EXHIBIT 10.15
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into as of
November 22, 2005 (the "Effective Date") by and between Xxxxxx Medical
Technology, Inc., a Delaware corporation (the "Company"), and Xxxxx X. Xxxx (the
"Employee").
Introduction. The Employee is an employee of the Company. The Company and
the Employee desire to set forth the terms and conditions of the Employee's
employment with the Company. Based on the foregoing, and for and in
consideration of the mutual covenants contained herein, the parties, intending
to be legally bound, hereby agree as follows:
1. Employment. The Company hereby employs the Employee, and the Employee
hereby accepts employment, upon the terms and conditions herein set forth.
2. Duties. The Employee is the Vice President, General Counsel and
Secretary of the Company and hereby promises to perform and discharge well and
faithfully the duties which may be assigned to him from time to time by the
President of the Company or the Board of Directors of the Company (the "Board")
in connection with the conduct of the Company's business.
3. Extent of Services. The Employee shall devote his entire time,
attention, and energies to the business of the Company and shall not, without
the written approval of the Company, during the term of this Agreement be
engaged in any other business activity, regardless of whether such activity is
pursued for gain, profit or other pecuniary advantage; provided, however, that
this requirement shall not be construed as preventing the Employee from (a)
investing his personal assets in businesses which do not compete with the
Company in such form or manner as will not require any services on the part of
the Employee in the operation of the affairs of the companies in which such
investments are made and in which his participation is solely that of an
investor, or (b) purchasing securities in any corporation engaged in a business
competitive to that of the Company whose securities are regularly traded on the
Nasdaq Stock Market, a national or regional stock exchange, or the
over-the-counter market, provided that such purchase shall not result in his
collectively owning beneficially at any one time one percent (1%) or more of the
equity securities of such corporation. Nothing in this paragraph 3 shall prevent
the Employee from serving on the board of directors of any other company, so
long as the Board has provided written approval of each directorship held by the
Employee.
4. Compensation Matters.
(a) Base Salary. For services rendered under this Agreement, the
Company shall pay the Employee a base salary of $175,000 per year (the "Base
Salary"), which shall be payable (after deduction of applicable payroll taxes)
in accordance with the Company's customary payroll practices in effect from time
to time.
(b) Incentive Bonus. During the Employee's employment hereunder, in
addition to the Base Salary, the Employee shall be eligible to receive an annual
performance incentive bonus (an "Incentive Bonus") in accordance with the terms
and subject to the
conditions of the Company's Executive Performance Incentive Plan, as the same
may be amended from time to time (the "Incentive Plan"). The Employee's
entitlement to receive an Incentive Bonus for any calendar year will depend on
whether, and to what extent, certain performance goals established for such year
by the Compensation Committee of the Board (the "Committee") have been achieved.
The Incentive Bonus, if any, payable to the Employee for any calendar year shall
not exceed two (2) times the Base Salary earned by the Employee in such year.
The Committee shall determine in good faith the Employee's entitlement to an
Incentive Bonus based on the achievement of such performance goals as soon as
reasonably practicable after the end of each calendar year. The Company shall
pay the Incentive Bonus, if any, to the Employee within ten (10) days after the
Committee makes such determination and in any event not later than March 15 of
the year following the calendar year in which the services upon which the
Incentive Bonus is based were performed.
(c) Equity Incentive Plan Awards. The Employee shall be eligible to
receive stock options and other awards granted by the Committee from time to
time under the Company's 1999 Equity Incentive Plan, as the same may be amended
from time to time (the "Equity Plan"). Any such grant of stock options or other
awards under the Equity Plan shall be made in accordance with and subject to the
terms of the Equity Plan and any agreement pursuant to which such stock options
or other awards are granted.
(d) Fringe Benefits. The Employee shall be eligible to receive, and to
participate in programs for, such fringe benefits (including, without
limitation, medical insurance and retirement benefits) as the Company may make
available generally to its executive officers from time to time during the term
of this Agreement. The Employee shall be responsible for making any generally
applicable employee contributions required under such fringe benefit programs.
