EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of February 10, 1996, between ProMedCo,
Inc. a Texas corporation (the "Company"), and Xxxxxxx X. X'Xxxxxx ("Executive
").
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company hereby employs Executive, and Executive accepts
employment with the Company, under the terms and conditions set forth in this
Agreement for the period beginning on the date hereof and ending as provided in
paragraph 4 hereof (the "Employment Period"). The date on which Executive ceases
to be employed by the Company and/or its Subsidiaries (as defined below) or its
successors or assigns is referred to herein as the "Termination Date."
2. Position and Duties.
(a) During the Employment Period, Executive shall perform such
duties for the Company, its affiliates and its Subsidiaries as
the Company's Chief Executive Officer may specify in his sole
discretion. Executive shall serve as the Company's Chief
Operating Officer and Company agrees to nominate Executive to
the Board of Directors.
(b) Executive shall devote his best efforts and his full business
time and attention (except for permitted vacation periods and
reasonable periods of illness or other incapacity) to the
business and affairs of the Company, its affiliates and its
Subsidiaries. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
corporation of which the securities having at least 50% of the
voting power in electing directors are, at the time of
determination, owned by the Company, directly or through one
or more Subsidiaries.
(e) The parties to this Agreement shall use their good faith
efforts to develop a written succession plan agreed to by the
Board, CEO and COO no later than March 1, 1999.
3. Compensation and Benefits.
(a) During the Employment Period, Executive's initial Base Salary (the
"Base Salary") shall be $150,000 per annum. The Base Salary shall increase to
$200,000 per annum beginning the first of the month following the Company's
achievement of a $40 million net revenue run rate. After the Company's initial
public offering, the Base Salary shall be as determined by the Compensation
Committee, considering studies of other similar companies in the industry.
However, the Base Salary shall be subject to annual increases of no less than
the increase in the Consumer Price Index for all goods and services, U.S. All
City Average Report, published by the United States Department of Labor for the
preceding 12 months. In any case, the Base Salary shall be a minimum of 80% of
the Base Salary of the Chief Executive Officer of Company. The Base Salary shall
be payable in regular installments in accordance with the Company's general
payroll practices.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) The Company will pay relocation expenses as follows:
(i) temporary housing expense in Fort Worth for a maximum period of six
months,
(ii) travel expenses for trips back to Boston (or for Xxx. X'Xxxxxx to Ft.
Worth) will be reimbursed for a maximum of one trip every two weeks,
(iii) moving expenses will be reimbursed, based on competitive bids as
approved by the CEO,
(iv) the brokerage costs of selling Executive's home plus the transaction
cost related to the sale and the purchase of a home in Ft. Worth, and
(v) the Company will "gross up" the reimbursement of such expenses that are
taxable as compensation to the Executive.
(d) In addition to the Base Salary, the Company may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon the Company's achievement of operating goals during such fiscal year.
The percentage and goals shall be as approved by the Compensation Committee of
the Board of Directors for each such fiscal year, and will typically be
structured such that a portion will be payable after the end of the fiscal year
(the "Current Portion") with the remaining balance payable in equal amounts
after the end of each of the following three fiscal years, provided Executive is
still employed by Company on such payment date. The Current Portion of the
bonus, if any, shall be payable upon determination of the amount due,
approximately 75 days after the end of the fiscal year. For the period ending
June 30, 1996 only, Executive is guaranteed a minimum bonus of $47,000 ($50,000
for period February 1 to June 30, prorated to the February 10 start date).
(e) In addition to the Base Salary and any bonuses payable to Executive
pursuant to this paragraph, during the Employment Period Executive shall be
entitled to participate in all benefit plans adopted by Company for all or a
select group of its employees, including:
(i) term life insurance of not less than one times Base Salary and health
insurance, with all premiums paid by the Company,
(ii) If the Employment Period is terminated as a result of Executive's
permanent disability or incapacity, Executive shall be entitled to receive his
Base Salary, as in effect immediately prior to the Termination Date, for 6
months following the Termination Date. Should the disability or incapacity
continue, the Company is to pay Executive an amount equal to 60% of Base Salary
for the previous year throughout the period that the disability continues. The
Company may purchase insurance to fund the amounts payable pursuant to this
paragraph 4(d)(ii). All amounts payable pursuant to this paragraph 4(d)(ii)
shall be paid in equal
monthly installments beginning immediately following the month in which the
Termination Date occurs, reduced by the amount of any proceeds Executive
receives from any insurance provided to him by the Company.
