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EXHIBIT 10.18
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement"), is made as of February 1,
1997, by and between FPA Medical Management, Inc., a Delaware corporation (the
"Company") and Xxxxx Xxxxxxxx ("Employee").
1. EMPLOYMENT DUTIES.
(a) Capacity. The Company shall employ Employee, and
Employee shall serve as Senior Vice President, General Counsel and Secretary of
the Company, on the terms and subject to the conditions set forth in the
Agreement.
(b) Scope and Duties. Employee shall be the senior and
chief legal officer of the Company, perform such executive and managerial
duties as normally associated with the position of chief legal officer, senior
vice president, general counsel and secretary and shall report to the Chief
Executive Officer of the Company. The duties of Employee shall be performed
primarily in San Diego, California, except for such travel in the ordinary
course of the business of the Company as may from time to time be reasonably
required. Employee s principal place of business shall be at the offices of
the Company in San Diego, California.
(c) Permitted Activities. Employee shall devote
substantially all of his business time to his obligations to the Company
pursuant to the Agreement, and shall not, without the approval of the Board of
Directors of the Company (the "Board"), render services of a business nature to
any other person or entity, if such activities would materially interfere with
the performance of Employee s duties under the Agreement; provided, however,
that none of the following activities (collectively, "Permitted Activities")
shall be deemed to be in violation of the Agreement: (i) owning or managing
real or personal property owned by the Employee or his family members; (ii)
owning any business which does not compete, directly or indirectly, with the
Company, so long as such interests are held only for investment purposes; (iii)
owning up to five percent (5%) of any
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class of any corporation s outstanding securities which are listed on any
national securities exchange, registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended, or otherwise regularly traded in the
over-the-counter market; (iv) holding directorships or similar positions in any
organization which is not competing with the Company and which is approved by
the Board, which approval shall not be unreasonably withheld but which shall
not be required with respect to charitable activities and community affairs
referred to in (v) below; and (v) engaging in charitable activities and
community affairs.
2. TERM OF EMPLOYMENT.
The term of Employee s employment under the Agreement will
commence on the date of the Agreement and continue for a period of five (5)
years thereafter, unless terminated sooner pursuant to Section 4 hereof or
extended pursuant to the immediately succeeding sentence. On January 31, 2001,
and on each subsequent anniversary thereof, the term of Employee s employment
shall be extended for a period of one (1) year unless, no later than six (6)
months prior to such January 31, or, if applicable, any extended term, either
party shall have given written notice to the other that it does not wish to
extend the term of the Agreement.
3. COMPENSATION AND OTHER BENEFITS.
(a) Base Salary. As compensation for his employment
under the Agreement, the Company shall pay to Employee a base salary at the
rate of Two Hundred Thirty-Nine Thousand Dollars ($239,000) per year. Employee
s base salary shall be paid in equal, bimonthly installments. Employee s base
salary shall be increased from time to time by the Company but shall not be
decreased.
(b) Performance Bonuses. Employee shall be entitled to a
bonus up to seventy-five percent (75%) of base salary based on the achievement
of certain
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performance criteria as determined annually by the Company s Chief Executive
Officer. Bonuses shall be paid within thirty (30) days from the completion of
the Company s audited financial statements for the applicable fiscal year.
(c) Other Benefits. During the term of Employee s
employment under the Agreement or in accordance with the terms of Sections 3(d)
or 4 of the Agreement:
(i) Other Bonus. Notwithstanding Section 3(b) of
the Agreement, lump sum cash bonuses payable to Employee or stock option grants
may from time-to-time be authorized by the Board, the Compensation Committee of
the Board or the Company s Chief Executive Officer at their sole discretion.
(ii) Benefit Plans, Medical Expense Reimbursement
and Other Perquisites.
(A) Employee (and his dependents, where
applicable) shall be entitled to participate and shall be included in any
employee benefit plans, programs, policies and arrangements of the Company,
including, but not limited to, any group health and life insurance, 401(k),
profit sharing, SEPP, stock option or other plans now existing or hereafter
established which are generally made available to senior management-level
employees of the Company, but the execution of the Agreement shall not prevent
the Company from amending, modifying or terminating any employee benefit plan,
program, policy or arrangement provided the benefits provided to Employee as of
the date hereof considered as a whole shall not be materially reduced by such
amendment, modification or termination. Employee shall also be provided with
all perquisites now existing or made available to senior management-level
employees of the Company.
