EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement"), is made and entered
into and effective this 6th day of August, 1998 (the "Effective Date"), by and
between A XXXXX XXXXXXXX, the individual signing this Agreement below as and
referred to in this Agreement as "Executive," and APPLE ORTHODONTIX, INC., a
corporation organized under the laws of the State of Delaware (hereinafter
referred to as "Company").
W I T N E S S E T H:
WHEREAS, Company is engaged in the business (the "Business") of providing
management and business services to, and acquiring, orthodontic practices;
WHEREAS, the Board of Directors of Company (the "Board of Directors")
recognizes Executive's substantial skills and expertise in the Business and
desires to provide for the employment of Executive on the terms and conditions
herein provided;
WHEREAS, Executive is willing to serve Company on the terms and
conditions herein provided; and
WHEREAS, in order to effect the foregoing, Company and Executive wish to
enter into an employment agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the remises and the mutual promises and
agreements contained herein, Executive and Company (hereinafter sometimes
collectively referred to as the "parties" or individually as a "Party,")
intending to be legally bound, hereby agree as follows:
SECTION 1. SCOPE OF EMPLOYMENT.
1.1 EMPLOYMENT. Subject to the terms of this Agreement, Company agrees to
the employment of Executive during the "Term" (as defined in Section 2.1), and
Executive accepts such employment. Executive shall hold the corporate office of
Chief Executive Officer (CEO) and President or such employment other executive
office as the Board of Directors from time to time may specify, and in
conjunction with any such office, shall perform the executive-level services
(collectively, "services") described in Company's Bylaws and as delegated to him
by the Board of Directors from time to time. Executive shall devote
substantially all of Executive's business time, energy and skill to performing
his obligations hereunder and shall perform his obligations hereunder
diligently, faithfully and to the best of Executive's abilities.
1.2 COMPLIANCE WITH POLICIES. Subject to the terms of this Agreement,
during the Term Executive shall comply in all material respects with all
policies and procedures applicable to executives of Company generally and to
Executive specifically.
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SECTION 2. TERM; TERMINATION.
2.1 TERM. The initial term of Executive's employment under this Agreement
(the "Initial Term") shall be a three (3)-year period commencing on the
Effective date. After the Initial Term, Executive's employment under this
Agreement shall automatically renew for successive additional one (1)-year
("Renewal Terms") terms (the Initial Term and any Renewal Terms being
collectively referred to as the "Term"). The Term shall be subject to
termination in accordance with Section 2.2.
2.2 TERMINATION.
(A) DEATH. The Term shall automatically and immediately terminate
upon the death of Executive.
(B) DISABILITY. The Term may be terminated by either Party upon
written notice to the other in the event Executive becomes "Disabled" (as
hereinafter defined). For purposes of this Agreement, "Disabled" shall be
defined as either: (a) the reasonable, good faith determination by a majority of
the members of the Board of Directors of Company that due to a mental or
physical impairment or disability, Executive has been incapable or unable, even
with reasonable accommodations, to fully perform the material duties performed
by Executive for Company immediately prior to such disability for a period of at
least one hundred twenty (120) days in the aggregate (although not necessarily
consecutively) within any consecutive three hundred sixty-five (365)-day period;
or (b) a determination that Executive is disabled pursuant to the terms of any
long-term disability insurance policy, if any, which Company or Executive has
purchased and which covers Executive.
(C) CAUSE. In addition to any other rights or remedies available to
company at law, in equity or pursuant to this Agreement, the Company may, in its
sole discretion, terminate the Term for "Cause" (as hereinafter defined)
effective immediately upon delivery of written notice to Executive. For purposes
of this Agreement, "Cause" shall mean any one or more of the following:
(i) the imposition by any governmental authority of any material
restriction or limitation on Executive's ability to perform his services
hereunder;
(ii) Executive's conviction of or pleading no contest to a crime
that constitutes a felony under applicable law;
(iii) Executive's breach or default in the performance of any
provision of this Agreement which Executive has not cured or corrected to
Company's reasonable satisfaction within thirty (30) days after receiving
written notice of such breach or default (provided that any breach by Executive
of any obligation under Section 5 shall be grounds for immediate termination for
"Cause" without any notice or right to cure or correct); or
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(iv) the determination by a majority of the Board of Directors
(excluding Executive's vote, if he is then a member of the Board of Directors)
that: (A) Executive has materially failed to perform his duties and to render
services on behalf of Company in an effective or professional manner (after 30
days of being provided with clear written notice of such deficiencies); (B)
executive has engaged in willful misconduct or fraudulent or unethical conduct;
or (C) Executive's conduct is materially detrimental to the reputation,
character or standing of Company.
