EMPLOYMENT AND NON-COMPETITION AGREEMENT
AGREEMENT, dated and entered into as of the eighth day of January,
1996, by and between American Dental Partners, Inc., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx, a resident of Ohio (the "Executive").
WHEREAS, the Company desires to engage the full-time services of the
Executive;
WHEREAS, the Executive desires to be so employed by the Company;
WHEREAS, the Company desires to be assured that the unique and expert
services of the Executive will be available solely to the Company on such full-
time basis, and that the Executive is willing and able to render such services
on the terms and conditions hereinafter set forth;
WHEREAS, the Company desires to be assured that the confidential
information and good will of the Company will be preserved for the exclusive
benefit of the Company; and
NOW, THEREFORE, in consideration of such employment and the mutual
covenants and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
Section 1. Employment. The Company hereby employs the Executive as
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its President and Chief Executive Officer, and the Executive hereby accepts such
employment, under and subject to the terms and conditions hereinafter set forth.
Section 2. Term. Unless sooner terminated as provided in Section 7,
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the term of employment under this Agreement shall begin on the date hereof, and
shall conclude on the fifth anniversary of such commencement (the "Initial
Term", whether the full term or the term ending pursuant to a termination under
Section 7). This Agreement shall be renewed for additional consecutive one year
terms ("Renewal Terms") unless either party shall give to the other written
notice not less than thirty (30) days prior to the end of the Initial Term or
any Renewal Term that it or he does not wish to renew this Agreement. The
Initial Term, as it may be so extended, is referred to herein as the "Term".
Section 3. Duties. The Executive shall serve as President and Chief
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Executive Officer of the Company, reporting only to the Board of Directors of
the Company (the "Board"). As President and Chief Executive Officer, the
Executive shall have the responsibility and broad authority to manage and direct
the affairs and operations of the Company, subject only to the reasonable
authority and control of the Board and such reasonable guidelines and policies
as the Board may from time to time approve. Such responsibility and authority
shall include, without
limitation, recruiting, hiring, and firing senior management personnel,
consultants, accountants, attorneys, and other professionals and agents of the
Company, establishing the terms and conditions of their employment or retainer,
preparation of an annual budget and operating plan for review by the Board,
establishing operating strategies, policies, and objectives of the Company,
identifying and negotiating with on behalf of the Company appropriate
acquisition candidates and performing such additional duties, consistent with
the foregoing, as the Board may reasonably assign to the Executive from time to
time. The Executive hereby agrees to devote his full business time and best
efforts to the performance of such duties and to the promotion and forwarding of
the business and affairs of the Company during the Term; provided that the
Executive shall be entitled (i) to devote time to professional activities,
including without limitation attendance at business and trade conventions and
meetings of other professional associations, (ii) to devote time and attention
to his personal investments, (iii) to provide transitional assistance to
Cardinal Health, Inc. and its subsidiaries ("Cardinal") through January 31,
1996 and to remain as an employee of Cardinal through March 19, 1996 and to
(iv) take periodic vacations and sick leaves as may be provided generally to the
Company's executive personnel or provided in this agreement, in each case so
long as such other matters do not interfere materially with the performance of
the Executive's duties and obligations hereunder.
Section 4. Salary Compensation. In consideration of the services
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rendered by the Executive under this Agreement, the Company shall pay the
Executive a base salary (the "Base Salary") at the initial annualized rate of
One Hundred Fifty Thousand Dollars ($150,000). The Base Salary shall be paid in
such installments and at such times as the Company pays its regularly salaried
executive employees, and the Board shall review on an annual basis the Base
Salary from time to time in its sole discretion; provided, however, that in no
event shall the Base Salary be reduced as the result of any such review or
otherwise.
Section 5. Bonus Compensation. Promptly after the commencement of
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the Term, with respect to the first fiscal year of the Company, and on an annual
basis thereafter with respect to each succeeding fiscal year, the Company shall
adopt a bonus plan for management personnel with respect to each such fiscal
year (the "Bonus Plan"). The Bonus Plan shall be based upon objectives, and
bonus percentages tied to the extent of achievement of those objectives, which
the Executive shall prepare and submit to the Board for its approval, which
approval shall not be unreasonably withheld or delayed. The Bonus Plan shall
provide that the Executive shall be entitled to earn a bonus each year in an
amount equal to a percentage, up to sixty percent (60%), of his Base Salary for
that year, determined based upon the extent of achievement of the Bonus Plan
objectives approved by the Board relating to the Executive for that year. Each
bonus payable to the Executive under the Bonus Plan shall be paid not later than
the first to occur of (i) ten days after receipt of financial statements for the
applicable fiscal year or (ii) the date which is 100 days after the end of such
fiscal year.
