**Exhibit 10.1**

 

**EMPLOYMENT AGREEMENT**

** **

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into and madeeffective as of June 1, 2007 (the “Effective Date”), by and between ProMedHealth Care Administrators, a California corporation (“ProMed HCA”) and JeereddiPrasad, M.D., an individual (“Executive”).

 

WHEREAS, the execution of this Agreement is a condition to the closingof the transactions under that *(a) *StockPurchase Agreement dated as of May 21, 2007 among Prospect Medical Group, Inc.,a California professional corporation (“PMG”), Prospect Medical Holdings, Inc.,a Delaware corporation and an affiliate of PMG (“PMH”), Upland Medical Group, AProfessional Medical Corporation (“ProMed Upland”) and Executive (the “ProMedUpland Stock Purchase Agreement”), *(b) *Agreementand Plan of Reorganization dated as of May 21, 2007 among PMG, ProspectPomona Medical Group, Inc., a California professional corporation, PMH,Pomona Valley Medical Group, Inc. dba ProMed Health Medical Group Networkof Pomona Valley Inc.  (“ProMed Pomona”)and certain of the ProMed Pomona Shareholders (the “ProMed Pomona MergerAgreement”), and *(c) *Agreement and Plan ofReorganization dated as of May 21, 2007 among PMH, Prospect HealthAdministrators, Inc., a California corporation, ProMed Health ServicesCompany, a California corporation (“ProMed HCA Parent”), ProMed Health CareAdministrators, a California corporation (“ProMed HCA”) and certain of theProMed HCA Parent shareholders (the “ProMed HCA Merger Agreement”).

 

WHEREAS, Executive is currently the President of ProMed Upland, ProMedPomona, ProMed HCA and ProMed HCA Parent under an existing employment Agreement(“Existing Employment Agreement”).

 

WHEREAS, PMH and PMG, as the new owners of the business of ProMedUpland, ProMed Pomona, ProMed HCA Parent and ProMed HCA (collectively, theProMed Entities”), desire that Executive remain as an officer of the ProMedEntities, pursuant to the terms and conditions set forth herein.

 

WHEREAS, the Executive has entered into a Non-Compete Agreement, datedas of even date herewith, with PHM (the “Non-Compete Agreement”).

 

WHEREAS, this Agreement shall supersede and replace the ExistingEmployment Agreement with no further consideration due thereunder.

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                       TERM OF EMPLOYMENT. ProMed HCA hereby employs Executive and Executive accepts suchemployment for an initial term of three (3) years commencing as of thedate of this Agreement (the “Commencement Date”) which shall be automaticallyrenewed for successive one year periods unless either party gives writtennotice of non-renewal at least ninety(90) days prior to the expiration of theinitial or any renewal term, subject to termination at any time, in accordancewith the termination provisions of Section 5 below (the “Term”).

 

2.                                       DUTIES.  Executiveshall be employed as the President of ProMed HCA.  Executive shall also serve, withoutadditional compensation, as President of each of the other ProMed

 

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Entities.  Executive shall perform such duties pertainingto the operations of the ProMed Entities as the ProMed Entities, PMG, PMH orany of their respective Board of Directors may from time to time direct.  During the period of employment, if elected,Executive shall serve as director on the Board of Directors of PMH.  ProMed HCA agrees to nominate Executive as adirector to the independent membersof PMH’s Board of Directors.  If approvedby the independent members of PMH’s Board of Directors, ProMed HCA will requestthe full board of PMH’s vote on the appointment of Executive to fill a currentvacancy on PMH’s Board of Directors. Additionally, if requested by PMH’s Board of Directors, Executive will serveas a director on the board of directors of any or all of the ProMedEntities.  Executive shall also serve asa member of anyboard committee to which he may be appointed. Executive shall not receive any additional compensation for sitting onany such boards or committees.

 

3.                                       NECESSARY SERVICES.

 

(a)                                  Performance of Duties. Executive agrees that he will at all times faithfully, industriously andto the best of his ability, experience and talents, perform to the reasonablesatisfaction of the ProMed Entities all of the duties that may be assigned tohim hereunder.  Such duties shall be of akind that are typically assigned to, and reasonably commensurate with, the positionof Chief Executive Officer of a subsidiary or affiliate company.  Executive acknowledges that Jacob Y. Terner,M.D., the Chief Executive Officer of PMH and PMG, and/or the Board of Directorsof PMH, shall assign tasks to Executive which are commensurate with anexecutive position.

