EXHIBIT 10.65
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
March 16, 2002, by and between Xxxxxxxx X. Xxxx, an individual resident of the
State of Florida ("Employee"), and Horizon Medical Products, Inc., a Georgia
corporation (the "Employer").
W I T N E S S E T H:
WHEREAS, Employee and Employer desire to enter into a new Employment
Agreement that replaces and supersedes in its entirety the Employment Agreement
dated April 3, 1998 between Employee and Employer, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms hereof, the Employer hereby employs Employee, and
Employee hereby accepts such employment. Employee will serve as Chairman of the
Board of Directors and Chief Executive Officer of Employer. Employee agrees to
devote his full business time and best efforts to the performance of the duties
that the Board of Directors of Employer (the "Board of Directors") may assign
Employee from time to time.
Section 2. Term of Employment.
The term of Employee's employment hereunder (the "Term") shall be from
March 16, 2002 (the "Effective Date") until the earlier of (i) March 16, 2003 or
(ii) the occurrence of any of the following events:
(a) The death or total disability of Employee (total
disability meaning the failure to fully perform his normal required services
hereunder for a period of ) three (3) consecutive months during the Term hereof,
as determined by the Board of Directors, by reason of mental or physical
disability);
(b) The termination by Employer of Employee's employment
hereunder, upon prior written notice to Employee, for "good cause", as
determined by the Board of Directors. For purposes of this Agreement, "good
cause" for termination of Employee's employment shall exist (i) if Employee is
convicted of, pleads guilty to, or confesses to any felony or any act of fraud,
misappropriation, or embezzlement, (ii) if Employee has engaged in a dishonest
act to the material damage or prejudice of Employer or a subsidiary of Employer,
or in conduct or activities materially damaging to the business of Employer or a
subsidiary of Employer, (iii) if Employee fails to comply with the terms of this
Agreement, and, within thirty (30) days after written notice from Employer of
such failure, Employee has not corrected such
failure or, having once received such notice of failure and having so corrected
such failure, Employee at any time thereafter again so fails, or (iv) if
Employee fails to follow a lawful directive of the Board of Directors (which is
consistent with Employee's position as Chairman of the Board and Chief Executive
Officer) and, within thirty (30) days after written notice from Employer of such
failure, Employee has not corrected such failure; or
(c) The termination of this Agreement by either party upon at
least ninety (90) days prior written notice.
Section 3. Compensation.
3.1 Term of Employment. Employer will provide Employee with the
following salary, expense reimbursement, and additional employee benefits during
the term of employment hereunder:
(a) Salary. Employee will be paid a salary (the "Salary") of
no less than Two Hundred and Seventy Thousand Dollars ($270,000) per annum, less
deductions and withholdings required by applicable law. The Salary shall be paid
to Employee in equal monthly installments (or on such more frequent basis as
other executives of Employer are compensated).
(b) Bonus.
(i) Employee will be entitled to annual bonus (the
"Bonus") equal to 50% of his Salary for the entire 2002 fiscal year,
based upon the achievement during the 2002 fiscal year of Employer
measured at the end of such year of a 25% or more (but less than 35%)
increase in the earnings per share of the Common Stock from the
earnings per share of the Common Stock for the 2001 fiscal year. If
such increase in earnings per share is 35% or more, then the Bonus for
such year shall equal 100% of Employee's Salary for the entire 2002
fiscal year. Any Bonus earned shall be paid promptly upon the
availability of annual financial results for 2002 (which is expected to
occur in February 2003). Employee shall also be entitled to receive a
pro rated Bonus, calculated based on the formula set forth above, for
the period commencing January 1, 2003 and terminating on March 31, 2003
based upon the achievement during such period of an earnings per share
increase of either 25% or 35%, as described above, when compared with
the same period during 2002. Such Bonus for 2003, if any, shall be
payable May 1, 2003. In the calculation of such Bonus under this
Section 3.1(b)(i), all restructuring costs and charges incurred by
Employer in connection with the refinancing in March 2002 will be
disregarded.
