BONE, MUSCLE AND JOINT, INC.
0000 X.X. 00xx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
May 6, 1996
Xxxxxx Xxxxxx, M.D.
0000 X.X. 00xx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Employment Letter
Dear Naresh:
The following terms summarize the agreement between you and Bone, Muscle
and Joint, Inc. (the "Corporation") with respect to your employment with the
Corporation.
1. You shall be employed by the Corporation as Chairman of the Board,
President and Chief Executive Officer commencing on January 2, 1996, and shall
perform duties and services consistent with such positions as may reasonably be
assigned to you by the Board of Directors of the Corporation. During your
employment with the Corporation, you shall devote your best efforts and your
full business time and attention to the business and affairs of the Corporation;
provided, however, that you may serve as director on the boards of directors of
up to three other business entities.
2. The Corporation shall pay you an annual base salary (the "Base Salary")
of not less than $225,000, payable in such installments as is the Corporation's
practice with respect to its executive employees. The Base Salary may be
increased in the sole discretion of the Board of Directors of the Corporation
based upon your performance of your duties and the range of salaries paid to
chief executive officers of companies at a similar stage of development in the
field of physician practice management as the Corporation. The Corporation shall
pay to you, in one lump sum on the date hereof, that portion of the Base Salary
in arrears as of the date hereof.
3. In addition to the Base Salary, the Board of Directors may, in its sole
discretion, award you an annual bonus (the "Bonus") in an amount up to thirty
percent (30%) of your then current Base Salary. The amount of the Bonus, if any,
will be determined by the Board of Directors based upon your obtaining certain
benchmarks (the "Benchmarks") that are specified on Annex 1 attached hereto. The
Bonus, if any, will be payable following the end of each fiscal year during your
employment with the Corporation.
4. You shall be eligible to participate in the
Xxxxxx Xxxxxx, M.D.
May 6, 1996
Page 2
Corporation's benefit plans, 401(k) plan, life insurance, hospitalization and
surgical and major medical coverages, sick leave, holidays, long-term disability
and other fringe benefits, if any. In addition, you shall be entitled to four
weeks of vacation per year.
5. During your employment with the Corporation, the Corporation shall
reimburse you for all reasonable and necessary traveling expenses and other
disbursements incurred by you for or on behalf of the Corporation in the
performance of your duties upon presentation of appropriate receipts or other
documentation therefor. In connection therewith, the Corporation shall reimburse
you, in one lump sum on the date hereof or as soon hereafter as reasonably
practicable, for all of the expenses incurred by you on behalf of the
Corporation prior to the date hereof, including, without limitation, expenses
incurred beginning December 1995 related to business travel, consulting services
and administrative support, which expenses are estimated at approximately
$100,000.
6. The Corporation will deduct from any payments to be made to you any
amounts required to be withheld in respect of any Federal, state or local income
or other taxes.
7. The Corporation may, for its own benefit, maintain "keyperson" life and
disability insurance policies covering you. You shall cooperate with the
Corporation and provide such information or other assistance as the Corporation
may reasonably request in connection with the Corporation obtaining and
maintaining such policies.
8. The Corporation shall grant you the option to purchase seventy five
thousand (75,000) shares of common stock, $.001 par value, of the Corporation at
each of the following times: (a) on the earlier to occur of (i) July 1, 1996,
and (ii) the date upon which the Corporation consummates the first acquisition
of a medical practice; (b) on January 1, 1997; and (c) on January 1, 1998. The
grants specified in clauses (b) and (c) are subject to your attaining the
Benchmarks intended to have been satisfied on each such date. The options
granted pursuant to this paragraph 9 shall be granted pursuant to the
Corporation's 1996 Stock Option Plan (the "Plan") and shall vest and become
exercisable in accordance with the provisions of a Nonqualified Stock Option
Agreement between you and the Corporation, the form of which is annexed to the
Plan as Attachment 3.
9. The Corporation may terminate your employment hereunder for any reason;
provided, however, that if the Corporation terminates your employment without
Cause (as hereinafter defined) or as a result of your becoming permanently
disabled (a) prior to January 1, 1997, you shall receive a severance amount
equal to 100% (being one year's severance) of
Xxxxxx Xxxxxx, M.D.