 

(b)                                 Faithful and Diligent Performance. During the Term of the Agreement, Executive agrees to devote such time,energy, skill and efforts to the performance of his duties hereunder as arenecessary to allow Executive to faithfully and diligently further the businessand interests of the ProMed Entities. The obligations hereunder shall not preclude Executive from working orinvolving himself in any other business venture so long as it does not detractfrom Executive’s ability to provide services to the ProMed Entities and anydirectorships or committee positions he is then serving under the terms of thisAgreement (including not conflicting with the provisions of Subsection (c) below).

 

(c)                                  Services by Executive. Executive agrees that, during the period of his employment, Executiveshall provide personal services to the ProMed Entities pursuant to thisAgreement, and Executive will not, within the California counties of LosAngeles, San Bernardino and Orange (other than Executive’s existing businesswith the Chaparral Clinics), without the prior written consent of PMH (whichconsent may be granted or withheld in the sole and absolute discretion of PMH),individually or in any combination, directly or indirectly, as an owner,shareholder, director, officer, trustee, partner, associate, consultant,principal, agent, contractor, employee or otherwise:

 

(i)                                     engage, participate in, form, contract,aid, or hold any interest in an independent physician association (IPA) withover 50,000 enrollees, or any entity that manages an IPA with over 50,000enrollees, which is, or as of the Executive’s engagement or participation,would become, competitive with any aspect of the business or operations of theProMed Entities, PMH, PMG or any affiliate of any of them (it being understoodthat the restrictions of this Subsection (a) shall not restrict (A) Executivefrom practicing medicine

 

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generally, norrestrict Executive from contracting with IPAs for the provision ofpersonally-provided patient care services, provided that such practice does notdetract from Executive’s ability to provide services to the ProMed Entities orany directorship or committees to which Executive is then serving under theterms of this Agreement, (B) restrict Executive from his ownership and/oroperation of the Chaparral Clinics, (C) prohibit Executive from owning upto five percent (5%) of any class of securities of any publicly traded company,or (D) prohibit Executive from continuing to engage in any activity inwhich Executive was engaged in as of the Effective Date, which activities havebeen disclosed in writing to Prospect provided such activities do not now, orin the future, become a conflict of interest with the business of Prospect orits affiliates).

 

(ii)                                  commit any other act or assist others tocommit any other act that is injurious to the business of the ProMed Entitiesor any of the ProMed Entities’ affiliates, including but not limited to PMG,PMH, or any other of PMH’s affiliates. Executive shall be entitled to attend seminars, conferences and meetingsrelating to the business of PMH consistent with PMH established policies inthat regard so long as such attendance does not interfere with Executive’sduties to the ProMed Entities.

 

4.                                       COMPENSATION.

 

(a)                                  Base Salary. ProMed HCA shall pay Executive a base salary of Three Hundred ThousandDollars ($300,000) per annum, effective as of the Commencement Date.  Payments shall be made in periodicinstallments in accordance with the normal payroll practices of PMH and itsaffiliates.

 

(b)                                 Employee Benefits. Executive shall be entitled to participate in all of the employee fringebenefit plans and programs available to other executive employees of PMH.  Executive shall receive an automobileallowance of One Thousand Three Hundred Dollars ($1,300) per month andreimbursement for one week annually of continuing medical education.  PMH retains the right to modify or eliminatesuch plans and programs, and to consolidate such plans and programs with thoseof its parent or affiliated corporations.

 

(c)                                  Deductions and Withholding. Executive hereby agrees that ProMed HCA may deduct and withhold from thecompensation payable to Executive hereunder any amounts of money required to bededucted or withheld by ProMed HCA under the provisions of any and allapplicable local, state or federal statutes or regulations or any amendmentsthereto hereafter enacted requiring the withholding or deducting ofcompensation.

 

(d)                                 Bonus.  Executiveshall be entitled to an annual incentive bonus of 6.67% of the amount bywhich the EBITDA (Earnings Before Interest, Taxes, Depreciation andAmortization) of the aggregate ProMed Entities exceeds $10,500,000,$11,500,000, $12,500,000, $13,500,000 and $14,500,000 in fiscal years 2007,2008, 2009, 2010 and 2011, respectively.

 

5.                                       TERMINATION.

 

(a)                                  Term.  Except asprovided herein, this Agreement shall terminate at the end of the initial or anyrenewal Term specified in Section 1 of this Agreement.

