Exhibit 10.3.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), is effective as of
January 1, 2003, by and between InterDent, Inc., a Delaware corporation (the
"Company"), and Xxxxx Xxxxx ("Employee").
RECITAL:
WHEREAS, the Company desires to employ Employee for the period provided
in this Agreement, and Employee is willing to serve in the employ of the Company
for such period, each upon the terms and conditions provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the covenants set
forth in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Employment. The Company hereby agrees to employ Employee, and
Employee hereby accepts such employment, in each case upon the terms and
conditions set forth herein, for a period commencing as of January 1, 2003 (the
"Commencement Date"), and ending on December 31, 2003 (the "Expiration Date"),
subject to extension or earlier termination as set forth herein (such period, as
it may be so extended or terminated, being referred to herein as the "Term").
Notwithstanding the foregoing, the Expiration Date shall be extended to December
31, 2004, unless either Executive or the Company provides notice to the other,
as provided herein, by not later than September 30, 2003, that the Expiration
Date shall not be so extended. Any such extended term shall also be subject to
earlier termination as set forth herein.
Section 2. Duties and Services.
(a) Offices. During the Term, Employee shall serve as the Chairman and Chief
Executive Officer of the Company, and in such capacity shall hold the most
senior positions in the Company. In the performance of his duties hereunder,
Employee shall report to and shall be responsible to the Board of Directors of
the Company (the "Board").
(b) Primary Responsibilities. During the Term, Employee's duties and
responsibilities will be those customarily performed by a Chief Executive
Officer of a company of comparable size to the Company. Employee shall also
perform those duties that are assigned to him by the Board, which shall be
commensurate with his position as Chief Executive Officer. During the Term, the
Company shall take all actions reasonably within its control, including
nominating Employee for election as director in connection with all elections of
directors (and the inclusion in any proxy statement prepared by the Company in
connection therewith). Following the Term, Employee may, but shall not be
required to, continue to serve as a director of the Company.
Section 3. Compensation and Related Matters. As full compensation for his
services hereunder, the Company shall pay, grant, issue or give, as the case may
be, to Employee the compensation and benefits described below:
(a) Base Salary. The Company shall pay Employee $450,000 per annum ($37,500 per
month) from the Commencement Date through May 31, 2003, and $500,000 per annum
($41,666.67 per month) from June 1, 2003 through the Expiration Date, which base
salary shall be paid to Employee in accordance with the customary employee
payroll policy of the Company as in effect from time to time.
(b) Incentive Bonus.
(i) 2003 Incentive Bonus. The Company shall pay Employee an incentive bonus (the
"2003 Incentive Bonus") depending on the actual earnings before interest, taxes,
depreciation and amortization, of the Company for 2003 and after the accrual of
all bonuses (with adjustments as necessary to reflect items beyond Employee's
control, including, but not limited to, elimination of consulting fees and legal
fees, but not the accrual of bonuses, the "Adjusted EBITDA"), as compared to the
"Adjusted EBITDA Objective" for calendar year 2003, which Adjusted EBITDA
Objective shall be $30,000,000. The Company will pay Employee a bonus equal to
the specified percentage of the base salary provided to be paid from January 1,
2003 through December 31, 2003 pursuant to Section 3(a) (the "2003 Base
Salary").
Percentage of Adjusted EBITDA Percentage of 2003 Base Salary
Objective Met Due as Incentive Bonus
0 - 50% 25%
50 - 90% 25 - 50%
90 - 100% 50 - 100%
100 - 110% 100 - 150%
110 - 125% 150 - 200%
125 - 150% 200 - 250%
If the Company's actual Adjusted EBITDA falls within one of the ranges set forth
above under the heading "Percentage of Adjusted EBITDA Objective Met," then the
percentage of 2003 Base Salary Due as Incentive Bonus (as set forth under the
heading so labeled) shall be determined on a pro rata basis. By way of example,
if the Company's actual Adjusted EBITDA equals 105% of the Adjusted EBITDA
Objective, the percentage of 2003 Base Salary due as incentive bonus shall be
125%.