(B) The Company shall pay on behalf of the
Employee or reimburse Employee for any and all
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medical or dental expenses incurred by Employee or his dependents that are not
covered by the insurance plans of the Company.
(iii) Disability Plan. The Company shall maintain
in effect for Employee a long-term disability "own occupation" portable
insurance policy with annual disability benefits of not less than sixty percent
(60%) of base salary in effect at the time of disability commencing not more
than six (6) months after the date of Employee s disability determined in
accordance with Section 3(d) of the Agreement. To the extent insurance cannot
be purchased in such amount, the Company shall self insure the difference. The
execution of the Agreement shall not prevent the Company from amending,
modifying or terminating any disability plan provided that the benefits
provided to Employee under this Section 3(c)(iii) as of the date hereof
considered as a whole shall not be materially reduced by such amendment,
modification or termination. Employee shall pay the premiums associated with
such policies. Such premiums shall be reimbursed by Company to Employee as
additional taxable compensation. The amount of the Company's premium
reimbursement shall be grossed up for state and federal income and employment
taxes so that the net taxable effect to Employee is zero with respect to the
premiums and tax gross-up thereon.
(iv) Life Insurance.
(A) The Company shall maintain during
the term of Employee s employment hereunder one or more life insurance policies
insuring the life of Employee in the aggregate principal amount of Two Million
Dollars ($ 2,000,000), with the beneficiary or beneficiaries of such policy or
policies being those persons who are so designated from time to time by
Employee.
(B) Employee understands that the
Company may determine to purchase a key-man life insurance policy on the life
of Employee. Employee
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agrees to fully cooperate with the Company, submitting to reasonable physical
examinations if required to do so by the insurance carrier or another entity.
Employee acknowledges that (x) the Company shall be responsible for any
premiums due on any key-man life insurance policy, (y) all incidents of
ownership in any key-man life insurance policy on the life of Employee are held
by the Company, and (z) the Company is the sole beneficiary of any such policy
or shall appoint, in its sole discretion, a beneficiary. The inability of the
Company to secure any such policy shall not affect the obligations of the
Company hereunder.
(v) Professional Fees and Clubs. The Company
shall provide Employee with a maximum of Five Thousand Dollars ($5,000) each
year during the term of the Agreement for personal financial, tax and legal
counseling or fitness club, social club, or similar benefits.
(vi) Vacation. Employee will be entitled to four
(4) weeks vacation each calendar year. During periods of vacation, Employee's
compensation shall be paid in full, and any vacation day unused as of the end
of any calendar year shall be accumulated and carried forward, and may be used
in future years, provided that no more than ten (10) weeks vacation may be
taken by Employee in any calendar year.
(d) Salary and Benefit Continuation. The Company shall
continue to pay to Employee all compensation and all benefits set forth in
Sections 3(a), 3(c)(i), (ii), (iv), (v), and (vi) from the date Employee is
declared permanently and totally disabled and unable to perform the duties
required under the Agreement, until the date on which Employee commences to
receive benefits under the long-term disability plan provided pursuant to
Section 3(c)(iii).
Following commencement of the payment of benefits
under Section 3(c)(iii), the Company will pay to Employee fifty percent (50%)
of Employee's annual base
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salary as set forth in Section 3(a) for an additional thirty-six (36)
consecutive months, regardless of the then-remaining term of Employee s
employment under the Agreement. Furthermore, in the event of such disability:
(i) the benefits described in Sections 3(c)(ii)
and 3(c)(iv) will continue as if Employee had continued to render services
pursuant to the Agreement and shall remain in effect for a minimum of
thirty-six (36) calendar months after the date of any such disability; and
(ii) the benefits described in Section 3(c)(v)
will continue to the extent that any portion of the allowance for professional
fees and clubs set forth in such Section 3(c)(v) remains unused for the
calendar year in which such disability occurs and the Company shall not be
entitled to reimbursement of any such allowance paid prior to the disability.
To the extent the Company may not continue the
benefits described in this Section 3(d) after termination of employment for
legal or insurance underwriting reasons, the Company shall provide comparable
benefits through the purchase of individual coverage or from its general
assets. To the extent benefits after termination of employment are limited or
reduced under a retirement plan qualified under Section 401 of the Internal
Revenue Code, such benefits shall be informally funded into a grantor trust
established by the Company with distribution and investment options comparable
to those available under a Company's qualified retirement plan.
