EXHIBIT 10.39
EMPLOYMENT AGREEMENT
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Employment Agreement (the "Agreement"), dated October 29, 1995 by and
between Physicians Resource Group, Inc., a Delaware corporation (the "Company"),
and Xxxxxxxx X. Xxxx ("Employee").
In consideration of the mutual premises and conditions contained herein,
the parties hereto agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ Employee, and
Employee hereby accepts employment by the Company, upon the terms and subject to
the conditions hereinafter set forth.
Section 2. DUTIES. Employee shall serve as the Senior Vice President of
the Company. Except as otherwise provided pursuant to Section 11 hereof,
Employee agrees to devote his full time and best efforts to the performance of
his duties to the Company. Employee will report to the Company's President and
Chief Executive Officer. Initially Employee's duties will include assistance
with acquisitions. It is anticipated that within six (6) months following the
Commencement Date (hereinafter defined), Employee's duties will be expanded to
include operational responsibilities.
Section 3. TERM. Except as otherwise provided in Section 6 hereof, the
term of this Agreement shall be for five years, commencing on the date of
employment as reflected in the employment records of the Company (the
"Commencement Date"), and shall be automatically renewed thereafter for
successive one year terms unless either party gives to the other written notice
of termination no fewer than sixty (60) days prior to the expiration of any such
term that it does not wish to extend this Agreement.
Section 4. COMPENSATION AND BENEFITS. In consideration for the services
of the Employee hereunder, the Company will compensate Employee as follows:
(a) Base Salary. Commencing on the Commencement Date, Employee shall be
entitled to receive a base salary of $155,000 per annum or as increased from
time to time by the Board of Directors of the Company.
(b) Bonus. Employee shall be eligible to receive an annual cash bonus in
an amount equal to up to 50% of his base salary in the event that the Company
experiences at least 20% or greater growth in earnings per share on a year to
year basis (calculated on a pro forma basis for the calendar year prior to
Company's first fiscal year of operations) in accordance with the following
schedule:
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Percentage Increase Bonus as a Percentage
in Earnings Per Share of Annual Base Salary
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20.0 - 22.5% 10%
Over 22.5 - 25.0% 20%
Over 25.0 - 27.5% 30%
Over 27.5 - 30.0% 40%
Over 30.0% 50%
Employee will be entitled to draw in advance against 75% of his maximum
"projected" annual bonus, on a quarterly basis, as determined based on Company
projections, and actual quarterly results, of operations. For purposes of this
Section 6(a), calculations of earnings per share for 1995 and 1996 shall be made
in accordance with Exhibit A attached hereto.
(c) Benefits. The Company shall grant Employee an option to purchase
95,000 shares of the Company's Common Stock, with the per share exercise price
being the closing sale price for the Company's Common Stock on the New York
Stock Exchange on the Commencement Date and on other terms that are consistent
with the terms of the stock option plans adopted by the Company pursuant to
which the options are granted and the provisions of Section 7 hereof. Such
options will vest over a period of five years. In addition, during the term of
this Agreement, Employee shall be entitled to participate in and receive
benefits under any and all employee benefit plans and programs which are from
time to time generally made available to the executive employees of the Company,
subject to approval and grant by the appropriate Company committee with respect
to programs calling for such approvals or grants.
Section 5. EXPENSES. It is acknowledged by the parties that Employee, in
connection with the services to be performed by him pursuant to the terms of
this Agreement, will be required to make payments for travel, entertainment of
business associates and similar expenses. The Company will reimburse Employee
for all reasonable expenses of types authorized by the Company and incurred by
Employee in the performance of his duties hereunder. Employee will comply with
such budget limitations and approval and reporting requirements with respect to
expenses as the Company may establish from time to time.
Section 6. TERMINATION. Employee's employment hereunder will commence on
the Commencement Date and continue until the end of the term specified in
Section 3 hereof and any renewals of such term, except that the employment of
Employee hereunder will terminate earlier in the following manner:
(a) Death or Disability. Immediately upon the death of Employee during the
term of his employment hereunder or, at the option of the Company, in the event
of
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Employee's disability, upon 30 days notice to Employee. Employee will be deemed
disabled if, as a result of Employee's incapacity due to physical or mental
illness, Employee shall have been absent from his duties with the Company on a
full-time basis for 120 consecutive business days;
(b) For Cause. For "Cause" immediately upon written notice by the Company
to Employee. For purposes of this Agreement, a termination will be for Cause
if: (i) Employee willfully and continuously fails to perform his duties with the
Company (other than any such failure resulting from incapacity due to physical
or mental illness), (ii) Employee willfully engages in gross misconduct
materially and demonstrably injurious to the Company or (iii) Employee has been
convicted of a felony;
(c) Termination Upon Anniversary. Upon the occurrence of any annual
anniversary of the Commencement Date, in the event that one party has provided
to the other 60 days prior written notice of its election to terminate this
Agreement.