(iii) Incentive Stock Options ("ISOs") for an initial 480,000 shares of
Common Stock of the Company at $6.00 per share, 20,000 of such shares to vest
immediately, with the balance vesting 1/60th per month, with not less than 25%
(120,000 shares) to be vested at the date of the Company's Initial Public
Offering (IPO). The Company will finance the purchase of stock up to $500,000
with a non- recourse loan for a maximum of 48 months from inception. Prior to 48
months, repayment will be required only to the extent of proceeds of any sale of
the stock. At the end of 48 months, any outstanding balance will be due and
payable. Prior to the IPO, the Company will have first right of refusal on any
proposed sale. Any stock purchased by Executive that is financed by the Company,
will be held by the Company to serve as collateral for the loan. Interest on
such loans will be at the Applicable Federal Rate for a "mid-term" loan, and
will be paid by payroll deduction. Stock owned may be used to exercise vested
options. Stock underlying ISOs will be registered soon after Company's IPO. To
the extent some of the options do not qualify as ISOs for tax treatment and
Company receives tax deductions for the difference between the exercise price
and fair market value at the date of exercise, the amount of tax saved first
reduces any loan balance, with any excess to be paid to Executive.
(iv) up to four weeks of vacation each year, but such time shall not accrue
or carry over.
4. Term.
(a) The Employment Period is for a term of two years ending on February 9,
1998, provided that (i) the Employment Period shall terminate prior to such date
upon Executive's resignation, death or permanent disability or incapacity (as
determined by the Board in its good faith judgment) and (ii) the Employment
Period may be terminated by the Company at any time prior to such date For Cause
(as defined below) or Without Cause. The Employment Period is automatically
extended for successive years unless notice to the contrary is given not later
than ninety (90) days preceding the end of the final year of the contract.
(b) If the Employment Period is terminated by the Company Without Cause
prior to the second anniversary of the date of this Agreement, or if Executive's
position is eliminated or responsibilities materially reduced without a
substantial reduction in Company's most recent 6 month earnings, excluding
extraordinary charges, Executive shall be entitled to receive his Base Salary,
as in effect immediately prior to the Termination Date, plus the average of
bonuses paid during the prior three years, through the second anniversary of
this Agreement, or one year, whichever is greater, so long as Executive has not
breached the provisions of paragraphs 5, 6 and 7 hereof. The Base Salary and
bonus payments described in this paragraph 4(b) shall be payable in regular
installments in accordance with the Company's general payroll practice.
(c) If the Employment Period is terminated by the Company For Cause or is
terminated as a result of Executive's resignation or normal expiration of the
Agreement, Executive shall
be entitled to receive only his Base Salary through the Termination Date.
In the case of normal expiration, any earned bonus which is due will be paid.
(d) All of Executive's rights to fringe benefits and bonuses hereunder (if
any) accruing after the termination of the Employment Period shall cease upon
termination, provided however, if Employment Period is terminated by the Company
Without Cause ((4(b) above)), term life, health and disability insurance will
continue through the second anniversary of this Agreement, or one year, which
ever is greater, so long as Executive has not breached the provisions of
paragraphs 5, 6 and 7 hereof.
(e) For purposes of this Agreement, "Cause" shall mean (i) the commission
of a felony or a crime involving moral turpitude, (ii) the commission of any act
involving dishonesty, embezzlement or fraud with respect to the Company or any
of its Subsidiaries, (iii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iv) failure to
perform duties as reasonably directed by the Company's Chief Executive Officer,
(v) gross negligence or willful misconduct with respect to the Company or any of
its Subsidiaries, (vi) Executive's violation of the non- competition provisions
of Section 7, (vii) Executive's material breach of any duty owed to the Company,
including without limitation the duty of loyalty, or (vii) any other material
breach of this Agreement, all of the above as determined solely by the Chief
Executive Officer of the Company (the "CEO"). Cause shall not include acts or
failure to act if Executive has exercised substantial efforts in good faith to
perform the duties reasonably assigned or appropriate to his position, as
determined solely by the CEO.
(f) If a "Change of Control" occurs and the Employment Period is terminated
or Executive voluntarily resigns within 12 months, such termination shall
constitute a termination Without Cause. For this purpose, a "Change of Control"
occurs when:
- any "Person" or "Group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act")), other than
the Executive or the Founders (Xxxxxxx X. Xxxxxxxx, H. Xxxxx Xxxxx, E. Xxxxxx
Xxxxxx, and Xxxx X. XxXxxxxx), or an entity the majority of the voting stock of
which is owned or controlled by the Executive or the Founders becomes the
"beneficial owner" (within the meaning of Rule 13d-3 and/or Rule 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that such Person has the right to acquire without
condition, other than the passage of time, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly 30% or
more of the total voting power of the then outstanding voting stock of the
Company; or
- the Company consolidates with or merges into another Person or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates with or merges into the Company pursuant to a
transaction in which the outstanding voting stock of the Company is changed into
or exchanged for cash, securities or other property, other than a transaction
between the Company and (i) an Affiliate of the Company, or (ii) any other
entity owned or controlled by the Founders.
