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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of July 24, 1996,
between MEDPARTNERS/XXXXXXXX, INC., a Delaware corporation (together with any
successor corporation, "MedPartners"), and XXXX X. XXXXX, a resident of Agoura
Hills, California ("Executive").
WITNESSETH:
WHEREAS, MedPartners and its subsidiaries and affiliates are engaged
in providing medical practice management services throughout the United States;
and
WHEREAS, MedPartners desires to avail itself of Executive's talents
and expertise in the management of the medical practice management business of
MedPartners, and to employ him as the President and Chief Operating Officer -
Western Operations 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 July 24, 1996, 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 July 24, 1996, and shall remain in full force and effect for a period of
three years thereafter. Such term shall be automatically extended for an
additional year on each anniversary of the term 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 Operating Officer -
Western Operations of MedPartners. In addition, Executive shall also hold
similar offices with MedPartners' subsidiaries and affiliates and/or their
successors, and shall perform such duties, as may be assigned to him from time
to time by the Chief Executive Officer of MedPartners ("Chief Executive
Officer").
In carrying out his duties under this Agreement, Executive shall have
such powers and duties usually incident to the office of President and Chief
Operating Officer - Western Operations. The performance by Executive of any
duties assigned to him which are not of the type provided for herein shall not
constitute a waiver of his rights hereunder or an abrogation, abandonment or
termination of this Agreement.
Executive shall devote all of his working time and best efforts in the
best interest of and on behalf of MedPartners throughout the term of this
Agreement in a manner appropriate for an executive having Executive's position,
duties, responsibilities and status. Executive shall not be restricted from
engaging in a business which is non- competitive with MedPartners and its
subsidiaries and affiliates after normal working hours or on week-
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ends or 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 headquarters for the performance of Executive's duties shall be
located in Long Beach, California, 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,
MedPartners shall pay Executive the following compensation:
(a) Executive shall be paid a Base Salary of $350,000 per year,
payable in accordance with MedPartners' standard payroll practices for
executive employees. Executive's Base Salary shall be reviewed annually during
the term of this Agreement by the Chief Executive Officer.
(b) Executive shall be eligible to receive an annual Incentive
Bonus of up to 50% of his Base Salary at the discretion of the Chief Executive
Officer, which shall not be unreasonably withheld. In addition, Executive
shall be eligible to receive an annual Performance Bonus of up to 25% of his
Base Salary based on Executive's accomplishment of certain financial and
non-financial objectives during each year. The initial criteria for awarding
the Performance Bonus shall be developed jointly by MedPartners and Executive
within 60 days of the date this Agreement is signed by the parties and shall be
subject to adjustment annually during the first 60 days of each calendar year.
All bonus payments shall be made after January 1 of the year following the year
for which such bonus payments are earned.
(c) Executive shall be eligible for other discretionary bonuses
approved by the Board of Directors of MedPartners ("Board of Directors").
(d) For purposes of administration, the terms of this Agreement
shall be given effect on a pro-rata basis for partial calendar years and
otherwise administered on a calendar year basis.
SECTION 6. EMPLOYEE BENEFITS.
Subject to eligibility requirements, Executive will be entitled to
participate in any employee retirement, benefit or welfare plans provided by
MedPartners to its employees and/or to its senior executives, such as life
insurance, health and dental, retirement, savings 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) reasonable vacation during each year of this Agreement;
(b) a reasonable 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;
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(c) disability insurance coverage paying benefits equal to at
least 80% of Executive's Base Salary, either through a corporate group
disability insurance plan or otherwise;
(d) payment of dues for such professional societies and
associations of which Executive is a member in furtherance of his duties
hereunder;
(e) a split-dollar arrangement with Executive, or a third party
designated by Executive as the owner of life insurance provided under such
arrangement, providing for the payment of premiums on a policy of life
insurance insuring the life of Executive, or insuring the joint lives of
Executive and his spouse;
(f) 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; and
(g) consideration, at least annually, by the Board of Directors
for the grant to Executive of options to purchase Common Stock of MedPartners.