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Section 6. Benefits. In addition to the compensation detailed in
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Sections 4 and 5 of this Agreement, the Executive shall be entitled to the
following additional benefits:
Section 6.01. Paid Vacation. The Executive shall be entitled to four
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(4) weeks paid vacation per calendar year, such vacation to extend for such
periods and to be taken at such intervals as shall be appropriate and consistent
with the proper performance of the Executive's duties hereunder. The Executive
shall also be entitled to such paid holidays and other time off as may be
provided to the Company's executive personnel.
Section 6.02 Insurance Coverage. As soon as reasonably practicable
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after the commencement of the Term, the Company shall adopt, and shall provide
to the Executive during the Term, group health, life and disability insurance
plans for its executive employees. Such plans shall be proposed by the
Executive for the Board's approval, which approval shall not be unreasonably
withheld or delayed, and such plans shall provide coverage substantially
comparable to that set forth on Schedule 1 attached hereto. Until such group
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plans can be put in place, the Company shall fund interim insurance coverage
substantially comparable to that set forth on Schedule 1 attached hereto;
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provided that it shall be Executive's responsibility to implement such coverage.
Section 6.03. Reimbursement of Expenses. The Company shall reimburse
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the Executive for all reasonable expenses actually incurred by the Executive in
connection with the business affairs of the Company and the performance of his
duties hereunder, including without limitation those incurred prior to the
execution of this Agreement or commencement of the Term. The Executive shall
comply with such reasonable limitations and reporting requirements with respect
to such expenses as the Board may establish from time to time.
Section 6.04. Options. The Company shall provide the Executive with
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options (the "Stock Options") to acquire 45,045 shares (subject to adjustment in
the event of a stock split, stock dividend or the like) of common stock, par
value $.01 per share (the "Common Stock"), of the Company pursuant to a separate
stock option plan and agreement of even date (the "Initial Option Plan")
pursuant to which there shall be reserved for issuance 60,060 shares of Common
Stock outstanding on a fully diluted basis. The Executive also shall be
entitled to participate in such additional stock option or equity-based
incentive plans adopted by the Company from time to time for its executive
personnel but unless otherwise approved by the Board of Directors, the Executive
shall not be entitled to further participation in the Initial Option Plan.
Section 6.05. Relocation Expenses. The Company shall pay the
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Executive the following reasonable fees and expenses associated with his
relocation to the Boston, Massachusetts metropolitan area or any other area in
which the Company has operations or completes an acquisition and to which the
Board requests that the Executive relocate, it being understood that
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the Company may not require the Executive to further relocate after his
relocation to the Boston metropolitan area (in any event, the "New Location"):
(i) brokerage fees and reasonable and customary legal fees and closing costs
incurred with respect to the sale of the Executive's home in Dublin, Ohio and
his purchase of a home in the New Location, and (ii) moving and storage
expenses, including without limitation (i) charges for packing, crating,
loading, van transportation, and unloading of household furnishings, clothing,
and other property, all insured at full replacement value, and shipment of up to
two automobiles, (ii) travel expenses during the relocation, including without
limitation up to two (2) trips by the Executive's family to the New Location,
(iii) temporary living expenses in the New Location for up to two (2) months,
including without limitation lodging, meals and local transportation prior to
delivery of a personal vehicle, (iv) costs incurred in connection with the
search for a new residence, including without limitation expenses of the
Executive and his family for up to two (2) trips to the New Location, lodging,
and meals, and (v) telephone, fax, and other miscellaneous costs and expenses
associated with such relocation.
