1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is
entered into as of the 30th day of November, 1998, by and between Integrated
Orthopaedics Inc., a Texas corporation (the "Company"), and Xxxxxx X.
Xxxxxx (the "Executive").
WHEREAS, the Chief Executive Officer and Board of Directors of
the Company recognize that the Executive's contribution to the growth and
success of the Company is expected to be substantial, and desires to assure the
Company of the Executive's employment in an executive capacity and to compensate
him therefor; and
WHEREAS, the Executive desires to commit himself to serve the
Company on the terms and subject to the conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1 . Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to be employed exclusively by the Company, for a
period commencing on November 30, 1998 (the "Commencement Date") and ending upon
the termination of this Agreement pursuant to Section 5 hereof (the "Employment
Period").
2. Position and Duties. The Executive, during the Employment Period,
shall serve as the Chief Financial Officer of the Company, reporting to the
Chief Executive Officer. The Executive shall have such powers and duties as may
from time to time be prescribed by the Chief Executive Officer so long as such
duties are consistent with the Executive's positions on the date hereof. The
Executive shall devote substantially all of his working time and efforts to the
business and affairs of the Company, shall perform his duties hereunder
diligently and in a prudent and businesslike manner, and shall act in the best
interest of the Company.
3. Compensation and Benefits:
(a) Base Salary. During the Employment Period (subject to Section
5 (c) hereof), the Executive shall receive an annual base
("Base Salary") salary of $225,000 during the first twelve
months, increasing by $25,000 for each subsequent twelve month
period for the duration of the Base Term, the period from the
Commencement Date to and including the third (3rd) anniversary
of the Commencement Date being referred to herein as the "Base
Term." Base Salary is subject to annual review by the
Compensation Committee of the Board of Directors (the
"Compensation Committee"). The Base Salary may be increased,
but not decreased, during the Employment Period upon
recommendation of the Compensation Committee and approval by
the Board of Directors, which recommendation and approval may
be withheld at the sole discretion of the Compensation
Committee and the Board of Directors, respectively. The Base
Salary shall be payable in installments in accordance with the
Company's customary payroll practices but not less frequently
than monthly.
2
(b) Bonus. In addition to the Base Salary, the Executive shall be
eligible to receive bonus compensation, up to fifty percent
(50%) of base salary, in such amounts and payable at such
times as determined by recommendation of the Compensation
Committee and approval by the Board of Directors, which
recommendation and approval may be withheld at the sole
discretion of the Compensation Committee and the Board of
Directors, respectively, at all times during the Employment
Period. On January 1, 1999, 2000, and 2001, the Executive will
be guaranteed payment of the first $25,000 of the total amount
of bonus earned each year. In the event the Executive
terminates this Agreement, pursuant to Section 5 (D),
Executive shall forfeit, and return to the Company if prepaid,
the pro-rata unearned bonus guarantee for that year. Executive
shall receive a signing bonus of $25,000.
(c) Stock Option Eligibility. The Executive shall receive a grant
of two hundred thousand (200,000) company stock options to be
delivered on the first date of full time employment and an
additional fifty thousand (50,000) company stock options to be
delivered on the first anniversary of that date. The basis
price for the stock options shall be the closing price on the
date of delivery. Vesting of stock options is performance
based, and is explained in the company's 1997 Long Term
Incentive Plan. During the Employment Period, the Executive
shall be eligible to receive additional stock option grants,
including annual performance stock option grants, pursuant to
Company's stock option plans in effect from time to time, all
at the discretion of the Compensation Committee and the Board
of Directors.
(d) Fringe Benefits. During the Employment Period (subject to
Section 5(c) hereof), the Executive shall receive the fringe
benefits described on Exhibit A attached hereto. In addition,
during the Employment Period, the Executive shall be eligible
to participate in such retirement, profit sharing and pension
plans and life and other insurance programs, as well as other
benefit programs, which are available to senior executive
officers of the Company, subject to the Company's policies
with respect to all of such benefits or insurance programs or
plan; provided, however, that except as expressly set forth
herein, the Company shall not be obligated to institute or
maintain any particular benefit or insurance program or plan
or aspect thereof.