For purposes of this Section 3(d), the determination
of whether or not Employee is declared permanently and totally disabled shall
be made by Employee s physician, by written notice to the Board. If the Board
disagrees with
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the determination by Employee s physician, the Board will appoint, at the
Company s expense, another physician to make such determination. If the
physician so appointed by the Board disagrees with the determination made by
Employee s physician, then the two physicians shall appoint a mutually
acceptable third physician, at the Company s expense, to make the final
determination of whether Employee is permanently and totally disabled, which
determination will be binding on all parties hereto.
(e) Professional Dues and Continuing Legal Education.
The Company shall pay the dues and other fees necessary for Employee to
maintain his active memberships in the Pennsylvania and American Bar
Associations and the National Health Lawyers Association, such other bar
associations to which Employee shall be admitted and other legal associations
which the Company and Employee agree are beneficial for Employee, including
costs of attendance at continuing legal education courses. The Company shall
also pay for Employee to attend a review course in preparation for sitting for
the California bar and shall pay for the costs related to Employee's admission
to such bar.
4. TERMINATION PROVISIONS.
(a) Termination by Company and by Employee Under Certain
Circumstances.
(i) Employee's employment under the Agreement may be
terminated by the Company for Cause (as hereinafter defined) following thirty
(30) days' written notice from the Company to Employee. For purposes of the
Agreement, "Cause" means (A) Employee's conviction for the commission of a
felony other than a traffic violation; (B) any willful or grossly negligent act
by Employee having the effect of materially injuring the reputation or business
of the Company; or (C) the willful and continued failure by Employee to
substantially perform his duties hereunder (other than by reason of incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered by the Board, which demand specifically identifies the
manner in which the Board believes that the Employee has not substantially
performed the Employee's duties and which
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failure is not cured within twenty (20) days after notice of such failure has
been given to Employee. For purposes of clauses (B) and (C) above, (x) no act,
or failure to act, on the Employee's part shall be deemed "willful" unless
done, or omitted to be done, by the Employee not in good faith and without
reasonable belief that the Employee's act, or failure to act, was in the best
interest of the Company and (y) in the event of a dispute concerning the
application of this provision, no claim by the Company that Cause exists shall
be given effect unless the Company establishes by clear and convincing evidence
that Cause exists.
(ii) If Employee's employment under the Agreement is
terminated by the Company for other than Cause, or by the Employee pursuant to
Section 4(b)(i) of the Agreement, then unless Section 4(a)(iii) hereof shall
apply:
(A) the Company will pay to Employee (or
his estate) the sum of (1) Employee's monthly base salary at the base salary
rate in effect immediately prior to the date of termination (without regard to
any decrease in such base salary giving rise to Employee's voluntary
termination pursuant to Section 4(b)(i) hereof) plus (2) one-twelfth (1/12) of
the performance and any other bonuses paid or payable to Employee in respect of
the Company's fiscal year immediately preceding the date of termination. For
purposes of clause (2) of the preceding sentence, to the extent Employee's
bonus for such preceding year was payable in the form of a grant of options to
acquire Company stock ("Options"), such bonus shall be deemed to be equal to
one hundred twenty percent (120%) of the cash amount that would otherwise have
been payable to the Employee as a cash bonus but for the payment of such bonus
in the form of a grant of Options. The amounts determined hereunder shall be
payable on a monthly basis for a period of thirty-six (36) months following the
date of termination;
(B) the Company shall continue to pay
for and provide Employee with benefits set forth in
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Sections 3(c) (other than Sections 3(c)(i) and 3(c)(vi))and 3(e) during the
period that Employee is receiving the amounts described in clause (A) above.
In addition, all Employee stock options shall be immediately and fully vested
and exercisable and all Employee stock awards shall be immediately and fully
vested. To the extent the Company may not continue the benefits described
herein after termination of employment for legal or insurance underwriting
reasons, the Company shall provide comparable benefits through the purchase of
individual coverage or from its general assets. To the extent benefits after
termination of employment are limited or reduced under a retirement plan
qualified under Section 401 of the Internal Revenue Code, such benefits shall
be informally funded into a grantor trust established by the Company with
distribution and investment options comparable to those available under the
Company's qualified retirement plan; and
(C) the Company shall pay to the
Employee, in a lump sum, a payment in settlement of all accrued but unused
vacation days as of the date of termination, plus a pro rata performance bonus
for the year in which occurs the date of termination, such bonus to be
determined by multiplying (1) the performance bonus paid for the calendar year
preceding the date of termination, by (2) a fraction the numerator of which is
the number of months completed during the calendar year in which the
termination occurs but preceding the date of termination and the denominator of
which is twelve (12).
