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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement"), dated as of May 13, 1997, is
by and between OrthAlliance, Inc., a Delaware corporation (the "Company"), and
Xxx Xxxxxxxx ("Employee").
In consideration of the mutual promises and conditions contained
herein, the parties hereto agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ
Employee, and Employee hereby accepts employment by the Company, upon the terms
and subject to the conditions hereinafter set forth.
Section 2. DUTIES. Employee shall serve as the Chief Executive
Officer of the Company. Employee will perform the duties attendant to his
executive position with the Company under the direction of the Board of
Directors of the Company. Employee agrees to devote his reasonable best
efforts to the performance of his duties to the Company.
Section 3. TERM. The term of this Agreement shall be for five
(5) years, commencing on the date that the Registration Statement on Form S-1,
relating to an underwritten initial public offering (the "IPO") of the
Company's Common Stock, $0.001 par value ("Common Stock"), is effective (the
"Commencement Date"), and shall be automatically renewed for successive one
year terms unless either party gives to the other written notice of termination
no fewer than ninety (90) days prior to the expiration of any such term that it
does not wish to extend this Agreement.
Section 4. COMPENSATION AND BENEFITS. In consideration for the
services of the Employee hereunder, the Company will compensate Employee as
follows:
(a) Base Salary. Commencing on the date of consummation of the
IPO, Employee shall be entitled to receive a base salary of $250,000 per annum.
(b) Bonus. Employee shall be eligible to receive an annual cash
bonus in an amount equal to 30% of his base salary in the event that certain
annual financial performance targets established by the Board of Directors are
achieved.
(c) Benefits. The Company shall grant to Employee options to
purchase 300,000 shares of the Company's Common Stock at the initial public
offering price for the Company's Common Stock on terms to be agreed upon
following good faith negotiations between the Company's management team and the
underwriters of the IPO, which terms shall be consistent with the terms of any
stock option plans adopted by the Company and the terms of Section 7 hereof.
In addition, during the term of this Agreement, Employee shall be entitled to
participate in and receive benefits under any and all employee benefit plans
and programs which are from time to time generally made available to the
executive employees of the Company, subject to approval and grant by the
appropriate Company committee with respect to programs calling for such
approvals or grants.
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Section 5. EXPENSES. It is acknowledged that Employee, in
connection with the services to be performed by him pursuant to the terms of
this Agreement, will be required to make payments for travel, entertainment of
business associates and similar expenses. The Company will reimburse Employee
for all reasonable expenses of types authorized by the Company and incurred by
Employee in the performance of his duties hereunder. Employee will comply with
such budget limitations and approval and reporting requirements with respect to
expenses as the Company may establish from time to time.
Section 6. TERMINATION. Employee's employment hereunder will
commence on the Commencement Date and continue until the end of the term
specified in Section 3 hereof and any renewals of such term, except that the
employment of Employee hereunder will terminate earlier in the following
manner:
(a) Death or Disability. Immediately upon the death of Employee
during the term of his employment hereunder or, at the option of the Company,
in the event of Employee's disability, upon 30 days prior written notice to
Employee. Employee will be deemed disabled if, as a result of Employee's
incapacity due to physical or mental illness, Employee shall have been absent
from his duties with the Company on a full-time basis for 120 consecutive
business days. Employee will be eligible for short and/or long-term disability
benefits made available to Company executives.
(b) For Cause. For "Cause" immediately upon written notice by the
Company to Employee. For purposes of this Agreement, a termination will be for
Cause if (i) Employee willfully and continuously fails to perform his duties
with the Company (other than any such failure resulting from incapacity due to
physical or mental illness), (ii) Employee willfully engages in misconduct
materially and demonstrably injurious to the Company or (iii) Employee has been
convicted of a felony or a crime involving moral turpitude.
(c) Failure of IPO. Automatically in the event that the IPO is
not consummated on or before December 31, 1997.
(d) Without "Cause." Without "Cause" upon 30 days prior written
notice to Employee.
(e) Constructive Termination. At Employee's option, upon written
notice by Employee to the Company within 120 days following a Constructive
Termination. As used herein, the term "Constructive Termination" means (i) a
change in Employee's title without Employee's consent, (ii) a material
reduction in Employee's duties and responsibilities without Employee's consent,
(iii) a reduction in Employee's base compensation or maximum eligible bonus
from the immediately preceding year without Employee's consent or (iv) the
relocation of the Company's principal executive offices outside a 20 mile
radius from the location of the Company's principal executive offices at the
Commencement Date without Employee's consent.