Employee will not be entitled to any severance pay or other compensation
upon termination of his employment pursuant to Subsections (a) or (b) or Section
3 or in the event that Employee voluntarily leaves the employment of the Company
except for any portion of his base salary accrued but unpaid from the last
monthly payment date to the date of termination and expense reimbursements under
Section 5 hereof for expenses incurred in the performance of his duties
hereunder prior to termination. In the event Employee's employment with the
Company is terminated by the Company for reasons other than any of the reasons
enumerated in Subsections 6(a) or (b) above, the Company will pay Employee, as
Employee's sole remedy in connection with such termination, severance pay in the
amount of Employee's monthly base salary at the rate in effect immediately
preceding the termination of Employee's employment for 12 months after the
termination of Employee's employment (the "Separation Payment Period"), which
severance pay will be paid by the Company in equal monthly payments in arrears.
The Company will also pay Employee the portion of his base salary accrued but
unpaid from the last monthly payment date to the date of termination and expense
reimbursements under Section 5 hereof for expenses incurred in the performance
of his duties hereunder prior to termination.
Section 7. Effect of Termination on Options. Options held by the Employee
will automatically expire if the Employee's employment with the Company is
terminated for Cause as defined in Section 6(b) or if the Employee voluntarily
leaves the employment of the Company in breach of this Agreement. If Employee's
employment with the Company ends for any other reason than termination for
Cause, voluntary departure in breach of this Agreement, due to death or pursuant
to Section 6(c) above, such Employee's options will remain exercisable and will
vest and expire in accordance with the terms of the applicable option
agreements. If the Employee dies while employed by the Company his options shall
become fully exercisable on the date of his death and shall expire twelve months
thereafter. If this Agreement is terminated by the Company pursuant to Section
6(c) above, (i) the options that are vested as of the date of termination shall
remain exercisable for a period of twelve months after the date of termination
and shall expire at the end of
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such twelve month period and (ii) the options that would have vested during the
twelve months following termination shall vest upon termination, remain
exercisable for a period of twelve months after the date of termination and
expire at the end of such twelve month period. If this Agreement is terminated
by the Employee pursuant to Section 6(c) above, the options that are vested as
of the date of termination shall remain exercisable for a period of twelve
months after the date of termination and shall expire at the end of such twelve
month period.
Section 8. CHANGE IN CONTROL TERMINATION PAYMENT.
(a) Termination Payment.
(i) Amount. Notwithstanding anything to the contrary contained in
Section 7 hereof, in the event Employee's employment with the Company
terminates for any reason (other than death) within the twelve month period
following a Change In Control (as defined in subsection 8(b) hereof)
occurring after the Commencement Date, the Company will pay Employee a lump
sum payment (the "Termination Payment") in cash equal to 2.99 times the sum
of the items in the following subsections (I) through (VI):
(I) Employee's annual base compensation determined by reference to his base
salary in effect immediately prior to the Change In Control;
(II) the maximum bonus that Employee could receive under any
management incentive bonus plan of the Company for the year in which
the Change In Control occurs, assuming all incentives and financial
targets were achieved that are necessary to require payment of the
largest bonus amount by the Company to Employee; provided that the
maximum bonus under this subsection 8(a)(i)(II) will not be less than
60% of the amount specified under subsection 8(a)(i)(I) hereof;
(III) the amount of Employee's base salary accrued but unpaid from
the last monthly payment date to the date of termination;
(IV) expense reimbursement under Section 5 hereof for expenses
incurred in the performance of his duties hereunder prior to the
termination of his employment with the Company;
(V) any other benefit accrued but unpaid as of the date of such
termination; and
(VI) the estimated cost to Employee of obtaining medical, dental,
life and disability insurance coverage for a period of eighteen months
after
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the expiration of his continuation (COBRA) rights; provided that such
coverage will be substantially similar to the coverage provided to
Employee by the Company immediately prior to the Change In Control;
and provided further that this subsection 8(a)(i)(VI) will be applied
without regard to, and the amount payable under this subsection
8(a)(i)(VI) is in addition to, any continuation (COBRA) rights or
conversion rights under any plan provided by the Company, which rights
are not affected by any provision hereof.
