THIS EMPLOYMENT AGREEMENT (this "Agreement") is executed as of the
25th day of September, 1997, by and between Sierra Medical Management, Inc., a
Delaware corporation formerly known as Prospect Acquisition Corporation, Inc.
("Employer"), and Xxxxxxxxxx Xxxxxxxxx ("Employee").
R E C I T A L S
A. Employer is a provider of management services to medical practices;
B. Employee was formerly a shareholder of Sierra Medical Management,
Inc., a Delaware corporation which merged with and into Employer; and
C. Employer desires to obtain the services of Employee, and Employee
desires to be employed by Employer, upon the terms and conditions hereinafter
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. TERMS AND CONDITIONS OF EMPLOYMENT.
1.1 EMPLOYMENT. Employer hereby employs Employee and Employee hereby
accepts employment subject to the terms and conditions hereinafter set forth.
1.2 FULL-TIME EMPLOYMENT. Employee agrees to devote his full time and
attention to the performance of his duties as Chief Operating Officer of
Employer. Employee's duties shall include, but not be limited to, the
(a) Employee shall serve as the Chief Operating Officer of Employer
and shall be responsible for performing those duties which are customarily
performed by the Chief Operating Officer, including but not limited to,
overseeing in the management of Employer's Palmdale, Lancaster and other
Antelope Valley operations, subject to the control of the Board of Directors;
(b) Such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws of Employer.
2.1 SALARY. Employer shall pay Employee the salary of One Hundred Fifty
Thousand dollars ($150,000.00) per annum. Employer shall pay Employee in
accordance with Employer's policies for the payment of salaried employees in
effect from time to time. Salary payments are to be reduced by the cost of and
subject to all state and federal withholding taxes and any other applicable
2.2 BONUSES/PERFORMANCE CRITERIA. Employer may determine from time to
time to pay Employee additional compensation/discretionary bonus(es). Employee
shall participate in any executive bonus plan of Employer or Prospect Medical
Holdings, Inc. ("Prospect Medical Holdings"). Any such determination shall be
made by the Compensation Committee, or similar committee, if any, of the Board
of Directors of Employer or, if there is no such committee, by the Board of
Directors of Employer.
2.3 BENEFITS. During the term of this Agreement, Employer shall provide
Employee and his beneficiaries with certain employment benefits at a level
commensurate with other members of Employer's and Prospect Medical Holdings'
senior management. Such benefits include but are not limited to the following:
(a) Employee shall be entitled to participate in Employer's
retirement 401(k) and other benefit plans as offered from time to time.
Employee be given credit for past service on behalf of Sierra Primary Care
Medical Group, Inc., subject to applicable laws or plan provisions;
(b) A policy of disability insurance;
(c) A policy of term life insurance in the principal amount of
$300,000, naming Employee's family members as beneficiaries;
(d) Participation in the Prospect Medical Holdings, Inc. Stock Option
(e) A policy of medical insurance for Employee and Employee's
(f) A policy of dental insurance for Employee and Employee's
immediate family; and
(g) A policy of vision insurance for Employee and Employee's
However, with respect to the foregoing health benefits, Employer's life
insurance company and/or disability insurer may require Employee to
satisfactorily pass a physical examination in order to issue a life insurance
policy to Employee, and Employee shall comply with all such reasonable
requirements. In addition, Employer may elect to obtain key-man life insurance
coverage on Employee, and Employee agrees to submit to any required examination
2.4 FRINGE BENEFITS/REIMBURSEMENT OF EXPENSES. During the term of this
Agreement, Employer shall provide Employee with the following fringe benefits
or reimburse the following expenses, as the case may be, which are incurred in
the performance of Employee's duties on behalf of the Company:
(a) An allowance of $800 per month for automobile expenses;
(b) An allowance of $400 per month for cellular and other phone
2.5 VACATION BENEFITS. Employee shall be entitled to four weeks of paid
vacation each year, commencing on the date hereof. Employee shall also be given
full credit for 210 hours of vacation time that Employee accrued while employed
by Sierra Primary Care Medical Group, Inc., a California professional
corporation; provided however, that Employee shall only be entitled to take such
time as vacation and shall not be entitled to any salary for any of such time
that is not taken as vacation.
3. TERM AND TERMINATION OF AGREEMENT.
3.1 CONTRACT TERM. The initial term of this Agreement shall commence on
September 25, 1997 (the "Effective Date"), and shall continue for a period of
three (3) years, subject to earlier termination of this Agreement as provided
3.2 TERMINATION WITHOUT CAUSE. Employer may not terminate this Agreement
3.3 TERMINATION BY EMPLOYER. Employer may terminate Employee's employment
hereunder at any time for "cause" by giving notice of termination to the
Employee (the "Termination Notice"). Cause includes the following:
(a) Upon the material violation by Employee of any provision of this
Agreement or the rules, policies and/or procedures of Employer.