(ii) Employee will be entitled, at any time, whether
employed by the Company or not, to an additional Bonus in an amount
equal to one percent (1%) of the principal amount of any Purchaser
Senior Subordinated Convertible Note issued to ComVest Venture
Partners, L.P. and any Additional Note (as defined in the Note
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Purchase Agreement) issued to the Additional Note Purchasers upon and
to the extent any such Note is paid or converted, payable upon such
payment or conversion.
(c) Car Allowance. Employer shall provide Employee with a
leased automobile during the Term of this Agreement, the monthly lease payments
for which shall not exceed $1,500.00, and shall pay for gasoline, insurance, and
maintenance expenses for such automobile.
(d) Club Dues. Employee shall be reimbursed for the initiation
fee and monthly dues (not in excess of the initiation fee and monthly dues of
the Capital City Club) for any one club joined by Employee during the Term.
Employee shall be reimbursed for the dues and expenses incurred by Employee and
his family in connection with his membership in the Young Presidents
Organization.
(e) Vacation. Employee shall receive eight (8) weeks vacation
time per calendar year during the term of this Agreement. Any unused vacation
days in any calendar year may not be carried over to subsequent years.
(f) Expenses. Employer shall reimburse Employee for all
reasonable and necessary expenses incurred by Employee in furtherance of the
Company's business at the request of and on behalf of Employer.
(g) Benefit Plan. Employee may participate in such medical,
dental, disability, hospitalization, life insurance, and other benefit plans
(such as pension and profit sharing plans) as Employer maintains from time to
time for the benefit of other executives of Employer, on the terms and subject
to the conditions set forth in such plans. Without limiting the foregoing,
Employer shall pay the premiums on the disability policies maintained on
Employee's behalf and set forth on Exhibit "A" hereto. Employer shall also
reimburse Employee with respect to any reasonable medical and dental expenses
incurred by Employee and/or his immediate family members which are not
reimbursable under the medical and dental benefit plans maintained by Employer
in which Employee participates.
3.2 Effect of Termination or Change of Control.
(a) Except as hereinafter provided, upon the termination of
the employment of Employee hereunder for any reason, Employee shall be entitled
to all compensation and benefits earned or accrued under Section 3.1 as of the
effective date of termination (the "Termination Date"), but from and after the
Termination Date no additional compensation or benefits shall be earned by
Employee hereunder. Except in the case of a termination of the employment of
Employee pursuant to Section 2(b) hereof or a termination by Employee of
Employee's employment pursuant to Section 2(c) hereof, Employee shall be deemed
to have earned any Bonus payable with respect to the calendar year in which the
Termination Date occurs on a prorated basis (with the Bonus calculated as of the
end of the month in which termination occurs). Any such Bonus shall be payable
on (i) the date on which the Bonus would
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have been paid had Employee continued his employment hereunder if the
Termination Date occurs during December or (ii) the 30th day following the end
of the month in which the Termination Date occurs and shall be calculated as of
the end of the month in which the Terminate Date occurs. If Employee's
employment hereunder is terminated by Employer pursuant to Section 2(c) hereof,
or if Employee is not offered employment with Employer commencing March 16, 2003
on terms and conditions that are at least as favorable as the terms and
conditions of this Agreement, or if Employee continues his employment with
Employer after March 16, 2003 and such employment is then terminated at any time
by Employer for any reason other than good cause (as defined in Section 2(b)
above), then, in any such event in addition to any other amount payable
hereunder, Employer shall continue to pay Employee his normal Salary pursuant to
Section 3.1(a) for twelve (12) months after the Termination Date, plus an amount
equal to Employee's Bonus for the twelve (12) months immediately prior to the
Termination Date, in periodic payments on the dates each month on which
Employer's employees are paid. Employee shall continue to be eligible to receive
the benefits set forth in Section 3.1(c) and Section 3.1(g) above during such
twelve (12) months.
