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EXHIBIT 10.14
CONSULTING AND SETTLEMENT AGREEMENT
CONSULTING AND SETTLEMENT AGREEMENT (this "Agreement"), dated as
of April 1, 1998 (the "Effective Date"), between FPA Medical Management, Inc., a
Delaware corporation (the "Company") and Xxxxxx Xxxxxxx (the "Executive").
WHEREAS, the Company and the Executive have previously entered
into that certain Employment Agreement, dated as of October 1, 1996 (the
"Employment Agreement");
WHEREAS, it is mutually in the best interests of the Executive
and the Company to modify and settle certain provisions of the Employment
Agreement and to provide for its earlier termination;
WHEREAS, the Company desires to continue to benefit from the
experience and ability of the Executive in the capacity of a consultant to the
Company upon termination of his employment relationship with the Company and
the Executive is willing to commit himself to serve in the capacity of a
consultant to the Company; and
WHEREAS, the parties desire to enter into this Agreement setting
forth the terms and conditions related to the termination of the Executive's
employment relationship with the Company and the terms and conditions of the
retention of the Executive as a consultant to the Company.
NOW, THEREFORE, in order to effect the foregoing, in
consideration of the premises and the respective covenants and agreements of the
parties herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows (capitalized terms used but not defined herein having
the meanings ascribed to such terms in the Employment Agreement):
1. Termination of Employment.
(a) Effective as of the Effective Date, the Executive
hereby resigns his position as Executive Vice President - Corporate Development
and hereby resigns as an officer and director, as applicable, of each of the
Company's direct or indirect subsidiaries and affiliated professional
corporations. Executive
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hereby agrees to resign as a director of the Company as of the next annual
meeting of the Company's stockholders. Except as provided in paragraph (b)
below, effective as of the Effective Date, the Employment Agreement shall be
terminated and the Company and the Executive shall have no further rights or
obligations under the Employment Agreement. The Executive shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary to effect the resignation of his positions pursuant to this Section
1(a).
(b) Notwithstanding paragraph (a) above and other
provisions of this Agreement, except as modified herein, the provisions of
Sections 4(a),4(d), 4(e), 4(f), 4(g), 4(h), 4(i), 4(j), 5 and 6 of the
Employment Agreement shall survive the termination of the Employment Agreement
(the "Surviving Provisions").
(c) The Company acknowledges and agrees that, effective as
of the Effective Date, the Executive's employment shall be deemed to have been
terminated for other than Cause and the Executive shall be entitled to receive
the Severance Benefits consistent with the terms of Section 4(a)(ii) of the
Employment Agreement (including but not limited to the vesting of all stock
options then held by the Executive). The Executive shall be entitled to exercise
all of his employee stock options during the seventeen (17) months following the
Effective Date during which the Executive serves as a consultant to the Company
pursuant to Section 2 below and for one (1) month thereafter, consistent with
the terms of the Company's stock option plans.
(d) The Company and the Executive acknowledge and agree
that the aggregate amount to be paid to the Executive in equal payments over the
36 month period pursuant to Section 4(a)(ii)(A) of the Employment Agreement
shall be $2,025,000. The Company and the Executive acknowledge and agree that
the benefit due to the Executive pursuant to Section 4(a)(ii)(B) relating to
Section 3(c)(v) of the Employment Agreement shall be paid in equal monthly
payments. The Company and the Executive acknowledge and agree that the aggregate
amount to be paid to the Executive pursuant to Section 4(a)(ii)(C) of the
Employment Agreement shall be $127,212, payable within twenty (20) days of the
date hereof.
(e) Notwithstanding Section 1(c) above, in the event of a
Change of Control within six (6) months following the Effective Date, the
Executive shall be entitled to receive, in lieu of the payments and benefits
described in Sections 1(c) and 1(d), the Severance Package described in and
payable pursuant to Section 4(a)(iii) of the Employment Agreement and shall have
the right to receive the Gross-
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Up Payments described in Section 4(a)(iii)(E). The Executive and the Company
acknowledge and agree that the amount payable to the Executive as part of the
Severance Package shall be determined utilizing the amounts set forth in
paragraph (d) above.
(f) As compensation for the services rendered during the
course of the Consulting Period (as defined below) and in consideration of the
Executive's agreement not to compete with the Company pursuant to Section 3
below, the Company shall pay the Executive $1,250,000, payable as follows: (i)
within 20 days of the date hereof, the Company shall pay to the Executive
$250,000 and (ii) on the date which is the six month anniversary of the
Effective Date, the Company shall pay to the Executive $1,000,000, in each case,
by wire transfer in accordance with instructions to be provided to the Company
by the Executive in writing.
