EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement"), effective July 1, 1997, by and
between Pentegra Dental Group, Inc., a Delaware corporation (the "Company"), and
Xxxx X. Xxxxxxx ("Employee").
In consideration of the mutual premises and conditions contained herein,
the parties hereto agree as follows:
Section 1. EMPLOYMENT. The Company hereby agrees to employ Employee,
and Employee hereby accepts employment by the Company, upon the terms and
subject to the conditions hereinafter set forth.
Section 2. DUTIES. Employee shall serve as the Chief Executive Officer
and President of the Company. Employee agrees to devote his full time and best
efforts to the performance of his duties to the Company. All of Employee's
powers and authorities shall be subject to the reasonable direction and control
of the Company's Board of Directors ("Board"). The Company shall use its best
efforts to elect Employee as a director of the Company during the term of this
Agreement. Employee acknowledges that the executive offices of the Company will
be located in Phoenix, Arizona.
Section 3. TERM. Except as otherwise provided in Section 6 hereof, the
term of this Agreement shall be for at least four (4) years commencing on July
1, 1997 (the "Commencement Date") and ending on the date that is four (4) years
from the date the initial public offering of the Company's common stock ("IPO")
is consummated (the "Term").
Section 4. COMPENSATION AND BENEFITS. In consideration for the
services of the Employee hereunder, the Company will compensate Employee as
follows:
(a) BASE SALARY. Commencing on the Commencement Date, Employee shall
be entitled to receive a base salary of (i) $175,000 per annum for the
period from July 1, 1997 through June 30, 1997, (ii) $200,000 per annum for
the period from July 1, 1998 through June 30, 1999, (iii) $225,000 per
annum for the period from July 1, 1999 through June 30, 2000, and (iv)
$250,000 per annum from July 1, 2000 thereafter, or as increased from time
to time by the Board of Directors of the Company or the Compensation
Committee of the Board of Directors ("Compensation Committee") thereof.
(b) BONUS. Commencing January 1, 1998, Employee shall be eligible to
receive a bonus each year during the term of this Agreement in accordance
with the bonus plan set forth on Exhibit A. Such bonus shall be payable by
the Company to Employee on or before 90 days from the end of each calendar
year.
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(c) BENEFITS. The Company shall grant Employee options to purchase
shares of the Company's Common Stock at the initial public offering price
for the Company's Common Stock on terms and in a quantity to be agreed upon
following good faith negotiations between the Company's management team and
the underwriters of the IPO, which terms shall be consistent with the terms
of the stock option plans adopted by the Company pursuant to which the
options are granted. It currently is contemplated that such options will
vest over a period of four years.
In addition, during the term of this Agreement, Employee shall be
entitled to participate in and receive benefits under any and all employee
benefit plans and programs which are from time to time generally made
available to the executive employees of the Company, subject to approval
and grant by the appropriate committee of the Board of Directors of the
Company with respect to programs calling for such approvals or grants.
Additionally, Employee shall be entitled to medical, dental, disability,
life insurance and other benefits as are generally made available to the
executive employees of the Company. Medical, dental and other health
insurances shall also be provided for Employee's spouse and children.
Employee shall be entitled to four (4) weeks vacation and such other days
for personal and religious reasons as reasonably determined by the Company.
Section 5. EXPENSES; AUTOMOBILE. It is acknowledged by the parties
that Employee, in connection with the services to be performed by him pursuant
to the terms of this Agreement, will be required to make payments for travel,
entertainment of business associates, mobile telephone and similar expenses.
The Company will reimburse Employee for all reasonable expenses of types
authorized by the Company and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and
approval and reporting requirements with respect to expenses as the Company may
establish from time to time. The Company will provide Employee with an 800#
pager, a cellular phone and a corporate credit card from a major issuer (e.g.,
American Express, Master Card or Visa International) to facilitate payment of
such expenses.
The Company shall provide Employee with a suitable automobile for
business use and shall pay all costs and expenses reasonably incurred by
Employee in connection with the business use thereof, including purchase or
leasing costs, fuel, maintenance, insurance, garaging and mobile (cellular)
telephone.
Section 6. TERMINATION. Employee's employment hereunder will commence
on the Commencement Date and continue until the end of the Term, except that the
employment of Employee hereunder will terminate earlier upon the occurrence of
the following events:
(a) DEATH OR DISABILITY. Employee's employment will terminate
immediately upon the death of Employee during the term of his employment
hereunder or, at the option of the Company, in the event of Employee's
disability, upon 30 days notice to Employee. Employee will be deemed
disabled if, as a result of Employee's incapacity due to physical or mental
illness, Employee shall have been absent from his duties with the Company
on a
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full-time basis for 120 consecutive business days and Employee shall not
reasonably be expected to be able to resume his duties within 60 days
of the end of such 120 day period. In the event of the termination of this
Agreement pursuant to this subsection, Employee or the legal representative
of Employee's estate will be paid base salary and bonus (determined on a
quarterly rather than an accrual basis) to the end of the calendar quarter
in which Employee dies or in which such termination occurs, as the case may
be. Additionally, Employee or the legal representative of Employee's
estate will be entitled to expense reimbursements under Section 5 hereof
for expenses incurred in the performance of Employee's duties hereunder
prior to termination.
(b) FOR CAUSE. The Company may terminate the Employee's employment
for "Cause" immediately upon written notice by the Company to Employee.
For purposes of this Agreement, a termination will be for Cause if: (i)
Employee willfully and continuously fails to perform his duties with the
Company (other than any such failure resulting from incapacity due to
physical or mental illness), (ii) Employee willfully engages in gross
misconduct materially and demonstrably injurious to the Company or (iii)
Employee has been convicted of a felony. In the event of the termination
of this Agreement pursuant to this subsection, Employee will not be
entitled to any severance pay or other compensation except for any portion
of his base salary accrued but unpaid from the last monthly payment date to
the date of termination and expense reimbursements under Section 5 hereof
for expenses incurred in the performance of his duties hereunder prior to
termination.
(c) BY COMPANY WITHOUT CAUSE. If the Company terminates this
Agreement at any time during the Term without cause, the Company shall pay
Employee, as Employee's sole remedy in connection with such termination,
severance pay in the amount of Employee's base salary for the remainder of
the Term as set forth in Section 4(a) hereof. The Company will also pay
Employee the bonus due Employee under Section 4(b) hereof through the end
of the calendar year in which such termination shall occur, which bonus
shall be payable on the date for payment set forth in Section 4(b) hereof.
The Company will pay the severance payments provided for in this subsection
(other than in the foregoing sentence) in a lump sum amount concurrent with
Employee's termination of employment. The Company will also pay Employee
the portion of his base salary accrued but unpaid from the last monthly
payment date to the date of termination and expense reimbursements under
Section 5 hereof for expenses incurred in the performance of his duties
hereunder prior to termination. The Company will not be entitled to offset
or mitigate the amounts due under this subsection by any other amounts
payable to Employee, including amounts payable or paid to Employee by third
parties for Employee's services after the date of termination.
Section 7. EFFECT OF TERMINATION ON OPTIONS. The Employee has been
granted options to purchase shares of the Company's Common Stock and may
continue to be granted such options from time to time. The effect of the
termination of the Employee's employment on such options shall be determined by
the option agreement between the Employee and the Company.
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Section 8. CONFIDENTIAL INFORMATION. Employee recognizes and
acknowledges that certain assets of the Company and its affiliates, including
without limitation information regarding customers, pricing policies, methods of
operation, proprietary computer programs, sales, products, profits, costs,
markets, key personnel, formulae, product applications, technical processes, and
trade secrets (hereinafter called "Confidential Information") are valuable,
special and unique assets of the Company and its affiliates. Employee will not,
during or after his term of employment, disclose any of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Employee of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by the Company or Employee, Employee will deliver to the Company all
documents and data pertaining to the Confidential Information and will not take
with him any documents or data of any kind or any reproductions (in whole or in
part) of any items relating to the Confidential Information.