(b) Upon the total disability of Employee, as defined in Employer's
policies and procedures;
(c) Upon the inability or failure of Employee to perform the duties
required hereunder as President.
(d) Upon Employee's conviction of a felony or crime of moral
(e) Upon the habitual use of alcohol or a controlled substance which
materially impairs the ability of Employee to effectively perform Employee's
duties and obligations under this Agreement.
(f) Upon repeated failure by Employee to meet individual performance
or productivity standards established by Employer for Employee.
In the event of termination pursuant to subsections (a), (c) or (f)
above, Employer shall be required to provide prior notice to Employee, after
which Employee shall have a thirty (30) day period in which to cure such breach.
3.4 TERMINATION BY EMPLOYEE. Employee may terminate his employment
hereunder at any time for "cause." Cause is limited to a material breach by
Employer of a material term of this Agreement. In the event Employee terminates
this Agreement for cause, termination shall be effective immediately upon
notification to Employer by Employee.
4. CONFIDENTIALITY/TRADE SECRETS. Employee acknowledges that his position
with Employer will be one of the highest trust and confidence both by reason of
his position and by reason of his access to and contact with the trade secrets
and confidential and propriety business information of Employer and all of its
Affiliates (as defined below), during the term of this Agreement and thereafter.
Employee covenants and agrees at all times during and after the term of this
Agreement as follows:
4.1 PROTECTION. That Employee shall use his best efforts and exercise
utmost diligence to protect and safeguard the trade secrets and confidential and
proprietary information of Employer and its "Affiliates" (which term as used in
this Agreement shall include any person, corporation, partnership, general
partner or other entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
Employer), including, without limitation, their trade secrets, proprietary
information, the identity of their customers and suppliers, their arrangements
with their customers and suppliers, and their technical data, records,
compilations of information, processes, computer software, and specifications
relating to their customers, suppliers, products and services (collectively,
4.2 NON-DISCLOSURE. That Employee shall not disclose any Confidential
Information, except as may be required in the course of his employment or as
may be required by law.
4.3 NON-USAGE. That Employee shall not use, directly or indirectly, for
his own benefit or for the benefit of another, any Confidential Information.
The covenants contained in this Section 4 shall not be applicable to any
information which is in the public domain other than as a result of action by
Employee or which Employee can establish was obtained from sources other than
Employer or any of its Affiliates, who are not under a duty of nondisclosure.
All Confidential Information and all files, records, documents, drawings,
specifications, computer software, memoranda, notes, or other documents relating
thereto or otherwise relating to the business of Employer and its Affiliates,
whether prepared by Employee or otherwise coming into his possession, shall be
the exclusive property of Employer (and/or its Affiliates, as applicable) and
shall be delivered to Employer or its Affiliates as appropriate and not retained
by (nor any copies thereof retained by) Employee upon termination of his
employment for any reason whatsoever.
5. REMEDIES FOR BREACH OF COVENANTS OF EMPLOYEE. The covenants set forth in
Section 4 of this Agreement shall continue to be binding upon Employee
notwithstanding the termination of his employment with Employer for any reason
whatsoever. Such covenants shall be deemed and construed as separate agreements
independent of any other provision of this Agreement. The existence of any
claim or cause of action by Employee against Employer or any of its Affiliates,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Employer or any of its Affiliates of any or all of
such covenants. It is expressly agreed that the remedy at law for the breach of
any such covenant is inadequate and that temporary and permanent injunctive
relief shall be available to prevent the breach or any threatened breach
thereof, without the necessity of proof of actual damages and without the
necessity of posting a bond, cash or otherwise. In this connection, Employee
agrees not to assert any defense that monetary damages would be sufficient.
6. DEFAULT. Any default by Prospect Medical Holdings, Inc. in the payment
when due, of any amount owed by Prospect Medical Holdings, Inc. to Employee
under the Promissory Note, of even date herewith, issued from Prospect Medical
Holdings, Inc. to Employee, in the principal amount of $250,000, which default
continues for a period of ten (10) days, shall constitute a default under this
Agreement. Upon written notice from Employee of such default, Prospect Medical
Holdings, Inc. shall have a thirty (30) day period in which to cure such
default. In the event Prospect Medical Holdings, Inc. fails to cure such
default within thirty (30) days of such notice, at Employee's option, this
Agreement shall terminate and Employee shall have no further obligations
7. ARBITRATION. The parties firmly desire to resolve all disputes arising
hereunder without resort to litigation in order to protect their respective
business reputations and the confidential nature of certain aspects of their
relationship. Accordingly, any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration as set
7.1 All disputes which in any manner arise out of or relate to this
Agreement or the subject matter thereof, shall be resolved exclusively by
arbitration in accordance with the provisions of this Section 7. Either party
may commence arbitration by sending a written demand for arbitration to the
other party, setting forth the nature of the controversy, the dollar amount
involved, if any, and the remedies sought, and attaching a copy of this Section
to the demand.