(ii) Payment of 2003 Incentive Bonus. The Company shall make quarterly advances
against the 2003 Incentive Bonus to Employee at a rate of 50% of the 2003 Base
Salary earned during each quarter, payable on each of April 1, 2003, July 1,
2003, October 1, 2003, and December 31, 2003. To the extent that the aggregate
amount paid to Employee pursuant to this Section 3(b)(ii) exceeds the amount of
the 2003 Incentive Bonus, as calculated pursuant to Section 3(b)(i), such excess
amounts will be deducted from any Termination Fee (as defined below) to be paid
to Employee pursuant to Section 5(c) and/or any Recruitment Fee (as defined
below) to be paid to Employee pursuant to Section 3(i), but shall not otherwise
be required to be remitted by Employee to the Company. To the extent that the
aggregate amount of advances paid to Employee pursuant to this Section 3(b)(ii)
is less than the amount of the 2003 Incentive Bonus, as calculated pursuant to
Section 3(b)(i), such additional amounts shall become due and payable by the
Company to Employee on the earlier to occur of (A) completion by the Company's
outside auditors of the Company's financial statements for the year ending
December 31, 2003, (B) termination of Employee pursuant to Section 5, or (C) a
Change of Control (as defined).
(iii) For purposes of this Agreement, a "Change of Control" means any of the
following: (A) the shareholders of the Company as of the Commencement Date shall
cease for any reason to own at least fifty percent (50%) or more of the voting
power of the Company; (B) the acquisition (in any manner) of shares of common
stock or other voting securities of the Company having fifty percent (50%) or
more of the outstanding voting power of the Company by any person or group of
persons acting in concert, other than the current shareholders of the Company,
(C) the sale, lease, assignment, or transfer of all or a material part of the
assets of the Company, (D) a merger, consolidation or reorganization involving
the Company in which the Company is not the surviving corporation or which
results in fifty percent (50%) or more of the outstanding voting power of the
Company being held of record or beneficially by persons who are not shareholders
of the Company on the Commencement Date, or (E) any person or group of persons
acting in concert (other than the shareholders on the Commencement Date) having
the right to elect or appoint a majority of the directors of the Company.
(c) Company Stock Options. Upon the execution of this Agreement, the Company
shall issue to the Employee stock options (which shall be incentive stock
options to the maximum extent permitted by law, with the remaining options being
non-qualified options) to acquire (i) 75,000 shares of Common Stock, which the
Company represents and warrants is equal to 1.875% of the issued and outstanding
shares of Common Stock on the date hereof, calculated on a Fully Diluted Basis
(as defined below) (the "Base Options") to be granted at the then-current market
price and (ii) an additional 25,000 shares of Common Stock, which the Company
represents and warrants is equal to 0.625% of the issued and outstanding shares
of Common Stock on the date hereof (the "EBITDA Options," and together with the
Base Options, the "Options") to be granted at the then-current market price. The
Base Options shall vest upon the issuance thereof. The EBITDA Options shall vest
if and at such time as it is determined that the Company achieves the Adjusted
EBITDA Objective. The Options shall provide that, in the event that a
Restructuring Event (as defined below) occurs, the number of shares (but not the
aggregate exercise price) that Employee may acquire pursuant to the Options
shall be adjusted on a pro rata basis such that the total number of shares that
Employee may acquire pursuant to the Options shall be not less than 2.5% of the
issued and outstanding shares of Common Stock of the Company or its successor
immediately following such a Restructuring Event. Except as specifically set
forth above, the option agreement pursuant to which the Options are granted
shall be the standard form of option agreement that the Company has historically
granted to other Company executives in positions commensurate to that of
Employee.
(i) Definitions
(A) For purposes of this Agreement, the term "Fully Diluted Basis" means, with
reference to outstanding equity securities of the Company (or any successor to
the Company), the shares of common stock of such entity that would be
outstanding assuming that all outstanding options, warrants and other rights to
acquire common stock in such entity have been exercised and all securities
convertible into common stock of such entity have been converted, regardless of
whether such options, warrants or other rights are then exercisable or whether
such securities are then convertible.
(B) For purposes of this Agreement, the term "Restructuring Event" means, any
event pursuant to which the Company consummates a material restructuring of its
current debt and/or capital structure that is approved by the Board, including,
but not limited to a merger (including a Takeover), sale of capital stock, Asset
Sale, any debt financing, or the restructuring of any current equity ownership
or debt financing, or any similar transaction, or any combination of the
foregoing.
