EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made effective as of November 4,
1997 (the "Effective Date") by and between GENTLE DENTAL SERVICE CORPORATION, a
Washington corporation (the "Company"), and XXXXXXX X. XXXXX ("Employee").
RECITALS
Pursuant to the Agreement and Plan of Merger dated October 30, 1997 (the
"Merger Agreement") between the Company and GMS Dental Group, Inc., a Delaware
corporation, the Company has agreed to employ Employee as its Co-Chairman, Chief
Executive Officer and President. Employee wishes to accept such position of
employment with the Company.
AGREEMENT
In consideration of the promises, covenants, and representations below, the
parties agree as follows:
1. Base Compensation. The Company will pay Employee as compensation for
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Employee's services a base salary at the annual rate of $225,000 or at such
higher rate as the Company may determine from time to time ("Base Salary").
Employee's Base Salary will be payable in accordance with the Company's standard
payroll procedures.
2. Duties. Employee shall serve as Co-Chairman, Chief Executive Officer
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and President of the Company and shall perform such customary, appropriate and
reasonable executive duties as are usually performed by persons in these
positions or as may be delegated to Employee by the Board of Directors (the
"Board") of the Company. Employee shall be employed on a full-time basis and
shall devote all of Employee's working time, attention and energies to the
Company during the term of Employee's employment. Notwithstanding the
preceding, Employee will not be precluded from engaging in appropriate
professional, educational, civic, charitable or religious activities or from
devoting a reasonable amount of time to private investments that do not
interfere or conflict with Employee's responsibilities to the Company. Employee
shall principally perform Employee's duties hereunder at the principal executive
offices of the Company in southern California.
3. Term of Employment. Employee's employment with the Company is for an
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initial term commencing on the date of this Agreement and ending in
approximately 1 3/4 years on July 31, 1999. During the initial term, the
Company may not terminate Employee's employment other than for "cause" (as
defined in Section 8(b) below). After the completion of the initial term,
Employee's employment with the Company will be "at-will" and, therefore, the
Company will thereafter be able to terminate Employee's employment at any time
for any reason, with or without cause.
4. Employee Benefits. During the term of Employee's employment, Employee
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will be eligible to participate in the employee benefit plans and executive
compensation programs (including any bonus plan(s) established by the
Compensation Committee) maintained from time to time for other senior executive
officers of the Company to the extent that other senior executive officers of
similar level and duties are eligible to participate in such programs and if
Employee qualifies for participation in any such programs. These benefits may
change from time to time.
5. Business Expenses; Automobile Allowance. During the term of
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Employee's employment, the Company shall reimburse Employee for necessary and
reasonable travel, entertainment and other business expenses appropriately
incurred by Employee in connection with performing Employee's duties. The
Company will reimburse Employee for such expenses upon presentation of an
itemized account and appropriate supporting documentation, all in accordance
with the Company's generally applicable policies. During the term of Employee's
employment, Employee will be entitled to an automobile allowance of $1,000 per
month.
6. Proprietary Information Agreement. Employee will sign and abide by
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the terms of the Proprietary Information Agreement, the form of which is
attached as Exhibit A.
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7. Vacation and Holidays. Employee will be entitled to fully-paid
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vacation time and holidays consistent with the Company's policy as may be in
place from time to time.
8. Severance Compensation.
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(1) In the event Employee's employment is terminated by Employee for
"good reason" (as defined below) or in the event, on or after April 1, 2001,
Employee's employment is terminated by the Company for any reason other than
"cause" (as defined below), and provided in either case that Employee complies
with the provisions of Section 9 hereof, Employee will be entitled to continue
to receive from the Company Employee's Base Salary then in effect for a period
of 18 months following the effective date of such termination (the "Termination
Date"), payable in equal monthly installments. In the event, after the
expiration of the Initial Term and prior to April 1, 2001, Employee's employment
is terminated by the Company for any reason other than "cause" (as defined
below), and provided that Employee complies with the provisions of Section 9
hereof, Employee will enter into a consulting agreement at Employee's Base
Salary as of the Termination Date. The consulting agreement shall have a term
equal to one-half of the number of whole or partial one-month periods between
the Termination Date and April 1, 2001. Following the termination of such
consulting agreement, Employee will receive severance payments from the Company
at Employee's Base Salary as of the Termination Date for the balance of the 18
month period following the Termination Date, payable in equal monthly
installments.