(e) Annual Compensation Review. The Committee shall review the
Employee's compensation at least once per year and shall make any increase to
the Base Salary or award any bonus to the Employee that the Committee, in its
sole and absolute discretion, determines is merited based upon the Employee's
performance and is consistent with the Company's compensation policies. The
Company shall pay any bonus to the Employee not later than March 15 of the year
following the year in which the services upon which the bonus in based were
performed.
5. Sick Leave and Vacation. During the term of this Agreement, the Employee
shall be entitled to annual vacation of at least five (5) weeks, or such greater
time period if permitted by Company policy, to be taken at his discretion in a
manner consistent with his obligations to the Company under this Agreement. The
actual dates of such vacation periods shall be agreed upon through mutual
discussions between the Company and the Employee; provided, however, that the
Company shall have the ultimate decision with respect to the actual vacation
dates to be taken by the Employee, which decision shall not be unreasonable. The
Employee also shall be entitled to sick leave consistent with Company policy.
6. Expenses. During the term of this Agreement, the Company shall reimburse
the Employee for all reasonable out-of-pocket expenses incurred by the Employee
in connection
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with the business of the Company and in performance of his duties under this
Agreement upon the Employee's presentation to the Company of an itemized
accounting of such expenses with reasonable supporting data.
7. Term; Termination; Certain Effects of Termination.
(a) The Employee's employment by the Company under this Agreement
shall commence on the Effective Date and shall expire on March 31, 2007 (the
"Expiration Date"). Notwithstanding the foregoing but subject to paragraph 7(b),
the Company, in its sole and absolute discretion, may terminate the Employee's
employment and the Company's obligations hereunder as follows:
(i) upon 30 days' notice if the Employee becomes Disabled (as
defined herein);
(ii) for Cause (as defined herein) upon notice of such
termination to the Employee; or
(iii) without Cause upon 30 days' notice of such termination to
the Employee.
(b) (i) If the Employee's employment by the Company is terminated due
to his becoming Disabled pursuant to paragraph 7(a)(i), the Company, subject to
paragraph 11(c), shall provide to the Employee with respect to a period of
twelve (12) months beginning immediately after the date of termination (A) (1)
the Base Salary for such period at the Base Salary on the date of termination,
minus (2) the amount or amounts (if any) that the Employee receives during such
period under any disability insurance policy or plan maintained by the Company
or the Employee or under Social Security or similar laws, which net amount shall
be payable (after deduction of applicable payroll taxes) in accordance with the
Company's customary payroll practices in effect from time to time, and (B)
continued coverage for such period under the Company's then existing health
benefit and life insurance programs on the same terms that were applicable to
the Employee on the date of termination.
(ii) If the Employee's employment by the Company is terminated
for Cause pursuant to paragraph 7(a)(ii), or if the Employee resigns from his
employment with the Company other than for Good Reason (as defined herein), the
Company, subject to paragraph 11(c), may, but shall not be obligated to, provide
to the Employee, for and in consideration of the Employee's compliance with the
covenants set forth in paragraph 11, with respect to a period of up to
twenty-four (24) months beginning immediately after the date of termination or
resignation, as determined by the Company in its sole and absolute discretion,
the Base Salary for such period at the Base Salary on the date of termination or
resignation, which amount shall be payable (after deduction of applicable
payroll taxes) in accordance with the Company's customary payroll practices in
effect from time to time and with a final payment due not later than March 15 of
the year following the year in which the termination or resignation occurred.