(ii) Time for Payment; Interest. The Company will pay the Termination
Payment to Employee concurrent with Employee's termination of employment.
The Company's obligation to pay to Employee any amounts under this Section
8, including without limitation the Termination Payment and any Gross Up
Payment due under subsection (c), will bear interest at the maximum rate
allowed by law until paid by the Company, and all accrued and unpaid
interest will bear interest at the same rate, all of which interest will be
compounded daily.
(iii) Payment Authority. Any officer of the Company (other than
Employee) is authorized to issue and execute a check, initiate a wire
transfer or otherwise effect payment on behalf of the Company to satisfy
the Company's obligations to pay all amounts due to Employee under this
Section 8.
(iv) Termination. The Company's obligation to pay the Termination
Payment will not be affected by the manner in which Employee's employment
with the Company is terminated. Without limiting the generality of the
foregoing, the Company will be obligated to pay the Termination Payment and
any Gross Up Payment regardless of whether Employee's termination of
employment is voluntary, involuntary, for cause, without cause, in
violation of any employment agreement or other agreement in effect at the
time of the Change In Control, or due to Employee's retirement or
disability. Employee's notice of his termination of employment in
connection with a Change In Control may be made by any means.
(b) Change In Control. A Change In Control will be deemed to have occurred
for purposes hereof (i) when a change of stock ownership of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and any successor Item of a similar nature has occurred;
or (ii) upon the acquisition of beneficial ownership, directly or indirectly, by
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) of securities of the Company representing 33% or more of the combined
voting power of the Company's then outstanding securities; or (iii) a change
during any period of two consecutive years of a majority of the members of the
Board of Directors of the Company for any reason, unless the election, or the
nomination for election by the Company's shareholders, of each director was
approved by a vote of a majority of the directors then still in office who were
directors at the beginning of the period; provided that
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a Change In Control will not be deemed to have occurred for purposes hereof with
respect to any person meeting the requirements of clauses (i) and (ii) of Rule
13d-1(b)(1) promulgated under the Securities Exchange Act of 1934, as amended.
(c) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the
"Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Company will pay to Employee an amount (the
"Gross Up Payment") such that the net amount retained by Employee, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income tax (together with penalties and interest)
and Excise Tax upon the payment provided for by this subsection (c)(i),
will be equal to the amount of the excess parachute payment.
(ii) Applicable Rates. For purposes of determining the amount of the
Gross Up Payment, Employee will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year
in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Employee's residence on the date of his termination of employment, net
of the maximum reduction in federal income taxes that could be obtained
from deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Employee. If such opinion is not
finally accepted by the Internal Revenue Service (or state and local taxing
authorities), then appropriate adjustments to the Excise Tax will be
computed and additional Gross Up Payments will be made in the manner
provided by this subsection (c).
(iv) Time For Payment. The Company will pay the estimated amount of
the Gross Up Payment in cash to Employee concurrent with Employee's
termination of employment. Employee and the Company agree to reasonably
cooperate in the determination of the actual amount of the Gross Up
Payment. Further, Employee and the Company agree to make such adjustments
to the estimated amount of the Gross Up Payment as may be necessary to
equal the actual amount of the Gross Up Payment, which in the case of
Employee will refer to refunds of prior overpayments and in the case of the
Company will refer to makeup of prior underpayments.
(d) Arbitration. Any controversy or claim arising out of or relating
to this Section 8, or the breach thereof, will be settled exclusively by
arbitration in Dallas, Texas, in accordance with the Commercial Arbitration
Rules of the American Arbitration
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Association then in effect. Judgment upon the award rendered by the
arbitrator(s) may be entered in, and enforced by, any court having jurisdiction
thereof.
(e) No Right To Continued Employment. This Section 8 will not give
Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
(f) Exercise of Stock Options. Notwithstanding anything to the contrary
contained herein, all of Employee's options to purchase the Company's Common
Stock will become immediately exercisable upon a Change In Control.
Section 9. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges
that certain assets of the Company and its affiliates, including without
limitation information regarding customers, pricing policies, methods of
operation, proprietary computer programs, sales, products, profits, costs,
markets, key personnel, formulae, product applications, technical processes, and
trade secrets (hereinafter called "Confidential Information") are valuable,
special and unique assets of the Company and its affiliates. Employee will not,
during or after his term of employment, disclose any of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Employee of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by the Company or Employee, Employee will deliver to the Company all
documents and data pertaining to the Confidential Information and will not take
with him any documents or data of any kind or any reproductions (in whole or in
part) of any items relating to the Confidential Information.
