EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), is made
and entered into as of the 19th day of September, 1996, effective as of July 1,
1996, by and between Physician Partners, Inc., a Delaware corporation (the
"Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive and the Company have entered into the Employment
Agreement, dated as of July 29, 1996 (the "Old Employment Agreement"), effective
as of July 1, 1996, providing for the Company's employment of the Executive; and
WHEREAS, the Executive and the Company deem it to be in their respective
best interests to amend and restate the Old Employment Agreement upon the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, it is hereby agreed as follows:
1. DUTIES. The Company hereby agrees to employ Executive as its
President and Chief Executive Officer for the "Term of Employment" (as herein
defined). Executive in this capacity agrees to use his best efforts during the
Term of Employment to protect, encourage, and promote the interests of the
Company. During the Term of Employment, Executive shall also perform such other
duties consistent with the offices held by Executive as may be reasonably
assigned to him from time to time by the Board of Directors of the Company, and
will devote substantial time and attention to such duties, except while on sick
leave, reasonable vacations, and excused leaves of absence. During such period,
Executive may also be required to perform services for one or more affiliates of
the Company.
2. COMPENSATION.
(a) BASE SALARY. From July 1, 1996 until the consummation of the
merger of the Company with the Corvallis Clinic, P.C., HealthFirst Medical
Group, P.C. and Medford Clinic, P.C. (the "Merger") the Company agrees to pay to
Executive base salary at an annual rate of three hundred thousand dollars
($300,000) payable in regular installments in accordance with the Company's
normal payroll procedures. Effective on the date the Merger is consummated (the
"Merger Date"), the Company agrees to pay to Executive a minimum base salary
during the Term of Employment equal to two hundred twenty-five thousand dollars
($225,000) per year ("Base Salary"), payable in regular installments in
accordance with the Company's normal payroll procedures. Executive's Base
Salary shall be increased at the discretion of the Compensation Committee of the
Board of Directors of the Company (the "Committee") to maintain or bring
Executive to the 35th percentile of peer companies selected by the Committee.
(b) ANNUAL INCENTIVE. Executive shall not be entitled to a bonus
award for any period prior to the Merger. However, effective on the Merger
Date, Executive will be eligible to participate in the Company's annual
management incentive plan (or such other incentive plan established in place of
the Company's annual management incentive plan) at a target bonus equal to such
percentage of Base Salary as determined each year by the Committee in its
discretion. The actual amount of the annual bonus award, if any, for a fiscal
year shall be dependent upon the achievement of certain financial standards of
performance for the operations of the Company, the achievement of certain non-
financial objectives mutually agreed upon by Executive and the Company at the
beginning of the fiscal year and a discretionary component for performance above
targets. For the 1997 fiscal year, the incentive standards and target goals for
Executive shall be mutually agreed upon by Executive and the Company within
sixty (60) days after the Merger Date and Executive shall be entitled to receive
a bonus award not less than one hundred twenty-five thousand dollars ($125,000)
assuming achievement of the financial standards of performance and 100% of the
agreed upon non-financial objectives. No bonus award for the 1997 fiscal year
shall be awarded if Executive fails to achieve at least 85% of the agreed upon
non-financial objectives. The Committee will review Executive's performance
from time to time and assuming satisfactory performance, additional bonus awards
as the Committee may determine in its sole discretion shall be made sufficient
to maintain Executive's short-term compensation package (i.e, Base Salary plus
annual bonus awards) at a level equal to the 60th percentile of peer companies
selected by the Committee.
(c) LONG-TERM INCENTIVES. As soon as practicable after the date
hereof, Executive shall receive a restricted stock award for 27,000 shares of
Class A Common Stock, par value $0.01 per share ("Class A Common Stock"), of the
Company. One-third (1/3) of the restricted shares so awarded shall vest and the
risk of forfeiture on such shares shall lapse as of each of the first, second
and third anniversaries of the Merger Date, provided that Executive is still
employed on each such anniversary. In addition, effective on the Merger Date,
Executive shall be granted an option to purchase 50,000 shares of Class A Common
Stock of the Company at the fair market value of a share of Class A Common Stock
of the Company as of the date such option is granted. The option shall vest and
become exercisable with respect to twenty percent (20%) of the shares subject to
the option on each anniversary of the date the option is granted. The
restricted stock award and the option grant specified above shall be subject to
such other terms and conditions as may be specified in a separate agreement
providing for the award or grant, as the case may be, and the terms and
conditions relating to such award or grant, including, without limitation,
restriction on transfer of shares, vesting requirements and forfeiture, and
redemption of shares. The Committee will review Executive's performance from
time to time and assuming satisfactory performance, additional awards of long
term incentives, in such form and in such amounts as the Committee may determine
in its sole discretion, shall be made sufficient to maintain Executive's total
compensation (i.e Base Salary, annual bonus awards and long-term incentives) at
a level that is within the 60th to 70th percentile of compensation ranges for
peer companies selected by the Committee.