7.2 There shall be one arbitrator. If the parties shall fail to select a
mutually acceptable arbitrator within ten (10) days after the demand for
arbitration is mailed, then the parties stipulate to arbitration before a single
arbitrator sitting on the Los Angeles, California Judicial Arbitration Mediation
Services (JAMS) panel, and selected in the sole discretion of the JAMS
7.3 The parties shall share all costs of arbitration. The prevailing
party shall be entitled to reimbursement by the other party of such party's
attorneys' fees and costs and any arbitration fees and expenses incurred in
connection with the arbitration hereunder.
7.4 The substantive law of the State of California shall be applied by the
7.5 Arbitration shall take place in Los Angeles, California unless the
parties otherwise agree. As soon as reasonably practicable, a hearing with
respect to the dispute or matter to be resolved shall be conducted by the
arbitrator. As soon as reasonably practicable thereafter, the arbitrator shall
arrive at a final decision, which shall be reduced to writing, signed by the
arbitrator and mailed to each of the parties and their legal counsel.
7.6 All decisions of the arbitrator shall be final, binding and conclusive
on the parties and shall constitute the only method of resolving disputes or
matters subject to arbitration pursuant to this Agreement. The arbitrator or a
court of appropriate jurisdiction may issue a writ of execution to enforce the
arbitrator's judgment. Judgment may be entered upon such a decision in
accordance with applicable law in any court having jurisdiction thereof.
7.7 Notwithstanding the foregoing, because time is of the essence of this
Agreement, the parties specifically reserve the right to seek a judicial
temporary restraining order, preliminary injunction, or other similar short term
equitable relief, and grant the arbitrator the right to make a
final determination of the parties' rights, including whether to make permanent
or dissolve such court order.
7.8 The decision and award of the arbitrator shall be kept confidential by
the parties to the greatest extent possible. No disclosure of such decision or
award shall be made by the parties except as required by law or as necessary or
appropriate to effect the enforcement thereof.
8.1 NOTICES. Any notice, demand, or communication required, permitted or
desired to be given hereunder shall be deemed effectively given when personally
delivered or mailed by prepaid certified mail, return receipt requested,
addressed as follows:
Employee: Xxxxxxxxxx Xxxxxxxxx
00000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Employer: Sierra Medical Management, Inc.
c/o Prospect Medical Holdings
00000 Xxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxx, XX 00000
8.2 GOVERNING LAW. This Agreement has been executed and delivered and
shall be interpreted, construed, and enforced in accordance with the laws of the
State of California.
8.3 ENFORCEMENT. In the event that either party shall be required to
enforce the terms of this Agreement, whether with or without arbitration, the
prevailing party shall be entitled to recover the costs of such action,
including reasonable attorneys' fees.
8.4 ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended except in writing signed by both of the parties hereto. No oral
statements or prior written materials not specifically incorporated herein shall
be of any force or effect.
8.5 SEVERABILITY. In the event any provision of this Agreement is held to
be unenforceable or void for any reason, the remainder of the Agreement shall be
unaffected and shall remain in full force and effect in accordance with its
terms, unless such unenforceability or voidness defeats an essential business
8.6 ASSIGNMENT. Except for any assignment to Imperial Bank, a California
banking corporation, neither this Agreement nor any of the rights of obligations
of the parties hereunder shall be assignable by either party, whether
voluntarily or by operation of law. Any attempted assignment, transfer, pledge
or hypothecation or other disposition of this Agreement or of any such rights,
interests and benefits shall be null and void and without effect.
8.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and permitted assigns.
8.8 HEADINGS. The headings used herein are for convenience only and do
not limit the contents of this Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which will be deemed to be an original, but all of which together will
constitute one and the same agreement.
8.10 COMPLIANCE WITH LAW. The parties recognize that this Agreement at all
times is to be subject to applicable state, local and federal law.
8.11 WAIVERS. The waiver of any of the provisions hereof shall not be
effective unless in writing and signed by the party intending to be bound
thereby. The waiver by either party of any act to be performed hereunder will
not constitute a waiver of any other act or identical act required to be
performed at a later time.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of
the day and year first above written.
SIERRA MEDICAL MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxxxxx Xxxxxxxxx