(d) Existing Success Options. The option agreement providing for the terms of
the Success Options (as defined in the Employment Agreement between the Company
and Employee dated September 5, 2001 (the "Initial Employment Agreement")) shall
be amended to provide that such options shall vest on the earlier to occur of
(i) September 5, 2008 or (ii) the date, on or before March 5, 2005, on which the
trading price for the Company's Common Stock equals $5.00 or more; provided,
however, that if Employee is terminated pursuant to Section 5, is no longer
serving as a director and the trading price for the Company's stock does not
reach $5.00 on or before March 5, 2005, the Success Options shall immediately
terminate on the later of (i) March 5, 2005 or (ii) the date on which Employee's
termination pursuant to Section 5 is effective. Subject to the foregoing
amendment, and notwithstanding the expiration of the Initial Employment
Agreement, the Company acknowledges and reaffirms its obligations with respect
to the Base Options and the Success Options (each as defined in the Initial
Employment Agreement) issued pursuant to the terms of the Initial Employment
Agreement, including without limitation the Company's obligations in connection
with the adjustment of such options upon the occurrence of a Restructuring
Event.
(e) Fringe Benefits. During the Term, Employee shall be eligible to participate
in all then-operative employee benefit plans of the Company which are applicable
generally to the Company's executives of comparable rank to Employee ("Employee
Benefit Plans"), subject to the respective terms and conditions of such Employee
Benefit Plans. Nothing contained in this Agreement shall obligate the Company to
adopt or implement any Employee Benefit Plan, or prevent or limit the Company
from making any blanket amendments, changes, or modifications to the eligibility
requirements or any other provisions of, or terminating, any Employee Benefit
Plan at any time (whether during or after the Term), and Employee's
participation in or entitlement under any such Employee Benefit Plan shall at
all times be subject in all respects thereto.
(f) Vacation. Employee shall be afforded four weeks paid vacation per year, to
be taken at such time as is consistent with the needs of the Company as
reasonably determined by Employee.
(g) Expense Reimbursement. The Company shall reimburse Employee for all
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, including, but not limited to, all travel expenses to and from
the Company's headquarters in California (or to such other locations as Employee
travels to and from with respect to his employment with the Company), including
expenses for lodging and food (collectively, "Travel Expenses"), professional
activities and membership fees and dues relating to professional organizations
of which Employee is a member in connection with his employment with the
Company, and business related telephone, including cell phone, expenses, all
upon the presentation of appropriate documentation therefor to the Company. In
addition to the foregoing, Executive shall be entitled to receive additional
payments ("Gross-Up Payments") in the aggregate amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes) potentially imposed upon the reimbursement of Travel
Expenses incurred by Executive since September 1, 2002, including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and any taxes imposed upon the Gross-Up Payment, the Executive
retains an amount equal to the Travel Expenses incurred since September 1, 2002.
For purposes of determining the amount of the Gross-Up Payments, Executive shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year with respect to which the Gross-Up Payments
are to be made and state and local income taxes at the highest marginal rate of
taxation in any state and locality having jurisdiction thereover, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.
(h) CEO Recruitment Fee. The Company shall pay Employee a fee (the "Recruitment
Fee") in the event that (i) the Company retains a successor Chief Executive
Officer by November 1, 2003 and (ii) Executive exercises reasonable efforts to
assist the Company in such efforts, including serving on the search committee
established by the Board of Directors for such purpose. Notwithstanding the
foregoing, the date set forth in the previous sentence shall be extended by the
number of days beyond March 31, 2003 required for the Company to consummate a
Restructuring Event.
Section 4. Nondisclosure Agreement. Employee, during the Term, shall have access
to and become familiar with Confidential Information. Employee acknowledges and
agrees that the Confidential Information (a) is secret and not known in the
industry; (b) is entrusted to Employee after being informed of their
confidential and secret status by the Company and because of the fiduciary
position occupied by Employee with the Company; (c) has been developed by the
Company for and on behalf of the Company through substantial expenditures of
time, effort and money and are used in its business; (d) gives the Company an
advantage over competitors who do not know or use the Confidential Information;
(e) is of such value and nature as to make it reasonable and necessary to
protect and preserve the confidentiality and secrecy of the Confidential
Information; and (f) the Confidential Information constitutes a valuable,
special and unique asset of the Company, the disclosure of which could cause
substantial injury and loss of profits and goodwill to the Company. Employee
shall not use in any way or disclose any of the Confidential Information,
directly or indirectly, either during the Term or for a period of one year
thereafter, except as required in the course of his employment under this
Agreement. All files, records, documents, information, data and similar items
relating to the business of the Company, whether prepared by Employee or
otherwise coming into his possession, shall remain the exclusive property of the
Company and shall not be removed from the premises of the Company under any
circumstances without the prior written consent of the Board (except in the
ordinary course of business during Employee's period of active employment under
this Agreement), and in any event shall be promptly delivered to the Company
upon termination of this Agreement. Employee agrees that upon his receipt of any
subpoena, process or other request to produce or divulge, directly or
indirectly, any Confidential Information to any entity, agency, tribunal or
person, Employee shall timely notify and promptly hand deliver a copy of the
subpoena, process or other request to the Board. For this purpose, Employee
irrevocably nominates and appoints the Company (including any attorney retained
by the Company), as his true and lawful attorney-in-fact, to act in Employee's
name, place and stead to perform any act that Employee might perform to defend
and protect against any disclosure of any Confidential Information.