(b) Upon the occurrence of a Change in Control Event (as
defined below) and if at the time of the Change in Control Event Employee is
employed with Employer or is receiving severance payments under Section 3.2(a)
above, then Employer will pay to Employee (in lieu of an obligation to make
further payments to Employee under or on account of Section 3.1(a)) the annual
Salary that would have been payable to Employee under this Agreement for each of
the three (3) years after the Change in Control Event. The amounts payable to
Employee under the previous sentence of this Section 3.2(b) shall be paid by
Employer in equal monthly payments during such period or in a lump sum, at the
option of Employee.
If any payment or other benefit (a "Termination
Payment") received or to be received by Employee in connection with a Change in
Control Event (whether or not this Agreement is terminated) or Employee's
termination of employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement, or agreement with Employer, with any person whose
actions result in a Change in Control Event or with any person affiliated with
Employer or such person) is or will be subject to the tax (the "Excise Tax")
imposed by ss.4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), Employer shall pay to Employee a Gross-Up Payment (as defined below) to
the extent provided by the third paragraph of this Section 3.2(b). A Gross-Up
Payment shall be payable pursuant to this Section 3.2(b) on and subject to the
following terms and conditions:
(i) At the time the applicable Termination Payment is
made, an additional amount (the "Gross-Up Payment") shall be paid by
Employer such that the net amount retained by Employee, after deduction
of any Excise Tax on such Termination Payment and any federal, state,
and local income tax, employment tax, and Excise Tax on the Gross-Up
Payment, shall be equal to the amount or value of such Termination
Payment. For purposes of determining whether any such Termination
Payment will be subject to the Excise Tax, all Termination Payments
shall be treated as "parachute payments" within the meaning
ofss.280G(b)(2) of the Code, and all "excess parachute
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payments" within the meaning of ss.280G(b)(1) of the Code shall be
treated as being subject to the Excise Tax, unless in the opinion of
tax counsel reasonably acceptable to Employee and selected by the
accounting firm which, immediately prior to the Change in Control
Event, was Employer's independent auditors, such payments (in whole or
in part) do not constitute "parachute payments" within the meaning of
ss.280G of the Code or represent reasonable compensation for services
actually rendered in excess of the "base amount" allocable to such
reasonable compensation. The full amount of the Gross-Up Payment shall
be treated as being subject to the Excise Tax. The value of any
non-cash benefits or any deferred payment or benefit shall be
determined in accordance with the principles of ss.ss.280G(d)(3) and
(4) of the Code.
(ii) For purposes of determining the amount of any
Gross-Up Payment, Employee shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar
year in which the applicable Termination Payment or Gross-Up Payment is
made, and shall be deemed to pay state and local income taxes at the
highest marginal rates of taxation in the state and locality of his
residence on the date the applicable Termination Payment or Gross-Up
Payment is made, net of the maximum reduction in federal income taxes
that could be obtained from deduction of such state and local taxes.
(iii) If the Excise Tax or income tax payable with
respect to a Gross-Up Payment as finally determined exceeds the amount
taken into account or paid to Employee at the time the applicable
Termination Payment or Gross-Up Payment is made (including by reason of
any payment the existence or amount of which cannot be determined at
the time of the applicable Gross-Up Payment), Employer shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest payable by Employee with respect to such excess) at the time
that the amount of such excess if finally determined.
For purposes of this Agreement a "Change in Control
Event" shall mean the occurrence of either one of the following transactions on
or prior to March 16, 2005:
(1) the adoption of a plan of merger or consolidation of
Employer with any other corporation as a result of which the holders of
the outstanding voting stock of Employer as a group would receive less
than 50% of the voting stock of the surviving or resulting corporation;
or
(2) the sale of substantially all of the assets of Employer,
and
(3) as a result of the transaction described in clause (1) or
(2) above, the shareholders of Employer receive cash and/or securities
valued on the date of the consummation of the transaction at $3.00 or
more per share.
