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Exhibit 10.88
Prospect Medical Holdings, Inc.
Stock Option Agreement
WHEREAS, the Compensation Committee (the "
Committee ") of the Board of Directors of Prospect Medical
Holdings, Inc. (the " Company ") has determined that it
would be in the best interests of the Company and
its stockholders to grant the Option provided for herein
to the Optionee as set forth in the Notice of Grant of Stock Option
attached as Exhibit "A" (the " Notice ").
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth, the parties agree as follows:
1.
Definitions . Whenever the following terms
are used in this Stock Option Agreement (the " Agreement "),
they shall have the meanings set forth below and as defined in the
Notice.
(a)
" Affiliate " means any entity that is
consolidated with the Company for financial reporting
purposes.
(b)
" Cause " includes (and is not limited to)
dishonesty with respect to the Company or any Affiliate,
insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, and conduct
substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Committee as to the existence
of "Cause" will be conclusive on the Optionee and the
Company.
(c)
" Change in Control " occurs when, after the
grant of the Option, any person (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended, or any successor thereto (the " Act ") (other
than any person who on the date of grant of the Option is a
director or officer, or holder of more than 10% of the Shares, of
the Company or an Affiliate of the Company) is or becomes the
beneficial owner (as defined in Rule 1 3d-3 of the Act)
directly or indirectly, of securities of the Company representing
more than 50% of the combined voting power of the Company’s
then-outstanding securities entitled to vote in the election of
directors
(d)
" Code " means the Internal Revenue Code of
1986, as amended, or any successor thereto.
(e)
" Disability " has the meaning ascribed to it
in an employment agreement between the Company and the Optionee or,
if not defined therein, then it shall have the meaning ascribed to
it under Section 22(e)(3) of the Code, as determined by
the Committee.
(f)
" Expiration Date " means the date set forth
on the Notice.
(g)
" Fair Market Value " means, as of any date,
the value of the Shares determined as follows:
(i)
if the Shares are publicly traded and are listed on
a national securities exchange, the last reported sale price or, if
no such reported sale takes place on such date, the
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average of the closing bid and asked prices on the principal
national securities exchange on which the Shares are listed or
admitted to trading;
(ii)
if the Shares are quoted on the American Stock
Exchange (" AMEX "), the last reported sale price on the
AMEX or, if no such reported sale takes place on such date, the
average of the closing bid and asked prices;
(iii)
if the Shares are publicly traded but are not quoted
on the AMEX nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked
prices on such date, as reported by the Wall Street Journal, for
the over-the-counter market; or
(iv)
if none of the foregoing is applicable, by the
Committee in good faith.
(h)
" Good Reason " means (i) a breach by
the Company or any Affiliate of any employment or consulting
agreement to which the Optionee is a party and (ii) following
a Change in Control, (x) the failure of the Company to pay or
cause to be paid the Optionee’s base salary or annual bonus
when due or (y) any substantial and sustained diminution in
the Optionee’s authority or responsibilities materially
inconsistent with the Optionee’s position; provided that
either of the events described in clauses (x) and
(y) will constitute Good Reason only if the Company fails to
cure such event within 30 days after receipt from the Optionee of
written notice of the event which constitutes Good Reason;
provided, further, that "Good Reason" will cease to exist for an
event on the sixtieth (60th) day following the later of its
occurrence or the Optionee’s knowledge thereof, unless
the Optionee has given the Company written notice of his or her
termination of employment for Good Reason prior to such
date.
(i)
" Shares " means shares of common stock of
the Company, $0.01 par value per share.
(j)
" Vested Portion " means, at any time, the
portion of an Option which has become vested, as described in
Section 3 of this Agreement.
2.
Grant of Option . The Company hereby
grants to the Optionee the right and option (the " Option ")
to purchase, on the terms and conditions set forth in the Notice
and hereinafter set forth, the number of Shares set forth in the
Notice. The purchase price of the Shares subject to the
Option (the " Option Price ") shall be as set forth on the
Notice. The Option is intended to be a non-qualified stock
option, and as such is not intended to be treated as an option that
complies with Section 422 of the Internal Revenue Code of
1986, as amended.
3.
Vesting of the Option.
(a)
In General . Subject to Sections
3(b) and 3(c), the Option shall vest and become exercisable at
such times as are set forth in the Notice.
(b)
Change in Control . Notwithstanding the
foregoing, in the event of a Change in Control, the Option shall
become vested as to all the Shares subject thereto.
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(c)
Termination of Employment . If the
Optionee’s employment with the Company and its Affiliates is
terminated by the Company for cause (including, unless otherwise
determined by the Committee, Optionee’s change in status from
an employee to a non-employee (other than director of the Company
or any Affiliate)), or if the Optionee terminates his employment
without Good Reason, the Option, to the extent not then vested,
shall be immediately canceled by the Company without consideration;
provided, however, that if the Optionee’s Employment is
terminated for any other reason, including the death or Disability
of the Optionee, the unvested portion of the Option, to the extent
not previously cancelled or forfeited, shall immediately become
vested and exercisable. The Vested Portion of the Option
shall remain exercisable by the Optionee (or his representative)
for a period ending on the earlier of (A) three years
following the date of such termination or (B) the Expiration
Date. If the Optionee is absent from work with the Company or
with a Affiliate because of a temporary disability (any disability
other than a Disability), or on an approved leave of absence for
any purpose, the Optionee shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have
terminated employment, except to the extent that the Committee so
determines.
4.
Exercise of Option . Except as provided
below, the Vested Portion of the Option shall remain exercisable
until the Expiration Date.
(a)
The Vested Portion of an Option may be exercised by
delivering to the Company at its principal office written notice of
intent to so exercise; provided that the Option may be exercised
with respect to whole Shares only. Such notice shall specify the
number of Shares for which the Option is being exercised, shall be
signed (whether or not in electronic form) by the person exercising
the Option and shall make provision for the payme
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