EXHIBIT 10(q)
EMPLOYMENT AND NON-COMPETE AGREEMENT
Agreement made as of November 1, 1996, between Hanger Orthopedic Group,
Inc., a Delaware corporation (the "Company"), and Xxxx XxXxxxx ("Executive").
WITNESSETH:
WHEREAS, Executive has great expertise in the Company's and its
Subsidiaries' businesses;
WHEREAS, Executive's use of such expertise in competition with the
Company and its Subsidiaries would have an extremely detrimental effect on the
Company and its Subsidiaries; and
WHEREAS, the Company desires to retain the services of Executive and to
assure itself that Executive does not engage in competition with the Company
and its Subsidiaries.
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment by the Company upon the terms and conditions set forth
in this Agreement, for the period beginning on the date of this Agreement, and
ending upon termination pursuant to paragraph 4 hereof (the "Employment
Period").
2. COMPENSATION.
(a) During the Employment Period, the Company will pay Executive a base
salary at the rate of $234,000.00 per annum in consideration for the services
to be rendered to the Company by Executive (the "Base Salary"). Executive's
Base Salary may be increased from time to time as determined by the Board of
Directors of the Company (the "Board"). In addition to the Base Salary payable
to Executive pursuant to this paragraph 2(a), during the Employment Period
Executive will be entitled to the benefits set forth on Schedule I attached
hereto.
(b) In addition to the Base Salary and the other benefits paid to
Executive during the Employment Period, Executive also shall be eligible to
receive awards of stock options from the Company, as well as cash bonus
compensation based on formulae related to year-end financial data of the
Company and determined in the reasonable discretion of the Board and its
Compensation Committee.
3. SERVICES. During the Employment Period, Executive shall devote his
best efforts and substantially all of his business time and attention to the
affairs of the Company or its Subsidiaries (except for reasonable vacation
periods subject to the reasonable approval of the Board, or reasonable periods
of illness or other incapacity). During the Employment Period, Executive
agrees to render such services of an executive and administrative character to
the Company and its Subsidiaries as the Board may from time to time direct.
4. TERMINATION. The Employment Period will continue from year to year
unless terminated earlier by (a) Executive's death or permanent disability (as
determined by the Board in its good faith judgment), (b) by Executive's
resignation upon prior written notice to the Company of not less than three
(3) months, (c) the Board for Cause, or (d) the Board without Cause. For
purpose of this paragraph 4, "Cause" shall mean (i) the failure or refusal of
Executive to follow the lawful directives of the Board (except due to
sickness, injury or disabilities), (ii) inattention to duty or any other
willful, reckless or negligent act (or omission to act) by Executive, which,
in the good faith judgment of the Board, materially injures the Company or one
of its Subsidiaries, including the repeated failure to follow the policies and
procedures of the Company or one of its Subsidiaries, (iii) a material breach
of this Agreement by Executive, (iv) the commission by Executive of a felony
or other crime involving moral turpitude or the commission by Executive of an
act of financial dishonesty against the Company or one of its Subsidiaries or
(v) a proper business purpose of the Company, including but not limited to a
decrease in the staffing of the office in which Executive is working or the
elimination of the position filled by Executive; provided, however, that prior
to any termination of the Employment Period for Cause as defined under items
(i) and (ii) above, the Company shall be required to give Employee prior
written notice of any such claim of Cause by the Company, with Executive
having the right promptly thereafter to appeal such claim of Cause by the
Company in a hearing with the Board. Except in the case of death, resignation
or the continuation of the Employment Period during the appeal process
described above, termination will not be effective until 30 days after the
Board has given written notice to Executive of such termination.
If Executive's employment is terminated by the Executive in any manner
other than clauses (a) or (b) above, the Company will have the remedies
enumerated in paragraph 17.
If Executive's employment is terminated, then Executive may be entitled
to receive severance payments in the amount and under the terms set forth in
Schedule II attached hereto.