Employee will not be entitled to any severance pay or other
compensation upon termination of his employment pursuant to Subsections 6(a),
(b) or (c) or in the event that Employee voluntarily leaves the employment of
the Company, except for any portion of his base
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salary accrued but unpaid from the last monthly payment date to the date of
termination and expense reimbursements under Section 5 hereof for expenses
incurred in the performance of his duties hereunder prior to termination. In
the event Employee's employment with the Company (i) is terminated by the
Company without Cause or (ii) is terminated by Employee within 120 days
following a Constructive Termination, the Company will pay Employee, as
Employee's sole remedy in connection with such termination, (aa) severance pay
in the amount of Employee's monthly base salary at the rate in effect
immediately preceding the termination of Employee's employment multiplied by 24
months (the "Separation Payment"), which Separation Payment will be paid by the
Company in a lump sum on the date of termination, (bb) the portion of his base
salary accrued but unpaid from the last monthly payment date to the date of
termination, (cc) expense reimbursements under Section 5 hereof for expenses
incurred in the performance of his duties hereunder prior to termination and
(dd) any unpaid bonus for any year that was completed prior to the termination
and a pro-rata portion of the annual maximum bonus for the year in which the
termination occurs.
Section 7. EFFECT OF TERMINATION ON OPTIONS/COMMON STOCK. Any
options to purchase the Company's Common Stock held by the Employee that have
not yet vested will automatically expire if the Employee's employment with the
Company is terminated for Cause as defined in Section 6(b) or if the Employee
voluntarily leaves the employment of the Company in breach of this Agreement.
If Employee's employment with the Company ends for any reason other than
termination for Cause, voluntary departure or due to death, such Employee's
options will remain exercisable and will vest and expire in accordance with the
terms of the applicable option agreements. If the Employee dies while employed
by the Company his options shall become fully exercisable on the date of his
death and shall expire twelve months thereafter. If Employee has any vested
but unexercised options upon any termination of employment, such options shall
remain exercisable for the greater of 90 days or the time period specified in
any applicable option plan or option agreement.
Section 8. CHANGE IN CONTROL TERMINATION PAYMENT.
(a) Termination Payment.
(i) Amount. Notwithstanding anything to the contrary
contained in Section 7 hereof, in the event Employee's employment with
the Company terminates for any reason (other than death) within the
twelve month period following a Change In Control (as defined in
subsection 8(b) hereof) occurring after consummation of the IPO, the
Company will pay Employee a lump sum payment (the "Termination
Payment") in cash equal to three (3) times the sum of the 3 items in
the following subsections (1) and (II):
(I) Employee's annual base compensation
determined by reference to his base salary in effect
immediately prior to the Change In Control; and
(II) the maximum bonus that Employee could receive
under any management incentive bonus plan of the Company for
the year in which the Change In Control occurs.
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The Termination Payment will also include the following:
(III) Employee's base salary accrued but unpaid
from the last payment date to the date of termination;
(IV) expense reimbursement under Section 5 hereof
for expenses incurred in the performance of his duties
hereunder prior to the termination of his employment with the
Company;
(V) any other benefit accrued but unpaid as of
the date of such termination; and
(VI) the estimated cost to Employee of obtaining
medical, dental, life and disability insurance coverage for a
period of eighteen months; provided that such coverage will be
substantially similar to the coverage provided to Employee by
Employer immediately prior to the Change In Control; and
provided further that this subsection 8(a)(i)(VI) will be
applied without regard to, and the amount payable under this
subsection 8(a)(i)(VI) is in addition to, any continuation
(COBRA) rights or conversion rights under any plan provided by
Employer, which rights are not affected by any provision
hereof.
(ii) Time for Payment; Interest. The Company will pay the
Termination Payment to Employee concurrent with Employee's termination
of employment. Employer's obligation to pay to Employee any amounts
under this Section 8, including without limitation the Termination
Payment and any Gross Up Payment due under subsection (c), will bear
interest at the maximum rate allowed by law until paid by Employer,
and all accrued and unpaid interest will bear interest at the same
rate, all of which interest will be compounded daily.
(iii) Payment Authority. Any officer of the Company (other
than Employee) is authorized to issue and execute a check, initiate a
wire transfer or otherwise effect payment on behalf of the Company to
satisfy the Company's obligations to pay all amounts due to Employee
under this Section 8.
