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EXHIBIT 9
FORM OF EMPLOYMENT AGREEMENT
(MASSAMINO AND AUSTIN)
AGREEMENT by and between Xxxxxxx Medical Management Holdings
Corporation, a Delaware corporation (the "Company"), and ____________________
(the "Executive"), dated as of the 7th day of January, 1997. For all purposes
of this Agreement, employment with the Company shall include employment with
any of its affiliated companies.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall mean the first date during
the Change of Control Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the second anniversary of the date
hereof.
(c) A "Hostile Change in Control" shall mean a change of
control that results from an unsolicited proposal that is not approved by a
majority of the Continuing Directors (as defined below) prior to disclosure of
such proposal for a Change in Control or if such disclosure is made without the
prior approval of a majority of the disinterested directors. Any reference in
this Agreement to a Change in Control includes any Hostile Change in Control
unless specifically noted otherwise.
(d) A "Continuing Director" shall mean any member of the
Board of Directors of the Company (while such Person is a member of the Board)
who (i) is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of
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an Acquiring Person or of any such Affiliate or Associate, and (ii) either (A)
was a member of the Board of Directors prior to the time any person became an
Acquiring Person, or (B) became a member of the Board of Directors subsequent
to the time any person became an Acquiring Person, if such person's nomination
for election, or re-election, to the Board was recommended, or approved, by a
majority of the Continuing Directors then in office.
(e) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act (as defined below), as in effect as of the
date hereof.
2. CHANGE OF CONTROL. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (an "Acquiring Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 2; or (v) any acquisition by FHP International Corporation
("FHP") as a result of the rights offering to purchase the Company's Common
Stock being made in connection with PacifiCare Health Systems, Inc.'s
acquisition of FHP and more fully described in the Form S-1 Registration
Statement filed with the Securities and Exchange Commission on December 11,
1996, (the "Rights Offering"), or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of an Acquiring Person
other than the Board; or
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(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 70% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on either
(i) the third anniversary of such date if such Effective Date is triggered by a
Hostile Change of Control or (ii) the second anniversary of such date if such
Effective Date is triggered by a Change in Control that is not hostile (the
"Employment Period").
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
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period immediately preceding the Effective Date.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of the
Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable
best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. To the extent that any such
activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) COMPENSATION.
(i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least equal to
twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of
the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies"
shall include any company controlled by, controlling or under common
control with the Company.
(ii) OTHER BENEFITS. During the Employment
Period, the Executive shall be entitled to participate in all
incentive, savings, retirement, welfare benefit, vacation and sick
leave plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies.
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5. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment
shall terminate automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the
30 days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's
duties with the Company on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
(b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with
the Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies
the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive
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is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty
of the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in material diminution in
such position, authority, duties or responsibilities;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other
than an isolated insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
(iii) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(iv) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
For purposes of this Section 5(c), any controversy or claim arising out of or
relating to any determination of "Good Reason" made by the Executive shall be
settled by arbitration in Orange County, California, in accordance with the
following:
(v) Each party shall appoint its own arbitrator
and the two arbitrators shall choose a third, impartial
arbitrator as umpire before the date set for the hearing. If
a party fails to appoint its arbitrator within 30 days after
having either received or given the notice requesting
arbitration, the other shall appoint the second arbitrator.
If the two arbitrators fail to appoint the umpire within 30
days after their appointments, either party may apply to the
Orange County Superior Court of the State of California to
appoint an impartial umpire. The umpire shall promptly notify
all parties to the arbitration of his selection.
(vi) The arbitration shall be conducted pursuant
to the provisions of the California Code of Civil Procedure,
including the rules pertaining to
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discovery.
(vii) Within a reasonable time after completion of
the arbitration, the arbitrators shall prepare a written
opinion, a copy of which shall be provided to each party.
(viii) The parties shall share equally the expenses
of arbitration, including the arbitrator's fee, provided,
however, that the arbitrators, in their discretion, may award
costs to the prevailing party.
(d) NOTICE OF TERMINATION. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 12(c) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days after the giving of such
notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of Death or Disability, the Date of Termination shall be
the date of Death of the Executive or the Disability Effective Date, as the
case may be.