3. BENEFITS. During the Term of Employment:
(a) The Company shall furnish Executive with, and Executive shall be
allowed full use of, office facilities, automobiles, secretarial and clerical
assistance, and other Company property and services of a quality, nature and to
the extent made available to senior executive employees of the Company from time
to time;
(b) Executive shall be eligible to participate in life, health, long-
term disability insurance and severance programs, stock purchase programs, stock
option plans, qualified and non-qualified pension and retirement plans,
incentive compensation programs and other fringe benefit programs, if any,
available to other senior executive employees of the Company and physicians
employed by medical clinics that are party to a practice management agreement
with the Company or any Subsidiary thereof;
(c) Executive shall be allowed 4 weeks of vacation and paid leaves of
absence on the same basis as other senior executive employees of the Company;
(d) Company will reimburse Executive for reasonable business expenses
in performing Executive's duties and promoting the business of Company,
including, without limitation, reasonable entertaining expenses, automobile
expenses, and travel and lodging, when incurred. The cost of these items shall
be borne by the Company upon presentation of an itemized expense voucher;
(e) The Company shall provide the Executive with a car allowance of
$1,000 per month and customary support, such as a cellular phone and laptop
computer; and
(f) Company shall reimburse Executive for reasonable and documented
relocation expenses that would otherwise be deductible by Executive.
4. TERM OF EMPLOYMENT. As used herein, the phrase "Term of Employment"
shall mean the period commencing on July 1, 1996 and ending June 30, 1999. The
Company shall provide Executive with at least ninety (90) days notice of its
intent not to renew this Agreement. Notwithstanding the foregoing, the Term of
Employment shall expire on the first to occur of the following:
(a) TERMINATION WITHOUT CAUSE. Notwithstanding anything to the
contrary in this Agreement, whether express or implied, the Company may at any
time terminate Executive's employment with the Company by giving Executive at
least sixty (60) days prior written notice of the effective date of termination.
In the event of such termination, Executive shall be entitled to receive his
Base Salary (at the rate in effect immediately prior to such notice) during the
period commencing on the effective date of such termination and ending on the
first anniversary of such date (the "Severance Period") as though Executive's
employment had continued during the Severance Period. Executive shall also be
entitled to continue to be covered by all medical, health and accident and
disability insurance, at the same coverage level maintained for Executive's
benefit immediately prior to the date of Executive's termination, until the end
of the Severance Period. In the event Executive is ineligible under the terms
of such insurance to continue to be so covered, the Company shall provide
Executive with substantially equivalent coverage through other sources or will
provide the Executive with a lump sum payment equal to the agreed upon present
value of the continuation of such insurance coverages to which Executive is
entitled under this section 4(a).
(b) TERMINATION FOR CAUSE. The Company shall have the right to
terminate Executive's employment at any time for Cause by giving Executive
written notice of the effective date of termination (which effective date may,
except as otherwise provided below, be the date of such notice). For purposes
of this Agreement, Cause shall mean:
(i) fraud, misappropriation, embezzlement or other act of
material misconduct against the Company or any of its affiliates thereof or an
act contrary to their best interests;
(ii) substantial and willful failure to render services in
accordance with the terms of this Agreement, provided that (A) a demand for
performance of services had been delivered to the Executive by the Board of
Directors of the Company at least thirty (30) days prior to termination
identifying the manner in which such Chief Executive Officer believes that the
Executive has failed to perform and (B) the Executive has thereafter failed to
remedy such failure to perform;
(iii) willful and knowing violation of any rules or regulations
of any governmental or regulatory body material to the business of the Company;
or
(iv) conviction of or plea of guilty or nolo contendere to a
felony.
