Exhibit 10.3
FORM OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of _____________, is made between Xxxxxx
Medical Group, Inc., a Delaware corporation (the "Company"), and _____________
(the "Employee").
1. EMPLOYMENT. The Company hereby employs the Employee and the Employee
hereby accepts employment all upon the terms and conditions herein set forth.
2. DUTIES. The Employee is engaged as the _____________ of the Company and
hereby promises to perform and discharge well and faithfully the duties which
may be assigned to him from time to time by the Board of Directors of the
Company (the "Board") in connection with the conduct of the Company's business.
3. EXTENT OF SERVICES. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not, during the
term of this Agreement, be engaged in any other business activity, regardless of
whether such business activity is pursued for gain, profit or other pecuniary
advantage; but this shall not be construed as preventing the Employee from
investing his personal assets in businesses which do not compete with the
Company in such form or manner as will not require any services on the part of
the Employee in the operation of the affairs of the companies in which such
investments are made and in which his participation is solely that of an
investor, and except that the Employee may purchase securities in any
corporation whose securities are regularly traded on NASDAQ, a national or
regional stock exchange or in the over-the-counter market provided that such
purchase shall not result in his collectively owning beneficially at any time
one percent (1%) or more of the equity securities of any corporation engaged in
a business competitive to that of the Company. Nothing in this paragraph 3 shall
prevent the Employee from serving on the Board of Directors of any other
company, so long as the Board shall approve each position so held by the
Employee.
4. COMPENSATION MATTERS.
(a) BASE SALARY. For services rendered under this Agreement, the
Company shall pay the Employee an aggregate salary of $______ per annum (the
"Base Salary"), payable (after deduction of applicable payroll taxes) in
accordance with the customary payroll practices of the Company, as may exist
from time to time.
(b) ANNUAL BONUS. During Employee's employment hereunder, in
addition to Salary, the Employee shall be eligible to receive an annual
performance bonus (the "Bonus") with a target of ___% of Base Salary for each
calendar year during Employee's employment; provided that, except as otherwise
provided in this Agreement, the Employee must be employed on the last day of
such calendar year in order to receive the Bonus attributable thereto. The
Employee's entitlement to the Bonus for any particular calendar year shall be
based on the attainment of performance objectives established by the
Compensation Committee of the Company (the "Committee") and communicated to the
Employee in writing at the beginning of each calendar year. The Committee shall
determine the Employee's entitlement to the Bonus, based on the achievement of
the performance objectives for such year, as determined by the Committee and
communicated to the Employee, in good faith within sixty (60) days after the end
of each such calendar year, which shall be paid by the Company no later than ten
days following such determination. The Employee shall also be eligible for and
participate in such fringe benefits as shall be generally provided to executives
of the Company, including medical insurance and retirement programs which may be
adopted from time to time during the term hereof by the Company. The Employee
shall be responsible for making any generally applicable employee contributions
required under such fringe benefit programs.
(c) INITIAL OPTION GRANT. On the effective date of this Agreement,
the Company will grant the Employee options to purchase a number of shares of
the Company's common stock under the Company's 1999 Equity Incentive Plan (the
"Stock Option Plan") equal to ___% (fully diluted) of the then outstanding
shares of the Company's common stock (the "Target Number"), at a price per share
equal to the fair market value of such share on the date of grant as determined
by the Company's Board of Directors in accordance with the terms of the Stock
Option Plan, such options to terminate on the _____ anniversary of the effective
date hereof and to vest as to ___% of the options on and after the first
anniversary of the effective date hereof, an additional ___% of the options on
and after the second anniversary of the effective date hereof, an additional
___% of the options on and after the third anniversary of the effective date
hereof and an additional ___% of the options on and after the fourth anniversary
of the effective date hereof. Such options will be evidenced by a stock option
agreement to be entered into by the Company and the Employee substantially in
the form attached hereto as Exhibit A.
