable to him under this Agreement if he had continued
to live, all such amounts shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee, or other designee or, if there is
no such designee, the Employee's estate.
6. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect (except to
the extent that the procedures outlined below differ from such rules). Within 7
days after receipt of written notice from either party that a dispute exists and
that arbitration is required, both parties must within 7 business days agree on
an acceptable arbitrator. If the parties cannot agree on an arbitrator, then the
parties shall list the "Big Six" accounting firms (other than PCA's auditors) in
alphabetical order and the first firm that does not have a conflict of interest
and is willing to serve will be selected as the arbitrator. The parties agree to
act as expeditiously as possible to select an arbitrator and conclude the
dispute. The arbitrator must render his decision in writing within 30 days of
his or its appointment. The cost and expenses of the arbitration and of legal
counsel to the
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prevailing party shall be borne by the non-prevailing party. PCA shall advance
the estimated fees and expenses of the arbitrator. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles to the extent that such principles would require the
application of laws other than the laws of the State of Florida.
8. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail by registered or
certified mail, return receipt requested, postage prepaid, addressed, if to PCA,
to Physician Corporation of America, 0000 Xxxx Xxxxxx Xxxxx, Xxxxx, Xxxxxxx
00000, attention: President; and if to the Employee, to the most current address
of the Employee in the records of PCA, or to such other addresses as either
party hereto may from time to time give notice of to the other in the aforesaid
manner.
9. WAIVERS. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
10. BOARD APPROVAL; AGREEMENT. PCA warrants and represents to the Employee
that this Agreement has been approved and authorized by the Board of Directors
of PCA. No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing signed
by the Employee and the officer of PCA which is specifically designated by the
Board.
11. NO EMPLOYMENT AGREEMENT CREATED. Nothing herein shall be deemed to
constitute an employment agreement between the Employee and PCA or any
Subsidiary. The Employee acknowledges and agrees that the sole purpose of this
document is to confirm the Continuation Benefit that PCA will pay to the
Employee if on or after a Change in Control of PCA, the Employee's employment by
PCA is terminated without Good Cause, or if the Employee resigns from employment
by PCA due to his or her Demotion without Good Cause. The Employee further
acknowledges and agrees that his or her employment by PCA is employment at will,
and that PCA may terminate such employment at any time without the payment of
any severance compensation or other benefit to the Employee, other than that
required by law or as specifically provided in this Agreement.
12. ENTIRE AGREEMENT. This Agreement and all attachments, riders and
addenda hereto together constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes and replaces in its entirety
any salary continuation agreement, severance agreement, change-in-control
agreement or other similar agreement executed between the Employee and PCA
executed prior to the effective date hereof.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
PCA:
PHYSICIAN CORPORATION OF AMERICA
By:
---------------------------------
EMPLOYEE:
--------------------------------------
Xxxxxxxx X. Xxxxxxxx
EXHIBIT A
Black-Scholes Option Pricing Model assumptions:
1. The Pricing Model will use the volatility of PCAM stock during
the trading days occurring within the 90 day period immediately
prior to the date of announcement of the Change-in-Control.
2. The expiration length used in the Pricing Model will equal the
Initial Benefit Period (as such term is defined in this
Agreement).
3. The strike price will be the existing option exercise price.
4. The risk free rate will be the one (1) year T-Xxxx yield on the
Change-in-Control Date.
5. PCAM stock will be valued at its last trade price prior to the
Change-in-Control Date.
