December 6, 2007
Exhibit 10.26
December
6, 2007
Xx.
Xxxxxx Xxxx
c/o
Orthofix, Inc.
The
Storrs Building, Suite 250
10115
Xxxxxx Avenue
Xxxxxxxxxxxx
Xxxxxxxx Xxxx
Xxxxxxxxxxxx,
XX 00000
Dear
Xxx:
Reference
is made to that certain Employment Agreement, dated July 13, 2006 (as modified
by this side letter, the “Agreement”), by and between Orthofix, Inc., a
Minnesota corporation (the “Company”), and Xxxxxx Xxxx (the “Executive,” or
“you”), under which the Company’s payment obligations are guaranteed as provided
therein by Orthofix International N.V., a Netherlands Antilles company
(“Parent”). All capitalized terms used, but not otherwise defined, herein shall
have the meaning ascribed to them in the Agreement. This letter (“Letter”) is
being delivered to memorialize the understanding between the parties to the
Agreement (the “Parties”) with respect to the transition of your
duties as
Chief Financial Officer of the Company and Parent to a new Chief Financial
Officer (“CFO”), as well as your assuming the role of Executive Vice President –
Finance of the Company and Parent.
By
executing this Letter as provided below, the Parties hereby agree as
follows:
1. The
Company acknowledges that once the new CFO commenced employment with the Company
on November 19, 2007 (the “Start Date”), an event constituting Good Reason
pursuant to Section 4.4 of the Agreement occurred and would permit you to resign
for Good Reason and receive the severance payments and other benefits described
in Section 5.1 of the Agreement and elsewhere therein (“Benefits”), unless such
event was cured by the Company. Such Benefits would include a right to (a)
payment of a one-time lump sum in an amount equal to 100% of your Base Amount
(the “Good Reason Payment”),
(b) acceleration of the vesting of all stock options then held by you (the
“Acceleration”), (c) payment of a bonus (through your date of termination) in
the form of Incentive Compensation under the Bonus Plan based on your 2007
Goals, payable on the Severance Bonus Payment Date for the 2007 Bonus Plan year
and (d) various other benefits, including outplacement services and certain
welfare benefits (“Other Benefits”). Receipt of the Benefits requires your
execution of a release as provided in Section 5.4 of the Agreement and your
compliance with protective provisions in Article VI of the Agreement,
both of which obligations continue following effectiveness of this Letter. With
respect to such Good Reason event, the Parties agree to waive the related notice
and cure periods in the Agreement and agree that such Good Reason event occurs
as of the Start Date. Nothing in this Letter shall otherwise modify any notice
or cure provisions under the Agreement, including requirements to give advance
notice of termination by the Company or the Executive. The Parties further agree
that the amount of the Good Reason
Payment under the Agreement is $407,726.00.
Xx.
Xxxxxx Xxxx
December
6, 2007
Page 2 of
6
2. You
hereby agree to continue in employment and thereby waive temporarily any and all
Benefits under the Agreement (except unpaid base salary and accrued unpaid
vacation), including the Good Reason Payment, Acceleration and Other Benefits,
in exchange for the Company offering you the opportunity to earn a retention
bonus of $150,000 (“Retention Bonus”). The Retention Bonus will be payable on
July 15, 2008, as long as you:
a. remain
an employee of the Company (or one of its affiliates) from the Start Date
through July 15, 2008 (the “Transition Period”); and
b. work
in good faith, as reasonably determined by the Company, with the new CFO to
complete a plan for the transition of your current duties and responsibilities
to the new CFO.
The
Company agrees that during the Transition Period ending July 15, 2008, it may
terminate your employment only for “Cause” as provided in Section 4.6 of the
Agreement.
3. During
the Transition Period, you will serve as Executive Vice President – Finance and
your duties will be as set forth by the CFO and the Chief Executive Officer in
their sole discretion without regard to Section 1.1 or otherwise of the
Agreement, which provisions are hereby superseded. While an employee of the
Company (or one of its affiliates) during the Transition Period, you will
continue to receive your current salary under Section 2.2 of the Agreement and
the benefits set forth under Article III.