In addition to the severance rights provided in section 4(b), if a Change
of Control occurs, any unvested options will vest immediately and Executive
shall have 36 months
to exercise all options. Notwithstanding the 36 month exercise period, the
exercise of an option shall not be permitted more than ten years after the date
on which the option was granted.
5. Confidential Information. The Executive acknowledges that the information,
observations and data obtained by him while employed by the Company concerning
the business or affairs of the Company, any of its affiliates or any Subsidiary
("Confidential Information") are the property of the Company or such affiliate
or Subsidiary, as the case may be. Therefore, Executive agrees not to disclose
to any unauthorized person or use for Executive's own account any Confidential
Information without the prior written consent of the Company, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive's acts or omissions to
act. Executive shall deliver to the Company at the termination of the Employment
Period, or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes and software and other documents and
data (and copies thereof) relating to the Confidential Information, Work Product
or the business of the Company, any of its affiliates or any Subsidiary which
Executive may then possess or have under his control.
6. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and
all similar or related information which relates to the Company's or any of its
Subsidiaries' actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed by the Company and/or its Subsidiaries ("Work
Product") belong to the Company or such Subsidiary. Executive will promptly
disclose such Work Product to the Board and perform all actions reasonably
requested by the Board (whether during or after the Employment Period) to
establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
7. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with the
Company he will become familiar with the information concerning the Company, its
affiliates, Subsidiaries and its predecessors and that his services have been
and will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Employment Period and for the
period of two years thereafter, the Executive shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the business of the Company or
its Subsidiaries as such businesses exist or are in process on the date of the
termination of Executive's employment, within any geographic area in which the
Company, its affiliates or its Subsidiaries engage or plan to engage in such
businesses. Nothing herein shall prohibit Executive from being a passive owner
of not more than 3% of the outstanding stock of any class of a corporation which
is publicly traded, so long as Executive has no active participation in the
business of such corporation.
(b) During the non-compete Period, executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company, any of its affiliates or any Subsidiary to leave the employ of
the Company or such affiliate or Subsidiary, or in any way interfere with the
relationship between the Company, any of its affiliates or any Subsidiary and
any employee thereof, (ii) hire any person who was an employee of the Company,
any of its affiliates or any Subsidiary at any time during the Employment
Period, or (iii) induce or attempt to induce any customer, supplier, licensee
or other business relation of the Company, any of its affiliates or any
subsidiary to cease doing business with the Company or such affiliate or
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company, any of its
affiliates or any Subsidiary.
(c) If Executive is terminated by the Company Without Cause or the Company
is liquidated, the Non-compete provisions of this Agreement will also terminate
upon the Termination Date or date of liquidation.
8. Enforcement. If, at the time of enforcement of paragraph 5, 6 or 7 of this
Agreement, a court holds that the restrictions stated herein are unreasonable
under circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area. Because Executive's services
are unique and because Executive has access to Confidential Information and Work
Product, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of this Agreement, the Company or its successors or assigns
may, in addition to other rights and remedies existing in their favor, apply to
any court of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce, or prevent any violations of, the
provisions hereof (without posting a bond or other security).
9. Executive Representation. Executive hereby represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement by
Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (ii) Executive is not a
party to or bound by an employment agreement, non-compete agreement or
confidentiality agreement with any other person or entity, except for Cellcor
technology (autolymphocyte therapy), and (iii) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable in accordance with its terms.
10. Survival. Paragraphs 5, 6 and 7 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period, unless such termination was Without Cause.
11. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the Address indicated below:
Notice to Executive: 000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Notices to Company 000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
12. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
13. Complete Agreement. This Agreement, those documents expressly referred to
herein and other documents of even date herewith embody the complete agreement
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may be related to the subject matter hereof in any way.
14. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be in an original and all of which taken together
constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive, the Company and their respective
heirs, successors and assigns, except that Executive may not assign his rights
or delegate his obligations hereunder without the prior written consent of the
Company.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas. In furtherance of the
foregoing, the internal law of the State of Texas shall control the
interpretation and construction of this Agreement, even though under that
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
17. Amendment and Waiver. The provisions of this Agreement may be amended or
waived only with the prior written consent of the Company and Executive, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
18. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
19. No Strict Construction; Interpretation. The language used in this agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent and no rule of strict construction will be applied against any
person. The term "including" as used in this Agreement is used to list items by
way of example and shall not be deemed to constitute a limitation of any term or
provision contained herein. As used in this Agreement, the singular or plural
number shall be deemed to include the other whenever the context so requires.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
ProMedCo, "Executive"
BY: /s/ H. XXXXX XXXXX /s/ XXXXXXX X. D'XXXXXX
X. Xxxxx Xxxxx Xxxxxxx X. X'Xxxxxx
President and Chief Executive Officer