6. OBLIGATIONS OF THE COMPANY OR EXECUTIVE UPON
TERMINATION.
(a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR
DISABILITY. If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause, Death or Disability or the
Executive shall terminate employment for Good Reason, such termination, for
purposes of this Section 6(a), shall constitute separation from, and cessation
of duties for, the Company as of the Date of
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Termination. Under such circumstances, the Company shall pay to the Executive
the following payments and benefits:
(i) Bi-weekly salary continuation at the
Executive's Annual Base Salary as if the Executive had
remained employed through the end of the Employment Period;
and
(ii) Medical and Dental Coverage continuation as
if the Executive had remained employed through the end of the
Employment Period at the Executive's benefit level as of the
Date of Termination;
(iii) Life Insurance Coverage continuation through
the end of the Employment Period at the Executive's current
benefit level as of the Date of Termination;
(iv) Outplacement services consistent with the
Company's outplacement policy for a person at the Executive's
job classification and/or grade level;
(v) A payment on the last day of the Employment
Period in an amount equal to the sum of (A) the additional
contributions that would have been allocated to Executive's
accounts under the Xxxxxxx Medical Management Holdings
Corporation Employee Stock Ownership Plan (the "ESOP") and the
Xxxxxxx Medical Management Holdings Corporation Money Purchase
Pension Plan if the Executive had remained employed through
the end of the Employment Period and deferred the maximum
pretax deferral allowed under the terms of the ESOP (after the
application of the limitations on deferrals set forth in the
ESOP) and (B) the amount of any benefits under the ESOP which
were forfeited upon termination of employment but which would
have become vested if the Executive had remained employed
through the end of the Employment Period;
(vi) Payment within 30 days of the Date of
Termination of all accrued vacation, holiday and personal
leave days as of the Date of Termination; and
(vii) Payment of any incentive compensation that
Executive would have earned if Executive had remained employed
through the end of the Employment Period under, and in
accordance with the terms of, any applicable incentive
compensation plan.
The Company reserves the right to deduct from any applicable
sum those amounts required by law. Any monies owed to the Company by Executive
may be deducted
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from the Amounts payable pursuant to this Section 6(a). All accruals of
vacation, holiday and personal leave days shall end effective the Date of
Termination. The payments called for in this Section 6(a) shall be in lieu of
and discharge any obligations of Company to Executive for compensation, accrued
vacation, accrued personal leave days, accrued holidays, incentive
compensation, car allowances or any other expectations of remuneration or
benefit on the part of the Executive.
(b) DEATH. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of accrued
obligations and the timely payment or provision of other benefits under any
plan, program, policy or practice of the Company in accordance with the terms
of such plan, program, policy or practice (the "Other Benefits"). Accrued
obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
(c) DISABILITY. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive, other than for payment of accrued obligations and the timely payment
or provision of Other Benefits. Accrued obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the
Executive's employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) his Annual Base
Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for accrued obligations and the timely payment or
provision of Other Benefits. In such case, all accrued obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(e) ACCELERATION OF OPTIONS. The Board of Directors has
determined that the events described in Section 2 hereof will constitute a
"Change of Control of the Company" for purposes of Section 6.2(b) of the
Incentive Plan (as defined below). Therefore, if the Executive's employment is
terminated other than voluntarily or for Cause, Death or Disability prior to
the end of the Employment Period, then, subject to Section 11 of this
Agreement, all of the Executive's outstanding Options under, and as defined in,
the Xxxxxxx Medical Management Holdings Corporation 1996 Stock Incentive Plan
(the "Incentive Plan") which have not otherwise become exercisable shall become
immediately exercisable in full on the Date of Termination, and all substantial
risks of forfeiture and restrictions on transfer relating to any of the
Executive's shares of Restricted Stock under,
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and as defined in, the Incentive Plan shall be terminated on the Date of
Termination. For purposes of this provision, any termination of the Executive's
employment other than voluntarily or for Cause, Death or Disability shall be
deemed to be a termination for the convenience of the Board; accordingly, any
Option granted to the Executive which are or become exercisable as of the Date
of Termination shall terminate 90 days after the Date of Termination.