4. With
respect to Incentive Compensation under Section 2.3 of the Agreement, you will
only be eligible for the earning and payment of such compensation as
follows:
a. if
you remain employed with the Company through December 31, 2007, you shall
receive your Incentive Compensation on the Severance Bonus Payment Date as if
you had continued in the role of CFO through such date; and
b. if
you terminate employment with the Company for any reason prior to December 31,
2007, then on the Severance Bonus Payment Date you shall receive only your
Incentive Compensation through the date hereof as if your employment had
terminated under the Agreement as of the date hereof.
c. if
you remain employed with the Company on or after January 1, 2008, you will
participate in the Bonus Plan in your new role as Executive Vice
President-Finance. Your participation will be subject to the provisions of the
Bonus Plan except as those terms might be modified by the Agreement and this
Letter and will be at a level similar to that of your peers at the
Company.
Xx.
Xxxxxx Xxxx
December
6, 2007
Page 3 of
6
d. if
you terminate your employment after January 1, 2008, but on or before July 15,
2008 (unless you are terminated for Cause), you will receive Bonus Plan
Incentive Compensation for fiscal year 2008 through the date of the termination
of your employment as follows: you will be entitled to receive the pro rata
amount of any 2008 Bonus Plan Incentive Compensation (based on the number of
business days you were actually employed during 2008) that you would have
received had you not terminated your employment during 2008; provided, however,
the foregoing sentence is not intended to give you greater rights to such
Incentive Compensation than a pro rata portion of what you would ordinarily be
entitled to under the Bonus Plan and such pro rata portion shall be paid at the
time such Incentive Compensation is paid to other senior executives of the
Company in 2009.
5. The
following outlines when you would receive your Benefits (other than Incentive
Compensation, which is outlined above) and, if earned, the Retention
Bonus:
a. if
you voluntarily terminate employment with the Company before July 15, 2008,
then, in addition to any unpaid base salary and accrued unpaid vacation then
owing through the date of termination, as well as any pro rata amount of any
Bonus Plan Incentive Compensation as provided under Section 4, following your
termination you would receive your Good Reason Payment and Other Benefits, but
you would not receive the Retention Bonus; the Acceleration would occur as of
the date you terminated employment with the Company;
b. if
you die before July 15, 2008, then following your death, in addition to any
unpaid base salary for the period from the date of your death until July 15,
2008 and accrued unpaid vacation owing through the date of death, as well as any
pro rata amount of any Bonus Plan Incentive Compensation for the fiscal year of
your death as provided under Section 4, your beneficiary would receive your Good
Reason Payment, Other Benefits and the Retention Bonus; the Acceleration would
occur as of the date you died;
c. if
you remain employed by the Company (or one of its affiliates) until July 15,
2008, but do not accept a long-term role with the Company (or are not offered a
long-term role with the Company) for any reason, then following your termination
of employment you would receive (i) your Good Reason Payment and Other Benefits;
(ii) the Retention Bonus (to be paid on or before August 1, 2008); (iii)any
unpaid base salary and accrued unpaid vacation then owing through the date of
termination, as well as any
pro rata
amount of any Bonus Plan Incentive Compensation as provided under Section 4, and
the Acceleration would occur as of the date you terminated employment with the
Company; further, the Parties agree that the Company is not obligated to offer,
nor are you obligated to accept, any long-term role; and
Xx.
Xxxxxx Xxxx
December
6, 2007
Page 4 of
6
d. if
you remain employed by the Company (or one of its affiliates) until July 15,
2008, and you accept in writing a long-term role and continued employment with
the Company, then you would receive the Retention Bonus (to be paid on or before
August 1, 2008), but not receive the Good Reason Payment, Other Benefits or any
other severance payments or benefits under the Agreement as a result of the Good
Reason event (nor will the Acceleration occur); instead, the Agreement would
remain in effect as if the Company had cured and remedied the event constituting
Good Reason in accordance with Section 4.4 of the Agreement, to the reasonable
satisfaction of the Executive, and the Executive shall have no right to
terminate his employment or receive Benefits under Sections 4.4, 5.1 or any
other provision of the Agreement, as a result of such Good Reason
event.