Section 6.06. Indemnification. The Company shall indemnify the
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Executive, to the fullest extent permitted under applicable law, against any and
all liabilities, claims, judgments, fines, expenses (including without
limitation reasonable attorney's fees and court costs), and amounts paid in
settlement (collectively "Claims") incurred by the Executive in connection with
any threatened, pending or completed action, suit, claim, or proceeding (whether
civil, criminal, administrative or investigative, and including without
limitation any actions by or in the right of the Company) to which the Executive
is, was, or at any time becomes a party, or is threatened to be made a party as
a result, directly or indirectly, of serving as a director, officer, employee,
or agent of the Company or at the request of the Company as a director, officer,
employee, or agent of another corporation, partnership, trust, or other
enterprise or entity; provided, however, that the Executive shall not be
entitled to indemnification with respect to any claim to the extent that such
Claim is attributable to the Executive's gross negligence or willful
misconduct. Such indemnification shall include, without limitation, to the
fullest extent permitted by applicable law, payment as incurred of related
expenses and costs upon receipt by the Company of an undertaking from the
Executive to the effect that he will repay all such payments if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to
indemnification. The rights of the Executive under this section shall be in
addition to any other rights to indemnification which the Executive may have
under the organizational documents of the Company or applicable law.
Section 6.07. Tax Offset Bonuses. In addition to the bonuses
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provided for in Section 5, the Company shall pay to the Executive additional
bonuses in an amount equal to the result obtained when (i) all income earned or
deemed earned by the Executive in connection with the issuance or release from
restrictions of the shares of Common Stock described in Section 12 is divided by
the difference between one and the then-applicable Aggregate Tax Rate (defined
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below), and (ii) the resulting quotient is reduced by the amount of such income.
Each such bonus shall be paid not later than fifteen (15) calendar days prior to
the date on which the related tax becomes payable by the Executive (including
without limitation tax resulting from any adjustments as a result of an audit).
The Executive shall file on a timely basis an election under Section 83(b) of
the Internal Revenue Code with respect to the shares of Common Stock subject to
repurchase under Section 12.
For purposes of this Agreement, the "Aggregate Tax Rate" shall mean, at any
time, the sum of the maximum individual income tax rates then in effect, using
for this purpose the highest tax rates then in effect, using for this purpose
the highest tax rates applicable to individuals under the federal laws and the
laws of all states, counties, cities, and other municipalities or governmental
jurisdictions to which the Executive is then required to pay taxes with respect
to the income described in the preceding paragraph, including without limitation
any surtaxes but excluding consideration of any so-called alternative minimum
tax. For purposes of the calculations under the preceding paragraph, the
Aggregate Tax Rate shall be expressed as the decimal equivalent of the aggregate
applicable tax rate percentages.
Section 6.08. Other Benefits. The Executive shall be entitled to
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participate in all other benefit programs made available to senior executives of
the Company (subject to the limitation set forth in Section 6.04 with respect to
participation in the Initial Option Plan) and such other benefits as may be
agreed upon by the parties from time to time. The Executive's benefits and
perquisites under this Agreement shall be reviewed by the Board not less often
than annually for appropriate increases, if any, and shall not be decreased
during the Term without the Executive's consent; provided that the Company may
replace a benefit with another benefit of equivalent value.
Section 7. Termination. This Agreement shall be terminated at the
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end of the Initial Term or any Renewal Term (in each case if not renewed as
herein provided), or earlier as follows:
Section 7.01. Death. This Agreement shall terminate upon the death
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of the Executive, except that the compensation provided in Section 4 shall
continue through the end of the month in which the Executive's death occurs.
Section 7.02. Permanent Disability. In the event of any physical or
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mental disability of the Executive rendering the Executive unable to perform his
duties hereunder for a period of at least one hundred twenty (120) consecutive
days or one hundred eighty (180) days within any three hundred and sixty (360)
consecutive days, the Company may terminate this Agreement upon notice to the
Executive following the end of such period. Any determination of disability
shall be made by a qualified independent physician or physicians selected by the
Board, the fees and expenses of which will be paid by the Company. The failure
of the Executive to submit to a
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reasonable examination by such physician or physicians, at a reasonable time and
location and following reasonable notice, shall serve to bar the Executive from
objecting to any determination of disability by the Board.
