EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
May 7, 1998 by and between MedPartners, Inc., a Delaware corporation
("Employer") and Xxxxx X. Xxxxxxxxx, Xx. ("Officer").
WHEREAS, Employer desires to retain the services of Officer and Officer
desires to serve Employer in the capacity of Executive Vice President and Chief
Financial Officer; and
WHEREAS, Employer and Officer desire to set forth the terms and conditions
of Officer's employment with Employer under this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and agreements contained in this Agreement, the parties agree
as follows:
1. Term. Employer agrees to employ Officer, and Officer agrees to serve
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Employer, in accordance with the terms of this Agreement, for a term (the
"Term") beginning on the date of this Agreement and ending, unless earlier
terminated in accordance with the provisions of this Agreement, on May 6, 2001.
2. Employment of Officer.
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(1) Specific Position. Employer and Officer agree that, subject to
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the provisions of this Agreement, Employer will employ Officer and Officer will
serve Employer as Executive Vice President and Chief Financial Officer. Employer
agrees that Officer's duties under this Agreement shall be the usual and
customary duties of an Executive Vice President and Chief Financial Officer and,
consistent with the foregoing, as are determined from time-to-time by the Chief
Executive Officer of Employer, and shall not be inconsistent with the provisions
of the Certificate of Incorporation of Employer or applicable law.
(2) Promotion of Employer's Business. Subject to the provisions of
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Section 2(c), during the Term Officer shall devote his full business time and
energy to the business, affairs and interests of Employer and related matters,
and shall use his best efforts and abilities to promote Employer's interests.
Officer agrees that he will diligently endeavor to perform services contemplated
by this Agreement in accordance with the policies established by the Chief
Executive Officer of Employer and the Board of Directors of Employer (the
"Board"), subject to the provisions of the second sentence of Section 2(a).
(3) Permitted Activities. Officer may serve as an officer, director,
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agent or employee of any direct or indirect subsidiary or other affiliate of
Employer but may not serve as
an officer, director, agent or employee of any other business enterprise without
the written approval of the Chief Executive Officer of Employer.
(4) Principal Office. Officer's principal office and normal place of
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work shall be at Employer's principal executive offices in Birmingham, Alabama.
3. Salary. During the Term, Employer shall pay Officer a base salary in
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the amount of $400,000 per calendar year (pro-rated for any partial calendar
year during the Term) payable in equal semi-monthly installments, less state and
federal tax and other legally required and Officer-authorized withholdings. Such
base salary shall be subject to review and adjustment by the Board (or a
Committee of the Board) from time-to-time consistent with past practice;
provided, however, that, during the Term, such base salary may not be reduced
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below any previous level paid during the Term as a result of such review, unless
the salaries of all executive officers of Employer are reduced in the same
proportionate manner, but in no event shall such base salary be reduced below
$400,000 per calender year during the Term.
4. Signing Bonus. Promptly following execution hereof, Employer shall pay
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Officer a signing bonus in the amount of $100,000, less state and federal tax
and other legally required and Officer-authorized withholdings.
5. Incentive Compensation. During the Term, Officer shall be eligible to
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receive from Employer annual incentive compensation in an amount up to one
hundred percent (100%) of Officer's base salary (pro-rated for any partial
calender year during the Term), less state and federal tax and other legally
required and Officer-authorized withholdings. The incentive compensation
contemplated by this Section 5 shall be payable to Officer solely at the
discretion of the Chief Executive Officer of Employer based upon Officer's
performance hereunder; provided, further, that promptly following execution
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hereof Employer shall pay Officer $100,000 (less state and federal tax and other
legally required and Officer-authorized withholdings), which payment shall
represent an advance of incentive compensation payable to Officer pursuant to
this Section 5 for Employer's fiscal year ending December 31, 1998 and shall be
deemed earned by Officer upon Officer's receipt thereof. The incentive
compensation which Officer shall be eligible to earn under this Section 5 shall
be subject to review and adjustment by the Board (or a Committee of the Board)
from time-to-time consistent with past practice.
6. Non-Qualified Stock Options. Officer shall receive a stock option award
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(the "Award") covering non-qualified stock options to acquire 400,000 shares of
common stock, par value $.001 per share, of Employer (the "Common Stock"), which
Award shall be made under the MedPartners, Inc. 1998 New Employee Stock Option
Plan (the "New Employee Plan") and shall be subject to the terms and conditions
of the New Employee Plan and the applicable stock option agreement evidencing
the Award thereunder. Employer and Officer further acknowledge and agree that
the: (a) Award constitutes a material inducement for Officer to enter into this
Agreement; and (b) stock option agreement evidencing the Award shall provide,
among other things, for accelerated vesting of the options evidenced thereby in
the case of the sale, transfer or other disposition, in a transaction or series
of related transactions, of a majority of the assets of
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any one of the Employer's three major lines of business as of the date hereof
(consisting of its physician practice management services business, pharmacy
benefit management services business and contract management services business).