(a) For purposes of this Agreement, the term "Confidential Information" shall
mean various trade secrets and proprietary and confidential information
consisting of, but not limited to, computer programs, compilations of
information, business records, methods of doing business and other confidential
information which is owned by the Company and regularly used in the operation of
its business, but in connection with which the Company takes precautions to
prevent dissemination to persons other than certain directors, officers and
employees. Notwithstanding the foregoing, the term "Confidential Information"
shall not include such portions of such Confidential Information which (i) are
or become generally available to the public other than as a result of a
disclosure by Employee, (ii) were in Employee's possession on a nonconfidential
basis prior to its receipt of such information, or (iii) become available to
Employee on a nonconfidential basis from a source other than the Company or its
employees, directors, agents, representatives (including attorneys, accountants
and financial advisors) or others acting on the Company's behalf.
Section 5. Termination.
(a) Definitions.
(i) Termination For Cause. As used herein, the term "Termination For Cause"
shall mean the termination by the Company of Employee's employment hereunder by
reason of (A) Employee's conviction of a felony offense under state or federal
law, (B) the continued breach by Employee of any of the material provisions of
this Agreement for a period of thirty (30) days after written notice of such
breach is given to Employee by the Company, (C) the failure by Employee to
comply with any reasonable directive of the Board which shall continue for 10
days after written notice thereof is given by the Board to Employee, (D) the
taking by Employee of any action on behalf of the Company or any of its
affiliates or subsidiaries contrary to the directions of the Board, (E)
Employee's decision to voluntarily terminate his employment with the Company at
any time (other than a "Termination For Good Reason"), so long as the Company is
not in breach of its obligations under this Agreement (after the Company has
been given an opportunity to cure any such breach and has failed to do so), (F)
Employee's death or (G) Employee's "Disability." In this Agreement, "Disability"
means Employee's total disability, which shall be deemed to exist if he is
unable to perform his duties under this Agreement in any material respect
because of any physical or mental impairment, which has lasted for at least four
(4) consecutive weeks, or any six (6) nonconsecutive weeks during any period of
twelve (12) months. The foregoing time periods shall not include any periods of
Employee's vacation as provided herein.
(ii) Termination Without Cause. As used herein, "Termination Without Cause"
shall mean any termination of Employee's employment by the Company hereunder
that is not a Termination For Cause.
(iii) Termination For Good Reason. As used herein, the term "Termination For
Good Reason" shall mean the termination by Employee of Employee's employment
hereunder, provided such termination occurs following the occurrence of one or
more of the following events, without Executive's prior written consent: (A) the
Company's breach of any material obligation under this Agreement, (B) a material
change in the positions or duties of Executive, (c) the failure of any successor
to all or substantially all of the business and/or assets of the Company to
assume, in writing, the Company's obligations hereunder or (D) the failure of
the Company to enter into an agreement in principle with respect to a
Restructuring Event by March 31, 2003, with the consummation thereof occurring
by September 30, 2003.
(b) Termination For Cause. Employee and the Company agree that the Company shall
have the right to effectuate a Termination For Cause in accordance with the
terms of this Agreement at any time. Upon the occurrence of a Termination For
Cause, this Agreement shall terminate upon the date that such Termination For
Cause occurs (subject to the provisions of Section 7), whereupon the Company,
(i) shall pay to Employee an amount equal to Employee's base salary, as then in
effect, to and including the date on which such Termination For Cause occurs,
(ii) shall pay any incentive bonus due pursuant to Section 3(b), (iii) and shall
pay the Recruitment Fee, if required to do so pursuant to Section 3(h). Upon the
occurrence of a Termination For Cause pursuant to Employee's death or
Disability, notwithstanding any other provision herein, all Options issued or
required to be issued to Employee hereunder immediately shall vest in full.