May 6, 1996
Page 3
the Base Salary; (b) after December 31, 1996 but prior to January 1, 1998, you
shall receive a severance amount equal to 75% (being nine months' severance) of
the sum of the then current Base Salary plus the Bonus paid with respect to the
previous year (such sum being referred to herein as the "Compensation Amount");
(c) after December 31, 1997 but prior to January 1, 1999, you shall receive a
severance amount equal to 50% (being six months' severance) of the Compensation
Amount; and (d) on or after January 1, 1999, you shall receive a severance
amount equal to 25% (being three months' severance) of the Compensation Amount.
Such severance amount shall be paid in a lump sum within ten business days
following the date of termination of your employment. As used herein "Cause"
means (i) the repeated failure to perform such duties as are reasonably
requested of you by the Board of Directors of the Corporation; (ii) gross
negligence or willful misconduct in the performance of your duties; or (iii) the
commission of any act of fraud or financial dishonesty with respect to the
Corporation, or any felony or act involving moral turpitude.
10. During the period of your employment with the Corporation and for the
Additional Period (as hereinafter defined), you shall not directly or indirectly
engage in any business activity, either as an individual proprietor, partner,
stockholder, officer, employee, director, or consultant (otherwise than as the
holder of not more than five percent (5%) of the total outstanding capital stock
of a publicly-held company), which competes with the Corporation or any of its
subsidiaries in the Restricted Territory (as hereinafter defined) and in the
field of musculoskeletal physician management. As used herein, (a) "Restricted
Territory" means any state of the United States in which the Corporation or any
of its subsidiaries conducted business at any time during the period of your
employment with the Corporation, or specifically planned to conduct business at
the time of the termination of your employment with the Corporation; and (b)
"Additional Period" means (i) in the event that you are terminated without Cause
or as a result of your becoming permanently disabled, the period in which you
receive severance payments from the Corporation in accordance with paragraph 9
hereof (being either 3, 6, 9 or 12 months) and (ii) in the event that you are
terminated with Cause or you voluntarily resign, a period of one year following
the date of termination. You and the Corporation agree that the restrictions set
forth in this paragraph 10 are reasonable for the purposes of protecting the
business of the Corporation. However, if any such restriction is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
11. You recognize that your relationship with the
Xxxxxx Xxxxxx, M.D.
May 6, 1996
Page 4
Corporation is and will continue to be one of high trust and confidence by
reason of your access to and contact with the trade secrets and confidential and
proprietary information of the Corporation. Therefore, you agree that you will
not at any time, either during your employment with the Corporation or
thereafter, disclose to others, or use for your own benefit or the benefit of
others, any confidential, proprietary or secret information owned, possessed or
used by the Corporation ("Proprietary Information"). By way of illustration, but
not limitation, Proprietary Information includes trade secrets, processes, data,
know-how, marketing plans, forecasts, unpublished financial statements, budgets,
licenses, prices, costs and employee, customer and supplier lists.
Notwithstanding anything to the contrary contained herein, this paragraph 11
shall not apply to any Proprietary Information which: (a) is or becomes in the
public domain through no action on your part, (b) is generally disclosed to
third parties by the Corporation or a person entitled to disclose such
information to third parties without an obligation of confidentiality to the
Corporation, or (c) is approved for release by written authorization of the
Board of Directors of the Corporation or its designees. Upon termination of your
employment with the Corporation or at any other time upon request, you will
promptly deliver to the Corporation all notes, memoranda, notebooks, drawings,
records, reports, files and other documents (and all copies or reproductions of
such materials) in your possession or under your control, whether prepared by
you or others, which contain Proprietary Information. You hereby acknowledge
that this material is the sole property of the Corporation.
12. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contacts made and performed
wholly therein.
13. This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by you and the Corporation.
Xxxxxx Xxxxxx, M.D.
May 6, 1996
Page 5
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space indicated
below and returning it to the undersigned.
Sincerely,
BONE, MUSCLE AND JOINT, INC.
BY:
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Name:
Title:
Accepted and agreed to:
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Xxxxxx Xxxxxx, M.D.