(D) DISCRETIONARY TERMINATION. Either Company or Executive may terminate
the Term effective as of the end of the Initial Term or the then-current Renewal
Term by providing the other with written notice of termination at least sixty
(60) days prior to the end of the Initial Term or then current Renewal Term, as
the case may be.
(E) CHANGE OF CONTROL. In the event a "Change of Control" (as defined
below) occurs and within sixty (60) days following the Change of Control,
Company materially breaches this Agreement (i.e. Executive is removed as the
CEO/President and/or a material change in his duties and responsibilities as the
CEO/President as the result of the Change in Control), Executive shall have the
right, upon serving written notice to Company, to terminate the Term if Company
does not cure the breach within thirty (30) days after being provided with
written notice of the breach by Executive, with the Effective Date of such
termination to be thirty (30) days after the termination of the thirty (30)-day
cure period. For purposes of this Agreement, Change of Control shall be defined
as any Aperson@ (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, but excluding any Company employee stock
ownership plan) becoming the beneficial owner, directly or indirectly, of
securities of the Company representing forty percent (40%) or more of the
combined voting power of the Company=s then outstanding securities, or the Board
of Directors ceasing to consist of a majority of Continuing Directors, and (ii)
AContinuing Director@ means a member of the Board of Directors who either (i)
was a member of the Board of Directors as of the Date of Grant or (ii) was
nominated or appointed (before initial election as a director) to serve as a
director by a majority of the then Continuing Directors.
SECTION 3. CASH COMPENSATION; EXPENSE.
3.1 BASE SALARY. Executive shall be paid a base salary (the "Base Salary")
during the Term at an initial rate of $170,000 per twelve (12)-month period. The
Base Salary shall be (a) payable in equal installments on the schedule that
Company may implement from time to time for general payroll purposes, and (b)
subject to any withholdings and deductions required by applicable law. Employee
shall be eligible to receive an annual discretionary cash bonus in an amount up
to 50% of his base salary. This Section in no way shall obligate the Board of
Directors or the Company to approve and issue any such bonuses. Further, the
Executive will be compensated for his travel and apartment expenses associated
with his travel and lodging in Houston, Texas for the first 60 days of this
Agreement.
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3.2 STOCK OPTIONS. See Schedule "A". Upon a Change of Control as defined
in Section 2.2 (e) above and a diminution of, and a material change to, his
duties and responsibilities as CEO/President, all stock options previously
granted to the Executive under the incentive plans that have not vested shall
vest. Executive shall have one year after the Change of Control occurs to
exercise said additional vested options.
3.3 BENEFITS. During the Term, Executive shall be entitled to participate
in the employee benefit plans as provided for and in accordance with the
Company's standard personnel policies, practices and rules, as maintained by the
Company from time to time, including but not limited to health insurance, sick
days, vacation, pension programs, stock option programs, 401K programs, life
insurance, disability insurance, etc. Nothing herein shall obligate the Company
to maintain any or all of the aforesaid benefits. In addition, and in accordance
with their terms, Executive may be entitled to participate in any plans or
agreements maintained by the Company relating to retirement, health and other
benefits. Company shall have the right to purchase in Executive's name a "key
man" life insurance policy naming Company as sole beneficiary under the policy.
Company shall be the sole owner of such policy. Executive agrees to reasonably
cooperate with the Company in obtaining such insurance, including making an
application therefor and submitting to any required medical examination in
connection therewith.
3.4 VACATION. Executive shall be entitled to three (3) paid weeks of
vacation per year during the Term, to be accrued and taken in accordance with a
policy that is consistent with Company's normal vacation policy applicable to
senior executive employees.
4. INTENTIONALLY OMITTED.
5. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION COVENANTS.
5.1 DEFINITIONS. For purposes of this Section 5, the following terms shall
have the following respective meanings:
(a) "COMPETITIVE POSITION" shall mean (i) the direct or indirect
equity ownership (excluding ownership of less than one percent (1%) of the
equity of an entity whose equity is listed on a major U.S. exchange or
traded on the NASDAQ over-the-counter market) or control of all or any
portion of a "Competitor" (as hereinafter defined), or (ii) any
employment, consulting, partnership, advisory, directorship, agency,
promotional or independent contractor arrangement between Executive and
any Competitor whereby Executive, regardless of Executive's particular
title, office or position, is required to perform services substantially
similar to any of those that he is to or does perform for Company.