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 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 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, or (ii) the conviction of Executive of a felony involving moral
turpitude.
(b) "CHANGE IN CONTROL" shall mean:
(i) The acquisition 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 13d-3
promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding shares of Common
Stock of MedPartners (the "Outstanding Company 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 Company Voting Securities"); provided,
however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a
Change in Control: (1) any acquisition directly from
MedPartners, (2) any acquisition by MedPartners, (3)
any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by MedPartners
or any corporation controlled by MedPartners, or (4)
any acquisition by
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any corporation pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection
(iii) below;
(ii) Individuals who, as of the date of this Agreement,
constitute the Board of Directors of MedPartners (the
"Incumbent Board") cease for any reason 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;
(iii) Consummation of a reorganization, merger or
consolidation 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 Company Common Stock and Outstanding
Company 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 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 Company Common Stock
and Outstanding Company 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 the
Company 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 of MedPartners 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;
or
(v) Xxxxx X. House ceases to be Chairman of the Board and
Chief Executive Officer of MedPartners or any
successor corporation.
(c) "CODE" shall mean the Internal Revenue Code of 1986 and all
regulations promulgated thereunder, as the same may be amended from time to
time.
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(d) "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 Chief Executive Officer following reasonable review of a medical opinion
certifying that Executive will be unable to perform his duties under this
Agreement for at least 90 days due to a physical or mental condition.
(e) "GOOD REASON" shall mean:
(i) The assignment to Executive, without Executive's
prior written consent, of any duties inconsistent
with Executive's position, duties, responsibilities
and status with MedPartners as described in this
Agreement or an adverse change in Executive's titles
or offices or any removal of Executive from, or any
failure to reelect Executive to, any of such
positions, except in connection with the termination
of this Agreement under Sections 9(c), 9(d) or 9(e);
(ii) A reduction in Executive's Base Salary, as the same
may be increased from time to time;
(iii) 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;
(iv) A material reduction in Executive's title or
responsibilities unless replaced with a new title or
new responsibilities of comparable stature or value
to MedPartners within 30 days;
(v) A material breach of this Agreement by MedPartners
that is not remedied within 30 days after receiving
written notice from Executive of such failure;
(vi) Any purported termination for Cause or Disability
without reasonable grounds therefor;
(vii) The relocation of Executive's primary work location
to a location that is more than 40 miles from
Executive's primary work location without Executive's
prior consent; or
(viii) Following the occurrence of a Change in Control, any
decision by Executive to terminate his employment
during the period from the Change in Control through
the first anniversary of the Change in Control.
(f) "RETIREMENT DATE" shall mean the date Executive reaches age 70
1/2, or the date Executive retires in accordance with MedPartners' retirement
arrangements established for Executive with Executive's consent.
SECTION 9. TERMINATION.
This Agreement shall terminate upon the occurrence of any of the
following termination events:
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(a) Executive gives notice to MedPartners prior to the occurrence
of a Change in Control that Executive wishes to terminate this Agreement for
any reason other than Good Reason not less than 180 days after such notice is
given, such termination to be effective on the date specified in such notice;
(b) Executive gives notice to MedPartners prior to the occurrence
of a Change in Control that Executive wishes to terminate this Agreement for
Good Reason not less than 90 days after such notice is given, such termination
to be effective on the date specified in such notice;
(c) MedPartners gives notice to Executive that MedPartners wishes
to terminate this Agreement for Cause, such termination to be effective upon
receipt by Executive of such notice;
(d) Executive dies or Executive ceases to be able to perform his
duties hereunder due to death or Disability, such termination to be effective
immediately upon such death or Disability;
(e) Executive reaches his Retirement Date, such termination to be
effective upon such Retirement Date;
(f) MedPartners gives notice to Executive following the occurrence
of a Change in Control that MedPartners wishes to terminate this Agreement for
any reason other than for Cause or due to Executive's death, Disability or
Retirement Date, such termination to be effective upon receipt by Executive of
such notice; or
(g) Executive gives notice to MedPartners following the occurrence
of a Change in Control that Executive wishes to terminate this Agreement for
Good Reason, such termination to be effective upon receipt by MedPartners of
such notice.