(g) The Company hereby forgives Executive's indebtedness
to the Company reflected by the Note dated February 18, 1998 in the amount of
$59,000.
(h) The Company shall continue to provide malpractice
insurance coverage to Executive on its current policy for covered medical
malpractice claims occurring between July 15, 1984 and April 1, 1998. If the
Company does not renew such policy with similar coverage, an unlimited reporting
period endorsement will be purchased to cover this same period.
2. Retention as a Consultant.
(a) The provisions of this Section 2 shall commence upon
the Effective Date and shall expire seventeen (17) months thereafter (the
"Consulting Period").
(b) During the Consulting Period, in consideration of
payments to be made pursuant to Sections 1(c) and 1(f) above and the mutual
covenants contained herein, the Executive shall render such consulting services
to the Company and its affiliates as the Executive and the Company agree upon
from time to time (including, without limitation, attendance at Company meetings
not less than once every six (6) weeks); provided, however, that, subject to
Section 3 below, the obligation of the Executive to render such services shall
not preclude his undertaking full-time employment for another employer.
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(c) The Executive shall perform his duties hereunder at
such locations as are acceptable to him and the Company and consistent with the
nature of the services or by telephone consultation.
(d) The Company shall reimburse the Executive for
reasonable business expenses incurred in the performance of the Executive's
duties hereunder; provided, that such expenses shall be incurred and accounted
for in accordance with the policies and procedures established by the Company
from time to time for its senior executives.
3. Non-Competition.
In consideration of the payments to be made to the Executive
pursuant to Sections 1(c) and 1(f) above and the mutual covenants contained
herein, the Executive agrees not to compete with the Company pursuant to the
terms set forth in Section 4(e) of the Employment Agreement; provided that the
"Non-Competition Period" set forth in Section 4(e) of the Employment Agreement
for purposes of this Agreement shall begin on the Effective Date and continue
for a period of eighteen (18) months thereafter.
4. Releases.
(a) As a material inducement to enter into this Agreement,
the Executive hereby knowingly and voluntarily, fully and finally releases,
acquits and forever discharges as of the Effective Date, the Company and its
affiliates, and their past and present officers, directors, shareholders,
partners, trustees, beneficiaries, managers, employees, attorneys, agents,
successors or assigns (the "Company Released Parties") from any and all claims,
charges, complaints, liens, demands, causes of action, obligations, damages and
liabilities, known or unknown, suspected or unsuspected, that he had, has, or
may claim to have against the Company Released Parties arising out of or
relating in any way to the Executive's relationship with the Company as an
employee, officer, director, or representative or the termination thereof, or
the termination of the Employment Agreement (including without limitation the
federal Age Discrimination in Employment Act or equivalent state law).
Notwithstanding the generality of the foregoing, nothing contained herein shall
release the Company or in any way impair the Executive's rights to the benefits
of insurance coverage or reimbursement or indemnification from the Company
arising from or relating in any way to the Executive's service as an employee,
officer or director as provided by law or under the Company's bylaws, or under
any applicable
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indemnification agreement or insurance policy to which the Company is a party,
including, but not limited to, the Executive's rights to reimbursement, coverage
or indemnification in connection with any current or future litigation matter
arising from or relating in any way to the Executive's services as an employee,
officer, director or representative of the Company; nor shall the foregoing
release the Company from any claim relating to the breach by the Company of its
obligations set forth herein, or set forth in the Surviving Provisions, or the
right to receive any payments or benefits to which the Executive is entitled
pursuant to any Company employee benefit plan. Notwithstanding the generality of
the foregoing, nothing in this Agreement shall be construed to effect a release
of any right or claim by the Executive in connection with his rights as a
stockholder of the Company.
(b) As a material inducement to enter into this Agreement,
the Company, likewise hereby knowingly and voluntarily, fully and finally
releases, acquits, and forever discharges as of the Effective Date, the
Executive and his agents, employees, successors, heirs, beneficiaries or assigns
(the "Executive Released Parties") from any and all claims, charges, complaints,
liens, demands, causes of action, obligations, damages and liabilities, known or
unknown, suspected or unsuspected, that it had, has, or may claim to have
against the Executive Released Parties arising out of or relating in any way to
the Executive's relationship with the Company as an employee, officer, director
or representative, whether or not previously asserted before any state or
federal court or before any state, federal or regulatory agency or governmental
entity. Notwithstanding the generality of the foregoing, nothing contained
herein shall release the Executive from any claim relating to the breach by the
Executive of any confidentiality agreements with the Company or any of its
affiliates or the obligations set forth herein, or set forth in the Surviving
Provisions.