If Company terminates Executive's employment for any of the reasons set forth in
this Section 4(b), Company shall have no further obligations hereunder from and
after the effective date of termination and shall have all other rights and
remedies available under this or any other agreement and at law or in equity.
If Executive's employment is terminated for Cause (as defined above) and
Executive does not consent to such termination, such termination shall not be
considered effective and Executive's rights under this Agreement during the Term
of Employment shall continue (including, without limitation, the provisions of
Sections 2 and 3 hereof) until the existence of such Cause has been determined
by an independent arbitrator appointed by the American Arbitration Association
and either party's rights to petition a court of law for a decision in the
matter have been exhausted. In connection with the appointment of an
arbitrator, both parties agree to submit the question to final and binding
arbitration by an appointee of the American Arbitration Association and to
cooperate with the arbitrator, with all costs of arbitration paid by the
Company. If the arbitrator determines that the Executive's termination was for
Cause, then the Executive shall repay to the Company all compensation received
pursuant to Section 2 during the period commencing upon the Executive's
termination and ending upon the arbitrator's final determination. The Executive
shall also repay to the Company all amounts that it paid or reimbursed the
Executive pursuant to Section 6.
(c) TERMINATION ON ACCOUNT OF DEATH. In the event of Executive's
death while in the employ of the Company, the Company shall pay to the
Executive's Designated Beneficiaries (as defined below) one hundred percent
(100%) of Executive's Base Salary as in effect immediately prior to Executive's
death, payable to Executive's Designated Beneficiary at the beginning of each
month for a period of twelve (12) months following Executive's death or until
the end of the Term of Employment, whichever is sooner. In addition,
Executive's surviving spouse, if any, shall continue to be covered by all
medical, health and accident insurance, and for the same coverage, maintained
for Executive's benefit immediately prior to the date of Executive's death, for
a period of twelve (12) months thereafter. In the event Executive's surviving
spouse is ineligible under the terms of such insurance to continue to be so
covered, the Company shall provide substantially equivalent coverage through
other sources or will provide the Executive's surviving spouse with a lump sum
payment equal to the agreed upon present value of the continuation of such
insurance coverages under this Section 4(c).
(d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that
Executive's employment with the Company is voluntarily terminated by Executive,
the Company shall have no further obligations hereunder from and after the
effective date of such termination and shall have all other rights and remedies
available under this or any other agreement and at law or in equity.
(e) FAILURE OF MERGER TO CLOSE. In the event that the Merger Date
fails to take place on or before January 31, 1997, Executive's Term of
Employment shall expire and the Company shall have no further obligations
hereunder except as follows:
(i) Executive will be "made whole" by the Company for losses (if
any) in purchasing a home in Portland, Oregon (including closing and loan
costs), provided Executive sells home and relocates to a new home outside of
Portland, Oregon, within one year after the date of such expiration; and
(ii) The Company will provide Executive with a severance benefit
equal to three hundred thousand dollars ($300,000) payable in twelve (12) equal
installments and provide Executive (or reimburse him for) health and disability
insurance coverage for twelve (12) months following such expiration.
5. CHANGE IN CONTROL. In the event of a Change in Control of the
Company, Executive shall be entitled to benefits provided under the Company's
Change in Control Plan and the agreement Employee has executed pursuant to that
plan.
6. EXPENSES. The Company will pay or reimburse the Executive for all
costs and expenses (including court costs and reasonable attorneys' fees)
incurred by the Executive as a result of any claim, action or proceeding arising
out of, or challenging the validity or enforceability of, this Agreement or any
provision hereof.
7. MITIGATION. In the event of a termination of Executive's employment
for any reason, Executive shall not be required to seek other employment; in
addition, no amount payable under Section 4 of this Agreement shall be reduced
by any compensation earned by Executive as a result of employment by another
employer after such termination of employment with the Company.