6. While
nothing will obligate you to remain employed with the Company after July 15,
2008, or for the Company to offer you a long-term position after July 15, 2008,
the Parties agree to work in good faith to determine to what extent and in what
role you might remain with the Company after that date. Failure of the Parties
to determine a long-term role for the Executive will create no liability or
obligation for any of the Parties. For the avoidance of doubt, the Agreement and
its Term will cease on your last day of employment with the Company (or any of
its affiliates) unless you continue in a long-term role as provided in paragraph
5(d) (other than provisions of the Agreement that survive, which provisions
shall remain in effect in accordance with their terms).
7. Until
the earlier of (a) the end of the Transition Period and (b) your ceasing to be
an employee of the Company (or one of its affiliates), you understand and
acknowledge that you are an at-will employee of the Company and, in the event of
any termination of your employment by the Company or voluntarily by you, you
would not be entitled to any sums or other payments or benefits, other than the
Good Reason Payment, Incentive Compensation, Other Benefits, Acceleration, and,
if earned, the Retention Bonus, all
as
specifically provided herein; provided, however, that nothing in this letter
shall (i) limit the Company’s obligations under Section 7.2 of the
Agreement with respect to legal fees or (ii) your obligation to comply with the
protective provisions set forth in Article VI of the Agreement.
8. Any
payments to be made hereunder following termination of employment will be paid
in a lump sum as provided under the Agreement, unless expressly set forth
otherwise herein, promptly thereafter, subject to compliance with Section 409A
(“Section 409A”) of the Internal Revenue Code of 1986, as amended, including but
not limited to any requirement that such payments be delayed for at least six
months following termination of employment. The terms “termination” and
“termination of employment,” and any variations thereof, as used in this Letter
are intended to mean a termination of
employment
which constitutes a “separation from service” under Section 409A.
9. The
terms of this offer remain open for 5 days from the date of this Letter, after
which the offer represented by this Letter will be deemed
revoked.
Xx.
Xxxxxx Xxxx
December
6, 2007
Page 5 of
6
10. As
an inducement for the Executive to enter into this Letter, the Company has
agreed to enter into an Amended and Restated Employment Agreement (the "New
Agreement") with you immediately following execution of this Letter in order to,
among others, reflect your new title and make changes in an effort to ensure
compliance with Section 409A. Following such time, any references to the
Agreement in this Letter shall be construed as references to the New Agreement
and the exercise period for options held
by you
shall be governed by the terms of that New Agreement.
Please
confirm your agreement with and consent to the terms of this Letter by executing
the same in the space provided below. This Letter shall only be effective as of
the date it is signed by both you and the Company. For the avoidance of doubt,
this Letter represents an amendment of the Agreement. This Letter may be
executed in one or more counterparts, each of which shall be deemed to be an
original and all of which together shall constitute one and the same agreement.
This Letter shall be subject to the governing law and dispute resolution
provisions set forth in the Agreement.
(Remainder
of this page intentionally left blank)
Xx.
Xxxxxx Xxxx
December
6, 2007
Page 6 of
6
Sincerely,
ORTHOFIX,
INC.
By: /s/ Xxxxxxx X.
Xxxxx
Name:
Xxxxxxx X.
Xxxxx
Title:
Secretary
Acknowledged and agreed to
by:
XXXXXX
XXXX
By: /s/ Xxxxxx
Xxxx
ORTHOFIX
INTERNATIONAL N.V.
By:/s/Xxxxxxx X.
Xxxxx
Name: Xxxxxxx X.
Xxxxx
Title:
Secretary