(f) DUTY TO COOPERATE. During the Employment Period and
thereafter, Executive agrees to cooperate with and assist the Company, upon
reasonable notice, in the defense of any litigation or governmental
investigation arising from events which occurred while Executive was employed
by the Company. Such cooperation and assistance shall include, but not be
limited to, Executive's full participation in locating, producing, collecting,
analyzing and preparing documents and other informational materials; in
preparing for and participating in depositions, hearings and trials; and in
responding to document production requests, interrogatories, and other
discovery. If it becomes necessary for Executive to testify in any judicial or
administrative proceedings, the Company shall reimburse Executive for any
reasonable travel expenses (including transportation, food and lodging) which
are incurred (or are to be incurred) in connection with such testimony
(including preparation therefor). The Company shall not be required to pay
Executive any additional consideration, including, but not limited to,
consulting or witness fees, in connection with any cooperation, assistance or
testimony required of or provided by Executive pursuant to this Agreement. In
addition, from the Date of Termination to the end of the Employment Period, the
Executive shall devote a reasonable amount of time cooperating with and
assisting the Company in maintaining and improving its relationships with its
customers.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in
any plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or any
of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. Except as stated herein, the
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no event shall
the Executive be obligated to seek other employment or take any other
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action by way of mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.
9. CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company
or any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it.
10. SUCCESSORS. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will 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 to assume
expressly 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 hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
11. CERTAIN PAYMENTS BY THE COMPANY
(a) Notwithstanding anything to the contrary in this
Agreement, in the event that any payment, grant of securities or distribution
by Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 11) ("Payment") is determined to be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the "Code") (or any
similar provision) and/or any taxes incurred in connection with delivering
documents contemplated by Section 11(e) (such excise and other tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "Excise and Other Tax"), then the Company shall
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pay to Executive an additional payment (a "Gross-Up Payment") in an amount such
that after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise and Other Tax imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the Excise and Other Tax imposed
upon the Payments.
(b) Subject to later additional adjustment pursuant to
Section 11(c), all determinations required to be made under this Section 11,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte and Touche or such other certified
public accounting firm as may be designated by Executive and which is
satisfactory to the Company (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days of the receipt of request from Executive or the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 11(b), shall be
paid by the Company to Executive within five days of the receipt of the
Accounting Firm's determination. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 11(c) and Executive thereafter is required to make a payment of any
Excise and Other Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which Executive gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive shall:
(i) Give the Company any information reasonably
requested by the Company relating to such claim,
(ii) Take such action in connection with
contesting such claim as the Company shall reasonably request
in writing from time to time, including,
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without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company,
(iii) Cooperate with the Company in good faith in
order to contest such claim effectively, and
(iv) Permit the Company to participate in any
proceedings relating to such claim;
provided, however, the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise and Other Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 11(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and xxx for a refund or contest
the claim in any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such
payment to Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise and Other Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 11(c), Executive becomes entitled
to receive any refund with respect to such claim, Executive shall (subject to
the Company's complying with the requirements of Section 11(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section 11(c), a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such
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advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(e) Notwithstanding anything to the contrary in this
Section 11, if any payment made to Executive pursuant to this Agreement or
otherwise would constitute an excess parachute payment within the meaning of
Section 280(G) of the Code, Executive shall forfeit (to the extent necessary to
avoid such excess parachute payment) (i) first, cash receivable hereunder under
Sections 6(a)(i) and 6(a)(v), (ii) next, shares of Common Stock of the Company
received under that certain Stock Purchase Agreement dated as of March 15,
1996, between Executive, certain other individuals, Xxxxxxx Medical Management
Corporation and FHP International Corporation, as amended (the "Purchase
Agreement") that are subject to restrictions under paragraphs 5.3.(c) thereof
and that are not yet free of restrictions on the sale thereof that are
applicable until July 1, 1998, and (iii) lastly, shares of Common Stock of the
Company received under the Purchase Agreement that are not yet free of
restrictions on the sale thereof that are applicable until July 1, 1999;
provided, however, that none of the foregoing forfeitures shall take place if
Executive, within 30 days after the Date of Termination shall have executed and
delivered to the Company (i) a Covenant Not to Compete in substantially the
form of "EXHIBIT A" hereto (as amended to provide that such Covenant Not to
Compete shall terminate on September 18, 1999 and the references to Section
11(c) are revised to Section 11(e)), and (ii) a Settlement and Release
Agreement in substantially the form of "EXHIBIT B" hereto.