Section 7.03. By The Company For Cause. The employment of the
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Executive may be terminated by the Company for Cause (as defined below) at any
time effective upon written notice to the Executive, subject to the following
provisions of this section. The Company shall provide the Executive with at
least ten (10 ) days' prior written notice of a Board meeting at which a
termination for Cause will be considered and the Executive will have an
opportunity to attend and participate in that meeting. If the Company elects to
terminate the Executive's employment under this Agreement for Cause, then Cause
must be determined to exist by the Board by the adoption by the affirmative vote
of not less than a majority of the entire membership of the Board (which
majority for purposes of this Section must include at least two of the Directors
designated pursuant to Section 6(c) of the Shareholders' Agreement of even date)
of one or more resolutions containing a finding that the Executive was guilty of
the conduct constituting Cause and specifying such conduct, a copy of which
resolution shall be furnished to the Executive along with the notice of
termination of his employment for Cause. For purposes hereof, the term "Cause"
shall mean only any one or more of the following has occurred:
(a) The Executive shall have been convicted of, or shall have
pleaded guilty or nolo contendere to, any felony;
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(b) The Executive shall have wilfully failed or refused to
perform his duties hereunder in carrying out the lawful and
reasonable directives of the Board which are consistent with
this Agreement and such willful failure or refusal shall have
continued for a period of fifteen (15) days following written
notice from the Board specifying such willful failure or refusal
in reasonable detail;
(c) the Executive shall have breached any provision of Section
9 hereof which shall have resulted in a material and adverse
effect on the business or financial condition of the Company;
(d) The Executive shall have breached any provision of Section
10 hereof and such breach shall have continued for a period of
ten (10) days following written notice from the Board specifying
such breach in reasonable detail; or
(e) the Executive shall have committed any (i) fraud or
embezzlement, or (ii) any other act of dishonesty against the
Company which has a material and adverse effect on the Company.
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Section 7.04. By the Company without Cause. At any time after the
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date which is eighteen (18) months after commencement of the Term, the Company
may terminate the Executive's employment without Cause effective upon not less
than 90 days' prior written notice to the Executive.
Section 7.05. By the Executive Without Good Reason. The Executive
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may terminate this Agreement at any time during the Term without Good Reason (as
defined below) effective upon at least ninety (90) days' prior written notice to
the Company.
Section 7.06. By the Executive for Good Reason. The Executive may
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terminate this Agreement at any time upon written notice to the Company for
"Good Reason", which term shall mean only one or more of the following:
(a) The Company shall have failed to provide the Executive with
the compensation payable hereunder or shall have reduced such
compensation payable hereunder, or shall have materially reduced
the other benefits to which the Executive is entitled hereunder,
and such failure shall have continued for fifteen (15) days
after notice from the Executive to the Board of Directors,
specifying such failure or reduction in reasonable detail;
(b) The Company shall have (i) effected any material diminution
or reduction in the Executive's responsibilities, authority,
title or position with respect to his employment by the Company
or (ii) assigned to the Executive responsibilities or duties
inconsistent with his position as President and Chief Executive
Officer or this Agreement, and such diminution, reduction or
assignment shall have continued for ten (10) days after notice
from the Executive to the Board, specifying such diminution,
reduction or assignment in reasonable detail;:
(c) The Company shall have failed to fulfill any of its other
obligations under this Agreement, and such failure shall have
continued for thirty (30) days after notice thereof to the
Board, specifying such failure in reasonable detail;
(d) A Change of Control (as herein defined) shall have
occurred; provided, however, that if in connection with such
Change of Control the Executive shall be afforded the
opportunity to continue in his position as President and Chief
Executive Officer, with responsibilities, authority, Base Salary
and other benefits and terms no less favorable to the Executive
than those enjoyed by the Executive prior to the transaction
which resulted in such Change of Control (provided that while
the Executive may exercise any rights which he may have under
options granted pursuant to the Initial Option Plan, he shall
not be entitled to receive new
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comparable option benefits following such Change of Control),
then the Executive's termination of this Agreement for Good
Reason may not be effective earlier than the first anniversary
of such Change of Control transaction. For purposes of this
Agreement, a Change of Control shall occur if (x) from and after
the date the Company has consummated its first public offering
of securities, as a result of one or more transactions (other
than public offerings of securities by the Company) a person or
group of persons acting in concert, other than Summit Ventures
IV, L.P. and the Executive and their respective affiliates,
shall own collectively a majority of the voting securities of
the Company or shall have the right to elect a majority of the
Board; or (y) prior to consummation by the Company of its first
public offering, Summit Ventures IV, L.P. and the Executive and
their respective affiliates shall cease to own a majority of the
voting securities of the Company; provided that in making such
determination there shall be excluded any voting securities
issued pursuant to an acquisition recommended to the Board by
the Executive; or
(e) The Company shall issue voting securities, and as a result
of such issuance, the Executive (together with any person to
whom he Shares after the date hereof) shall cease to own at
least ten percent (10%) of the voting securities of the Company
(calculated on a fully diluted basis, including, without
limitation after giving effect to the conversion of the
Company's Series A Preferred Stock and the exercise of any
option or warrant then outstanding, regardless of whether then
exercisable); provided, however, that this Section 7.06(e) shall
not apply to, and there shall be disregarded in making any
calculations under this Section 7.06(e), any voting securities
issued (i) pursuant to an acquisition recommended to the Board
by the Executive; or (ii) pursuant to a public offering which
constitutes a Qualified Public Offering, as defined in Article
IX of a certain Series A and Series B Preferred Stock Purchase
Agreement of even date among the Company, the Executive and
others (the "Stock Purchase Agreement").