4. Expenses. Upon submission of properly documented expense account
reports, the Company shall reimburse the Executive for all reasonable travel,
entertainment and work-related expenses incurred by the Executive in connection
with the performance of his duties as Chief Financial Officer of the Company,
subject to and in accordance with the expense and reimbursement policies that
may be adopted by the Company from time to time.
5. Termination. This Agreement shall terminate on the third (3rd)
anniversary of the Commencement Date (first date of full time employment),
unless earlier terminated pursuant to any one or more of the following
provisions:
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of Executive.
For purposes of the Agreement, "total disability" shall be
deemed to have occurred if Executive shall have been unable to
perform his duties hereunder for a period of three (3)
consecutive months or
3
for any sixty (60) working days out of any period of six (6)
consecutive months Upon such termination for death or total --
disability, the Company shall pay to the Executive or his
estate, heirs or legal representative, as the case may be, all
compensation of the Executive accrued but unpaid in respect to
periods ending on or prior to such termination and the Company
shall have no further obligations to pay the Executive or his
estate, heirs or legal representative any other compensation
or provide any other benefits pursuant to this Agreement.
(b) Termination for Cause. The Company may terminate this
Agreement for Cause upon ten (10) days' written notice to the
Executive. For purposes of this Agreement, "Cause" shall be
deemed in include (i) material acts of fraud, dishonesty or
deceit, (ii) competition with the Company or its subsidiaries,
(iii) unauthorized use of any of the Company's or its
subsidiaries' trade secrets or Confidential Information, (iv)
conviction of a felony involving moral turpitude, (v) any
material violation of any other material duty to the Company
or its shareholders imposed by law or the Board of Directors,
or (vi) any material breach of Executive's representations,
covenants, duties and responsibilities hereunder. Upon such
termination for Cause, the Company shall pay to the Executive,
as soon as practicable after such termination, all
compensation of the Executive accrued but unpaid in respect of
periods ending on or prior to such termination and the Company
shall have no further obligations to pay the Executive any
other compensation or provide any other benefits pursuant to
this Agreement.
(c) Termination Without Cause. The Company may terminate this
Agreement without Cause upon 30 days' written notice to
Executive. Upon such termination without Cause, the Company
shall pay to the Executive a termination fee equal to the
amount of compensation and benefits that would otherwise be
payable or provided to the Executive pursuant to Section 3(a)
and the first sentence of Section 3(d) hereof through the
later of (i) the remainder of the Base Term as if this
Agreement had remained in full force and effect for the
remainder of the Base Term (payable or provided in accordance
with Section 3 (a) or Exhibit A hereof, as the case may be)
and (ii) one year after the effective date of the termination
without Cause; plus the cash replacement value of benefits
described in the first sentence of Section 3(d) hereof,
through the later of (i) the remainder of the Base Term as if
this Agreement has remained in full force and effect for the
remainder of the Base Term and (ii) one year after the
effective date of the termination without Cause. In the event
of a change in control of the company resulting in any
involuntary reduction in title, responsibility and/or
compensation may be considered by Executive as termination
without Cause. Upon any termination without Cause, all options
to purchase capital stock of the Company and all restricted
stock of the Company held by the Executive at the time of such
termination without Cause shall be deemed vested immediately
prior to such termination without Cause. The Executive shall
have 90 days after such termination to exercise any such stock
options. All such stock options that are not exercised within
such 90-day period shall be forfeited and canceled.
(d) Termination by Executive. The Executive may terminate this
Agreement upon thirty (30) days' written notice to the
Company. Upon termination by the Executive, the Company shall
pay to the Executive, as soon as practicable after such
termination, all compensation of the Executive accrued but
unpaid in
4
respect of periods ending on or prior to such termination and
the Company shall have no further obligations to pay the
Executive any other compensation or provide any other benefits
pursuant to this Agreement.