7. Benefits.
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(1) Fringe Benefits. In addition to the compensation and other
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remuneration provided for in Sections 3, 4, 5 and 6, Officer shall be entitled,
during the Term, to such other benefits of employment with Employer as are now
or may after the date of this Agreement be in effect for (i) salaried officers
of Employer or (ii) senior executives of Employer, including, without
limitation, all special bonus and deferred compensation, pension, stock option,
life and other insurance, disability (insured and uninsured), medical and dental
and other benefit plans or programs.
(2) Relocation Package. Officer shall be entitled to receive
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Employer's standard relocation package as set forth in the MedPartners, Inc.
Relocation Policy and Procedure Statement attached hereto as Exhibit A.
(3) Expenses. During the Term, Employer shall reimburse Officer
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promptly for all reasonable travel, entertainment, parking, business meeting and
similar expenditures in pursuit and furtherance of Employer's business upon
receipt of reasonable supporting documentation as required by Employer's
policies applicable to its officers generally.
8. Termination.
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(1) Termination Due to Resignation and Termination For Cause.
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Officer's employment under this Agreement shall be terminated and, except as
provided in this Section 8, all of Officer's rights to receive salary and other
benefits (except for salary, incentive compensation and other benefits accrued
through the date of termination) shall terminate upon the occurrence of (i)
Officer's resignation, other than for "good reason" as defined in Section 8(e),
or (ii) termination by Employer for "cause," as defined below. Employer shall
have the right, exercisable upon 30 days' written notice, to terminate, without
liability except as provided in the parenthetical in the preceding sentence,
Officer's employment for "cause" if Officer (i) materially breaches any material
term of this Agreement, (ii) is convicted by a court of competent jurisdiction
of a felony, (iii) refuses, fails or neglects to perform his duties under this
Agreement in a manner substantially detrimental to the business of the Employer,
(iv) engages in illegal or other wrongful conduct substantially detrimental to
the business or reputation of Employer, or (v) develops or pursues interests
substantially adverse to Employer; provided, however, that in the case of
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clauses (i), (iii) or (v), no such termination shall be effective unless (1)
Employer shall have given Officer 30 days' prior written notice of any conduct
or deficiency in performance by Officer that Employer believes could, if not
discontinued or corrected, lead to Officer's termination under this Section 8(a)
in order that Officer shall have had an opportunity to cure such noncomplying
conduct or performance, and (2) Officer shall not have cured such noncomplying
conduct or performance during such notice period. In the event Officer's
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employment under this Agreement is terminated pursuant to this Section 8(a), any
stock option or other stock-based compensation award then held by Officer shall
be governed by the terms of the plan and/or agreement pursuant to which such
award was granted.
(2) Termination Due to Death or Disability. Officer's employment and
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all of his rights to receive salary and other benefits under this Agreement may
be terminated by Employer upon Officer's death, or on 30 days' written notice
from Employer if Officer has been unable to perform substantially all of his
duties under this Agreement for a period of 180 days, or can reasonably be
expected to be unable to do so for such period, as the result of physical or
mental impairment; provided, however, that upon any termination by Employer
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pursuant to this Section 8(b), Officer (or in the event of his death, his
estate) shall be entitled to receive the Specified Amount (as defined below), in
cash in a lump sum payment on the date of termination and any stock option or
other stock-based compensation award to Officer shall be governed by the terms
of the plan and/or agreement pursuant to which such award was granted. The term
"Specified Amount" shall mean the sum of: (i) the total of all salary payments
pursuant to Section 3 that would thereafter have come due during the Term had
there been no such termination; and (ii) any portion or portions of any bonus or
other cash incentive compensation that had been accrued with respect to Officer
on the books of Employer through the date of termination pursuant to this
Section 8(b) or otherwise.
(3) Termination Without Cause. Subject to compliance with the
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provisions of Section 8(d), Employer shall have the right, exercisable on 30
days' written notice, to terminate Officer's employment under this Agreement
without cause at any time during the Term.