Section 7.07 Termination of Financing Commitment. If pursuant to
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Section 1.6 of the Stock Purchase Agreement Purchasers (as defined in the Stock
Purchase Agreement) terminate their commitment to purchase Purchased Shares (as
defined in the Stock Purchase Agreement), then the Executive may terminate this
Agreement at any time thereafter upon notice to the Company.
Section 8. Termination Payments and Benefits.
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Section 8.01. Voluntary Termination; Election Not to Renew;
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Termination For Cause; Death or Disability. Upon any termination of this
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Agreement: (a) voluntarily by the Executive
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without Good Reason as defined in Section 7.06; (b) upon the election by the
Executive or the Company not to renew this Agreement at the end of the Term or
any Renewal Term pursuant to Section 2; (c) by the Company for Cause pursuant to
Section 7.03; (d) upon the death of the Executive as provided in Section 7.01;
(e) upon the disability of the Executive as defined in Section 7.02; or (f) by
the Executive pursuant to Section 7.07, all payments, salary and other benefits
hereunder shall cease at the effective date of termination, and the Executive
shall be entitled to receive only (i) Base Salary accrued through the date of
termination, or in the case of death, through the end of the month in which
death occurs; (ii) reimbursement under Section 6.03 for expenses incurred
through the date of termination; (iii) to the extent required under applicable
law, continued participation, at the Executive's expense, in the health,
disability, and other insurance benefit programs of the Company; and (iv) unless
the termination is by the Company for Cause pursuant to Section 7.03 or by the
Executive without Good Reason pursuant to Section 7.06, , his pro rata share of
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any bonus which otherwise would have been payable under Section 5 with respect
to the year in which termination of employment occurs. The Executive's pro rata
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share of any such bonus shall be equal to the amount of any bonus payable with
respect to such year times a fraction, the numerator of which is the number of
days of such year during which the Executive was employed by the Company, and
the denominator of which is 365. Any such pro rata bonus shall be paid at such
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time as such bonus would otherwise have been paid.
Section 8.02. Termination without Cause; Termination for Good Reason.
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In the event that this Agreement is terminated (a) by the Company without Cause
(as defined in 7.03); or (b) by the Executive for Good Reason (as defined in
Section 7.06), the Executive shall receive as a termination settlement an amount
equal to twelve (12) month's Base Salary at the level in effect at the
effective date of termination (the "Termination Payment"). The Termination
Payment shall be paid in twelve (12) consecutive monthly installments on the
first business day of each month, commencing on the first such day of the month
immediately following the month in which termination occurs. The Executive
shall also continue to receive during such twelve (12) month period, at the
Company's cost, health, disability, and other insurance benefits of the type
required under Section 6.02. In addition, the Executive shall be entitled to
receive (i) Base Salary accrued through the date of termination; (ii)
reimbursement under Section 6.03 for expenses incurred through the date of
termination; (iii) to the extent required under applicable law, continued
participation, at the Executive's expense, in the health, disability, and other
insurance benefit programs of the Company after the 12-month continuation period
described in the preceding sentence; and (iv) his pro rata share of any bonus
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which otherwise would have been payable under Section 5 with respect to the year
in which termination of employment occurs, calculated and paid in the manner
described in Section 8.01.