(b) "COMPETITOR" shall refer to any person or entity engaged, wholly
or partly, in the business of providing management and business services
to, and/or acquiring, orthodontic or dental practices.
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(c) "CONFIDENTIAL INFORMATION" shall mean any and all proprietary
and confidential data or information of company or any of its affiliates,
other than "Trade Secrets" (as hereinafter defined), which is of tangible
or intangible value to Company or any of its affiliates and is not public
information or is not generally known or available to Company's
competitors but is known only to Company or its affiliates and their
employees, independent contractors or agents to whom it must be confided
in order to apply it to the uses intended.
(d) "Trade Secrets" shall mean information of company or any
Affiliated Practice (as defined in Section 5.5) (including, but not
limited to, confidential business information, technical or non-technical
data, formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans, product
plans, lists of actual or potential customers or suppliers, and the terms
of this Agreement and any associated agreements between the parties) that:
(a) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or use; and (b)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
(e) "WORK PRODUCT" shall mean all work product, property, data,
documentation, know how", concepts, plans, inventions, improvements,
techniques, processes or information of any kind, prepared, conceived,
discovered, developed or created by Executive in connection with the
performance of the Service.
5.2 ACKNOWLEDGMENTS. Executive hereby acknowledges and agrees that
during the term of this Agreement (i) Executive will frequently be
exposed to Trade Secrets and Confidential Information of Company;
and (ii) any competitive activity on Executive's part during the
Term, or any competitive activity on Executive's part for a
reasonable period thereafter, would necessarily involve Executive's
use of Company's Trade Secrets and Confidential Information and
would unfairly threaten Company's legitimate business interests,
including its substantial investment in the proprietary aspects of
its business and its associated goodwill. Moreover, Executive
acknowledges that, in the event of the termination of the Term,
Executive would have sufficient skills to find the event of the
termination of the Term, Executive would have sufficient skills to
find alternative, commensurate work in his field of expertise that
would not involve a violation of any of the provisions of this
Section 5. Therefore, Executive acknowledges and agrees that it is
reasonable for Company to require Executive to abide by the
covenants set forth in this Section 5. The Parties acknowledge and
agree that if the nature of Executive's responsibilities for or on
behalf of Company or the geographical areas in which Executive must
fulfill such responsibilities materially change, the Parties will
execute appropriate amendments to the scope of the covenants in this
Section 5.
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5.3 NONDISCLOSURE; OWNERSHIP OF PROPRIETARY PROPERTY.
(a) In recognition of Company's need to protect its legitimate
business interests, Executive hereby covenants and agrees that: (A) with
regard to each item constituting a Trade Secret, at all times during which
such item shall constitute a Trade Secret (before or after the Term): and
(B) with regard to any Confidential Information, at all times during the
Term and for a period of three (3) years following the expiration or
termination of the Term for any reason, Executive shall regard and treat
each Trade Secret and all Confidential Information of Company as strictly
confidential and wholly owned by company and will not, for any reason, in
any fashion, either directly or indirectly, sell, lend, lease, distribute,
license, give, transfer, assign, show, disclose, disseminate, or otherwise
communicate any such Trade Secret or Confidential Information, in either
case, for any purpose other than in accordance with this Agreement or as
required by applicable law.
(b) Executive shall immediately notify company of any intended or
unintended, unauthorized disclosure or use of any Trade Secrets or
Confidential Information by Executive or any other person or entity of
which Executive becomes aware. Executive shall cooperate fully with
Company in the procurement of any protection of Company's rights to or in
any of the Trade Secrets or Confidential Information.
(c) Immediately upon expiration or termination of the Term for any
reason, or if notice of termination is required hereunder, upon receipt of
such notice, or at any time after such termination or notice upon the
specific request of Company, Executive shall return to Company all written
or descriptive materials of any kind in Executive's possession or to which
Executive has access that constitute or contain any Confidential
Information or Trade Secrets, and the confidentiality obligations
described in this Agreement shall continue their expiration under the
terms of this Agreement.
(d) To the greatest extent possible, any Work Product shall be
deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. ss. 101 ET SEQ., as amended) and owned exclusively by Company.
Executive hereby unconditionally and irrevocably transfers and assigns to
Company all rights, title and interest Executive currently has or in the
future may have, by operation of law or otherwise, in or to any Work
Product, including, without limitation, all patents, copyrights,
trademarks, Trade Secrets, service marks and other intellectual property
rights. Executive agrees to execute and deliver to Company any transfers,
assignments, documents or other instruments which Company may deem
necessary or appropriate to vest complete title and ownership of any work
Product, and all rights therein, exclusively in Company.