8. DESIGNATED BENEFICIARY. In the event of the death of Executive while
in the employ of the Company, or at any time thereafter during which amounts
remain payable to the Executive under Section 4(a) or (c) hereof, such payments
shall thereafter be made to such person or persons as the Executive may
specifically designate (successively or contingently) to receive payments under
this Agreement following the Executive's death by filing a written beneficiary
designation with the Company during the Executive's lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Company and may be
amended from time to time or may be revoked by the Executive pursuant to written
instruments filed with the Company during his lifetime. Beneficiaries
designated by Executive may be any natural or legal person or persons, including
a fiduciary, such as a trustee or a trust or the legal representative of an
estate. Unless otherwise provided by the beneficiary designation filed by
Executive, if all of the persons so designated die before Executive on the
occurrence of a contingency not contemplated in such beneficiary designation,
then the amount payable under this Agreement shall be paid to the Executive's
estate.
9. MISCELLANEOUS. This Agreement shall also be subject to the following
miscellaneous considerations:
(a) The Company represents and warrants to Executive that it has the
authorization, power and right to deliver, execute and fully perform its
obligations under this Agreement in accordance with its terms.
(b) Except as provided in Section 5, this Agreement contains a
complete statement of all the arrangements between the parties with respect to
Executive's employment by the Company, this Agreement supersedes all prior and
existing negotiations and agreements between them concerning the Executive's
employment, and this Agreement can only be changed or modified pursuant to a
written instrument executed by each of the parties hereto.
(c) If any provisions of this Agreement or any portion hereof is
declared invalid, illegal or incapable of being enforced by any court of
competent jurisdiction, the remainder of such provisions and all of the
remaining provisions of this Agreement shall continue in full force and effect.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Oregon, except to the extent governed by federal
law.
(e) All compensation payable hereunder shall be subject to such
withholding taxes as may be required by law.
(f) This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. The Company will require any
successor, whether direct or indirect, by purchase, merger, consolidation or
otherwise, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Except as expressly provided herein,
Executive may not sell, transfer, assign, or pledge any of his rights or
interests pursuant to this Agreement.
(g) Except as otherwise provided in Section 4(b) hereof, in the event
of any dispute between the Company and the Executive with respect to any of the
provisions of this Agreement, the Company and the Executive agree that either
party may request that the dispute be resolved by submitting the issue to
arbitration or such other form of alternative dispute resolution as the parties
may agree upon (collectively, "Alternative Dispute Resolution"). The parties
expressly agree and acknowledge, however that, except as otherwise provided in
Section 4(b) hereof, nothing in this Agreement (whether express or implied)
shall under any circumstances require either party to consent to Alternative
Dispute Resolution.
(h) Any rights of Executive hereunder shall be in addition to any
rights Executive may otherwise have under benefit plans or agreements of the
Company to which he is a party or in which he is a participant, including,
without limitation, any Company sponsored employee benefit plans. Provisions of
this Agreement shall not in any way abrogate Executive's rights under such other
plans and agreements.
(i) The Company shall, to the maximum extent permitted by law,
indemnify Executive against expenses (including, without limitation, reasonable
attorneys' fees), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceedings arising by reason of the
fact that Executive is or was an employee, officer, or agent of the Company. The
Company shall advance to Executive expenses incurred in defending any such
proceedings to the maximum extent permitted by law. The Company's obligations
under this provision shall not cease upon termination of this Agreement.
(j) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, or prevent that party thereafter from enforcing each
and every other provision of this Agreement.
10. GUARANTEE BY CLINICS. Each of The Corvallis Clinic, P.C., HealthFirst
Medical Group, P.C. and Medford Clinic, P.C., by signing this Agreement in the
space provided below, hereby agrees to guarantee in favor of the Executive its
pro rata share of the aggregate value of compensation and benefits provided to
the Executive under this Agreement, such pro rata shares of The Corvallis
Clinic, P.C., HealthFirst Medical Group, P.C. and Medford Clinic, P.C. being
33.8%, 42.6% and 23.6%, respectively.
IN WITNESS WHEREOF, the parties hereto have read, understood, and
voluntarily executed this Agreement as of the day and year first above written.
PHYSICIAN PARTNERS, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Title:
AGREED AND ACKNOWLEDGED:
THE CORVALLIS CLINIC, P.C.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., M.D.
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Title:
HEALTHFIRST MEDICAL GROUP, P.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: President
MEDFORD CLINIC, P.C.
By: /s/ ▇▇▇▇▇ ▇▇▇ ▇▇▇, M.D.
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Title:
