EXHIBIT 10.20
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of the 12th day of December, 1997, by and between Integrated Orthopaedics,
Inc., a Texas corporation (the "Company"), and Xxxxxx X. Xxxxxx (the
"Executive").
WHEREAS, the Board of Directors of the Company recognizes 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 December 12, 1997 (the "Commencement Date") and ending upon
the earlier of the third anniversary of the Commencement Date or 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 President and Chief Executive Officer of the Company,
reporting only to the Board of Directors. The Executive shall have such powers
and duties as may from time to time be prescribed by the Board of Directors 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 interests 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 salary of $250,000
("Base Salary"), 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.
(b) Bonus. In addition to the Base Salary, the Executive shall be
eligible to receive bonus compensation 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.
(c) Stock Option Eligibility. During the Employment Period, the
Executive shall be eligible to receive additional stock option grants, including
annual performance stock option grants, pursuant to the 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 plans; 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 Executive Officer of the Company,
all 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
anniversary of the Commencement Date (the period from the Commencement Date to
and including the third
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anniversary of the Commencement Date being referred to herein as the "Base
Term"), 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 this
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 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 of periods ending on or prior to such termination for
death or total disability 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 to 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; provided, however, that if the Executive
is terminated without Cause at any time after
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July 1, 1999, in lieu of, and not in addition to, any compensation payable or
benefits required to be provided pursuant to this Section 5(c), the Company
shall make a lump sum payment to the Executive within thirty days after such
termination without Cause equal to the amount of compensation that would
otherwise be payable to the Executive pursuant to Section 3(a), 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 had 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 addition, upon such 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 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; provided,
however, that if the Executive terminates his employment hereunder because he
has been permanently relocated by the Board of Directors, without his prior
consent, to an office located more than fifty (50) miles away from the Company's
current principal executive offices or his executive titles, duties or authority
are materially diminished by action of the Board of Directors of the Company,
the Executive shall be entitled to the severance compensation provided in
Section 5(c) as if the Executive were terminated by the Company without Cause.
6. Additional Positions. During the Employment Period, the
Executive agrees that, in the event the Board of Directors (subject, as
required, to shareholder vote) requests the Executive to serve as a director of
the Company and/or any of its subsidiaries, as a member of one or more
committees of the respective Boards of Directors of the Company and any of its
subsidiaries, and in one or more executive offices of any of the Company's
subsidiaries as the Executive may from time to time be elected, he will so serve
without further compensation.
7. 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
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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 understandings
that would make unlawful the Executive's execution or delivery of this Agreement
or the performance of his obligations hereunder.
8. 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.
9. 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 "Noncompetition
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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 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
Noncompetition 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 Noncompetition Term, (x) has initiated
business acquisition or affiliation discussions with physician groups, (y) has
expressed a bona fide intent 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 thereon 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 interests in such
corporation or partnership.
(c) Extension for Noncompliance. If, during any period within the
Noncompetition Term, the Executive is not in compliance with the terms of this
Section 9, the Company shall be entitled to, among other remedies, compliance by
the Executive with the terms of this Section 9 for an additional period equal to
the period of such noncompliance. For purposes of this Agreement, the term
"Noncompetition Term" shall also include such additional period.
(d) Reasonableness. The Executive hereby acknowledges that the
geographic boundaries, scope of prohibited activities and the time duration of
the provisions of this Section 9 are reasonable and are no broader than are
necessary to protect the legitimate business interests of the Company.
10. 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 of 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.
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11. Injunctive Relief. The Executive acknowledges that the breach of
any of the agreements contained herein, including, without limitation, any of
the confidentiality, non-competition and non-solicitation covenants specified in
Sections 8 through 10, 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 breaches
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. The Executive further acknowledges and agrees
that the covenants contained herein are necessary for the protection of the
Company's legitimate business interests and are reasonable in scope and content.
12. 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).
13. 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.
14. 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: Board of Directors
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(ii) If to the Executive, to:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx 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 charged with the
contents thereof.
15. 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.
16. 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.
17. 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 hereto 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 thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies
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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.
18. 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.
19. 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.
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
COMPANY:
INTEGRATED ORTHOPAEDICS, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
EXECUTIVE:
---------------------------------------
Xxxxxx X. Xxxxxx
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EXHIBIT A
SCHEDULE OF FRINGE BENEFITS
1. The Company shall provide major medical health insurance coverage for the
Executive and those members of his immediate family whose primary residence is
the same as Executive's primary residence.
2. 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.
3. 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.
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