Section 10. NONCOMPETITION. Until two years after termination of
Employee's employment hereunder, Employee will not (i) engage directly or
indirectly, alone or as a shareholder, partner, officer, director, employee or
consultant of any other business organization, in any business activities which
(A) relate to the acquisition and consolidation of medical practices (the
"Designated Industry") and (B) were either conducted by the Company prior to
Employee's termination or proposed to be conducted by the Company at the time of
such termination, (ii) divert to any competitor of the Company in the Designated
Industry any customer of Employee, or (iii) solicit or encourage any officer,
employee, or consultant of the Company to leave its employ for employment by or
with any competitor of the Company in the Designated Industry. The parties
hereto acknowledge that Employee's noncompetition obligations hereunder will not
preclude Employee from (i) owning less than 5% of the common stock of any
publicly traded corporation conducting business activities in the Designated
Industry or (ii) serving as an officer or employee of an entity engaged in the
healthcare industry whose business operations are not competitive with those of
the Company. Employee will continue to be bound by the provisions of this
Section 10 until their expiration and will not be entitled to any compensation
from the Company with respect thereto. If at any time the provisions of this
Section 10 are determined to be invalid or unenforceable, by reason of being
vague or unreasonable as to area, duration or scope of activity, this Section 10
will be
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considered divisible and will become and be immediately amended to only such
area, duration and scope of activity as will be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
Employee agrees that this Section 10 as so amended will be valid and binding as
though any invalid or unenforceable provision had not been included herein.
Section 11. CONSULTING. During the term of this Agreement, Employee may
devote up to 10% of his professional time or two (2) days per month to a
consulting business independent from the Company.
Section 12. GENERAL.
(a) Notices. Except as provided in Section 8(a) hereof, all notices
and other communications hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested or by
written telecommunication, to the relevant address set forth below, or to
such other address as the recipient of such notice or communication will
have specified to the other party hereto in accordance with this Section
12(a):
If to the Company, to: with a copy to:
Physicians Resource Group, Inc. Xxxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxx Xxxxx 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxx 000 Xxxxxx, Xxxxx 00000
Xxxxxxx, Xxxxx 00000 Attn: Xxxxx X. Xxxx, III
Attn: Chief Executive Officer Fax No.: (000) 000-0000
Fax No.: (000) 000-0000
If to Employee, to:
Xxxxxxxx X. Xxxx
0000 Xxxxxxxx Xx.
Xxxxxx, Xxxxx 00000
(b) Withholding; No Offset. All payments required to be made by
the Company under this Agreement to Employee will be subject to the
withholding of such amounts, if any, relating to federal, state and
local taxes as may be required by law. No payment under this Agreement
will be subject to offset or reduction attributable to any amount
Employee may owe to the Company or any other person.
(c) Equitable Remedies. Each of the parties hereto acknowledges
and agrees that upon any breach by Employee of his obligations under
any of Sections 9 and 10 hereof, the
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Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and
equitable relief.
(d) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision will be fully
severable and this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision never comprised a part
hereof; and the remaining provisions hereof will remain in full force
and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there will
be added automatically as part of this Agreement a provision as
similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
(f) Waivers. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder will impair such
right, power or privilege, nor will any single or partial exercise of
any such right, power or privilege preclude any further exercise
thereof or the exercise of any other right, power or privilege.
(g) Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of
which together will constitute one and the same instrument.
(h) Captions. The captions in this Agreement are for convenience
of reference only and will not limit or otherwise affect any of the
terms or provisions hereof.
(i) Reference to Agreement. Use of the words "herein," "hereof,"
"hereto" and the like in this Agreement refer to this Agreement only
as a whole and not to any particular subsection or provision of this
Agreement, unless otherwise noted.
(j) Binding Agreement. This Agreement will be binding upon and
inure to the benefit of the parties and will be enforceable by the
personal representatives and heirs of Employee and the successors of
the Company. If Employee dies while any amounts would still be payable
to him hereunder, such amounts will be paid to Employee's estate. This
Agreement is not otherwise assignable by Employee.
(k) Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and may not be
amended except by a written instrument hereafter signed by each of the
parties hereto.
(l) Governing Law. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of
Texas, without regard to its choice of law principles.
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EXECUTED as of the date and year first above written.
PHYSICIANS RESOURCE GROUP, INC.
By: __________________________________
Xxxxxx X. Xxxxx
President and Chief Executive Officer
______________________________________
Xxxxxxxx X. Xxxx
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