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(iii) If the Employee's employment by the Company is terminated
without Cause pursuant to paragraph 7(a)(iii), or if the Employee resigns from
his employment with the Company for Good Reason, or if after the occurrence of a
Change in Control (as defined herein) the term of this Agreement expires as set
forth in the first sentence of paragraph 7(a) and the Employee's employment by
the Company is terminated without Cause within twelve (12) months after such
expiration, the Company, subject to paragraph 11(c), shall provide to the
Employee, for and in consideration of the Employee's compliance with the
covenants set forth in paragraph 11, with respect to a period of not less than
twelve (12) months and not more than twenty-four (24) months beginning
immediately after the date of termination, as determined by the Company in its
sole and absolute discretion, (A) the Base Salary for such period at the greater
of (I) the Base Salary on the Expiration Date, if applicable, or (II) the Base
Salary on the date of termination, which amount shall be payable (after
deduction of applicable payroll taxes) in accordance with the Company's
customary payroll practices in effect from time to time and with a final payment
due not later than March 15 of the year following the year in which the
termination occurred, and (B) continued coverage for such period under the
Company's then existing health benefit and life insurance programs on the same
terms that were applicable to the Employee on the date of termination.
(c) The Employee shall be under no obligation to mitigate any of the
costs incurred by the Company in providing post-employment pay and benefits to
the Employee under paragraph 7(b).
(d) For the purposes of this Agreement:
The term "Cause" means the occurrence on or after the Effective
Date of any of the following:
(i) the determination by the Board that the Employee has ceased
to perform his duties as an employee of the Company (other than as a result of
becoming Disabled), which failure amounts to an intentional and extended neglect
of his duties hereunder;
(ii) the death of the Employee;
(iii) the determination by the Board that the Employee has
engaged or is about to engage in conduct materially injurious to the Company;
(iv) the Employee having been convicted of a felony;
(v) the Employee's participation in activities proscribed by the
provisions of paragraphs 9 or 11 or his material breach of any of the other
covenants herein; or
(vi) the Employee's violation of the Tennessee Rules of
Professional Conduct as adopted by the Tennessee Supreme Court (the "TRPC").
The term "Change in Control" means the first to occur on or after
the Effective Date of any of the following:
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(i) the acquisition by any person or persons acting as a group
("Person") of capital stock of Xxxxxx Medical Group, Inc., a Delaware
corporation and the sole stockholder of the Company ("WMG"), which, when added
to any capital stock of WMG already owned by the Person, constitutes more than
fifty percent (50%) of either (A) the total fair market value of the outstanding
capital stock of WMG, or (B) the total voting power of the outstanding capital
stock of WMG; provided, however, that a Change in Control will not be deemed to
have occurred when any Person who owns more than fifty percent (50%) of the
total fair market value or the total voting power of the outstanding capital
stock of WMG as of the date of this Agreement acquires any additional capital
stock of WMG; and provided further, that an increase in the percentage of the
outstanding capital stock of WMG owned by a Person as a result of a transaction
in which WMG acquires its capital stock in exchange for property will be treated
as an acquisition of such capital stock by such Person; or
(ii) the acquisition by a Person, in a single transaction or a
series of transactions within a twelve (12) month period, of capital stock of
WMG representing not less than thirty-five percent (35%) of the total voting
power of the outstanding capital stock of WMG; or
(iii) the acquisition by a Person, in a single transaction or a
series of transactions within a twelve (12) month period, of consolidated assets
of WMG which have a total gross fair market value of not less than forty percent
(40%) of the total gross fair market value of all of the consolidated assets of
WMG immediately prior to such acquisition(s), in each case without regard to any
liabilities associated with such assets; provided, however, that a Change in
Control will not be deemed to have occurred when such assets are acquired by:
(A) an entity of which WMG owns, directly or indirectly,
fifty percent (50%) or more of the total fair market value or the total voting
power of the outstanding capital stock;
(B) a Person which owns, directly or indirectly, fifty
percent (50%) or more of the total fair market value or the total voting power
of the outstanding capital stock of WMG;
(C) an entity of which a Person described in clause (B)
owns, directly or indirectly, fifty percent (50%) or more of the total fair
market value or the total voting power of the outstanding capital stock;
(D) an entity which is controlled by the stockholders of WMG
immediately after the transfer; or
(E) a stockholder of WMG in exchange for or with respect to
capital stock of WMG; or
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(iv) a majority of the members of the Board is replaced in any
twelve (12) month period by directors whose appointment or election is not
endorsed by a majority of the members of the Board prior to the date of the
appointment or election.