(c) Termination Without Cause or For Good Reason. Upon the occurrence of a
Termination Without Cause or a Termination For Good Reason, this Agreement shall
terminate upon the date that such Termination Without Cause or Termination For
Good Reason occurs (subject to the provisions of Section 7), whereupon the
Company (i) shall pay to Employee an amount equal to 100% of the monthly base
salary in effect on the date of termination multiplied by 12 (the "Termination
Fee"), (ii) shall pay any incentive bonus due pursuant to Section 3(b) and (iii)
shall pay the Recruitment Fee, if required to do so pursuant to Section 3(c) and
Section 3(i).
(d) Payment of the Termination Fee. The Termination Fee shall be payable in (a)
cash or (b) in a combination of cash and Common Stock in the Company (or any
successor), at the sole option of Employee.
Section 6. Withholding. The Company shall be entitled to withhold from amounts
payable to Employee hereunder such amounts as may be required by applicable law
to be so withheld.
Section 7. Survival. Notwithstanding anything in this Agreement to the contrary,
Sections 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17 of this Agreement
shall survive any termination of this Agreement or cessation of Employee's
employment hereunder for the periods stated therein.
Section 8. Modification. This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
Section 9. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given, (i) to the Company at Pacific Corporate Towers, 000 X. Xxxxxxxxx
Xxxx., Xxxxx 000, Xx Xxxxxxx, Xxxxxxxxxx 00000, Attention: _____________, or
(ii) to Employee at 0000 Xxxxxx Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxx 00000, with a
copy (which shall not constitute notice) to Xxxxx X. Xxxxxxx, 0000 Xxx Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxx 00000, or as such party shall have otherwise furnished
in writing in accordance with the provisions of this Section 9. Notice to the
Employee's Estate shall be sufficient if addressed to Employee as provided in
this Section 9. Any notice or other communication given by certified mail shall
be deemed given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the time of receipt
thereof.
Section 10. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
Section 11. Assignment; Binding Effect. This contract is binding on and inures
to the benefit of the heirs and representatives of Employee and the assigns and
successors of Company, including any entity into which the Company may be
merged, any acquirer of substantially all the assets of the Company, or any
acquirer of a majority of the voting power of the Company. Neither this
Agreement nor any rights hereunder are assignable by Employee or by Company,
except that Company shall be required to assign this Agreement to any of
Company's successors, whether by merger, acquisition of a majority of the voting
power of the Company, or purchase of substantially all of the assets of the
Company, and that such assignee shall be required to expressly agree in writing
to assume the obligations of the Company hereunder. Any such assignment shall
not relieve the Company of its obligations hereunder. The Company agrees that it
will not transfer, or enter into an agreement to transfer, all or substantially
all of its assets unless the transferee expressly agrees in writing to assume
the obligations of the Company hereunder. The Company agrees that it will not
enter into any transaction or perform any act, the intent or result of which is
to cause Employee not receive the rights and benefits set forth in this
Agreement, including, but not limited to, those set forth in Sections 3 and 4
hereof.
Section 12. Headings. The headings in this Agreement are solely for convenience
of reference, and shall be given no effect in the construction or interpretation
of this Agreement.
Section 13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without reference to the
conflict of law provisions thereof.
Section 15. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that Employee, the Company and their
respective attorneys and representatives have participated in the preparation
hereof.
Section 16. Indemnification. The Employee, in any capacity on behalf of the
Company or any of its subsidiaries or affiliates, shall be entitled to
exculpation, indemnification, and advancement of expenses to the fullest extent
not prohibited by Delaware or other applicable law. The Employee shall also be
entitled to coverage under directors' and officers' liability insurance
policies, if any, maintained by or on behalf of the Company's directors and
officers.
Section 17. Legal Expenses. The Company shall pay in full, on demand, all legal
fees incurred by Employee in connection with the preparation and negotiation of
this Agreement and all future issues related thereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
THE COMPANY:
INTERDENT, INC.
By: \s\ XXXX X. XXXXXXX
Title: DIRECTOR
EMPLOYEE:
\s\ H. XXXXX XXXXX
Xxxxx Xxxxx