5.4 NON-COMPETITION. In recognition of Company's need to protect its
legitimate business interests, Executive hereby covenants and agrees that during
the Term, Executive will not, either directly or indirectly, alone or in
conjunction with any other party, accept, enter into or take any action in
furtherance of a Competitive Position. Executive further agrees that for
twenty-four (24) months following expiration or termination of the Term for
cause and for six (6) months without cause, Executive will not, either directly
or indirectly, alone or in conjunction with any other party, accept, enter into
or take any action in furtherance of a Competitive Position. (other than action
to reject an offer of a Competitive Position or to notify Company of the offer
pursuant to the requirements of the next sentence of this Section 5.4).
Executive shall notify Company promptly in writing if Executive receives an
offer of a Competitive Position during or within twenty-four (24) months for
cause and six (6) months without cause following expiration or termination of
the Term, and such notice shall describe all salient terms of such offer.
5.5 NON-SOLICITATION OF CUSTOMERS. Executive hereby covenants and agrees
that (I) during the Term, Executive will not, either directly or indirectly,
alone or in conjunction with any other party, solicit, divert or appropriate or
attempt to solicit, divert or appropriate any orthodontic practice managed, or
actively sought to be managed, by Company (in either case, an "Affiliated
Practice") for the purpose of providing (or having a Competitor or any party
other than Company provide) such Managed Practice with management services
competitive with those offered by Company; and (ii) for a period of twenty-four
(24) months following expiration or termination of the Term for any reason,
Executive will not, either directly or indirectly, alone or in conjunction with
a Competitor or any other party, solicit, divert or appropriate, or attempt to
solicit, divert or appropriate any Managed practice with which Executive had
direct or indirect contact during the Term for the purpose of providing (or
having a Competitor or any other party other than the Company provide) such
Managed Practice with a request that Executive provide Managed Practice with any
management services; and (B) provision of such services, as requested, would
constitute a violation of Executive's covenants in this Section 5. Such notice
shall include all salient information associated with such customer's request,
including, without limitation, the identity of such Managed Practice, the exact
services or products requested and the party or parties on behalf of such
Managed Practice who contacted Executive.
5.6 NONSOLICITATION OF COMPANY PERSONNEL. Executive hereby agrees that
during the Term, except to the extent that he is required to do so in connection
with his responsibilities hereunder, Executive will not, either directly or
indirectly, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor or other personnel of Company to
terminate, alter or lessen such party's affiliation with Company or to violate
the terms of any agreement or understanding between such party and Company.
Executive further agrees that during the twenty-four (24) months period
following expiration or termination of the Term for any reason,
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Executive will not, either directly or indirectly, alone or in conjunction with
any other party, solicit or attempt to solicit any "key" (as that term is
hereinafter defined) employee, consultant, contractor or other personnel of
Company, alter or lessen that party's affiliation with Company or to violate the
terms of any agreement or understanding between such party and Company. For
purposes of the preceding sentence "key" employees, consultants, contractors or
other personnel of Company are those with knowledge of or access to Company's
Trade Secrets or Confidential Information.
5.7 REMEDIES. Executive agrees that damages at law for Executive's
violation of any of the covenants in this Section 5 would not be an adequate or
proper remedy and that, should Executive violate or threaten to violate any of
the provisions of such covenants, Company or its successors or assigns shall be
entitled to obtain a temporary or permanent injunction against Executive in any
court having jurisdiction prohibiting any further violation of any such
covenants, in addition to any award or damages (compensatory, exemplary or
otherwise) for such violation.
5.8 PARTIAL ENFORCEMENT. Company has attempted to limit the rights of
Executive to compete only to the extent necessary to protect Company from unfair
competition. Company, however, agrees that, if the scope of enforceability of
any of these restrictive covenants is in any way disputed at any time, a court
or other trier of fact may modify and enforce such covenant to the extent that
it believes to be reasonable under the circumstances existing at the time.
5.9 SURVIVAL. Notwithstanding any expiration or termination of the Term,
the provisions of this Section 5 shall survive and remain in full force and
effect, as shall any other provision hereof that, by its terms or reasonable
interpretation thereof, sets forth obligations that extend beyond the
termination of this Agreement.
SECTION 6. RIGHTS ON TERMINATION.
(a) If Executive voluntarily resigns his employment or is
terminated for cause, death or because Executive has become Disabled
Executive shall be entitled only to receive any salary and bonus amounts
that have accrued prior to the effective date of termination of the Term
(the "Termination Date").