Section 8.03. No Other Benefits. Except as specifically provided in
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Sections 8.01 and 8.02, the Executive shall not be entitled to any compensation,
severance or other benefits from the Company or any of its subsidiaries or
affiliates upon the termination of this Agreement for
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any reason whatsoever, and the Executive agrees that he will accept such
payments in full and complete satisfaction of any obligations owed to him
hereunder.
Section 8.04. Survival. Notwithstanding any other provisions of this
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Agreement to the contrary, the termination of this Agreement shall not relieve
either party of any liabilities or obligations existing at or arising as a
result of the termination or any breach of this Agreement. Without limiting the
preceding sentence, the provisions of Sections 8.01, 8.02, and 9 through 16,
inclusive, shall survive the termination of this Agreement.
Section 9. Proprietary Information; Inventions in the Field.
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Section 9.01. Proprietary Information. In the course of his service
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to the Company, the Executive will have access to confidential strategic or
technical data, marketing research data, sources of supply and trade secrets,
which are confidential and proprietary and are owned or used by the Company, or
any of its subsidiaries or affiliates. Such information shall hereinafter be
called "Proprietary Information" and shall include any and all items enumerated
in the preceding sentence and coming within the scope of the business of the
Company or any of its subsidiaries or affiliates as to which the Executive may
have access, whether conceived or developed by others or by the Executive alone
or with others during the period of his service to the Company, whether or not
conceived or developed during regular working hours (if conceived or developed
within the scope of the Executive's employment). Proprietary Information shall
not include any data or information which: (a) is now or hereafter in the
public domain, provided the same are not in the public domain, as a consequence
of disclosure directly or indirectly by the Executive in violation of this
Agreement, (b) is in the Executive's possession prior to its disclosure to him
as an employee of the Company, or (c) is lawfully acquired by the Executive from
a third party.
Section 9.02. Non-Use and Non-Disclosure. The Executive shall not
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during the Term or at any time thereafter (a) disclose, directly or indirectly,
any Proprietary Information to any person other than the Company or its
Subsidiaries or affiliates or authorized employees thereof at the time of such
disclosure, or such other persons to whom the Executive has been specifically
instructed or permitted to make disclosure by the Board or its authorized
representative or (b) use any Proprietary Information, directly or indirectly,
for his own benefit or for the benefit of any other person or entity. At the
termination of his employment, the Executive shall deliver to the Company all
notes, letters, documents and records which contain Proprietary Information
which are then in his possession or reasonable control and shall destroy any and
all copies and summaries thereof. Notwithstanding the foregoing, the Executive
may make disclosure (i) to the extent required by law, as reasonably determined
by the Executive or his legal counsel, and (ii) on a confidential basis to the
Executive's lawyers, accountants, and other professional advisors.
Section 10. Restrictions on Activities of the Executive.
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Section 10.01. Acknowledgments. The Executive agrees that he is being
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employed hereunder in a key executive capacity with the Company and that the
Company is engaged in a highly competitive business and that the success of the
Company's business in the marketplace will depend upon its goodwill and
reputation for quality and dependability. The Executive further agrees that
reasonable limits may be placed on his ability to compete against the Company
under certain circumstances as provided herein so as to protect and preserve the
legitimate business interests and good will of the Company.
Section 10.02. General Restrictions.
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(a) During the Term and, if applicable, for the Non-Competition
Period (as defined below), the Executive will not anywhere in the United States
engage or participate in, directly or indirectly, as principal, agent, employee,
employer, consultant, investor or partner, or assist in the management of, or
own any stock or any other ownership interest in, any business which is
Competitive with the Company (as defined below). For purposes of this Agreement,
a business shall be considered "Competitive with the Company" only if it relates
to the acquisition, ownership, operation or management of dental practices or
any one or more of the related specialty practices of orthodontics,
periodontics, endodontics, pedodontics or oral surgery. Notwithstanding the
foregoing, the Executive may own, directly or indirectly, less than 1% of the
capital stock of any public corporation.