The term "Disabled" means that as a result of any medically
determinable physical or mental impairment which occurs on or after the
Effective Date and can be expected to result in death or can be expected to last
for a continuous period of at least twelve (12) months, the Employee either (i)
is unable to engage in any substantial gainful activity or (ii) receives income
replacement benefits for a period of at least three (3) months under an accident
and health plan covering employees of the Company.
The term "Good Reason" means that the Employee has withdrawn from
the legal representation of the Company, because:
(i) such representation will result in a violation of the TRPC or
other law as contemplated in Rule 1.16(a)(1) of the TRPC;
(ii) the Company persists in a course of action involving the
Employee's legal services that the Employee reasonably believes is criminal or
fraudulent as contemplated in Rule 1.16(b)(1) of the TRPC; or
(iii) the Company has used the Employee's legal services to
perpetrate a crime or fraud as contemplated in Rule 1.16(b)(2) of the TRPC.
8. Representations. The Employee hereby represents to the Company that (a)
he is legally entitled to enter into this Agreement and to perform his
obligations hereunder, and (b) he has the full right, power and authority,
subject to no rights of third parties, to grant to the Company the rights
contemplated by paragraph 10.
9. Disclosure of Information. The Employee recognizes and acknowledges that
the Company's and its predecessors' trade secrets, know-how and proprietary
processes as they may exist from time to time are valuable, special and unique
assets of the Company's businesses, access to and knowledge of which are
essential to the performance of the Employee's duties hereunder. The Employee
shall not, during or after his employment by the Company, in whole or in part,
disclose such trade secrets, know-how or proprietary processes to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall the Employee make use of any such property for his own
purposes or for the benefit of any person, firm, corporation, association or
other entity (except the Company) under any circumstances during or after his
employment by the Company, provided that after the Employee's employment by the
Company ceases these restrictions shall not apply to such trade secrets,
know-how and proprietary processes, if any, which are then in the public domain,
and provided further that the Employee was not responsible, directly or
indirectly, for such trade secrets, know-how or proprietary processes entering
the public domain without the Company's consent.
10. Inventions. The Employee hereby sells, transfers and assigns to the
Company or to any person or entity designated by the Company all of the right,
title and interest of the
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Employee in and to all inventions, ideas, disclosures and improvements, whether
patented or unpatented, and copyrightable material, made or conceived by the
Employee, solely or jointly, during his employment by the Company or any of its
predecessors which relate to methods, apparatus, designs, products, processes or
devices sold, leased, used or under consideration or development by the Company
or any of its predecessors, or which otherwise relate to or pertain to the
business, functions or operations of the Company or any of its predecessors, or
which arise from the efforts of the Employee during his employment by the
Company or any of its predecessors. The Employee shall, during and after his
employment by the Company, communicate promptly and disclose to the Company, in
such form as the Company requests, all information, details and data pertaining
to the aforementioned inventions, ideas, disclosures and improvements. The
Employee shall, during and after his employment by the Company, execute and
deliver to the Company such formal transfers and assignments and such other
papers and documents as may be necessary or required of the Employee to permit
the Company or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyright thereof. Any invention relating to the business of the Company and
disclosed by the Employee within one year after his employment by the Company
ceases shall be deemed to fall within the provisions of this paragraph 10 unless
proved to have been first conceived and made following such termination or
expiration.
11. Covenants Not To Compete or Interfere.
(a) During his employment by the Company and any period beginning
immediately after such employment ceases with respect to which the Company
provides to the Employee the post-employment pay and benefits provided for in
paragraph 7(b), the Employee shall not, directly or indirectly (whether as an
officer, director, owner, employee, partner or other participant), engage in any
Competitive Business (as defined herein) in the United States of America and any
other country where the Company or any of its subsidiaries conducts business
operations over which the Employee has management responsibility. For the
purposes of this Agreement, the term "Competitive Business" means the
manufacturing, supplying, producing, selling, distributing, marketing, or
providing for sale of any orthopaedic product, device or instrument manufactured
or sold by the Company or any of its subsidiaries or in clinical development
sponsored by the Company or any of its subsidiaries, in each case as of the date
on which the Employee's employment by the Company ceases.