(b) If company terminates the Term other than in accordance
with an express right under Section 2 of this Agreement or Executive
elects to terminate the Term in accordance with Section 2.2(e), as
Executive's exclusive remedy with respect to any such termination,
Executive shall be entitled to: (a) all salary and bonus amounts accrued
through the Termination Date, and (b) payment, for a period of the longer
of (i) twelve months from the Termination Date or (ii) fifty percent (50%)
of the then remaining period of time in the Initial Term or the then
current Renewal Term, as the case may be, of any amount equal to: (i)
executive's base salary as of the Termination Date (with such payments to
be made at such times as they would be made if Executive's employment
continued for an additional year) LESS (ii) any salary or other amounts
that
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Executive is paid by any other person during that period (and Executive
hereby agrees to take a reasonably diligent action to secure employment as
soon as practicable after any such termination from Company and to
otherwise mitigate his losses resulting from the loss of salary from
Company). Executive's rights to any of the compensation or benefits
identified in the preceding sentence shall be subject to Executive's
compliance in all respects of each of Executive's obligations under this
Agreement.
SECTION 7. MISCELLANEOUS.
7.1 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors,
representatives, heirs, and permitted assigns.
7.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
7.3 HEADINGS. The titles, captions and headings contained in this
Agreement are inserted by convenience of reference only and are not intended to
be a part of or to affect in any way the meaning or interpretation of this
Agreement.
7.4 NOTICES.
(a) All notices, consents, requests and other communications hereunder
shall be in writing and shall be sent by hand delivery, by certified or
registered mail (return-receipt requested), by facsimile or by a recognized
national overnight courier service as set forth below:
If to Company: APPLE ORTHODONTIX, INC.
0000 Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Fax No: 000-000-0000
With a copy to Xxxxxxx Xxxxxx, LLP
Att: Xxxxxxx Xxxx
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 77002Attn: Xxxxxxx Xxxx, Esq.
If to Executive: A. Xxxxx Xxxxxxxx
To be filled in by Stone.
(b) Notices delivered pursuant to this Section 7.4(a) hereof shall be
deemed given: at the time delivered, if personally delivered, three (3) business
days after being
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deposited in the mail, if mailed; one (1) business day after
being sent, if faxed; and one (1) business day after timely delivery to the
courier, if by overnight courier service.
(c) Either party hereto may change the address to which notice is to be
sent by written notice to the other party hereto in accordance with this Section
7.4.
7.5 SCHEDULES. All Schedules and Exhibits to this Agreement are hereby
incorporated herein by this reference.
7.6 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute the same Agreement. Any signature page of any
such counterpart, or any electronic facsimile thereof, may be attached or
appended to any other counterpart to complete a fully executed counterpart of
this Agreement, and any telecopy or other facsimile transmission of any
signature shall be deemed an original and shall bind such party.
7.7 ENTIRE AGREEMENT. This Agreement is intended by the parties hereto to
be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement may be modified only by a written instrument
signed by each of the parties hereto.
7.8 SEVERABILITY. The unenforceability or invalidity of any provision of
this Agreement shall not affect the validity or enforceability of the remaining
provisions hereof, but such remaining provisions shall be construed and
interpreted in such a manner as to carry out fully the intent of the parties
hereto; PROVIDED, HOWEVER, that should any judicial body interpreting this
Agreement deem any provision hereof to be unreasonably broad in time, territory,
scope or otherwise, it is the intent and desire of the parties hereto that such
judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
7.9 WAIVER. No waiver, termination or discharge of this Agreement, or any
of the terms or provisions hereof, shall be binding upon either party hereto
unless confirmed in writing. No waiver by either party hereto of any terms
hereof shall be more strictly construed against one party by reason of the rule
of construction that an instrument is to be construed more strictly against the
party which itself or through its agents prepared the agreement, it being agreed
that all Parties and/or their agents have participated in the preparation of
this Agreement equally.
7.10 APPLICABLE LAW. Should any provision of this Agreement, including,
without limitation, any provision relating to compensation, be found to be in
violation of any applicable law, rule or regulation, the Parties agree to
execute an amendment to this
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Agreement to bring such provision into compliance with any such law, rule or
regulation, as the case may be.
IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the date first above written.
"Company"
APPLE ORTHODONTIX, INC.
By: W. XXXXX XXXX
Name: W. XXXXX XXXX
Its: SENIOR VP
[SEAL]
"Executive"
X. XXXXX XXXXXXXX
X. XXXXX XXXXXXXX
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