 

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(b)                                 Termination For Cause And Other SpecifiedEvents.  Notwithstanding the provisions of paragraph (a) above,Executive’s employment with ProMed HCA shall terminate upon any of the eventsspecified below:

 

(i)                                     Upon the death of Executive, or (at theelection of ProMed HCA) the permanent disability of Executive, “permanentdisability” being defined as any continuous loss of one-half (1⁄2) or more of thetime spent by Executive in the usual daily performance of his duties as aresult of physical or mental illness for a continuous period in excess ofninety (90) days.

 

(ii)                                  Upon the date that ProMed HCA ceases toconduct business for any reason whatsoever (other than the voluntaryconsolidation of ProMed HCA’s business into PMG, PMH or one of theiraffiliates, in which case the terms of this Agreement shall continue andExecutive shall continue to be responsible for the business of ProMed HCA andwithin PMG, PHH or such affiliate despite such voluntary consolidation);

 

(iii)                               At the election of ProMed HCA, upon the breach byExecutive of any term or condition of this Agreement or upon the dismissal ofExecutive by ProMed HCA for Cause.  Forpurposes of this Agreement, “Cause” shall be deemed to exist if Executive (1) engagesin one or more acts constituting criminal conduct; (2) engages in one ormore acts involving fraud or serious moral turpitude; (3) misappropriatesassets or engages in gross misconduct materially injurious to ProMed HCA or itsparent or affiliates; or (4) engages in a course of conduct or pattern ofbehavior that has had or will have a material adverse impact upon ProMed HCA orits parent or affiliates, or their business or operations.  Termination under this subparagraph shall beeffective immediately upon written notice by ProMed HCA.

 

(iv)                              At the election of Executive for GoodReason.  For purposes of this Agreement, “GoodReason” shall mean (i) ProMed HCA’s failure to pay Executive’s salarypursuant to this Agreement for more than 30 days, (ii) a change inExecutive’s title, responsibilities or duties to a materially lesser status ordegree than his title, responsibilities or duties as of the Effective Date, or (iii) therelocation of ProMed HCA’s principal executive offices outside a 25-mile radiusprovided, however, that Employee shall be required to render services from timeto time at such other offices of PMH or PMG within or without the United Statesas ProMed HCA, PMG or PMG may require in the performance of Executive’s duties.

 

(c)                                  Compensation Following Termination ForCause And Other Specified Events.  In the eventExecutive’s employment is terminated pursuant to paragraph (b) above,ProMed HCA shall pay to Executive the portion of the total amount of the BaseSalary earned through the date of termination. In addition, Executive shall be paid any vacation, PTO, or othercompensation that has accrued pursuant to ProMed HCA’s written policies but hasnot been used.  Otherwise, ProMed HCAshall have no obligation to make payments to, or bestow benefits upon,Executive following the date of termination.

 

(d)                                 Termination Without Cause. Notwithstanding the above-stated provisions, ProMed HCA retains theright to terminate Executive’s employment “at-will,” either with or withoutcause and in its sole discretion; provided, however, that if ProMed HCA electsto exercise its right to terminate without cause under this provision,Executive shall be entitled to

 

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continue receivingall of the following for the balance of the Term or a period of six (6) months,whichever is greater, as though Executive were continuing to perform servicesto ProMed Upland under this Agreement:  (1) hisfull Base Salary as set forth in paragraph 4(a) above, (2) the bonusas set forth in paragraph 4(d) above, and (3) payment of the premiumsto continue group medical coverage for himself and his spouse anddependents.  In addition, Executive shallbe paid any vacation, PTO, or other compensation that has accrued pursuant toProMed HCA’s written policies but has not been used, as of the date oftermination.  Otherwise, ProMed HCA shallhave no obligation to make payments to, or bestow benefits upon, Executivefollowing the date of termination.

 

(e)                                  Return of Company’s Property. Upon expiration of this Agreement, or in the event Executive’semployment is terminated for any reason during the Term of this Agreement,ProMed HCA may, at its option, require Executive to vacate his officesimmediately, and to cease all activities on ProMed HCA’s behalf.  Executive agrees that upon receiving noticeof termination of his employment in any manner, he will immediately deliver toProMed HCA all notebooks, brochures, documents, memoranda, reports, pricelists, files, invoices, purchase orders, books, correspondence, customer lists,or other written or graphical records, and the like, relating to the businessor work of ProMed HCA, which are or have been in his possession or under hiscontrol.  Executive hereby expresslyacknowledges that all such materials referenced above are the property ofProMed HCA.

 

6.                                       EXPENSES.  ProMed HCAshall pay for or reimburse Executive for all properly documented reasonablebusiness expenses incurred or paid for by Executive in the performance of hisduties hereunder, including expenditures for travel, mileage, professionalorganization dues and other authorized expenses, subject to such writtenpolicies or guidelines and/or requirements for verification as ProMed HCA may,in its sole and absolute discretion, establish.