6. Representations by the Executive. The Executive hereby represents
and warrants to the Company that (a) the Executive's execution and delivery of
this Agreement and his performance of his duties and obligations hereunder will
not conflict with, cause a breach or default under, or give any party a right to
damages under (or to terminate) any other agreement to which the Executive is a
party or by which he is bound, and (b) there are no restrictions, agreements or
understanding that would make unlawful the Executive's execution or delivery of
this Agreement or the performance of his obligations hereunder.
7. Confidentiality.
(a) Non-Disclosure Obligation. During the Employment Period or at
any time thereafter, irrespective of the time, manner or cause
of the termination of this Agreement, the Executive will not
directly or indirectly reveal, divulge, disclose or
communicate to any person or entity, other than authorized
officers, directors, and employees of the Company, in any
manner whatsoever, any Confidential Information (as
hereinafter defined) without the prior written consent of the
Company.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by the Executive as a direct
or indirect consequence of his employment hereunder about the
Company or its subsidiaries or their respective businesses,
products and practices which information is not generally
known in the business in which the Company or its
subsidiaries, as the case may be, is or may be engaged.
However, Confidential Information shall not include under any
circumstances any information with respect to the foregoing
matters which is (i) available to the public from a source
other than the Executive or persons who are not under similar
obligations of confidentiality to the Company and who are not
parties to this Agreement, (ii) required to be disclosed by
any court process or any government or agency or department of
any government, or (iii) the subject of a written waiver
executed by the Company for the benefit of the executive.
(c) Return of Property. Upon termination of this Agreement, the
Executive will surrender to the Company all Confidential
Information, including without limitation, all lists, charts,
schedules, reports, financial statements, books and records of
the Company and its subsidiaries, and all copies thereof, and
all other property belonging to the Company.
8. Non-Competition.
(a) Term and Scope. Subject to the other provisions of this
Section 9, from and after the date hereof until the date which
is one year after the expiration or earlier termination of
this Agreement in accordance with the terms hereof (the
"Non-competition Term"), without the prior written consent of
the Board of Directors of the Company, the Executive shall not
directly or indirectly participate as a stockholder,
proprietor, partner, trustee, consultant, employee, director,
officer, lender, or investor in any corporation, business or
professional enterprise that
5
provides management services to medical practices within the
musculoskeletal specialty or other specialties practiced by
any medical practice subject to a management services contract
or arrangement during the Non-competition Term with the
Company or any of its subsidiaries, in each case within a
thirty mile radius of (i) any location in which the Company or
its subsidiaries presently conducts business or (ii) any
location in which the Company or its subsidiaries, during the
Non-competition Term, (x) has initiated business acquisition
or affiliation discussions with physician groups, (y) has
expressed a bona fide interest to conduct business or (z)
conducts business.
(b) Exception. Nothing contained herein shall limit the right of
the Executive to hold and make investments in securities of
any corporation or limited partnership that is registered on a
national securities exchange or admitted to trading privileges
there on or actively traded in a generally recognized
over-the-counter market, provided the Executive's equity
interest therein does not exceed 5% of the total outstanding
shares or interest in such corporation or partnership.
(b) Extension for Noncompliance. If, during any period within the
Noncompetition Term, the Executive is not in compliance with
the terms of this Section 8, the Company shall be entitled to,
among other remedies, compliance by the Executive with the
terms of this Section 8 for an additional period equal to the
period of such noncompliance.
(d) Reasonableness. The Executive hereby acknowledges that the
geographic boundaries, scope of prohibited activities and the
time duration of the provisions of this Section 8 are
reasonable and are not broader than are necessary to protect
the legitimate business interests of the Company.
9. Non-Solicitation and Non-Interference. During the Noncompetition
Term, the Executive shall not, directly or indirectly, (a) solicit the
employment of any current or future employee for the Company without the prior
written consent of the Board of Directors of the Company, (b) request, induce or
attempt to influence any employee of the Company to terminate his or her
employment with the Company, or (c) request, induce or attempt to influence any
supplier, customer, patient or client of the Company to terminate his, her or
its relationship with the Company.