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(2) For purposes of this Agreement, "cause" shall mean (i) Employee's
continuous and willful inattention to Employee's duties after at least one
written notice of same has been given to Employee and Employee has been given an
opportunity to cure the same within thirty days after such notice; (ii) any
breach by Employee of Section 9 of this Agreement; (iii) any act committed by
Employee with respect to the property or the business of the Company which
constitutes gross recklessness, willful or gross misconduct or fraud; or (iv)
criminal conduct which has caused material injury to the Company and which could
reasonably result in conviction of a felony which involves fraud, dishonesty or
moral turpitude, excluding from the definition of "cause," without limitation,
such events as are stated not to constitute "cause" in the following sentence.
Employee shall not be considered to have been terminated for "cause" if
terminated by the Company solely (a) as a result of Employee's bad judgment or
negligence, (b) because of any act or omission believed by Employee in good
faith to have been in or not opposed to the best interests of the Company
(without intent of gaining therefrom directly or indirectly a profit to which
Employee was not legally entitled) and reasonably believed by Employee not to
have been improper or unlawful, (c) because of an act or omission in respect of
which a determination could properly have been made by the Board that Employee
met the applicable standard of conduct prescribed for indemnification or
reimbursement under the bylaws or charter of the Company, or the laws of the
State of Washington, in each case in effect at the time of such acts or
omissions, or (d) because of any act or omission with respect to which notice of
termination is given more than twelve months after the earliest date on which a
non-employee director of the Company who is not a party to such act or omission
knew or should have known of such act or omission.
(3) For purposes of this Agreement, "good reason" shall mean
termination of Employee's employment by Employee within thirty days following
(x) any relocation of the Company's executive offices where Employee is employed
on the Effective Date to a new location which is in excess of 25 miles from its
current location, (y) a demotion in position from Co-Chairman, Chief Executive
Officer and President of the Company, or (z) the assignment of duties and
responsibilities of materially lesser status, dignity and character, or a
substantial reduction in the nature or status of Employee's duties and
responsibilities.
(4) During any period in which Employee receives severance
compensation pursuant to subsection (a) of this Section 8 or, with respect to
benefits other than medical insurance, such shorter period following the
Termination Date that Employee is eligible to participate in Employer's employee
benefit plans, Employee shall further be entitled to medical, life insurance,
disability insurance and any other similar benefits to the same extent as
theretofore provided by the Company to Employee prior to the Termination Date.
9. Restrictive Covenants and Confidentiality.
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(1) Non-Solicitation. Employee agrees that during the term of
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Employee's employment and for a period of one year following any termination
thereof (for any reason), Employee shall not (either directly or indirectly)
solicit, entice, encourage or induce any
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person who at any time within one year prior to Employee's termination of
employment shall have been an employee of the Company or any of its
subsidiaries, or who is a dentist who is employed by or performing professional
services for any dental practice managed by the Company or one of its
subsidiaries, to become employed by or associated with any person, firm or
corporation other than the Company, and Employee shall not approach any such
employee or dentist for such purpose or encourage the taking of such actions by
any other person, firm or corporation or assist any such person, firm or
corporation in taking such action.