(4) Payments Upon Termination Without Cause. If Officer is terminated
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by Employer without cause pursuant to Section 8(c), then (i) Officer shall be
entitled to receive the Specified Amount in a lump sum payment in cash on the
date of such termination; (ii) any stock option or other stock-based
compensation award to Officer shall be governed by the terms of the plan and/or
agreement pursuant to which such award was granted; and (iii) Officer shall be
entitled to continue to receive during the remainder of the Term the life and
other insurance, disability and medical and dental benefits contemplated by
Section 7 as if there had been no such termination.
(5) Termination By Officer For Good Reason. Officer shall be entitled
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to terminate his employment under this Agreement for "good reason" and in such
event shall be entitled to all of the salary, benefits and other rights provided
in this Agreement as though the termination was initiated by Employer without
"cause" pursuant to Section 8(c). For purposes of this Agreement, "good reason"
shall mean any of the following events, which event shall continue for 30 days
after notice to the Employer, unless the event occurs with Officer's express
prior written consent:
(1) the assignment to Officer of any duties inconsistent with
Officer's status as Executive Vice President and Chief Financial Officer of
Employer;
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(2) a reduction by Employer in Officer's annual base salary below
$400,000 per calender year;
(3) the failure of Employer to comply with Sections 3, 4, 5, 6 or 7 of
this Agreement; or
(4) any other material breach of this Agreement by Employer.
(6) Termination Upon a Change of Control. In the event of a Change of
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Control (as hereinafter defined), Officer shall have the right to request at any
time during the 30 day period following the consummation of such Change of
Control that the surviving corporation or organization in such Change of Control
(the "Surviving Entity") acknowledge and confirm in writing to Officer that the
Surviving Entity has assumed all of Employer's rights and obligations hereunder
in connection with such Change of Control (the "Employment Confirmation"). If
the Surviving Entity in a Change of Control shall fail to provide Officer with
an Employment Confirmation within 30 days of Officer's written request for same,
then Officer shall be entitled to terminate his employment hereunder during the
period commencing 31 days after Officer's written request for an Employment
Confirmation and terminating 61 days after Officer's written request for an
Employment Confirmation. In the event Officer terminates his employment
hereunder pursuant to the immediately preceding sentence of this Section 8(f),
then Officer shall be entitled to: (i) those payments and rights provided under
Section 8(d) as though the termination has been initiated by Employer without
cause pursuant to Section 8(c); and (ii) a Gross-Up Payment (as hereinafter
defined), to the extent provided by the second paragraph of this Section 8(f).
For purposes hereof, a Change of Control shall be deemed to have taken place
upon the occurrence of any of the following events: (a) the acquisition after
the date of this Agreement, in one or more transactions, of beneficial ownership
(within the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) by any person or entity (other than
Officer) or group of persons or entities (other than Officer) who constitute a
group (within the meaning of Section 13(d)(3) of the Exchange Act) of any
securities of Employer such that as a result of such acquisition such person or
entity or group beneficially owns (within the meaning of Rule 13d-3(a)(1) under
the Exchange Act) more than 50% of Employer's then outstanding voting securities
entitled to vote on a regular basis for a majority of the Board; or (b) the sale
of all or substantially all of the assets of Employer (including, without
limitation, by way of merger, consolidation, lease or transfer) in a transaction
where Employer or the holders of common stock of Employer do not receive (i)
voting securities representing a majority of the voting power entitled to vote
on a regular basis for the Board of Directors of the acquiring entity or of an
affiliate that controls the acquiring entity or (ii) securities representing a
majority of the equity interests in the acquiring entity or of an affiliate that
controls the acquiring entity.
A Gross-Up Payment (as hereinafter defined) shall be payable upon
termination of employment pursuant to this Section 8(f) on and subject to the
following terms and conditions:
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(i) If Employer determines that any payment, option vesting or other
benefit (a "Termination Payment") to Officer under this Section 8(f) is or will
be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or an Excise Tax is properly
assessed against Officer based on a Termination Payment, Employer shall pay to
Officer, at the time the applicable Termination Payment is made or the Excise
Tax is assessed, an additional amount (the "Gross-Up Payment") such that the net
amount retained by Officer, after the payment in full of any Excise Tax on such
Termination Payment and any federal, state and local income tax and Excise Tax
on the Gross-Up Payment and any related interest and penalties, shall be not
less than the amount or value of such Termination Payment. For purposes of
determining whether any such Termination Payment will be subject to the Excise
Tax, Employer shall take into account any other payments, option vesting or
benefits received or to be received by Officer in connection with an event
giving rise to a Termination Payment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Employer, with any
person whose actions result in the Change of Control or with any person
affiliated with Employer or such person) in accordance with Section 280G of the
Code and any related regulations (whether temporary, proposed or final) and
Internal Revenue Service Rulings and applicable case law.