(f) Notwithstanding anything to the contrary in this
Section 11, the Company's obligation to pay a Gross Up Payment shall not exceed
$4,000,000, when taken together with its obligations to pay Gross Up Payments to
[insert name of other Key Executive].
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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IF TO THE EXECUTIVE:
-------------------------
-------------------------
-------------------------
IF TO THE COMPANY:
Xxxxxxx Medical Management Holdings Corporation
0000 Xxxxxx Xxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) As stated, the Company may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(iv) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date,
the Executive's employment and/or this Agreement may be terminated by either
the Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement.
(g) From and after the Effective Date, this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof entered into prior to the date hereof.
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(h) This Agreement shall be void and without further
force and effect unless executed and delivered by the Executive to Xxxxxxx X.
Xxxxxxxx, Xx., Assistant Secretary of the Company, at least 48 hours prior to
the Effective Time of the merger contemplated by the Amended and Restated
Agreement and Plan of Reorganization among PacifiCare Health Systems, Inc., N-T
Holdings, Inc., Neptune Merger Corp., Tree Acquisition Corp., and FHP, dated as
of November 11, 1996.
(i) This Agreement shall be void and without further
force and effect if FHP holds in excess of 50% of the Company's Common Stock as
a result of the Rights Offering.
(j) In the event that as a result of the Rights Offering,
FHP holds less than 50% of the Company's Common Stock, then in consideration
of: (a) the Company, a majority-owned subsidiary of FHP, approving this
Agreement; and (b) FHP authorizing this Agreement, Executive hereby releases
FHP from all its duties and obligations under the Employment Agreement between
the Executive and FHP dated as of February 1, 1996 (the "FHP Agreement").
However, in the event that as a result of the Rights Offering, FHP holds in
excess of 50% of the Company's Common Stock, the FHP Agreement shall remain in
full force and effect.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.
XXXXXXX MEDICAL MANAGEMENT HOLDINGS
CORPORATION
----------------------------------------------
By: Xxxx X. Xxxxxxxxx
Its: President and Chief Executive Officer
----------------------------------------------
Executive
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COVENANT NOT TO COMPETE
This COVENANT NOT TO COMPETE, is entered into as of
____________, 1997 (the "Agreement"), is made by and between Xxxxxxx Medical
Management Holdings Corporation, a Delaware corporation (the "Company"), and
_____________________ ("Executive") pursuant to the Employment Agreement
between them dated as of the 7th day of January, 1997 (the "Employment
Agreement"). Defined terms not defined herein shall have the meanings assigned
to them in the Employment Agreement.
WHEREAS, the Company desires the benefits of the continued
services of the Executive, and the Executive is willing to render such
services, pursuant and subject to the terms and conditions of the Employment
Agreement; and
WHEREAS, Executive desires the benefits of Section 11(c) of
the Employment Agreement and in consideration thereof desires to execute and
deliver this Agreement in accordance therewith.
NOW, THEREFORE, in consideration of the promises and the
covenants and agreements contained herein, the parties hereto agree as follows:
1. COVENANT NOT TO COMPETE. Until the earlier of the
expiration of the Employment Period or the expiration of 30 days following
Executive's Date of Termination without execution and delivery by Executive of
a Settlement and Release Agreement as provided in Section 11(c) of the
Employment Agreement, Executive shall not, directly or indirectly, as
principal, employee, agent, independent contractor, proprietor, partner, or
otherwise, operate, own, manage, control, or participate in conducting the same
business in the same cities and counties as carried on by the Company in the
State of California at the Effective Date, if in so doing Executive personally
carries on activities substantially the same in all material respects as the
activities carried on by Executive as an officer and employee of the Company at
the Effective Date.
2. REASONABLENESS OF COVENANT. Executive has carefully
considered the nature and extent of the restrictions upon Executive and the
rights and remedies conferred upon Company under this Agreement, and hereby
acknowledges and agrees that such covenants are reasonable, are designed to
prevent irreparable damage to Company, are required to protect Company's
legitimate interests, and do not confer a benefit upon Company disproportionate
to the detriment of Executive.