SECTION 10. TERMINATION BENEFITS.
(a) Upon the occurrence of an event of termination described in
Section 9(a) or 9(c), Executive shall be entitled to receive the following as
severance compensation:
(i) payment of any previously unpaid Base Salary through
the date of termination;
(ii) payment of an amount equal to six months of
Executive's annual Base Salary at the time of
termination, payable in a lump sum at the time of
termination; and
(iii) payment of any life insurance, disability or other
benefits, if any, for which Executive is then
eligible under the terms of MedPartners' employee
retirement, benefit and welfare plans.
(b) Upon the occurrence of an event of termination described in
Section 9(d) or 9(e), Executive (or Executive's estate in the event of
Executive's death) shall be entitled to receive the following as severance
compensation:
(i) payment of any previously unpaid Base Salary through
the date of termination;
(ii) payment of an amount equal to six months of
Executive's annual Base Salary at the time of
termination, payable in a lump sum at the time of
termination;
(iii) payment of Executive's Incentive Bonus and
Performance Bonus under Section 5(b) through the date
of termination, calculated on the basis of the sum of
the total
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achievable amounts of each of the Incentive Bonus and
the Performance Bonus for the current fiscal year,
divided by twelve months, and multiplied by the
number of months Executive is employed during such
fiscal year through the date of termination, with any
partial month of employment to be treated as a full
month;
(iv) payment of any life insurance, disability or other
benefits, if any, for which Executive is then
eligible under the terms of MedPartners' employee
retirement, benefit and welfare plans; and
(v) a right to immediately vest in 100% of all options to
purchase Common Stock of MedPartners that have been
granted to Executive by MedPartners and a period of
at least 90 days following termination for Executive
to exercise all such options in accordance with the
terms thereof.
(c) Upon the occurrence of an event of termination described in
Sections 9(b), Executive shall be entitled to receive the following as
severance compensation:
(i) payment of any previously unpaid Base Salary through
the date of termination;
(ii) continued payment of Executive's annual Base Salary
at the time of termination (or, if greater, of
Executive's annual Base Salary in effect immediately
prior to the current annual Base Salary rate) for the
remaining term of this Agreement, but in no event for
a period of less than three years;
(iii) continued payment of the total achievable amounts of
each of Executive's Incentive Bonus and Performance
Bonus under Section 5(b) for the current fiscal year
(or, if greater, of the total achievable amounts of
each of Executive's Incentive Bonus and Performance
Bonus in effect for the fiscal year most recently
ended) for the remaining term of this Agreement, but
in no event for a period of less than three years;
(iv) payment of any life insurance, disability or other
benefits, if any, for which Executive is then
eligible under the terms of MedPartners' employee
retirement, benefit and welfare plans;
(v) subject to the terms and eligibility requirements of
any such plan, continued coverage for a period of
three years following the date of termination under
any employee retirement, benefit and welfare plans of
MedPartners for which Executive is then eligible;
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, (B) MedPartners' obligation under this
paragraph (v) 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 (C) to the extent applicable, upon termination of
coverage under any MedPartners plan pursuant to this
paragraph (v), Executive shall have the option to
have assigned to him at no cost and with no
apportionment for prepaid premiums, any assignable
insurance policy owned by MedPartners and relating
specifically to Executive;
(vi) a right to immediately vest in 100% of all options to
purchase Common Stock of MedPartners that have been
granted to Executive by MedPartners and a period of
at least 90 days following termination for Executive
to exercise all such options in accordance with the
terms thereof;
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(vii) payment of all reasonable legal fees and expenses
incurred by Executive as a result of termination,
including all such fees and expenses, if any,
incurred in contesting or disputing Executive's
termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement; and
(viii) payment of the reasonable costs for outplacement
services for a period not to exceed 18 months.