10. Injunctive Relief. The Executive acknowledges that the breach of
any of the agreements contained herein, including, without limitation, any of
the confidentiality, Noncompetition and non-solicitation covenants specified in
Section 7 through 9, may give rise to irreparable injury to the Company,
inadequately compensable in money damages. Accordingly, the Company shall be
entitled to injunctive relief to prevent or cure breaches or threatened breached
of the provisions of this Agreement and to enforce specific performance of the
terms and provisions hereof in any court of competent jurisdiction, in addition
to any other legal or equitable remedies which may be available. The Executive
waives any requirements for the posting of a bond in connection with the
issuance of such an injunction necessary for the protection of the Company's
legitimate business interests and are reasonable in scope and content.
11. Assignment. This Agreement will be binding upon the parties hereto
and their respective successors and permitted assignees. Because the Executive's
duties and services hereunder are special, personal and unique in nature, the
Executive may not transfer, sell or otherwise assign his rights, obligations or
benefits under this Agreement (and any attempt to do so will be void).
6
12. Headings. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof
13. Notices. All notices and other communications required or permitted
hereunder must be in writing and (a) delivered personally, (b) sent by
telefacsimile, (c) delivered by a nationally recognized overnight courier
service, or (d) sent by registered or certified mail, postage prepaid, as
follows:
(i) If to the Company, to:
Integrated Orthopaedics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Executive Officer
(ii) To the Executive, to:
Xxxxxx X. Xxxxxx
000 Xxxxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 14 will (x) if delivered
personally or by overnight courier service, be deemed given upon delivery; (y)
if delivered by telefacsimile or similar facsimile transmission, be deemed given
when electronically confirmed, and (z) if sent by registered or certified mail,
be deemed given when received. Any party from time to time may change its
address for the purpose of notices to that party by giving a similar notice
specifying a new address, but no such notice will be deemed to have been given
until it is actually received by the party sought to be charges with the
contents thereof.
14. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement; the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance from this Agreement. In
lieu of each such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
15. Entire Agreement: Amendments. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only by
an instrument in writing setting forth the particulars of such amendment and
duly executed by an executive officer of the Company and by the Executive.
16. Waiver. No delay or omission by any party hereto to exercise any
right or power hereunder shall impair such right or power or be construed as a
waiver thereof. A waiver by any party of any of the covenants to be performed by
any other party or any breach thereof shall not be construed to be a waiver of
any succeeding breach or of any other covenant herein contained. Except as
otherwise expressly set forth herein, all remedies provided for in this
Agreement shall be cumulative and in addition to and not in lieu of any other
remedies available to any party at law, in equity or otherwise.
7
17. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, and all of which
together shall constitute one and the same agreement.
18. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, without regard to conflict of
laws principles thereof.
IN WITNESS THEREOF, the Company and the Executive have
executed this Agreement as of the date first above written.
COMPANY:
INTEGRATED ORTHOPAEDICS, INC.
By:
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
EXECUTIVE:
By:
Name: Xxxxxx X. Xxxxxx
8
EXHIBIT A
SCHEDULE OF FRINGE BENEFITS
1. The Company shall provide long-term disability insurance coverage for
the Executive equal to 50% of the Executive's Base Salary payable
pursuant to Section 3 (a) of this Agreement.
2. The Company shall provide term life insurance coverage having a death
benefit of $1,000,000, payable, upon the death of the Executive, to the
beneficiary or beneficiaries selected by the Executive.
3. The Company will provide reimbursable relocation expenses, including
closing costs to seller (current home), closing costs to purchaser (new
home), transportation of household goods and temporary living expenses
(inclusive of temporary residence, on-site living expenses such as
meals, and travel from primary residence). Nondeductible relocation
expenses reimbursement will be grossed up. Total relocation expenses
(including gross up) are estimated to be no more than one hundred
thousand dollars ($100,000). Any variance in which actual relocation
expenses are more than five percent (5%) above that amount must be
pre-approved by the Company.