3. NO WAIVER. No waiver of any of the provisions herein
shall be valid unless in writing signed by the party against whom such claimed
waiver is sought to be enforced, nor shall a failure to enforce any right
hereunder constitute a continuing waiver of
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the notice or a waiver of any other right hereunder. The failure of the
Company at any time or from time to time to require performance of any of
Executive's obligations hereunder shall in no manner affect the Company's right
to enforce any provision of this Agreement at a subsequent time.
4. SEVERABILITY. In the event that any provision or
portion of this Agreement be found by a court of competent jurisdiction to be
invalid or unenforceable, this Agreement shall be deemed to be amended so as to
delete only the invalid or unenforceable provision, or the invalid or
unenforceable portion thereof, and the remaining provisions hereof shall remain
in full force and effect.
5. SUCCESSORS. This Agreement shall inure to the
benefit of, and be binding upon the parties, their heirs, executors,
administrators, successors and assigns.
6. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of California, without
reference to principles of conflicts of laws.
7. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed to be an original but all
of which together will constitute but one instrument.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above mentioned.
XXXXXXX MEDICAL MANAGEMENT HOLDINGS
CORPORATION
----------------------------------------------
By: Xxxx X. Xxxxxxxxx
Its: President and Chief Executive Officer
----------------------------------------------
Executive
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SETTLEMENT AGREEMENT AND RELEASE
This SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is entered into by
and between ____________________ ("Executive") and Xxxxxxx Medical Management
Holdings Corporation, a Delaware corporation (the "Company"), pursuant to the
EMPLOYMENT AGREEMENT between them dated as of the 7th day of January, 1997 (the
"Employment Agreement").
WHEREAS, the employment of Executive by the Company terminated
__________________ (the "Termination Date"); and
WHEREAS, Executive desires the benefits of Section 11(c) of
the Employment Agreement and in consideration thereof desires to execute and
deliver this Agreement in accordance therewith.
NOW, THEREFORE, in consideration of the promises and the
covenants and agreements contained herein, the parties hereto agree as follows:
1. RELEASE. In consideration of the above, the
sufficiency of which Executive hereby acknowledges, and subject to the proviso
hereinafter set forth, Executive hereby agrees not to xxx and fully, finally,
completely and generally releases, absolves and discharges the Company, its
predecessors, successors, subsidiaries, parents, related companies and business
concerns, affiliates, partners, trustees, directors, officers, agents,
attorneys, servants, representatives and employees, past and present, and each
of them (hereinafter collectively referred to as "Releasees") from any and all
claims, demands, liens, agreements, contracts, covenants, actions, suits,
causes of action, grievances, arbitrations, unfair labor practice charges,
wages, vacation payments, severance payments, obligations, commissions,
overtime payments, Workers' Compensation claims, debts, profit sharing or bonus
claims, expenses, damages, judgments, orders and/or liabilities of whatever
kind or nature in law, equity or otherwise, whether known or unknown to
Executive, which Executive now owns or holds or has at any time owned or held
as against Releasees, or any of them ("Claims"), including specifically but not
exclusively and without limiting the generality of the foregoing, any and all
Claims arising out of or in any way connected to Executive's employment with or
separation of employment from Executive including any Claims based on contract,
tort, wrongful discharge, fraud, breach of fiduciary duty, attorneys' fees and
costs, discrimination in employment, any and all acts or omissions in
contravention of any federal or state laws or statutes (including but not
limited to federal or state securities laws and the Racketeer Influenced and
Corrupt Organizations Act), and any right to recovery based on state or federal
age, sex, pregnancy, race, color, national origin, marital status, religion,
veteran status, disability, sexual orientation, medical condition, union
affiliation or other anti-discrimination laws, including, without limitation,
Title VII, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, the National Labor Relations Act, and the California Fair
Employment and Housing Act, all as amended,
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whether such claim be based upon an action filed by Executive or by a
governmental agency; PROVIDED, HOWEVER, the foregoing release shall not affect
or diminish any rights of Executive under the Employment Agreement or in
respect of vested employee benefits. "Vested employee benefits" means any and
all rights of Executive under or in respect of (i) any employee benefit plan of
the Company or any corporation or other entity which controlling, controlled by
or under common control with the Company or that is a Releasee ("Affiliated
Company"), (ii) any option or other agreement relating to any right or interest
of Executive in any stock or other securities of the Company or any Affiliated
Company, (iii) salary or wages payable for services rendered before the
Termination Date, (iv) reimbursement for business expenses or other amounts for
which Executive is entitled to reimbursement by the Company immediately before
the Termination Date, or (v) indemnification as an agent.