(iv) Termination. The Company's obligation to pay the
Termination Payment will not be affected by the manner in which
Employee's employment with the Company is terminated. Without
limiting the generality of the foregoing, the Company will be
obligated to pay the Termination Payment and any Gross Up Payment
regardless of whether Employee's termination of employment is
voluntary, involuntary, for cause, without cause, in violation of any
employment agreement or other agreement in effect at the time of the
Change In Control, or due to Employee's retirement or disability.
Employee's notice of his termination of employment in connection with
a Change In Control may be made by any means. If Employee receives
the Termination Payment, the Employee shall not be entitled to receive
the Separation Payment under Section 7.
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(b) Change In Control. A Change In Control will be deemed to have
occurred for purposes hereof (i) when a change of stock ownership of the
Company of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any successor Item of a similar nature has
occurred; or (ii) upon the acquisition of beneficial ownership, directly or
indirectly, by any person (as such term is used in Section 14(d)(2) of the
Exchange Act) of securities of the Company representing 33 % or more of the
combined voting power of the Company's then outstanding securities; or (iii) a
change during any period of two consecutive years of a majority of the members
of the Board of Directors of the Company for any reason, unless the election,
or the nomination for election by the Company's shareholders, of each director
was approved by a vote of a majority of the directors then still in office who
were directors at the beginning of the period; provided that a Change In
Control will not be deemed to have occurred for purposes hereof with respect to
any person meeting the requirements of clauses (i) and (ii) of Rule 13d-1(b)(1)
promulgated under the Securities Exchange Act of 1934, as amended.
(c) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the
"Code") on "excess parachute payments" within the meaning of Section 28OG(b)(1)
of the Code, the Company will pay to Employee an amount (the "Gross Up
Payment") such that the net amount retained by Employee, after deduction of any
Excise Tax on the excess parachute payment and any federal, state and local
income tax (together with penalties and interest) and Excise Tax upon the
payment provided for by this subsection (c)(i), will be equal to the amount of
the excess parachute payment.
(ii) Applicable Rates. For purposes of determining the amount of
the Gross Up Payment, Employee will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross Up Payment is to be made and state and local income taxes at
the highest marginal rates of taxation in the state and locality of Employee's
residence on the date of his termination of employment, net of the maximum
reduction in federal income taxes that could be obtained from deduction of such
state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination
of whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Employee. If such opinion is not
finally accepted by the Internal Revenue Service (or state and local taxing
authorities), then appropriate adjustments to the Excise Tax will be computed
and additional Gross Up Payments will be made in the manner provided by this
subsection (c).
(iv) Time For Payment. The Company will pay the estimated amount
of the Gross Up Payment in cash to Employee concurrent with Employee's
termination of employment. Employee and the Company agree to reasonably
cooperate in the determination of the actual amount of the Gross Up Payment.
Further, Employee and the Company agree to make such
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adjustments to the estimated amount of the Gross Up Payment as may be necessary
to equal the actual amount of the Gross Up Payment, which in the case of
Employee will refer to refunds of prior overpayments and in the case of the
Company will refer to makeup of prior underpayments.
(d) Arbitration. Any controversy or claim arising out of or
relating to this Section 8, or the breach thereof, will be settled exclusively
by arbitration in Los Angeles, California, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment upon the award rendered by the arbitrator(s) may be entered in, and
enforced by, any court having jurisdiction thereof.
(e) No Right To Continued Employment. This Section 8 will not
give Employee any right of continued employment or any right to compensation or
benefits from the Company except the rights specifically stated herein.
(f) Exercise of Stock Options. Employee's options to purchase the
Company's Common Stock will vest completely and become immediately exercisable
upon a Change In Control and will remain exercisable for the greater of 90 days
or the time period specified in the applicable option plan or option agreement.
Section 9. CONFIDENTIAL INFORMATION. Employee recognizes and
acknowledges that certain assets of Employer and its affiliates, including
without limitation information regarding customers, pricing policies, methods
of operation, proprietary computer programs, sales, products, profits, costs,
markets, key personnel, formulae, product applications, technical processes,
and trade secrets (hereinafter called "Confidential Information") are valuable,
special and unique assets of Employer and its affiliates. Employee will not,
during or after his term of employment, disclose any of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Employee of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary
and whether by the Company or Employee, Employee will deliver to the Company
all documents and data pertaining to the Confidential 6 Information and will
not take with him any documents or data of any kind or any reproductions (in
whole or in part) of any items relating to the Confidential Information.