The amounts referred to in Sections
4(a)(ii)(A), (B) and (C) above shall collectively be referred to as the
"Severance Benefits."
(iii) If, within twenty-four (24) months after, or
six (6) months before, a Change of Control, as that event is described below in
Section 4(a)(iii)(F): (1) the Employee's employment under the Agreement is
terminated by the Company for other than Cause; (2) the Company breaches the
Agreement; (3) pursuant to Section 2 hereof, the Company elects not to extend
the term of
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Employee's employment under the Agreement and the Employee terminates his
employment pursuant to Section 4(b)(ii); or (4) the Employee terminates his
employment pursuant to Section 4(b)(i):
(A) on the effective date of Employee's
termination, the Company will pay to Employee in a lump sum the aggregate
amounts determined under Section 4(a)(ii)(A) (for the entire thirty-six (36)
month period referred to therein) and Section 4(a)(ii)(C), except that for
purposes of this Section 4(a)(iii)(A), the bonus amount determined under clause
(2) of Section 4(a)(ii)(A) (taking into account the sentence immediately
succeeding said clause) shall be equal to one-twelfth (1/12) of the performance
and any other bonuses paid or payable to Employee in respect of the year
immediately preceding the date of termination or the year immediately preceding
the Change of Control, whichever bonus is greater;
(B) for a thirty-six (36) month period after
the date of termination, the Company shall continue to pay for and provide
Employee with benefits set forth in Sections 3(c)(i) through 3(c)(iii),
inclusive, 3(c)(v) and 3(e), including, but not limited to, the continuation in
kind (including, in the case of any corporate assets such as office space and
services, secretarial, computer and administrative support, transportation and
security made available for use by the Employee, continued use of such asset at
such times and in such manner as does not unreasonably interfere with the
continued use of such asset by the Company for corporate purposes) of all
perquisites provided to Employee immediately prior to the Change of Control, or
payment in lieu of such benefits (other than the aforementioned perquisites) in
an amount equal to the cost to Employee of replacing the benefits. In
addition, all Employee stock options shall be immediately and fully vested and
exercisable and all Employee stock awards shall be immediately and fully
vested. To the extent the Company may not continue the benefits described
herein after termination of employment for legal or insurance underwriting
reasons, the Company shall provide
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comparable benefits through the purchase of individual coverage or from its
general assets. To the extent benefits after termination of employment are
limited or reduced under a retirement plan qualified under Section 401 of the
Internal Revenue Code, such benefits shall be informally funded into a grantor
trust established by the Company with distribution and investment options
comparable to those available under the Company's qualified retirement plan;
(C) the Company shall prepay all remaining
premiums on a paid-up basis under any insurance policy in effect between the
Employee and the Company insuring the life of the Employee and shall transfer
to the Employee any and all rights and incidents of ownership in such
arrangements or at the Company's election, the Company shall purchase an
individual whole life policy for an equivalent face value, pay the projected
premium costs in advance and transfer such policy to Employee; and
(D) the Company shall provide to Employee
(and, to the extent applicable, his dependents), the benefits to which the
Employee is entitled as of the date of termination (or would have been so
entitled assuming he were eligible for such benefits as of the date of
termination) under the Company's post-retirement medical plan as in effect
immediately prior to the date of termination or, if more favorable to the
Employee, as in effect immediately prior to the Change of Control, such
benefits to be provided commencing on the later of the date on which such
coverage would have first become available and continuing for the remainder of
Employee's life.
The amounts and benefits referred to in Sections 4(a)(iii)(A)
through 4(a)(iii)(D), inclusive, shall collectively be referred to as the
"Severance Package."