5. NON-COMPETE.
(a) Executive agrees that during the Employment Period and for a period
of thirty-six (36) months thereafter (the "Non-Compete Period"), Executive
will not directly or indirectly (whether as employee, director, owner,
stockholder, consultant, partner (limited or general) or otherwise) own,
2
manage, control, participate in, consult with, render services for or in any
manner engage in any Competitive Business or solicit any other Person to
engage in any of the foregoing activities or knowingly request, induce or
attempt to influence any then existing customer of the Company or its
Subsidiaries to curtail or cause any business they are currently, or in the
last 36 months have been, transacting with the Company and its Subsidiaries
(the "Non-Compete"). Nothing herein will prevent Executive from being a
passive owner of not more than 1% of the outstanding stock of any class of a
corporation which is a competitor of the Company or its Subsidiaries and which
is publicly traded, so long as Executive has no participation in the business
of such corporation. Notwithstanding the terms of the Non-Compete, after the
expiration of the Employment Period but prior to the expiration of the
Non-Compete Period, Executive may engage in Limited Competition. Furthermore,
during the Non-Compete Period, Executive shall not, without the Company's
prior written consent, directly or indirectly, knowingly solicit or encourage
or attempt to influence any employee to leave the employment of the Company or
any of its Subsidiaries.
"Competitive Business" shall mean engaging in "Business" within the
"Restricted Territory." "Business" shall mean manufacturing, distributing,
wholesaling or retailing of orthotics or prosthetics, or the operation of
clinics to fit patients for orthotics or prosthetics, or any other related
businesses which the Company and its Subsidiaries are engaged in during and at
the expiration of the Employment Period. "Restricted Territory" shall mean the
United States of America, the District of Columbia and any U.S. territory in
which the Company or any one or more of its Subsidiaries conducts Business
during and at the expiration of the Employment Period. "Limited Competition"
shall mean being an employee, director, owner, stockholder consultant and/or
partner (limited or general) in only one business enterprise which consists of
only one retail clinical operation selling and fitting patients for
prosthetics and orthotics.
(b) If, at the time of enforcement of any provision of paragraph 5(a)
above, a court holds that the restrictions stated therein are unreasonable
under circumstances then existing, the parties hereto agree that the maximum
period, scope, and geographical area reasonable under such circumstances will
be substituted for the stated period, scope or area.
(c) The parties hereto agree and acknowledge that money damages may not
be an adequate remedy for any breach of the provisions of this paragraph 5;
therefore, in the event of a breach by Executive of any of the provisions of
this paragraph 5, the Company or its successors or assigns may, in addition to
other rights and remedies existing in its favor, apply to any court of law or
3
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof.
6. CONFIDENTIAL INFORMATION. Executive acknowledges that the information,
observations, data and trade secrets (collectively, "Confidential
Information") obtained by him during the course of his performance under this
Agreement, and previously as an employee of the Company and/or its
Subsidiaries, concerning the business or affairs of the Company or any of its
Subsidiaries are the property of the Company and its Subsidiaries. For
purposes of this Agreement, "trade secret" means any method, program or
compilation of information which is used in the Company's or any Subsidiary's
business, including but not limited to: (a) techniques, plans and materials
used by the Company and its Subsidiaries, (b) marketing methods and strategies
employed by the Company and its Subsidiaries, and (c) all lists of past,
present or prospective customers, suppliers, referring physicians and all
other referral sources of the Company and its Subsidiaries. Executive agrees
that he will not disclose to any unauthorized Person or use for his own
account any of such Confidential Information without the Board's written
consent, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result
of the Executive's acts or omissions to act or become known to the Executive
lawfully outside the scope of his employment under this Agreement. Executive
agrees to deliver to the Company at the termination of his employment, or at
any other time the Company may request, all memoranda, notes, plans, records,
reports and other documents and its Subsidiaries which he may then possess or
have under his control.