(b) During his employment by the Company and any period beginning
immediately after such employment ceases with respect to which the Company
provides to the Employee the post-employment pay and benefits provided for in
paragraph 7(b), the Employee shall not interfere with, disrupt or attempt to
interfere with or disrupt the relationships, contractual and otherwise, between
the Company and its subsidiaries and the suppliers, employees, sales
representatives, distributors, customers, contractors, lessors and lessees of
the Company and its subsidiaries.
(c) Without limiting the rights and remedies available to the Company,
in the event of any breach by the Employee of any of the covenants set forth in
this paragraph 11:
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(i) the Company's obligation to make any payment or provide any
benefits to the Employee under paragraphs 7(b) and 13 shall cease immediately
and permanently, which shall not have any impact whatsoever on the Employee's
continuing obligation to comply with paragraphs 11(a) and 11(b);
(ii) the Employee shall repay to the Company, within ten (10)
days after he receives written demand therefor, an amount equal to (A) ninety
percent (90%) of the payments and benefits previously received by the Employee
under paragraphs 7(b) and 13 of this Agreement, plus (B) interest on such amount
at an annual rate equal to the lesser of ten percent (10%) or the maximum
non-usurious rate under applicable law, from the dates on which such payments
and benefits were received to the date of repayment to the Company; and
(iii) the Employee shall pay to the Company from time to time,
within ten (10) days after he receives written demand therefor, an amount or
amounts equal to the reasonable costs and expenses (including reasonable
attorneys' fees and expenses) incurred by or on behalf of the Company in
enforcing this paragraph 11(c) from and after the date on which the Company
delivers notice of such breach to the Employee.
(d) It is the desire and intent of the parties that the provisions of
this paragraph 11 be enforced to the fullest extent permissible under the
applicable laws in each jurisdiction in which enforcement is sought.
Accordingly, if any portion of this paragraph 11 is adjudicated to be invalid or
unenforceable, this paragraph 11 shall be deemed curtailed, whether as to time
or location, to the minimum extent required for its validity under applicable
law and shall be binding and enforceable with respect to the Employee as so
curtailed, such curtailment to apply only with respect to the operation of this
paragraph 11 in the jurisdiction in which such adjudication is made. If a court
in any jurisdiction, in adjudicating the validity of this paragraph 11, imposes
any additional terms or restrictions with respect to this paragraph 11, this
paragraph 11 shall be deemed amended to incorporate such additional terms or
restrictions.
12. Remedies. The Employee acknowledges and agrees that (a) a monetary
remedy for any breach of any of the covenants set forth in paragraphs 9, 10 and
11 would be inadequate and impracticable, (b) such a breach would cause the
Company irreparable harm, and (c) the Company shall be entitled to specific
performance and to temporary, preliminary and permanent injunctive relief
without the necessity of proving actual damages. Therefore, in addition to any
other right or remedy to which the Company may be entitled at law or in equity
(including, without limitation, the rights and remedies set forth in paragraph
11(c)), the Company shall be entitled to enforce the covenants set forth in
paragraphs 9, 10 and 11 by a decree of specific performance and to temporary,
preliminary and permanent injunctive relief to prevent any breach or threatened
breach of any such covenants, without posting any bond or other undertaking.