(E) (1) Whether or not the Employee becomes
entitled to the Severance Package, if any of the
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payments or benefits (including timing and supplemental items such as
acceleration of vesting) received or to be received by the Employee in
connection with a Change of Control or the Employee's termination of employment
(whether pursuant to the terms of the Agreement or any other plan, arrangement
or agreement with the Company, any Person (as hereinafter defined) whose
actions result in a Change of Control or any Person affiliated with the Company
or such Person) (such payments or benefits, excluding the Gross-Up Payments (as
hereinafter defined), being hereinafter referred to as the "Total Payments")
will be subject to the excise tax (the "Excise Tax") imposed under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), the Company
shall pay to the Employee an additional amount (the "Gross-Up Payment") such
that the net amount retained by the Employee, after deduction of any Excise Tax
on the Total Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total
Payments.
(2) For purposes of determining whether
any of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) all of the Total Payments shall be treated as "parachute
payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Employee
and selected by the accounting firm which was, immediately prior to the Change
of Control, the Company's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of Section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of Section 280G(b)(4)(B) of the
Code) in excess of the "Base Amount" (as defined in Section 280G(b)(3) of the
Code) allocable to such reasonable compensation, or are otherwise not subject
to the Excise
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Tax, and (iii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Employee shall be deemed to pay federal
income tax 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 rate of taxation in the state and locality
of the Employee's residence on the date of termination (or if there is no date
of termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Section), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
(3) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Employee shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Employee,
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Employee's taxable income and wages for
purposes of federal, state and local income and employment taxes), plus
interest on the amount of such repayment at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating the
Gross-Up Payment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Employee with respect to such
excess) within five (5) business
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days following the time that the amount of such excess is finally determined.
The Employee and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total
Payments.
(F) A "Change of Control" shall be deemed to
have occurred if the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person (as hereinafter defined) is or
becomes the Beneficial Owner (as hereinafter defined), directly or indirectly,
of securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company or its
affiliates) representing 25% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (i) of
paragraph (3) below;
(2) the following individuals cease for any
reason to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new director
(other than a director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended;
(3) there is consummated a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation,
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other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof) at least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities Beneficially Owned
by such person any securities acquired directly from the Company or its
affiliates) representing 25% or more of the combined voting power of the
Company's then outstanding securities; or
(4) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity,
at least 60% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a Change of Control shall not
be deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record
holders of the common stock of the Company
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immediately prior to such transaction or series of transactions continue to
have substantially the same proportionate ownership in an entity which owns all
or substantially all of the assets of the Company immediately following such
transaction or series of transactions.
For purposes hereof, (1) the term "Person" shall have the
meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company; and (2) the term "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.
(b) Termination by Employee.
(i) Employee's employment under the Agreement may be
terminated by Employee following thirty (30) days written notice to the Company
for Good Reason (as hereinafter defined). If Employee's employment under the
Agreement is terminated by Employee pursuant to this Section 4(b)(i), the
Company shall pay and otherwise make available to Employee (or his estate) all
compensation and benefits (including the Severance Benefits) referred to in
Section 4(a)(ii), or if the breach or event (including a Change of Control)
giving rise to such termination occurs within the period described in Section
4(a)(iii) hereof, the Severance Package referred to in Section 4(a)(iii) and,
if applicable, the Gross-Up Payment referred to in Section 4(a)(iii)(E). In
the event of any dispute regarding the application of this Section 4(b)(i), the
position taken by Employee shall be presumed to be correct unless the Company
establishes by clear and convincing evidence that such position is not correct.
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For purposes of the Agreement, Good Reason shall constitute
(1) any breach by the Company of its material obligations under the Agreement
(including, but not limited to, any breach of Section 1 or Section 3 hereof),
which breach is not cured by the Company within thirty (30) days following the
Company's receipt of written notice from Employee specifying in detail the
precise nature of the Company's breach; (2) any action by the Company resulting
in the diminution in Employee's title or the material diminution of Employee's
authority, duties or responsibilities (including, but not limited to, a
substantial diminution in corporate operating assets or employees after a sale
of corporate assets); (3) notification by the Company that Employee's principal
place of employment will be relocated under the Agreement; or (4) nonpayment of
amounts due under the Agreement.
With respect to a particular set of circumstances giving rise
to Good Reason, Employee shall waive his right to terminate hereunder for Good
Reason if he does not give written notice within 120 days of the time he first
becomes aware of such circumstances.