7. INVENTIONS AND PATENTS. Executive agrees that all Confidential
Information and all inventions, innovations or improvements in the Company's
and its Subsidiaries' method of conducting their respective businesses, or any
reasonable development or extension of such businesses (including new
contributions, improvements, ideas and discoveries, whether patentable or
not), conceived or made by him (whether individually or in conjunction with
other Persons) during the Employment Period belong to the Company and its
Subsidiaries. Executive will promptly disclose such inventions, innovations or
improvements to the Board and perform all actions reasonably requested by the
Board to establish and confirm such ownership.
8. OTHER BUSINESSES. During the Employment Period, Executive agrees that
he will not, except with the express written consent of the Board, become
engaged in, render services for, or permit his name to be used in connection
with, any business other than the business of the Company and its
Subsidiaries.
4
9. ANNUAL PHYSICAL EXAMINATION. The Executive will assist the Company and
its Subsidiaries (without cost to the Executive) in obtaining key man life and
disability insurance, including, without limitation, to submitting to an
annual general physical examination (and such other physical examinations
requested by the Company's insurers), and to share the results of such
examinations with the Company and its insurers.
10. NO INCONSISTENT AGREEMENTS. Any and all employment, consulting or
other similar agreements heretofore executed between the Company and/or its
Subsidiaries on the one hand and Executive on the other are hereby terminated.
11. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, sent by overnight courier (E.G.,
Federal Express) or mailed by first class mail, to the recipient at the
address below indicated:
To the Company:
Hanger Orthopedic Group, Inc.
0000 Xxx Xxxxxxxxxx Xxxx (Xxxxxx Xxxxx)
Xxxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
To Executive:
Xxxx XxXxxxx
Hanger Orthopedic Group, Inc.
0000 Xxx Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
With a copy of any of the foregoing notices to:
Freedman, Levy, Xxxxx & Xxxxxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X. (Xxxxx 000)
Xxxxxxxxxx, X.X. 00000
Attention: Xxx X. Xxxxxxxx, Esq.
or such other address or to the attention of such other Person as the
recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement will be deemed to have been given when
so delivered, sent or mailed.
12. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law. The parties agree that (i) the provisions of this Agreement
shall be severable in the event that any of the provisions hereof are for any
reason whatsoever invalid, void or otherwise unenforceable, (ii) such invalid,
5
void or otherwise unenforceable provisions shall be automatically replaced by
other provisions which are as similar as possible in terms to such invalid,
void or otherwise unenforceable provisions but are valid and enforceable and
(iii) the remaining provisions shall remain enforceable to the fullest extent
permitted by law.
13. COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
14. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors and assigns. Executive may not assign his rights or
delegate his obligations hereunder without the prior written consent of the
Company. The Company may assign its rights and delegate its duties hereunder
without the consent of the Executive to Permitted Transferees.
16. GOVERNING LAW. All questions concerning the construction, validity
and interpretation of the Agreement will be governed by the internal law, and
not the law of conflicts of the State of Maryland.
17. REMEDIES. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement. Executive acknowledges that in
his past, present and future capacity as an executive officer of the Company
and/or its Subsidiaries, he was, is and will be critical to the success of the
Company and its Subsidiaries and that the Company would not have consummated
the Purchase unless Executive entered into this Agreement. Executive further
acknowledges that his material breach of this Agreement would cause the
Company and its Subsidiaries material adverse harm, including lost sales,
profits and growth potential. Executive believes it would be just and
6
equitable for a court to consider the foregoing factors when accessing damages
against Executive for his material breach of this Agreement.
18. AMENDMENTS AND WAIVERS; THIRD PARTY BENEFICIARIES. Any provision of
this Agreement may be amended or waived only with the prior written consent of
the Company and Executive. The failure of either party to insist, in any one
or more instances, upon performance of the terms or conditions of this
Agreement shall not be construed as a waiver or a relinquishment of any right
granted hereunder or of the future performance of any such term, covenant or
condition. Each direct and indirect Subsidiary of the Company shall be a third
party beneficiary of the Executive's obligations under this Agreement,
provided that this Agreement may be amended in any manner without the consent
of such third party beneficiaries.