(ii) For purposes of determining the amount of any Gross-Up Payment,
Officer shall be deemed to pay federal income taxes at the highest marginal rate
of federal income taxation in the calendar year in which the applicable
Termination Payment or Gross-Up Payment is made, and shall be deemed to pay
state and local income taxes at the highest marginal rates of taxation in the
state and locality of Officer's residence on the date the applicable Termination
Payment or Gross-Up Payment is made, net of the maximum reduction in federal
income taxes that could be obtained from deduction of such state and local
taxes.
(iii) If the Excise Tax or income tax payable with respect to a
Gross-Up Payment as finally determined exceeds the amount taken into account or
paid to Officer at the time the applicable Termination Payment or Gross-Up
Payment is made (including by reason of any payment the existence or amount of
which cannot be determined at the time of the applicable Gross-Up Payment),
Employer shall make an additional Gross-Up Payment in respect of such excess at
the time that the amount of such excess is finally determined.
(iv) If a Gross-Up Payment is made as a result of the assessment of an
Excise Tax, Officer at Employer's request and expense shall take such action as
reasonable and appropriate to challenge such assessment or recover (on
Employer's behalf) such Excise Tax.
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9. Trade Secrets, Confidentiality and Noncompetition.
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(a) Trade Secrets. Officer agrees and covenants that, both during the
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Term and after termination of his employment, Officer will hold in a fiduciary
capacity for the benefit of Employer, and shall not directly or indirectly use
or disclose, except as authorized by Employer in connection with the performance
of Officer's duties, any Trade Secret, as defined hereinafter, that Officer may
have or acquire during the Term for so long as the such information remains a
Trade Secret. The term "Trade Secret" as used in this Agreement shall mean
information including, but not limited to, technical or non-technical data, a
formula, a pattern, a compilation, a program, a device, a method, a technique, a
drawing, a process, financial data, financial plans, product plans, or a list of
actual or potential customers or suppliers, including without limitation,
information received by Employer or Officer from any client or potential client
of Employer, which:
(i) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and
(ii) is the subject of reasonable efforts by Employer or the
client from which the information was received to maintain
its secrecy.
(b) Confidentiality. In addition to the covenants set forth in
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Section 9(a) and not in limitation thereof, Officer agrees that, during the Term
and for a period of five (5) years after termination of his employment, Officer
will hold in a fiduciary capacity for the benefit of Employer and shall not
directly or indirectly use or disclose, except as authorized by Employer in
connection with the performance of Officer's duties, any Confidential or
Proprietary Information, as defined hereinafter, that Officer may have or
acquire (whether or not developed or compiled by Officer and whether or not
Officer has been authorized to have access to such Confidential or Proprietary
Information) during the Term. The term "Confidential or Proprietary
Information" as used in this Agreement means any secret, confidential or
proprietary information of Employer, including information received by Employer
or Officer from any client or potential client of Employer, not otherwise
included in the definition of "Trade Secret" in Section 9(a) above. The term
"Confidential or Proprietary Information" does not include information that has
become generally available to the public by the act of one who has the right to
disclose such information without violating any right of the client to which
such information pertains.
(c) Restrictions Supplemental to State Law. The restrictions set
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forth in Sections 9(a) and (b) are in addition to and not in lieu of protections
afforded to trade secrets and confidential information under applicable state
law. Nothing in this Agreement is intended to or shall be interpreted as
diminishing or otherwise limiting Employer's right under applicable state law to
protect its trade secrets and confidential information.
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(d) Noncompetition. In order to protect any confidential information
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that Officer may learn during the Term and in order to protect any goodwill that
Employer has earned and may earn during the Term, Officer agrees that, if
Officer voluntarily terminates this Agreement without good reason during the
Term he shall not, at any location within a fifty (50) mile radius of any office
of Employer or any subsidiary thereof, for a period of 12 months after such
termination, provide services, as an employee, officer, director, consultant or
otherwise, which services are substantially similar to the services performed by
Officer under this Agreement, for any company, firm or entity that is engaged in
Employer's Business (as hereinafter defined). For purposes hereof, Employer's
Business shall consist of: (a) the provision of physician practice management
services; (b) the provision of prescription benefit management services; (c) the
organization and management of physicians and other healthcare professionals
engaged in the delivery of emergency, radiology and teleradiology services,
primary care and temporary staffing and support services to hospitals, clinics,
managed care organizations, correctional facilities, Department of Defense
facilities and government-affiliated physician groups; and (d) the provision of
occupational health services to corporate industrial clients.