(ii) If the Company, pursuant to Section 2 hereof,
elects not to extend the term of Employee's employment under the Agreement,
Employee's employment under the Agreement may be terminated by Employee
following thirty (30) days written notice to the Company. In such event, the
Company shall pay or provide to Employee, for the remainder of the term of
Employee's employment under Section 2 (determined after giving effect to such
election by the Company), the amounts referred to in Section 4(a)(ii)(A) hereof
and the benefits referred to in Section 4(a)(ii)(B) hereof, and shall pay to
Employee the amounts referred to in Section 4(a)(ii)(C) hereof; provided
however, that if such election is made by the Company during the period
described in Section 4(a)(iii) hereof and Employee elects to terminate his
employment pursuant to the first sentence of this Section 4(b)(ii), in lieu of
the payments and benefits set forth herein, Employee shall be entitled to
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receive the Severance Package referred to in Section 4(a)(iii) and, if
applicable, the Gross-Up Payment referred to in Section 4(a)(iii)(E).
(iii) Employee may voluntarily terminate his
employment under the Agreement (other than pursuant to Sections 4(b)(i) and
(ii) above) following thirty (30) days' prior written notice to the Company.
(c) Other Termination.
(i) Employee's employment under the Agreement shall
terminate on the death of Employee. If Employee's employment under the
Agreement is terminated pursuant to this Section 4(c)(i), the Company shall pay
to Employee's estate the sum of (i) the Employee's monthly base salary at the
base salary rate in effect at the date of death plus (2) one-twelfth (1/12) of
the performance and any other bonuses paid or payable to Employee in respect of
the year immediately preceding the date of death (such bonus to be valued, if
applicable, in the manner described in Section 4(a)(ii)(A)). The amounts
determined hereunder shall be payable on a monthly basis for a period of twelve
(12) months following the date of death.
(ii) Employee's employment under the Agreement will
terminate as of the date Employee is declared permanently and totally disabled
and unable to perform the duties required under the Agreement. If Employee's
employment under the Agreement is terminated pursuant to this Section 4(c)(ii),
the Company will pay Employee compensation in accordance with Section 3(d).
(iii) If Employee's employment under the Agreement
is terminated for Cause or voluntarily by Employee other than pursuant to
Section 4(b)(i) or Section 4(b)(ii), the Company shall pay to Employee the base
salary that Employee would have been entitled to receive under Section 3(a)
through the date of termination.
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(d) No Mitigation. If Employee's employment under the
Agreement terminates for any reason, with or without Cause, Employee shall have
no obligation to seek other employment in mitigation of damages; and, except as
set forth in Section 4(e) below, no compensation received by Employee from
other employment or other sources shall be considered as a mitigation of the
amounts owing to Employee hereunder.
(e) Noncompetition. During the term of the Agreement and a
period of (1) six (6) months following termination of Employee pursuant to
Section 4(a)(i) or (2) six (6) months or such shorter period following
termination of Employee other than pursuant to Section 4(a)(i) and provided
that Employee is receiving Severance Benefits or the Severance Package during
such six (6) month or shorter period, (the "Noncompetition Period"), and except
as provided in Section 1(c) with regard to Permitted Activities, Employee shall
not, directly or indirectly, without the prior written consent of the Company,
which consent shall not unreasonably be withheld, provide material consultative
services with or without pay, own, manage, operate, join, control, participate
in, or be connected as a stockholder, partner or otherwise with any business,
individual, partner, firm, corporation, or other entity that (1) is in
substantial competition with any business then actively being conducted by the
Company or any subsidiary or affiliate of the Company or (2) manages physician
groups as its principal business in California, Texas, Florida or any other
geographic area in which the Company is then doing business.
(f) Confidential Information. During and after the term of
the Agreement, Employee shall not directly or indirectly, divulge, furnish or
make accessible to any party not authorized by the Company to receive it, any
of the proprietary or confidential information or knowledge of the Company,
including without limitation, any financial information, marketing plans,
strategies, trade secrets, data, know-how, processes, techniques and other
proprietary information of the Company or its
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subsidiaries (the "Confidential Information"), other than in the good faith
performance of his duties hereunder and with the consent of the Company, which
consent shall not unreasonably be withheld, in accordance with the Company's
policies and regulations, as established from time to time, for the protection
of the Company's Confidential Information. The term "Confidential Information"
does not include, and there shall be no obligation hereunder with respect to
(a) information that is obvious, or that may readily be determined by any
person reasonably knowledgeable in the industry in which the Company operates
by diligent review and examination of public sources, or that becomes generally
available to the public other than as a result of a disclosure by Employee (or
any agent or other representative thereof) in violation of the terms hereof,
and (b) office practices and procedures applicable to the Company's business.