(b) For purposes of this Agreement, the "Non-Competition
Period" shall mean the period of twelve (12) consecutive months after the
Executive's employment terminates for any reason; provided however, that in the
event of termination under Section 7.02 or 7.07, there shall be no Non-
Competition Period; and provided further, however, that in the event the
Executive's employment terminates as a result of either party's decision not to
renew this Agreement at the end of the Initial Term or any Renewal Term, then
the Executive shall not be bound by the provisions of this Section 11.02 after
termination of the Agreement unless the Company elects, by notice to the
Executive not less than thirty (30) days prior to such termination, to make (A)
payments to the Executive, at the level of the Base Salary then in effect, and
(B) provide the benefits described in Section 8.02, both for the period of
twelve months after such termination, in which case the Non-Competition Period
shall continue for such twelve (12) month period; and provided further than in
the event the Company terminates the Executive other than for Cause pursuant to
Section 7.03, or the Executive terminates his employment for Good Reason
pursuant to Section 7.06, then the Executive shall be bound by the provisions of
this Section 10 only if the Company pays the compensation and provides the
benefits required under Section 8.02..
Section 10.03. Employees, Customers and Suppliers. During the Term
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and, if applicable, the Non-Competition Period, the Executive will not solicit,
or attempt to solicit, any officer, director, consultant, executive or employee
of the Company or any of its subsidiaries or affiliates
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to leave his or her engagement with the Company or such subsidiary or affiliate
nor will he call upon, solicit, divert or attempt to divert from the Company or
any of its affiliates or subsidiaries any of their customers or suppliers, of
whose names he was aware during the term of his employment with the Company;
provided, however, that nothing in this Section 10.03 shall be deemed to
prohibit the Executive from calling upon or soliciting a customer or supplier
during the Non-Competition Period if such action relates solely to a business
which is not Competitive with the Company.
Section 10.04. Termination of Restrictions. Notwithstanding the
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foregoing, any restrictions under Sections 10.02 and 10.03 which are applicable
during the Non-Competition Period (if applicable) shall terminate automatically,
without terminating or modifying any obligations of the Company, if the Company
fails to make any payment, or fails to perform any of its other obligations,
during the Non-Competition Period and such failure continues for 10 days after
notice of such failure from the Executive.
Section 10.05. Acknowledgment. THE EXECUTIVE REPRESENTS AND WARRANTS
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THAT HE HAS READ CAREFULLY THE PROVISIONS OF THIS AGREEMENT AND HAS REVIEWED THE
SAME WITH HIS COUNSEL, AND ACKNOWLEDGES THAT THE RESTRICTIONS CONTAINED IN
SECTION 9 AND 10 HEREOF ARE REASONABLE IN BUSINESS AND GEOGRAPHIC SCOPE, ARE
REASONABLE IN DURATION, AND ARE IMPORTANT TO THE PROTECTION OF THE COMPANY'S
GOODWILL AND ITS COMPETITIVE POSITION IN THE MARKETPLACE.
Section 11. Remedies. It is specifically understood and agreed that
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any breach of the provisions of Section 9 or 10 of this Agreement is likely to
result in irreparable injury to the Company and that the remedy at law alone may
be an inadequate remedy for such breach, and that in addition to any other
remedy it may have, the Company shall be entitled to seek the specific
performance of this Agreement by the Executive and to seek both temporary and
permanent injunctive relief (to the extent permitted by law) without the
necessity of proving actual damages. All rights and remedies of each party
under this Agreement are cumulative and in addition to all other rights and
remedies which may be available to that party from time to time, whether under
this Agreement, at law, in equity, or otherwise.
Section 12. Shares Subject to Repurchase. Prior to commencement of
----------------------------
the Term, the Company has sold to the Executive 50,000 shares of Common Stock
(the "Shares"). Such shares are fully paid and nonassessable but shall be
subject to repurchase by the Company in certain events, as follows:
(a) Initially, all 50,000 Shares issued to the Executive shall be
subject to repurchase by the Company, as its option, in the event of termination
of his employment, subject
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to the following provisions of this Section 12. On the last day of each
calendar month, commencing with January 31, 1996, and continuing on the last day
of each calendar month thereafter through and including January 31, 2000, 1,042
Shares shall be automatically released from such repurchase restriction, and
after January 31, 2000, no Shares shall remain subject to such repurchase right.
(b) In the event of a Change of Control, all repurchase rights of
the Company with respect to the Shares shall terminate.