(c) Each of the Company and the Executive acknowledges
that such party has been advised by legal counsel regarding, is familiar with
and expressly waives all rights afforded by Section 1542 of the Civil Code of
the State of California ("Section 1542"), or any statute of similar effect in
any other jurisdiction in which any action might be brought, with respect to the
claims described in paragraphs (a) and (b) of this Section 4. Section 1542
states as follows:
A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE
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RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SET-
TLEMENT WITH THE DEBTOR.
Thus, notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release, each of the Company and the Executive
understands and agrees that this Agreement is intended to include all claims, if
any, described in paragraphs (a) (in the case of the Executive) and (b) (in the
case of the Company) above, which either party may have and which neither party
now knows or suspects to exist in such party's favor against the Company
Released Parties (in the case of the Executive) or the Executive Released
Parties (in the case of the Company) and that this Agreement extinguishes those
claims.
5. Right to Revoke.
The Executive acknowledges that the Company has advised him to
consult with an attorney of his choosing prior to signing this Agreement and
that he has been given the opportunity, if he so desired, to consider the
provisions of this Agreement for at least twenty-one (21) days. The Executive
further acknowledges that he has been advised by the Company that he has the
right to revoke this Agreement for a period of seven (7) days after the
execution of this Agreement and that this Agreement shall not become effective
or enforceable until such seven (7) day revocation period has expired. The
Executive acknowledges and agrees that, if he wishes to revoke this Agreement,
he must do so in writing, signed by the Executive and received by the Company at
its headquarters no later than 5:00 p.m. Pacific Standard Time on the seventh
(7th) day after the Effective Date. The Executive acknowledges and agrees that,
in the event that he revokes this Agreement, he shall have no right to receive
any payment hereunder. The Executive understands and agrees that the Company is
under no obligation to offer such payment and that he is under no obligation to
consent to the release set forth in Section 4 of this Agreement. The Executive
represents that he has read this Agreement and understands its terms and that he
enters into this Agreement freely, voluntarily, and without coercion.
6. Nondisparagement and Litigation Support.
(a) Neither the Company on the one hand, nor the Executive
on the other hand, will make any derogatory or negative statements about the
other party that may adversely affect the current or potential business
relationships of the other. The Company agrees that the Executive will have the
right to reasonably
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approve the content of any press release containing specific reference to the
Executive.
(b) The Executive agrees to make himself and his records
available to the Company for consultation, testimony and related matters in
connection with any claim, action, proceeding or investigation instituted by or
against the Company before any court or governmental authority, in any manner as
may be reasonably requested by the Company.
7. Successor; Binding Agreement.
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company and each entity
that, directly or indirectly, becomes a parent corporation of the Company, by
agreement in form and substance satisfactory to the Executive, 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. As used in this Agreement, "Company" shall mean the Company as
herein before defined and any successor to its business and/or assets and each
entity that, directly or indirectly, becomes a parent corporation of the
Company.
(b) This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable or benefits would still be provided to him and/or
his family hereunder if he had continued to live, all such amounts and benefits,
unless otherwise provided herein, shall be paid or provided in accordance with
the terms of this Agreement to the Executive's devisees, legatees, or other
designees or, if there be no such designee, to the Executive's estate.
8. Notice.
For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certificated or registered mail, return
receipt requested, postage prepaid, addressed as follows:
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If to the Executive:
Xxxxxx Xxxxxxx
00000 Xxx Xxxxxxxx
Xxxxxx Xxxxx Xx, XX 00000
If to the Company:
FPA Medical Management, Inc.
0000 Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective in accordance herewith, only upon receipt.
9. Withholding.
All amounts payable hereunder shall be subject to such
withholding taxes as may be required by law.
10. Modification of Agreement; Governing Law.
No provisions of this Agreement may be modified, waived or dis-
charged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer of the Company as may be
specifically designated by the board of directors of the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without regard to its conflicts of law principles.
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11. Validity.
The validity or enforceability of any provision or provisions of
this Agreement shall not be affected by the invalidity or unenforceability of
any other provision of this Agreement, and such valid and enforceable provisions
shall remain in full force and effect.
12. Counterparts.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
13. Entire Agreement.
This Agreement, including all schedules and exhibits, together
with the Employment Agreement as amended hereby upon its execution and delivery,
set forth the entire agreement of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto
which are related to the subject matter of the Employment Agreement or the
termination thereof.
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IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date and year first written above.
FPA MEDICAL MANAGEMENT, INC.
By: /s/ XXXXX X. XXXXXXXX
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Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
/s/ XXXXXX XXXXXXX
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XXXXXX XXXXXXX
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