Section 10. NONCOMPETITION. Until two years after termination of
Employee's employment hereunder, Employee will not (i) engage directly or
indirectly, alone or as a shareholder, partner, officer, director, employee or
consultant of any other business organization, in any business activities which
(A) relate to the acquisition, consolidation or management of orthodontic
practices (the "Designated Industry") and (B) were either conducted by the
Company prior to Employee's termination or proposed to be conducted by the
Company at the time of such termination, (ii) divert to any competitor of the
Company in the Designated Industry any customer of the Company, or (iii)
solicit or encourage any officer, employee, or consultant of the Company to
leave its employ for employment by or with any competitor of the Company in the
Designated Industry. The parties hereto acknowledge that Employee's
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noncompetition obligations hereunder will not preclude Employee from owning
less than 2 % of the common stock of any publicly traded corporation conducting
business activities in the Designated Industry. Employee will continue to be
bound by the provisions of this Section 1 0 until their expiration and will not
be entitled to any compensation from the Company with respect thereto. If at
any time the provisions of this Section 10 are determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10 will be considered divisible and will become
and be immediately amended to only such area, duration and scope of activity as
will be determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter; and Employee agrees that this Section 1 0
as so amended will be valid and binding as though any invalid or unenforceable
provision had not been included herein.
Section 11. GENERAL.
(a) Notices. Except as provided in Section 8(a) hereof, all
notices and other communications hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if delivered
personally or if mailed by certified mail, return receipt requested, or by
written telecommunication, to the relevant address set forth below, or to such
other address as the recipient of such notice or communication will have
specified to the other party hereto in accordance with this Section 11(a):
If to Employer, to:
OrthAlliance, Inc.
Attn: General Counsel
00000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
If to Employee, to:
Xxx Xxxxxxxx
c/o OrthAlliance, Inc.
00000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
(b) Withholding; No Offset. All payments required to be made by
Employer under this Agreement to Employee will be subject to the withholding of
such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Company or any
other person.
(c) Equitable Remedies. Each of the parties hereto acknowledges
and agrees that upon any breach by Employee of his obligations under any of
Sections 9 and 10 hereof, the Company will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other appropriate
injunctive and equitable relief.
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(d) Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable, such provision will be fully severable
and this Agreement will be construed and enforced as if such illegal, invalid
or unenforceable provision never comprised a part hereof; and the remaining
provisions hereof will remain in full force and effect and will not be affected
by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
(e) Waivers. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder will impair such right,
power or privilege, nor will any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(f) Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
(g) Captions. The captions in this Agreement are for convenience
of reference only and will not limit or otherwise affect any of the terms or
provisions hereof
(h) Reference to Agreement. Use of the words "herein," "hereof,"
"hereto" and the like in this Agreement refer to this Agreement only as a whole
and not to any particular subsection or provision of this Agreement, unless
otherwise noted.
(i) Binding Agreement. This Agreement will be binding upon and
inure to the benefit of the parties and will be enforceable by the personal
representatives and heirs of Employee and the successors of Employer. If
Employee dies while any amounts would still be payable to him hereunder, such
amounts will be paid to Employee's estate. This Agreement is not otherwise
assignable by Employee.
(j) Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and may not be amended
except by a written instrument hereafter signed by each of the parties hereto.
(k) Governing Law. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of
California, without regard to its choice of law principles.
EXECUTED as of the date first above written.
ORTHALLIANCE, INC.
By: /s/ Xxxx Xxxxxx
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Its: Sr. Vice President
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/s/ Xxx Xxxxxxxx
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Xxx Xxxxxxxx
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SCHEDULE 10.8
OrthAlliance, Inc. ("OrthAlliance") has entered into agreements
substantially identical to Exhibit 10.8 as follows:
1. Employment Agreement dated as of May 13, 1997 by and between
OrthAlliance and P. Xxxxx Xxxxxxx. Material details in which this agreement
differs from Exhibit 10.5 are as follows:
a. Xx. Xxxxxxx is employed as Chief Operating Officer of
OrthAlliance at a base salary of $185,000 per year.
b. Xx. Xxxxxxx was granted options to purchase 100,000
shares of Common Stock.
2. Employment Agreement dated as of May 13, 1997 by and between
OrthAlliance and Xxxx X. Xxxxxx. Material details in which this agreement
differs from Exhibit 10.5 are as follows:
a. Xx. Xxxxxx is employed as Senior Vice President -
Human Resources, General Counsel and Secretary at a base
salary of $165,000 per year.
b. Xx. Xxxxxx was granted options to purchase 75,000
shares of Common Stock.