19. DEFINITIONS. "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental entity or any department or agency thereof.
"Permitted Transferee" shall mean (a) any successor by merger or consolidation
to the Company or any Permitted Transferee; (b) any purchaser of all or
substantially all of the Company's or any Permitted Transferee's assets; and
(c) any lender to (i) the Company, (ii) any Permitted Transferee and/or (iii)
any affiliate of the Company or of any Permitted Transferee. "Subsidiary"
shall mean any Person which the Company has the direct or indirect right to
control, direct or cause direction of management and policies of, whether
through the ownership of voting securities, by contract or otherwise,
including but not limited to X.X. Xxxxxx, Inc. of Georgia.
* * * *
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
HANGER ORTHOPEDIC GROUP, INC.
By: ____________________________
Xxxx X. Xxxxx
President and Chief Executive Officer
____________________________
Xxxx XxXxxxx
7
SCHEDULE I
EXECUTIVE BENEFITS
1. All group medical, life, short-term disability, dental and other
insurance generally made available to employees of the Company and its
Subsidiaries.
2. Reasonable auto expense allowances consistent with the Company's past
practices.
3. Reimbursement for any reasonable out-of-pocket business expense actually
and necessarily incurred by Executive in the conduct of the business of
the Company upon receipt of itemized vouchers approved in accordance with
agreed-upon review and approval procedures. Reimbursement of the costs of
attending organizational and trade association conferences and customary
travel expenses.
4. General long-term disability insurance (group and individual policies)
generally made available to key employees of the Company and its
Subsidiaries.
SCHEDULE II
SEVERANCE BENEFITS OF EXECUTIVE
1. In the event the employment of Executive by the Company is terminated
for any reason other than Cause, as defined in the Employment Agreement
between Executive and the Company to which this Schedule is attached, then the
Company shall pay to Executive one of the following severance payments:
(i) in the event of the termination of Executive by the Company
within the first twelve (12) months immediately following the date of the
Employment Agreement, then in such event the Company shall pay to
Executive an amount equal to three (3) times the annualized average of
Executive's W-2 income for the years of 1995, 1994 and 1993;
(ii) in the event of the termination of Executive by the Company
more than twelve (12) months immediately following the date of the
Employment Agreement but on or prior to twenty-four (24) months
immediately following the date of the Employment Agreement, then in such
event the Company shall pay to Executive an amount equal to two (2) times
the annualized average of Executive's W-2 income for the years of 1995,
1994 and 1993; or
(iii) in the event of the termination of Executive by the Company
more than twenty-four (24) months immediately following the date of the
Employment Agreement but on or prior to thirty-six (36) months
immediately following the date of the Employment Agreement, then in such
event the Company shall pay to Executive an amount equal to one-half
(1/2) of the annualized average of Executive's W-2 income for the years
of 1995, 1994 and 1993.
For purposes of this calculation, the "annualized average of Executive's W-2
income for the years 1995, 1994 and 1993" shall be determined by adding the
gross income earned by Executive during 1995, 1994 and 1993 as shown on
Executive's W-2 wage statement and dividing such sum by three (3).
Notwithstanding anything else contained herein to the contrary, the Company
shall nevertheless pay to Executive the applicable amount of severance
payments as provided herein in the event the employment of Executive by the
Company is terminated by the Company for a proper business purpose as provided
in paragraph 4(v) of the Employment Agreement.
2. In the event the employment of Executive by the Company is terminated
for any reason other than Cause within the first thirty-six (36) months
immediately following the date of the Employment Agreement, then (i) the
non-compete portion of the Employment Agreement shall be invalid and (ii) all
stock options of Executive shall become immediately fully vested.
3. In the event the employment of Executive by the Company is terminated
either by the resignation of Executive or for reasons which are determined to
constitute Cause, then in either such event (i) Executive shall not be
entitled to any of the severance payments described herein and (ii) all
remaining provisions of the Employment Agreement shall apply, including but
not limited to the non-compete, confidentiality and non-solicitation
provisions.