(d) FUTURE OPTION INCENTIVE GRANTS. In addition to the options
granted pursuant to paragraph 4(c) above, during the term of this Agreement, the
Employee shall be eligible for participation in the Stock Option Plan and any
other stock option plan administered by the Compensation Committee of the Board
of Directors. In addition to the options granted pursuant to paragraph 4(c)
above, the Company will grant to the Employee during the term of this Agreement
options to purchase an additional number of shares of the Company's common stock
equal to the Target Number at such times and in such amounts and with such terms
as Employee and the Compensation Committee of the Board of Directors shall agree
upon. The Company and Employee agree to negotiate in good faith to reach an
agreement on or before _____________ as to the terms of the additional options
to be granted pursuant to this paragraph 4(d). Any such options granted pursuant
to this paragraph 4(d) will terminate on the tenth anniversary of the date of
grant, will vest in equal installments on each of the first four anniversaries
of the date of grant and will be evidenced by a stock option agreement to be
entered into by the Company and the Employee.
(e) The options granted pursuant to paragraphs 4(c) and 4(d) above
shall be collectively referred to herein as the "New Options."
(f) The Committee shall review the Employee's compensation at least
once per year and award such bonuses or make such increases to the Base Salary
as the Committee, in its sole discretion, determines are merited, based upon the
Employee's performance and consistent with compensation policies of the Company.
5. SICK LEAVE AND VACATION. During the term of this Agreement, the
Employee shall be entitled to annual vacation of at least ______ (___) weeks, or
such greater time period if
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permitted by Company policy, to be taken at his discretion, in a manner
consistent with his obligations to the Company under this Agreement. The actual
dates of such vacation periods shall be agreed upon by mutual discussions
between the Company and Employee; provided, however, that the Company shall have
the ultimate decision with respect to the actual vacation dates to be taken by
Employee, which decision shall not be unreasonable. The Employee shall also be
entitled to sick leave consistent with Company policy.
6. EXPENSES; RELOCATION. During the term of this Agreement, the Company
shall reimburse the Employee for all reasonable out-of-pocket expenses incurred
by the Employee in connection with the business of the Company and in
performance of his duties under this Agreement upon the Employee's presentation
to the Company of an itemized accounting of such expenses with reasonable
supporting data.
7. TERM.
(a) The Employee's employment under this Agreement shall commence on
effective date first set forth above and shall expire on the third anniversary
of such date. Notwithstanding the foregoing, the Company may at its election,
subject to paragraph 7(b) below, terminate the obligations of the Company under
this Agreement as follows:
(i) Upon 30 days' notice if the Employee becomes physically or
mentally incapacitated or is injured so that he is unable to perform the
services required of him hereunder and such inability to perform continues for a
period in excess of six months and is continuing at the time of such notice; or
(ii) For "Cause" upon notice of such termination to the
Employee. For purposes of this Agreement, the Company shall have "Cause" to
terminate its obligations hereunder upon (A) the determination by the Board that
the Employee has ceased to perform his duties hereunder (other than as a result
of his incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of his duties hereunder, (B) the
Employee's death, (C) the Board's determination that the Employee has engaged or
is about to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, or (E) the Employee's
participation in activities proscribed by the provisions of paragraphs 9 or 10
hereof or material breach of any of the other covenants herein; or
(iii) Without Cause upon 30 days' notice of such termination
to the Employee.
(b) (i) If this Agreement is terminated pursuant to paragraph
7(a)(i) above, the Employee shall receive salary continuation pay from the date
of such termination until the third anniversary of the date hereof at the rate
of 100% of the Base Salary, reduced by applicable payroll taxes and further
reduced by the amount received by the Employee during such period under any
Company-maintained disability insurance policy or plan or under Social Security
or similar laws. Such salary continuation payments shall be paid periodically to
the Employee as provided in paragraph 4(a) for the payment of the Base Salary.
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(ii) If this Agreement is terminated pursuant to paragraph
7(a)(ii) above, the Employee shall receive no salary continuation pay or
severance pay.
(iii) If this Agreement is terminated pursuant to paragraph
7(a)(iii) above, the Employee shall receive salary continuation pay for a period
of ______ (___) months from and after the date of such termination (the "Salary
Continuation Period") equal to the Base Salary. Such salary continuation
payments (less applicable payroll taxes) shall be paid periodically to the
Employee as provided in paragraph 4(a) for the payment of the Base Salary.
During the Salary Continuation Period, the Employee shall also be eligible to
receive continued coverage under all of the Company's current health benefit and
life insurance programs at the same rates that were applicable to the Employee
prior to the commencement of the Salary Continuation Period. At the commencement
of the Salary Continuation Period, all of the Employee's unexercised New Options
shall automatically vest and be fully exercisable and the Employee shall have
______ (___) months from such date to exercise all unexercised New Options. This
provision will not affect the terms of any options granted to the Employee after
the date of this Agreement.