(d) Upon the occurrence of an event of termination described in
Section 9(f) or 9(g), Executive shall be entitled to receive the following as
severance compensation:
(i) payment of any previously unpaid Base Salary through
the date of termination;
(ii) payment of an amount equal to three times Executive's
annual Base Salary at the time of termination (or, if
greater, three times Executive's annual Base Salary
in effect immediately prior to the current annual
Base Salary rate), payable in a lump sum at the time
of termination;
(iii) payment of an amount equal to three times the sum of
the total achievable amounts of each of Executive's
Incentive Bonus and Performance Bonus under Section
5(b) for the current fiscal year (or, if greater,
three times the sum of the total achievable amounts
of each of Executive's Incentive Bonus and
Performance Bonus in effect for the fiscal year most
recently ended), payable in a lump sum at the time of
termination;
(iv) subject to the terms and eligibility requirements of
any such plan, continued coverage for a period of
three years following the date of termination under
any employee retirement, benefit and welfare plans of
MedPartners for which Executive is then eligible;
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, (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 (C) to the extent applicable, upon
termination of coverage under any MedPartners plan
pursuant to this paragraph (iv), Executive shall have
the option to have assigned to him at no cost and
with no apportionment for prepaid premiums, any
assignable insurance policy owned by MedPartners and
relating specifically to Executive;
(v) a right to immediately vest in 100% of all options to
purchase Common Stock of MedPartners that have been
granted to Executive by MedPartners and a period of
at least 90 days following termination for Executive
to exercise all such options in accordance with the
terms thereof;
(vi) payment of all reasonable legal fees and expenses
incurred by Executive as a result of termination,
including all such fees and expenses, if any,
incurred in contesting or disputing Executive's
termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement; and
(vii) payment of the reasonable costs for outplacement
services for a period not to exceed 18 months.
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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 payment or
distribution 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 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 provisions 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 the 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 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,
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(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 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.
(a) In the event that Executive's employment under this Agreement
shall terminate during its term, for the period of time with respect to which
Executive is entitled to receive compensation hereunder after such termination,
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
medical practice management 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; provided, however, that if such termination shall occur as a
result of a Change in Control, this Section 12 shall be void and shall be of no
further force and effect.
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(b) 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 (but not in
excess of one year) as may be legally enforceable.
(c) 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. NON-ASSIGNABILITY.
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 13, 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.
SECTION 14. CLAIMS; ARBITRATION.
(a) All claims by Executive for compensation and benefits under
this Agreement shall be directed to and determined by the Chief Executive
Officer and shall be in writing. Any denial by the Chief Executive Officer 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 Chief Executive Officer 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 Chief Executive
Officer a decision of the Chief Executive Officer of MedPartners within 60 days
after notification by the Chief Executive Officer that Executive's claim has
been denied.
(b) To the extent permitted by applicable law, any further dispute
or controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration in Birmingham, Alabama, in accordance with
the rules of the American Arbitration Association 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. Section
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.
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Xxxx X. Xxxxx For MedPartners:
____________________ ____________________
(d) Notice of the demand for arbitration shall be filed in writing
with the other party to this Agreement and with the American Arbitration
Association. 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.
(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 15. EMPLOYMENT TAXES.
All compensation paid pursuant to this Agreement, including
compensation paid pursuant to Section 5 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 16. 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. Executive shall not assign or alienate
any interest of his in this Agreement, except as provided in Section 11 hereof.
SECTION 17. 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 18. 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).
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SECTION 19. ENTIRE AGREEMENT.
This instrument shall be governed by the laws of the State of Delaware
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. Without limiting the generality of the foregoing, this
Agreement supersedes and replaces in its entirety the Employment Agreement
dated January 18, 1995, as amended, between Executive and MedPartners (as
successor to Xxxxxxxx Medical Enterprises, L.P.).
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.
SECTION 20. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MEDPARTNERS/XXXXXXXX, INC.
By: /s/ Xxxxx X. House /s/ Xxxx X. Xxxxx
--------------------------------- ------------------------------
Xxxxx X. House Xxxx X. Xxxxx
Chairman of the Board, President
and Chief Executive Officer
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