(2) Non-Compete. Employee agrees that during the term of Employee's
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employment and during any period in which Employee is receiving severance
compensation pursuant to Section 8 hereof, Employee shall not, directly or
indirectly, within a 50 mile radius of any location where the Company or any of
its subsidiaries owns, manages, develops, or operates any dental practice or
assets, engage or participate or make any financial investments in, or become
employed by, or act as an agent or principal of, or render advisory or other
services to or for, any person, firm or corporation that is engaged, directly or
indirectly, in any line of business then engaged in, or planned to be engaged
in, by the Company (a "Competing Enterprise"). A Competing Enterprise shall not
include any practice of dentistry with or consulting to a group of 10 or fewer
dentists located outside of a five mile radius of any location where the Company
or any of its subsidiaries owns, manages, develops or operates any dental
practice or assets. Nothing herein contained shall restrict Employee from
holding investments in not more than three percent of the voting securities of
any Competing Enterprise whose stock is listed on a national securities exchange
or is actively traded on the National Association of Securities Dealers
Automated Quotation System, so long as in connection with such investments
Employee does not render services to a Competing Enterprise.
10. Survival. The provisions of this Agreement shall survive the
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termination of Employee's employment with the Company, irrespective of the
reason therefor.
11. Remedies. Employee acknowledges that the services to be rendered by
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Employee are of a special, unique and extraordinary character and, in connection
with such services, Employee will have access to confidential information vital
to the Company's and its subsidiaries' businesses. By reason of this access,
Employee consents and agrees that if Employee violates any of the provisions of
this Agreement, the Company and its subsidiaries shall be entitled, without the
need to show actual damages, to an injunction and a temporary restraining order
from any court of competent jurisdiction restraining Employee from committing or
continuing any such violation of this Agreement. Employee acknowledges that
damages at law would not be an adequate remedy for violation of this Agreement,
and Employee therefore agrees that the provisions of this Agreement may be
specifically enforced against Employee in any court of competent jurisdiction.
The rights, powers and remedies of the Company under this Agreement are
cumulative and not exclusive of any other right, power or remedy which the
Company may have under any other agreement or by law.
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12. Miscellaneous.
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(1) Successors and Assigns. This Agreement shall be binding on and
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inure to the benefit of the parties hereto and their heirs, executors, legal
representatives, successors and assigns. Neither party shall have the right to
assign its obligations, or all or any portion of their rights or interests under
this Agreement without the prior written consent of the other party hereto, and
any attempt to do so will be null and void.
(2) Governing Law. This Agreement is made and entered into and is to
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be governed by the internal laws of the State of California, applicable to
agreements made and to be performed entirely within such state without regard to
the conflicts of law principles of such State.
(3) Waiver. The failure of either party at any time to require
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performance by the other party of any provision hereof shall not affect in any
way the full right to require such performance at any time thereafter, nor shall
a waiver by either party of a breach of any provision hereof be taken or held to
be a continuing waiver of such provision, or waiver of any other breach under
any other provision of this Agreement.
(4) Entire Agreement. This Agreement and the Proprietary Information
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Agreement set forth the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
contracts, agreements, arrangements, communications, discussions,
representations and warranties, whether oral or written, between the parties
with respect to such subject matter. This Agreement may be amended only by a
written instrument signed by both parties hereto making specific reference to
this Agreement and expressing the plan or intention to modify it.
(5) Severability. If any provision of this Agreement shall be
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adjudicated to be invalid, ineffective or unenforceable, the remaining
provisions of this Agreement shall not be affected thereby. The invalid,
ineffective and unenforceable provision shall, without further action by the
parties, be automatically amended to effect the original purpose and intent of
the invalid, ineffective or unenforceable provision; provided, however, that
such amendment shall apply only with respect to the operation of such provision
in the particular jurisdiction with respect to which such adjudication is made.
(6) Prior Agreement Superseded. This Agreement supersedes and
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replaces in its entirety the Employment Agreement dated February 26, 1997
between Employee and GMS Dental Group, Inc.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
GENTLE DENTAL SERVICE CORPORATION
By: /s/ X. X. Xxx Xxxxxx
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Title: C.F.O.
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/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
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