(c) During the Salary Continuation Period, the Employee shall be
under no obligation to mitigate the costs to any of the Company of the salary
continuation payments.
(d) Not later than ninety (90) days prior to the expiration of the
stated term of the Agreement, the parties shall begin to negotiate in good faith
the terms of any extension of this Agreement, provided that no party shall be
under any obligation to enter into such an extension.
8. REPRESENTATIONS. The Employee hereby represents to the Company that (a)
he is legally entitled to enter into this Agreement and to perform the services
contemplated herein, and (b) he has the full right, power and authority, subject
to no rights of third parties, to grant to the Company the rights contemplated
by paragraph 10 hereof.
9. DISCLOSURE OF INFORMATION. The Employee recognizes and acknowledges
that the Company's and its predecessors' trade secrets, know-how and proprietary
processes as they may exist from time to time are valuable, special and unique
assets of the Company's businesses, access to and knowledge of which are
essential to the performance of the Employee's duties hereunder. The Employee
will not, during or after the term of his employment by any of the Company, in
whole or in part, disclose such secrets, know-how or processes to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall the Employee make use of any such property for his own
purposes or for the benefit of any person, firm, corporation or other entity
(except the Company) under any circumstances during or after the term of his
employment, provided that after the term of his employment these restrictions
shall not apply to such secrets, know-how and processes which are then in the
public domain (provided further that the Employee was not responsible, directly
or indirectly, for such secrets, know-how or processes entering the public
domain without the Company's consent).
10. INVENTIONS. The Employee hereby sells, transfers and assigns to the
Company or to any person, or entity designated by the Company all of the entire
right, title and interest of the Employee in and to all inventions, ideas,
disclosures and improvements, whether patented or
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unpatented, and copyrightable material, made or conceived by the Employee,
solely or jointly, during the term hereof which relate to methods, apparatus,
designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company or any of its predecessors, or which
otherwise relate to or pertain to the business, functions or operations of the
Company or any of its predecessors or which arise from the efforts of the
Employee during the course of his employment for the Company or any of its
predecessors. The Employee shall communicate promptly and disclose to the
Company, in such form as the Company requests, all information, details and data
pertaining to the aforementioned inventions, ideas, disclosures and
improvements; and the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
necessary or required of the Employee to permit the Company or any person or
entity designated by the Company to file and prosecute the patent applications
and, as to copyrightable material, to obtain copyright thereof. Any invention
relating to the business of the Company and disclosed by the Employee within one
year following the termination of this Agreement shall be deemed to fall within
the provisions of this paragraph unless proved to have been first conceived and
made following such termination.
11. COVENANTS NOT TO COMPETE OR INTERFERE. For a period ending ______
(___) months from and after the termination of the Employee's employment
hereunder, the Employee shall not (whether as an officer, director, owner,
employee, partner or other direct or indirect participant) engage in any
Competitive Business. "Competitive Business" shall mean the manufacturing,
supplying, producing, selling, distributing or providing for sale of any
orthopaedic product, device or instrument manufactured or sold by the Company or
its subsidiaries or in clinical development sponsored by the Company or its
subsidiaries, in each case, as of the date of termination of the Employee's
employment. For such period, the Employee shall also not interfere with, disrupt
or attempt to disrupt the relationship, contractual or otherwise, between the
Company or its subsidiaries and any customer, supplier, lessor, lessee or
employee of the Company or its subsidiaries. It is the intent of the parties
that the agreement set forth in this paragraph 11 apply in all parts of the
world.
Employee agrees that a monetary remedy for a breach of the agreement set
forth in this paragraph 11 will be inadequate and impracticable and further
agrees that such a breach would cause the Company irreparable harm, and that the
Company shall be entitled to temporary and permanent injunctive relief without
the necessity of proving actual damages. In the event of such a breach, Employee
agrees that the Company shall be entitled to such injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions
as a court of competent jurisdiction shall determine.