13. Gross-Up Payment. If, after the Effective Date, any event occurs or
circumstance exists which results in the Employee being subject to any excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor thereto or any similar tax imposed by any other
federal, state, local or other law, the Company shall cause an independent,
nationally recognized accounting firm or executive compensation consulting firm
selected by the Company (the "Firm") promptly to review, at the Company's sole
expense, the
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applicability of any such excise or similar tax to the Employee. If the Firm
determines that the Employee is or will be subject to any such excise or similar
tax or any interest thereon or penalty with respect thereto imposed by the Code
or any other federal, state, local or other law (any such excise or similar tax,
interest thereon, and penalty with respect thereto are referred to as the
"Excise Tax"), the Company shall make to the Employee, within ten (10) days
after the Company receives such determination, an additional cash payment (the
"Gross-Up Payment") equal to an amount such that after timely payment by the
Employee of the Gross-Up Payment to the appropriate taxing authority(ies), the
Employee's liability for all taxes (including all interest thereon and penalties
with respect thereto) would be the same as if no Excise Tax applied. For
purposes of the foregoing determination, the Employee's tax rate will be deemed
to be the highest statutory marginal federal and state tax rates applicable to
the Employee (on a combined basis) then in effect. If any taxing authority
finally determines that a greater Excise Tax should be imposed upon the Employee
than is determined by the Firm or is reflected in the Employee's tax return
pursuant to this paragraph 13, the Company shall pay to the Employee, within ten
(10) days after the Employee notifies the Company of such final determination,
the remaining balance of the Gross-Up Payment calculated based on the amount of
Excise Tax finally determined to be payable by the taxing authority. If any
taxing authority determines that a lesser Excise Tax should be imposed upon the
Employee than is determined by the Firm or is reflected in the Employee's tax
return pursuant to this paragraph 13, the Employee shall return to the Company,
within ten (10) days after receipt by the Employee of a refund from the taxing
authority, the excess of the Gross-Up Payment made by the Company to the
Employee over the Gross-Up Payment required to satisfy the Excise Tax as
determined by the taxing authority.
14. Insurance. The Company may, at its election and for its benefit, insure
the Employee against accidental loss or death, and the Employee shall submit to
such physical examination and supply such information as may be required in
connection therewith.
15. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
the Employee at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000, or to the Company
at Xxxxxx Medical Technology, Inc., 0000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx
00000, Attention: General Counsel, or to such other address as either party
shall notify the other.
16. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach of the other party.
17. Governing Law. This Agreement shall be governed by, construed under,
and enforced in accordance with the laws of the State of Tennessee without
regard to conflicts-of-laws principles that would require the application of any
other law.
18. Assignment. This Agreement may be assigned, without the consent of the
Employee, by the Company to any person, partnership, corporation, association or
other entity which has purchased all or substantially all the assets of the
Company, provided that such assignee assumes all the liabilities of the Company
hereunder.
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19. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter referred to herein and supersedes any
and all prior negotiations, understandings, arrangements, letters of intent, and
agreements, whether written or oral, between the Employee and the Company, its
subsidiaries, or any of its or their directors, officers, employees or
representatives with respect thereto, including, without limitation, the
Employment Agreement dated as of April 1, 2005, between the Company and the
Employee.
20. Amendment. This Agreement may not be amended, supplemented, or
otherwise modified except by a written agreement executed by all of the parties.
21. Delayed Commencement of Certain Payments. Notwithstanding any provision
of this Agreement to the contrary, the parties intend that this Agreement be
construed and applied in a manner that will conform its provisions with the
requirements for avoidance of additional federal income tax pursuant to Section
409A of the Code, to the extent that such Section applies to the payments
provided hereunder. Without limiting the foregoing, in the event that the
Employee is a "specified employee" within the contemplation of Section
409A(a)(2)(B) of the Code at the time that any payment otherwise would be made
based upon the Employee's separation from service with the Company within the
contemplation of Section 409A(a)(2)(A)(i) of the Code, then in no event shall
such payment or the commencement thereof be made before the six-month
anniversary of the date of such separation from service or, if earlier, the date
of the Employee's post-separation death.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the Effective Date.
COMPANY:
XXXXXX MEDICAL TECHNOLOGY, INC.
By: /s/ F. Xxxxx Xxxx
------------------------------------
F. Xxxxx Xxxx
President and Chief Executive
Officer
EMPLOYEE:
/s/ Xxxxx X. Xxxx
----------------------------------------
Xxxxx X. Xxxx
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