 

7.                                       CONFIDENTIALITY AND TRADE SECRETS.

 

(a)                                  Confidential Information. Executive shall keep in strictest confidence all information relating tothe business, affairs, customers and suppliers of the ProMed Entities or theirparent or affiliates (collectively hereinafter referred to as “Trade Secrets”),including, among other things but without limitation, the ProMed Entities’ costof performing services, pricing formulae, methods or procedures, and customerlists, which Executive may acquire during the performance of his services andduties hereunder and which is not otherwise generally known to the public.  Executive acknowledges that such TradeSecrets are of great value, and have been developed and/or acquired at greatexpense to the ProMed Entities, and the ProMed Entities would not enter intothis contract of employment and such information would not be made available toExecutive in Executive’s fiduciary capacity unless the ProMed Entities wereassured that all such information will be used for the exclusive benefit of theProMed Entities.  Accordingly, during theterm of this Agreement, and at all times thereafter, Executive shall notpublish, communicate, divulge, disclose or use, whether or not for his ownbenefit, any such information without the prior written consent of the ProMedEntities.

 

(b)                                 Non-Diversion. Executive hereby specifically agrees that he will not utilize anyinformation concerning patients, customers, or business associates of theProMed Entities, or its parent or affiliates, which Executive acquires duringthe term of this Agreement, whether or not

 

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the sameoriginated through Executive’s efforts, for any purpose detrimental to thebusiness of the ProMed Entities or their parent or affiliates.  Without limitation of the foregoing,Executive agrees that he shall not at any time interfere with any existingcontracts of the ProMed Entities, nor divert or attempt to divert business orpatients away from the ProMed Entities or their parent or affiliates.

 

(c)                                  Solicitation of Employees. Executive acknowledges that important factors in the ProMed Entities’business and operations are the loyalty and good will of its employees.  Accordingly, Executive agrees that bothduring the term of this Agreement, and following the expiration or terminationof this Agreement, he will not (i) solicit for hire, or induce any partyto recruit, hire or solicit for hire, any of the persons listed in Schedule2.17 to the ProMed Upland Stock Purchase Agreement, ProMed Pomona MergerAgreement or ProMed HCA Merger Agreement or any entities or persons who areindependent contractors of the ProMed Entities on the Effective Date (ii) solicit,divert or take away, or attempt to solicit, divert or take away, any customers,business or clients of the ProMed Entities or the ProMed Entities’ affiliates(including, without limitation, any third party payors); (iii) solicit orinduce any party to solicit, any contractors of the ProMed Entities or theProMed Entities’ affiliates to enter into the same or a similar type ofcontract with any other party; or (iv) disrupt, damage, impair, orinterfere with the business of the ProMed Entities or the ProMed Entities’ affiliates;provided, however, that the restrictions set forth above in (i) withrespect to Executive’s ability to hire employees or independent contractors ofthe ProMed Entities or the ProMed Entities’ affiliates are limited to a periodof (A) six (6) months from the termination or expiration of thisAgreement), or (B) the expiration of the non-competition provisions of theNon-Compete Agreement, whichever is greater, being executed by Executiveconcurrently herewith provided that Executive has remained in compliance withthe non-solicitation requirements set forth above during the restrictionperiod.  Executive further agrees thatinformation as to the capabilities of the ProMed Entities’ employees, theirsalaries and benefits, and the other terms of their employment is confidentialand proprietary to the ProMed Entities and constitutes its valuable tradesecrets.  Notwithstanding the foregoing,nothing in this Agreement shall preclude Executive from accepting an affirmativeresponse from a person to a general recruitment or advertising effort carriedout through public or general solicitation or hiring a person in the absence ofany indirect or indirect solicitation or inducement.

 

(d)                                 Ongoing Obligation. The provisions in this Section 7 shall be binding during Executive’semployment.  In the event the provisionsin this Section 7 are more restrictive than permitted by the laws of thejurisdiction in which enforcement of this provision is sought, such provisionsshall be interpreted to extend only over the maximum period of time, range ofactivities or geographic area as to which it may be enforceable.