(a) Executive acknowledges and agrees that neither
anything in this Agreement or the offer, execution, delivery, or acceptance
thereof shall be construed as an admission of any kind by the Company, and this
Agreement shall not be admissible as evidence in any proceeding except to
enforce this Agreement.
(b) It is the intention of Executive in executing this
instrument that it shall be effective as a bar to each and every claim, demand,
grievance and cause of action hereinabove specified as being released. In
furtherance of this intention, Executive hereby expressly consents that this
Agreement shall be given full force and effect according to each and all of its
express terms and provisions, including those relating to unknown and
unsuspected claims, demands and causes of action, if any, as well as those
relating to any other claims, demand and causes of action hereinabove
specified, and elects to assume all risks for claims that now exist in
Executive's favor, known or unknown, that are released under this Agreement.
Executive acknowledges that Executive may hereafter discover facts different
from, or in addition to, those Executive now knows or believes to be true with
respect to the claims, demands, liens, agreements, contracts, covenants,
actions, suits, causes of action, wages, obligations, debts, expenses, damages,
judgments, orders and liabilities herein released, and agrees the release
herein shall be and remain in effect in all respects as a complete and general
release as to all matters released herein, notwithstanding any such different
or additional facts.
(c) If any provision of this Agreement or application
thereof is held invalid, the invalidity shall not affect other provisions or
applications of the Agreement which can be given effect without the invalid
provision or application. To this end, the provisions of this Agreement are
severable.
(d) Executive represents and warrants that Executive has
not heretofore assigned or transferred or purported to assign or transfer to
any person, firm or corporation any claim, demand, right, damage, liability,
debt, account, action, cause of action, or any other matter herein released.
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(e) NOTICE TO EXECUTIVE: The law requires that Executive
be advised and the Company hereby advises Executive to consult with an attorney
and discuss this Agreement before executing it. Executive acknowledges that
the Company has provided to Executive at least 21 days within which to review
and consider this Agreement before signing it. If Executive decides not to use
the full 21 days, then Executive knowingly and voluntarily waives any claims
that Executive was not in fact given that period of time or did not use the
entire 21 days to consult an attorney and/or consider this Agreement.
Executive acknowledges that Executive may revoke this Agreement for up to seven
calendar days following Executive's execution of this Agreement and that it
shall not become effective or enforceable until the revocation period has
expired. Executive further acknowledges and agrees that such revocation must
be in writing addressed to the Company as follows: Xxxxxxx Medical Management
Holdings Corporation, 0000 Xxxxxx Xxx, Xxxxx Xxxx, Xxxxxxxxxx 00000-0000, Attn:
President, and received by the Company as so addressed not later than midnight
on the seventh day following execution of this Agreement by Executive. If
Executive so revokes this Agreement, the Agreement shall not be effective or
enforceable and Executive will not receive the benefits described above. If
Executive does not revoke this Agreement in the time frame specified above, the
Agreement shall become effective at 12:00:01 on the eighth day after it is
signed by Executive.
(f) Executive represents that Executive has read and
understood the foregoing Agreement, has been advised to and has had the
opportunity to discuss it with anyone he or she desires, including an attorney
of his or her own choice, and Executive accepts and agrees to the terms of this
Agreement, acknowledges receipt of a copy of the same and the sufficiency of
the benefits described above, and hereby executes this Agreement voluntarily
and with full understanding of its consequences.
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PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A GENERAL RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS.
Date:_______________, 199__ Executive:
----------------------------------
Date:_______________, 199__ Xxxxxxx Medical Management Holdings
Corporation
By:
----------------------------------------
Its:
----------------------------------------
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