Employee shall not have any obligation hereunder to keep confidential any
Confidential Information to the extent disclosure of any thereof is required by
law, or determined in good faith by Employee to be necessary or appropriate to
comply with any legal or regulatory order, regulation or requirement; provided,
however, that in the event disclosure is required by law, Employee shall
provide the Company with reasonable notice of such requirement so that the
Company may seek an appropriate protective order. Upon termination of
employment or the expiration of the Agreement, all tangible evidence of such
confidential or proprietary information in the possession of Employee shall be
returned to the Company, and Employee shall not make or retain any copies or
excerpts thereof, except that Employee may retain copies of all materials that
may be of a personal nature to Employee.
(g) Antisolicitation. During the period of Employee's
employment with the Company and for a period of two (2) years after termination
of Employee's employment for any reason (the "Antisolicitation Period"),
Employee shall not influence or attempt to influence customers of the Company
or any of its present or future subsidiaries either directly or indirectly, to
divert their business from the Company to any individual, part-
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nership, firm, corporation, or other entity that is in substantial competition
with any business then being actively conducted by the Company or any
subsidiary or affiliate of the Company. Notwithstanding the foregoing, if
Employee's employment is terminated under the Agreement by the Company other
than pursuant to Section 4(a)(i), or by Employee pursuant to Section 4(b)(i) or
Section 4(b)(ii), the term Antisolicitation Period shall mean the period during
which Employee is employed by the Company.
(h) Soliciting Employees. During the Antisolicitation
Period, Employee shall not directly or indirectly solicit any of the Company
employees to work for any business, individual, partnership, firm, corporation,
or other entity in substantial competition with any business then being
actively conducted by the Company or any subsidiary or affiliate of the
Company.
(i) Disclosure to Company; Intellectual Property as Sole
Property of the Company.
(i) Employee shall promptly disclose and deliver to
the Company copies of any and all literary material, discoveries, improvements,
trade secrets, techniques, processes, know-how, and any other intellectual
property rights, whether or not subject to patent, trademark, copyright, or
trade secret, and whether or not reduced to practice, which relate to or result
from actual or anticipated business, work, research or investigations of the
Company or any subsidiary or affiliate, either alone or jointly with others,
and which have been reduced to writing (the work hereinafter collectively
referred to as the "Intellectual Property").
(ii) Employee acknowledges and agrees that all
Intellectual Property shall be the sole property of the Company or other entity
designated by it, and Employee hereby assigns to the Company his entire right
and interest in and to all the Intellectual Property. The Company or any other
entity designated by it shall be
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the sole owner of all domestic and foreign rights pertaining to the
Intellectual Property.
(iii) Notwithstanding any provision in the Agreement
to the contrary, this Section 4(i) shall not apply to an invention which was
developed entirely on the Employee's own time without using the Company's
equipment, supplies, facilities or trade secret information.
(j) Injunction. Employee agrees that it would be difficult
to measure damage to the Company from any breach by Employee of the promises
set forth in subsections (e) through (i) of this Section 4, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for such breach. Accordingly,
Employee agrees that if Employee shall breach any provision of the subsections
(e) through (i) of this Section 4, or any of them, the Company shall be
entitled, in addition to all other remedies it may have, to injunctions or
other appropriate orders to restrain any such breach by Employee without
showing or proving any actual damage sustained by the Company.
5. INDEMNIFICATION.
To the fullest extent permitted by law and the Company's
certificate of incorporation and by-laws, the Company shall promptly indemnify
the Employee for all amounts (including, without limitation, judgments, fines,
settlement payments, losses, damages, costs and expenses (including reasonable
attorneys' fees)) incurred or paid by the Employee in connection with any
action, proceeding, suit or investigation arising out of or relating to the
performance by the Employee of services for (or acting as a fiduciary of any
employee benefit plans, programs or arrangements of) the Company or any of its
subsidiaries or affiliates, including as a director, officer or employee of the
Company or any such subsidiary or affiliate. The Company also agrees to
maintain a directors' and officers' liability insurance policy
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Employment Agreement
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covering the Employee to the extent the Company provides such coverage for its
other executive officers. Notwithstanding any other provision of the
Agreement, the provisions of this Section 5 shall survive any termination or
expiration of the Agreement.
6. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder will be in writing
and will be deemed to have been duly given if personally delivered, sent by
prepaid telegram, or by first class mail, postage prepaid, registered or
certified, as follows:
If to Employee: Xxxxx X. Xxxxxxxx
P.O. Box 8790
16625 Xxx Xxxx Xxxx
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000
If to Company: FPA Medical Management, Inc.
0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
With a copy to: FPA Medical Management, Inc.
0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Either party may change the address to which such
communications are to be delivered by giving written notice to the other party.
Any notice personally given shall be deemed received upon delivery to the
address designated, any notice by mail as provided in this Section shall be
deemed given on the third business day following such mailing, and any notice
given by telegram as provided herein shall be deemed delivered on the business
day following the delivery of such notice to the telegraph company for
transmission.
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(b) Entire Agreement. The Agreement contains the entire
understanding of the parties, supersedes all prior oral and written
understandings (including the Employment Agreement made as of February 1, 1996,
by and between Employee and the Company except for any provisions therein
relating to the grant of options and the payment of a signing bonus or stock
award) and there are no further or other agreements or understandings, written
or oral, in effect between the parties relating to the subject matter hereof
unless expressly referred to herein.
(c) Assignment. The Agreement will not be assignable by
Employee or the Company without the prior written consent of the other.
Subject to the preceding sentence, the Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors
and permitted assigns.
(d) Counterparts. The Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) Waiver. Neither the Agreement nor any term hereof
may be changed, waived, discharged or terminated orally or in writing, except
that any term of the Agreement may be amended and the observance of any such
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of
both parties hereto. No delay or omission to exercise any right, power or
remedy accruing to any party hereto shall be construed to be a waiver of any
such right, power or remedy, nor constitute any course of dealing or
performance hereunder.
(f) Legal Fees. The Company shall promptly pay or
reimburse the Employee for reasonable legal fees incurred by the Employee in
disputing in good faith any issue hereunder relating to the Employee's
employment or the termination thereof or in seeking in good faith to
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obtain or enforce any benefit or right provided by the Agreement. Such
payments shall be made within five (5) business days after delivery of the
Employee's written request for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
(g) Construction. The captions assigned to the
provisions of the Agreement are for convenience only and shall be disregarded
in construing the Agreement. Unless the context otherwise requires, the
pronouns of any gender shall include the other gender, either the singular or
plural shall include the other, and the word "or" is not exclusive. All of the
parties hereto have participated in the drafting, preparation and review of the
Agreement, and in any construction to be made of the Agreement, it shall not be
construed as against any party.
(h) Governing Law. The Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
regard to its principles of conflicts of law.
(i) Severability. Any provision of the Agreement that is
deemed invalid, illegal, or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this Section, be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of the Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If the covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant shall be
modified so that the scope of the covenant is reduced only to the minimum
extent necessary to render the modified covenant valid, legal and enforceable.
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(j) Taxes. Any payments provided for hereunder shall be
paid net of any applicable withholding required under federal, state or local
law.
(k) Arbitration. All differences, claims or matters in
dispute arising out of the Agreement, the breach hereof or otherwise arising
between the Company and the Employee shall, at the election of either party, by
notice to the other, be submitted to arbitration by the American Arbitration
Association or its successor, in San Diego, California. Such arbitration shall
be governed by the then existing rules of the American Arbitration Association,
except that if the dispute relates to the application of Section 4(a)(i) or
Section 4(b)(i) hereof, the evidentiary standards set forth therein shall
apply. Any arbitration conducted pursuant to the provisions of the Agreement
shall be conducted by a recognized independent and impartial arbitrator
mutually agreed to by the parties or, if they cannot agree within thirty (30)
days after the initial demand for arbitration, by three arbitrators, one chosen
by the Company, one chosen by the Employee and the third selected by the two so
chosen. If the arbitrators selected by the parties fail to agree on the third
arbitrator within thirty (30) days of the appointment of the second arbitrator,
the third arbitrator shall be selected by the American Arbitration Association
in accordance with its then existing rules. All fees and expenses relating to
the arbitration shall
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be paid by the Company. The judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement,
effective as of the date first above written.
FPA MEDICAL MANAGEMENT, INC.
By: /s/ XXXX XXXX
Its: President
By: /s/ XXXXXXX XXXXXXX
Chairman, Compensation
Committee
EMPLOYEE
/s/ XXXXX X. XXXXXXXX