 

8.                                       REMEDY FOR BREACH. Executive acknowledges that the services to be rendered by him hereunderare of a special, unique and extraordinary character, which gives thisAgreement a peculiar value to the ProMed Entities, the loss of which cannot bereasonably or adequately compensated in damages in an action at law, and abreach by Executive of the provisions of this Agreement will cause the ProMedEntities irreparable injury.  It is,therefore, expressly acknowledged that the Provisions of Sections 3 and 7 ofthis Agreement may be enforced by injunction and other equitable remedies,without bond.  Such relief shall not beexclusive, but shall be in addition to any other rights or remedies ProMed HCAmay have for such breach, and

 

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the ProMedEntities shall be entitled to recover all costs and expenses, includingreasonably attorneys’ fees, incurred by reason of any breach of the covenantsof this Agreement.

 

9.                                       ATTORNEYS’ FEES. In the event of any dispute (including but not limited to actions, suit,or arbitration) between the parties hereto in connection with this Agreement orExecutive’s employment with ProMed HCA or termination thereof, or to enforceany provision or right hereunder, the prevailing party shall be entitled to anaward of all costs and expenses incurred in connection therewith, including butnot limited to reasonable attorneys’ fees incurred by the prevailing party.

 

10.                                 GENERAL PROVISIONS.

 

(a)                                  The failure of ProMed HCA at any time toenforce performance by Executive of any provisions of this Agreement shall inno way affect ProMed HCA’s rights thereafter to enforce the same, nor shall thewaiver by ProMed HCA of any breach of any provision hereof be held to be awaiver of any other breach of the same or any other provision.

 

(b)                                 This Agreement shall be binding upon andinure to the benefit of the parties hereto and the successors and assigns of ProMedHCA; provided, however, it is understood and agreed that the services to berendered and the duties to be performed by Executive hereunder are of aspecial, unique and personal nature and that it would be difficult orimpossible to replace such services; by reason thereof, Executive may notassign either the benefits or the obligations of this Agreement.

 

(c)                                  Any notices, requests, consents, or othercommunications required or permitted under this Agreement shall be in writingand may be delivered in person to the other party, or sent by United Statesmail or commercial courier service.  Theaddresses set forth below shall be deemed sufficient for purposes of providingnotice under this Agreement:

 

To Executive:                                                                      Jeereddi Prasad, M.D.[Intentionally Omitted]

 

To ProMed:                                                                                ProMed Health Care Administratorsc/o Prospect Medical Group1920 East 17th Street, Suite 200Santa Ana, CA 92705Attn: Jacob Y.  Terner, M.D.

 

Each party may change hisor its address through written notice in compliance with this Section.  Written notice provided by methods other thanthose specified herein shall be effective if actually received, in timelyfashion, by the other party.

 

(d)                                 This Agreement is the entire agreementbetween the parties hereto with respect to the subject matter hereof andsupersedes all prior oral and written agreements and negotiations between theparties.  Nothing in this Agreement shallbe deemed to be a limitation on the remedies of any of the parties under theNon-Compete Agreement.

 

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(e)                                  The headings of the several paragraphs inthis Agreement are inserted solely for the convenience of the parties and arenot a part of and are not intended to govern, limit or aid in the constructionof any term or provision hereof.

 

(f)                                    This Agreement may not be modified exceptby a written instrument signed by all parties hereto.

 

(g)                                 All clauses and covenants contained inthis Agreement are severable, and in the event any of them shall be held to beinvalid by any court, such clauses or covenants shall be limited as permittedunder applicable law, or, if the same are not susceptible to such limitation,this Agreement shall be interpreted as if such invalid clauses or covenantswere not contained herein.

 

(h)                                 This Agreement is made with reference tothe laws of the State of California and shall be governed by and construed inaccordance therewith.  Any litigationconcerning or to enforce the provisions of this Agreement shall be brought inthe courts of the State of California.

 

(i)                                     Any and all disputes arising under thisAgreement, or with respect to Executive’s employment or the other subjectmatters addressed in this Agreement (other than claims for specific performanceor other equitable relief permitted by this Agreement), shall be resolvedthrough binding arbitration.  Thearbitration shall be administered by JAMS, with the arbitration to be conductedin Los Angeles, California. Notwithstanding the foregoing, the parties shall have the rights todiscovery in accordance with California Code of Civil Procedure Section 1283.05.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement asof the date first above written.

 
|   | EXECUTIVE                          |
|--------|------------------------------------|
|   |                               |   |
|   |                               |   |
|   | /s/ Jeereddi Prasad, M.D.          |
|   | Jeereddi Prasad, M.D.              |
|   |                               |   |
|   |                               |   |
|   | ProMed Health Care  Administrators |
|   |                               |   |
|   | By:                                | /s/ Jacob Y. Terner, M.D. |
|   |                               | Jacob Y. Terner, M.D. |
|   |                               | Vice President |

 

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