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Section 4. Other Payments and Reimbursements.
In consideration for Employee's entering into this Agreement, Employer
shall:
(a) pay to Employee at the closing of the Transaction (defined
below) the salary of Employee during the period of October 16, 2001 through the
date of such payment (at the salary rate in effect during such period), which
salary was not previously paid to Employee pursuant to the provisions of the
Forbearance Agreement (as defined below); (b) reimburse Employee at the closing
of the Transaction for all funds advanced personally by Employee on behalf of
Employer during Employee's efforts in 2002 to refinance its senior secured
indebtedness;
(c) pay to Employee within one week after the closing of the
Transaction bonus compensation in the amount of $319,921.43, with which payment
Employee shall immediately repay to Employer all principal and accrued interest
under outstanding promissory notes payable by Employee to Employer;
(d) grant options to purchase the common shares of Employer
pursuant to the provisions of that certain Option Agreements dated March 16,
2002; and
(e) issue to Employee 75,000 shares of Employer's common stock
in consideration for Employee's funding personally one-half of the principal
amount of the Convertible Promissory Bridge Note dated March 16, 2002.
Except as otherwise provided above in this Section 4, Employee hereby
forever waives and relinquishes any right or interest that Employee may have or
claim to have with respect to all Salary compensation, bonus compensation, or
any other compensation or benefits accruing prior to the date hereof under
Employee's prior Employment Agreement dated April 3, 1998, as amended, between
Employer and Employee.
For purposes of this Section 4:
(i) the term "Transaction" shall mean the refinancing
of the senior secured indebtedness of Employer in a financing described
under that certain Note Purchase Agreement dated March 1, 2002 (the
"Note Purchase Agreement"); and
(ii) the term "Forbearance Agreement" shall mean that
certain Forbearance Agreement dated March 30, 2001 between Employer and
Bank of America, N.A., as amended.
Section 5. Miscellaneous.
5.1 Severability. The covenants in this Agreement shall be construed as
covenants independent of one another and as obligations distinct from any other
contract between
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Employee and Employer. Any claim that Employee may have against Employer shall
not constitute a defense to enforcement by Employer of this Agreement.
5.2 Notices. Any notice or other document to be given hereunder by any
party hereto to any other party hereto shall be in writing and delivered in
person or by courier, by telecopy transmission, or sent by any express mail
service, postage or fees prepaid to the following addresses:
Employer: Attention: President
Seven North Parkway Square
0000 Xxxxxxxxx Xxxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Employee: Xx. Xxxxxxxx X. Xxxx
3935 Paces Manor
Xxxxxxx, Xxxxxxx 00000
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
5.3 Binding Effect. This Agreement inures to the benefit of, and is
binding upon, Employer and its respective successors and assigns, and Employee,
together with Employee's executor, administrator, personal representatives,
heirs, and legatees.
5.4 Entire Agreement. This Agreement is intended by the parties hereto
to be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements, or agreements to the contrary
heretofore made. This Agreement supersedes and terminates all prior employment
and compensation agreements, arrangements, and understandings between or among
Employer and Employee. This Agreement may be modified only by a written
instrument signed by all of the parties hereto.
5.5 Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed, and governed by and in accordance
with, the laws of the State of Georgia without reference to its conflicts of law
principles. No provision of this Agreement shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority or by any board of arbitrators by reason of
such party or its counsel having or being deemed to have structured or drafted
such provision.
5.6 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
HORIZON MEDICAL PRODUCTS, INC.
By /s/ Xxxxxxx X. Xxxxxxxx, Xx.
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Xxxxxxx X. Xxxxxxxx, Xx., President
EMPLOYEE:
/s/ Xxxxxxxx X. Xxxx
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Xxxxxxxx X. Xxxx