10. Miscellaneous.
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(a) Successors and Assigns. This Agreement shall inure to the benefit
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of and shall be binding upon Employer, its successors and assigns, and Employer
shall be entitled to assign its rights and obligations hereunder to the
surviving corporation or organization in a Change of Control without the consent
of Officer. The obligations and duties of Officer under this Agreement shall be
personal and not assignable by Officer.
(b) Notices. Any notice, request, instruction or other document to be
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given under this Agreement by any party to the others shall be in writing and
delivered in person or by courier, telegraphed, telexed or sent by facsimile
transmission or mailed by certified mail, postage prepaid, return receipt
requested (such mail notice to be effective on the date such receipt is
acknowledged), as follows:
If to Officer:
Xxxxx X. Xxxxxxxxx, Xx.
0000 Xxxx Xxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
If to Employer:
MedPartners, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
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or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
(c) Entire Agreement. This Agreement contains the entire agreement of
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the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter.
(d) Waiver and Amendment. No provision of this Agreement may be
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waived except by a written agreement signed by the waiving party. The waiver of
any term or of any condition of this Agreement shall not be deemed to constitute
the waiver of any other term or condition. This Agreement may be amended only
by a written agreement signed by each of the parties hereto.
(e) Governing Law. This Agreement shall be construed under and
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governed by the internal laws of the State of Alabama.
(f) Arbitration. Except for a claim by Employer for injunctive
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relief, any disputes or controversies arising out of or relating to this
Agreement including any breach hereof, Officer's employment or termination of
employment by Employer, including any claim of employment discrimination, or the
arbitrability of any matter under this Agreement, shall be settled by
arbitration in Birmingham, Alabama, in accordance with the Federal Arbitration
Act and the employment dispute arbitration rules of the American Arbitration
Association. Employer agrees to pay the administrative costs and expenses
required by such arbitration, including the fees and expenses of the
arbitrator(s). The determination and findings of such arbitrators shall be
final and binding on all parties and may be enforced, if necessary, in any court
of competent jurisdiction in the federal or state courts in Birmingham, Alabama.
(7) Attorneys' Fees in Action by Employee on Contract. In the event
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of litigation or arbitration between Officer and Employer arising out of or as a
result of this Agreement or the acts of the parties pursuant to this Agreement,
or seeking an interpretation of this Agreement, if Officer is the party in such
litigation or arbitration, in addition to any other judgment or award, he shall
be entitled to receive such sums as the court or panel hearing the matter shall
find to be reasonable as and for attorneys' fees.
(8) Remedies of Employer. Officer acknowledges that the services he
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is obligated to render under the provisions of this Agreement are of a special,
unique and intellectual character, which gives this Agreement peculiar value to
Employer. The loss of these services cannot be reasonably or adequately
compensated in damages in an action at law and it would be difficult (if not
impossible) to replace such services. Accordingly, Officer agrees and consents
that, if he materially violates any of the material provisions of this
Agreement, including, without limitation, Section 9, Employer, in addition to
any other rights and remedies available under this Agreement or under applicable
law, shall be entitled during the remainder of the Term (and, in the case of
Section 9, after the Term to the extent provided in Section 9) to
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seek injunctive relief, from a court of competent jurisdiction, restraining
Officer from committing or continuing any violation of this Agreement, or from
the performance of services to any other business entity, or both.
(9) Captions. Captions have been inserted solely for the convenience
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of reference and in no way define, limit or describe the scope or substance of
any provisions of this Agreement.
(10) Severability. If this Agreement shall for any reason be or become
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unenforceable by any party, this Agreement shall thereupon terminate and become
unenforceable by the other party as well. In all other respects, if any
provision of this Agreement is held invalid or unenforceable, the remainder of
this Agreement shall nevertheless remain in full force and effect and, if any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances; provided, however, that if any one or more of the terms
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contained in Section 9 shall for any reason be held to be excessively broad with
regard to time, duration, geographic scope or activity, that term shall not be
deleted but shall be reformed and construed in a manner to enable it to be
enforced to the greatest extent compatible with applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Attest: MEDPARTNERS, INC.
By:
----------------------- By: /s/ X. X. Xxxxxxxx
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Name: E. Xxx Xxxxxxxx
--------------------- President and Chief Executive Officer
Title:
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/s/ Xxxxx X. Xxxxxxxxx, Xx.
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Xxxxx X. Xxxxxxxxx, Xx.
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EXHIBIT A
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[Attach MedPartners, Inc. Relocation Policy and Procedures Statement]
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