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EXHIBIT 99.3
STOCK OPTION ACKNOWLEDGEMENT AGREEMENT
This Stock Option Acknowledgment Agreement ("Agreement") is entered into
as of October __, 1997 among Health Partners, Inc., a Delaware corporation (the
"Company"), FPA Medical Management, Inc., a Delaware corporation ("FPA"),
and FirstName, (the "Optionee").
WHEREAS, pursuant to (the) stock option agreement(s), the Company has
granted to the Optionee (an) option(s) (the "Options") to purchase the number of
common shares of the Company ("Company Common Shares") set forth on Schedule A
hereto at the exercise price (or prices) set forth opposite such number of
Company Common Shares;
WHEREAS, FPA and the Company have entered into an Agreement and Plan of
Merger (the "Merger Agreement") dated as of July 1, 1997, pursuant to which the
Company is merging (the "Merger") with a subsidiary of FPA and the Company is
becoming a wholly-owned subsidiary of FPA; and
WHEREAS, the Company, the Optionee and FPA desire to enter into this
Agreement to provide that at the Effective Time the Options shall be canceled
and exchanged for shares of fully paid common stock of FPA $0.002 par value per
share ("FPA Common Stock") having a market value immediately prior to the
Effective Time equal to the fair market value of the Options (the "Option
Value"), determined using a variation of the Black-Scholes option pricing model
as calculated by ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. in the manner set forth on Schedule B hereto.
Terms not defined herein shall have the meanings ascribed to them in the Merger
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company, FPA and the Optionee hereby agree as follows:
1. Exchange Options. At the Effective Time, the Options which are
outstanding immediately prior to the Effective Time shall be canceled and the
Optionee shall receive that number of fully paid shares of FPA Common Stock,
decreased to the nearest whole share, having an aggregate fair market value
immediately prior to the Effective Time equal to the Option Value. FPA will not
pay cash to the Optionee in lieu of issuing fractional shares of FPA Common
Stock. For purposes of this Section 1, the market value of a share of FPA Common
Stock at the Effective Time shall be equal to the average of the closing prices
of FPA Common Stock as reported on the NASDAQ National Market for the ten
consecutive trading days ending on the date two trading days prior to the
Effective Time. The shares of FPA Common Stock issuable pursuant to this Section
1 shall be registered under the Securities Act of 1933, as amended.
2. Termination of Agreement. This Agreement shall terminate and
shall be of no further force or effect if the Merger Agreement shall be
terminated and the Merger shall not become effective pursuant to the terms
thereof. Neither FPA nor the Company shall have any liability to the Optionee
upon any such termination.
3. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Optionee and by his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and by the Company and FPA and their respective successors and assigns.
4. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered, when delivered by courier or
overnight express service or five days after having been sent by certified or
registered mail, postage prepaid, addressed (a) if to the Optionee, to the
Optionee's address set forth in the
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records of the Company, or if to the Company, to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Chief Executive
Officer, Health Partners, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with a
copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President and General Counsel FPA Medical
Management, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or (b) to
such other address as any party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
5. Governing Law; Validity. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware without regard to the
applicable principles of conflicts of laws. The invalidity or enforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any of the other provisions of this Agreement, which other provisions shall
remain in full force and effect.
6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
7. Miscellaneous. No provisions of this Agreement may be modified
or waived unless such modification or waiver is agreed to in writing and
executed by the Optionee and by a duly authorized officer of the Company and of
FPA. No waiver by any party hereto at any time of any breach by another party
hereto of, or failure to comply with, any condition or provision of this
Agreement to be performed or complied with by such other party shall be deemed a
waiver of any similar or dissimilar conditions or provision at the same or at
any prior or subsequent time. Failure by the Optionee, the Company or FPA to
insist upon strict compliance with any provision of this Agreement or to assert
any right which the Optionee, the Company or FPA may have hereunder shall not be
deemed to be a waiver of such provision or right or any other provision of or
right under this Agreement.
IN WITNESS WHEREOF, both the Company and FPA has caused this Agreement
to be executed by a duly authorized officer and the Optionee has executed this
Agreement as of the day and year first above written.
HEALTH PARTNERS, INC.
By: _________________________________
FPA MEDICAL MANAGEMENT, INC.
By: _________________________________
OPTIONEE:
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SCHEDULE A
SCHEDULE OF OPTIONS
Number of Date of Vested Unvested Exercise
Date of Grant Shares Vesting Shares Shares Price
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* Options expire 10 years from date of grant.
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SCHEDULE B
DETERMINATION OF OPTION VALUE
Valuation Methodology
Calculations made by ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. will be based on the
Black-Scholes option pricing model, utilizing assumptions based on, among other
things, information provided by the Company and existing market conditions. In
determining the final value received by option holders, HPI will apply an annual
turnover discount to the Black-Scholes outputs for the unvested options for the
probability that an option holder will not complete the vesting period, and thus
will not receive full ownership of the entire option grant. The following are
the assumptions used and the valuation results:
Valuation Assumptions
HPI Stock Price on Valuation Date(1) $_____________
FPA Common Stock Price (2) $_____________
Valuation Date Close of business two days prior to
the Effective Time
Annual Dividend $_____________
Interest Rate ______________%
Volatility ______________%
Annual Turnover ______________
Valuation Results
Exercise Number of Vesting Vested Option Unvested Total Option
Date of ▇▇▇▇▇ ▇▇▇▇▇ Options Date Value Option Value Value
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$
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Total Option Value $
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Number of FPA Shares to be Issued
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(1) Based on FPA Common Stock Price, as defined below.
(2) Stock price calculated as the average closing price of FPA Common Stock for
the ten trading days ending two trading days prior to the Effective Time.