It is the desire and intent of the parties that the provisions of this
paragraph 11 shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular portion of this paragraph 11 shall be adjudicated
to be invalid or unenforceable, this paragraph 11 shall be deemed curtailed,
whether as to time or location, to the minimum extent required for its validity
under the applicable law and shall be binding and enforceable with respect to
the Employee as so curtailed, such curtailment to apply only with respect to the
operation of this paragraph in the particular jurisdiction in which such
adjudication is made. If a court in any jurisdiction, in adjudicating the
validity of this paragraph 11, imposes any additional terms or restrictions with
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respect to the agreement set forth in this paragraph 11, this paragraph 11 shall
be deemed amended to incorporate such additional terms or restrictions.
12. INJUNCTIVE RELIEF. If there is a breach or threatened breach of the
provisions of paragraphs 9, 10 or 11 of this Agreement, the Company shall be
entitled to an injunction restraining the Employee from such breach. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.
13. CHANGE OF CONTROL. Upon the occurrence of a Change of Control (as
defined below), all of the unexercised New Options shall automatically vest and
be fully exercisable and shall remain so exercisable in accordance with the
respective terms of such options. This provision shall apply without regard to
whether the Stock Option Plan or the Stockholders Agreement specifically
provides for accelerated vesting upon a Change in Control. For purposes of this
Agreement, "Change of Control" shall mean the first occurrence after the
effective date hereof of :
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more (on
a fully diluted basis) of either (A) the then outstanding shares of common stock
of the Company, taking into account as outstanding for this purpose such common
stock issuable upon the exercise of options or warrants, the conversion of
convertible stock or debt, and the exercise of any similar right to acquire such
common stock (the "Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control: (w) any
acquisition pursuant to an initial public offering of shares of common stock of
the Company pursuant to a registration statement declared effective under the
Securities Act of 1933, as amended, (x) any acquisition by the Company or any
"affiliate" of the Company, within the meaning of 17 C.F.R. ss. 230.405 (an
"Affiliate"), (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Affiliate of the Company,
(z) any acquisition by any corporation or business entity pursuant to a
transaction which complies with clauses (A), (B), (C) and (D) of subsection (ii)
of this Section 13 (persons and entities described in clauses (w), (x), (y) and
(z) being referred to herein as "Permitted Holders"); or
(ii) The consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
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Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, and (B) no Person (excluding any Permitted Holder) beneficially owns,
directly or indirectly, 50% or more (on a fully diluted basis) of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such Business Combination, taking into account as outstanding for this purpose
such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such common stock, or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, (C) at least a majority of
the members of the board of directors of the corporation resulting from such
Business Combination were members of the incumbent Board of Directors of the
Company at the time of the execution of the initial agreement providing for such
Business Combination and (D) the Employee is the Chief Executive Officer of the
new entity resulting from the Business Combination; or
(iii) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
(iv) The sale of at least 80% of the assets of the Company to an
unrelated party, or completion of a transaction having a similar effect; or
(v) The individuals who on the date of this Agreement constitute the
Board thereafter cease to constitute at least a majority thereof; provided that
any person becoming a member of the Board subsequent to the date of this
Agreement and whose election or nomination was approved by a vote of at least
two-thirds of the directors who then comprised the Board immediately prior to
such vote shall be considered a member of the Board on the date of this
Agreement.
14. INSURANCE. The Company may, at its election and for its benefit,
insure the Employee against accidental loss or death, and the Employee shall
submit to such physical examination and supply such information as may be
required in connection therewith.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
_________________________________, in the case of the Employee, or to Xxxxxx
Medical Group, Inc., 0000 Xxxxxxx Xxxx, Xxxxxxxxx XX 00000, in the case of the
Company, or to such other address as the as either party shall notify the other.
16. WAIVER OF BREACH. A waiver by the Company or Employee of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without reference
to the conflicts of laws principles therein.
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18. ASSIGNMENT. This Agreement may be assigned, without the consent of the
Employee, by the Company to any person, partnership, corporation, or other
entity which has purchased substantially all the assets of such Company,
provided such assignee assumes all the liabilities of such Company hereunder.
19. ENTIRE AGREEMENT. This instrument and the Option Agreement entered
into pursuant to Section 4(e) hereunder contains the entire agreement of the
parties with respect to the subject matter referred to herein and supersedes any
and all agreements, letters of intent or understandings between the Employee and
the Company, its subsidiaries or any of the Company's principal shareholders
with respect thereto. These Agreements may be changed only by an agreement or
agreements in writing signed by a party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.
XXXXXX MEDICAL GROUP, INC.
By:
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Name:
Title:
Date:
EMPLOYEE
By:
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Name:
Title:
Date:
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