Section 9. NONCOMPETITION. Until one year after termination of
Employee's employment with the Company for any reason, whether voluntary or
involuntary, Employee will not (i) engage directly or indirectly, alone or as
a shareholder, partner, officer, director, employee or consultant of any
other business organization, in any business activities which relate to the
acquisition and consolidation of dental practices which were either conducted
by the Company at the time of Employee's termination or "Proposed to be
Conducted" (as defined herein) by the Company at the time of such termination
(the "Designated Industry"), (ii) divert to any competitor of the Company in
the Designated Industry any customer of Employee, or (iii) solicit or
encourage any officer, employee, or consultant of the Company to leave its
employ for employment by or with any competitor of the Company in the
Designated Industry. The parties hereto acknowledge that Employee's
noncompetition obligations hereunder will not preclude Employee from (i)
owning less than 5% of the common stock of any publicly traded corporation
conducting business activities in the Designated Industry or (ii) serving as
an officer, director, stockholder or employee of an entity engaged in the
healthcare industry whose business operations are not competitive with those
of the Company. "Proposed to be Conducted", as used herein, shall mean those
business activities which are the subject of a formal, written business plan
approved by the Board of Directors prior to termination of Employee's
employment and which the Company takes material action to implement within 12
months of the termination of Employee's employment. Employee will continue
to be bound by the provisions of this Section 9 until their expiration and
will not be entitled to any compensation from the Company with respect
thereto. If at any time the provisions of this Section 9 are determined to
be invalid or unenforceable, by reason of being vague or unreasonable as to
area, duration or scope of activity, this Section 9 will be considered
divisible and will become and be immediately amended to only such area,
duration and scope of activity as will be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter;
and Employee agrees that this Section 9 as so amended will be valid and
binding as though any invalid or unenforceable provision had not been
included herein.
Section 10. GENERAL.
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(a) NOTICES. All notices and other communications hereunder will be
in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if mailed by certified mail, return
receipt requested or by written telecommunication, to the relevant address
set forth below, or to such other address as the recipient of such notice
or communication will have specified to the other party hereto in
accordance with this Section 10(a):
If to the Company, to: with a copy to:
Pentegra Dental Group, Inc. Xxxxxxx & Xxxxxx, L.L.P.
0000 X. 00xx Xxxxxx, Xxxxx 000 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attn: Chief Executive Officer AttAttn: Xxxxx X. Xxxx, III
Fax No.: (000) 000-0000 Fax No.: (000) 000-0000
If to Employee, to:
00000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
(b) WITHHOLDING; NO OFFSET. All payments required to be made by the
Company under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may
be required by law. No payment under this Agreement will be subject to
offset or reduction attributable to any amount Employee may owe to the
Company or any other person.
(c) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
agrees that upon any breach by Employee of his obligations under any of
Sections 8 and 9 hereof, the Company will have no adequate remedy at law,
and accordingly will be entitled to specific performance and other
appropriate injunctive and equitable relief.
(d) SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision will be fully severable
and this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision never comprised a part hereof; and the
remaining provisions hereof will remain in full force and effect and will
not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.
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(e) WAIVERS. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder will impair such right,
power or privilege, nor will any single or partial exercise of any such
right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.
(f) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
(g) CAPTIONS. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
(h) REFERENCE TO AGREEMENT. Use of the words "herein," "hereof,"
"hereto" and the like in this Agreement refer to this Agreement only as a
whole and not to any particular subsection or provision of this Agreement,
unless otherwise noted.
(i) BINDING AGREEMENT. This Agreement will be binding upon and inure
to the benefit of the parties and will be enforceable by the personal
representatives and heirs of Employee and the successors of the Company.
If Employee dies while any amounts would still be payable to him hereunder,
such amounts will be paid to Employee's estate. This Agreement is not
otherwise assignable by Employee.
(j) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and may not be amended
except by a written instrument hereafter signed by each of the parties
hereto. This Agreement supersedes and replaces all prior employment
agreements between Employee and the Company.
(k) GOVERNING LAW. This Agreement and the performance hereof will be
construed and governed in accordance with the laws of the State of Arizona,
without regard to its choice of law principles.
Section 11. BINDING ARBITRATION. Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, shall be settled
exclusively by arbitration in Phoenix, Arizona, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect. Judgment upon the award rendered by the arbitrator(s) may be entered
in, and enforced by, any court having jurisdiction thereof.
EXECUTED as of the date and year first above written.
PENTEGRA DENTAL GROUP, INC.
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By: /s/ Xxxxx X. Xxxx, Xx.
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Its: President
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EMPLOYEE
/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
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EXHIBIT A
BONUS
Employee shall be eligible to receive an annual cash bonus in an amount
equal to up to 200% percentage of his base salary in the event that the Company
experiences at least 5% or greater growth in earnings per share on a year to
year basis (calculated on a pro forma basis for the calendar year prior to the
Company's first fiscal year of operations). For purposes of determining the
applicable year's earnings per share, the cash bonus payable hereunder and under
all other agreements between the Company and its officers shall be included
prior to such determination.
Percentage Increase in Bonus as a Percentage
Earnings Per Share Of Annual Base Salary
5.0-9.99% 50%
10%-19.99% 100%
20%-29.99% 150%
30% or over 200%
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