(c) In the event of termination of the Executive's employment by the
Company without Cause as (defined in Section 7.03) and other than upon death or
disability, or in the event the Executive terminates his employment under
Section 7.06 or Section 7.07, then in addition to the Shares released from the
Company's repurchase rights under Section 12(a), there shall be automatically
released from such repurchase right an additional 12,504 Shares, effective as of
the date of such termination.
(d) In the event that the Executive's employment with the Company
terminates prior to January 31, 2000 as a result of his death, his termination
by the Company under Section 7.02 or by the Company without Cause (as defined in
Section 7.03), or termination by the Executive for Good Reason under Section
7.06, then those Shares which then remain subject to repurchase may, at the
option of the Company, be repurchased at the greater of $100,000 or the fair
market value thereof, which fair market value shall be determined as provided in
Section 13, and in the event of termination under Section 7.07 those shares
which remain unvested may, at the option of the Company, be repurchased at the
fair market value thereof as so determined. In the event that prior to January
31, 2000 the Executive's employment terminates for any other reason, those
Shares which then remain subject to repurchase may be repurchased by the Company
for a purchase price equal to $100,000 multiplied by a fraction having as its
numerator the number of Shares which then remain subject to such repurchase and
having 50,000 as its denominator.
(e) In the event that the Company wishes to exercise its right under
Section 12(d) to repurchase shares from the Executive or his estate or other
successor in interest, as the case may be, it shall give written notice to the
Executive or his estate or other successor as applicable, to such effect within
60 days following termination of his employment, specifying the number of Shares
to be repurchased, and the price to be paid therefor (consistent with Section
12(d)). Such repurchase shall be accomplished within 30 days after the date of
such notice, and payment for the Shares repurchased shall be made in cash.
(f) In addition to the foregoing, if (i) the Company exercises its
repurchase option under any of the circumstances described in the first sentence
of Section 12(d), (ii) a
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Liquidity Event (as defined below) occurs within six months after the
termination of the Employee's employment, and (iii) the net proceeds per share
payable to the shareholders of the Company (in the event of a Liquidity Event
comprised of a sale of stock or assets), or the offering price to the public of
shares of Common Stock (in the event of a Liquidity Event comprised of a public
offering) exceeds the amount paid to the Executive under Section 12(e), then the
Company shall pay to the Executive, in cash, not later than 30 days after such
Liquidity Event, an amount equal to the difference between such net proceeds per
share or offering price and such amount paid per share under Section 12(e). The
term Liquidity Event shall mean the merger or consolidation of the Company
pursuant to which those persons who held all of the voting securities of the
Company immediately prior to such transaction fail to hold at least a majority
of the voting securities of the resulting or surviving corporation, the sale of
all or substantially all of the stock or assets of the Company or the
consummation of the sale of stock of the Company to the public pursuant to a
registration statement filed under the Securities Act of 1933, as amended.
Section 13. Determination of Value. For the purposes of Section 13,
----------------------
fair market value of the shares shall be determined as follows:
(a) Fair market value thereof, as of the date of such proposed
repurchase, shall be agreed upon in good faith by the Company and the Executive
(or his estate or other successor in interest, as the case may be), taking into
account, in valuing such Shares, all relevant facts and circumstances; provided,
however, that there shall be no discount to reflect the fact that the Shares are
illiquid or that they represent a minority interest in the Company . If no such
agreement is reached within sixty (60) days after termination of employment, the
fair market value shall be determined by appraisal as set forth below.
(b) All appraisals shall be undertaken by two appraisers, one
selected by the Board and one selected by the Executive (or his estate or other
successor in interest, as the case may be). No Director whose Shares are being
appraised shall vote on the selection of the appraiser chosen by the Company.
The Company and the Executive shall use all reasonable efforts to cause such
appraisers to determine the fair market value of the shares within thirty (30)
days following the appointment of the last appraiser to be appointed. In the
event that the two appraisers agree in good faith on such fair market value,
such agreed value shall be used for these purposes. If the appraisers cannot
agree but their valuations are within 10% of each other, the fair market value
shall be the mean of the two valuations. If the appraisers cannot agree and the
differences in the valuations are greater than 10%, the appraisers shall select
a third appraiser who will calculate fair market value independently, and,
except as provided in the next sentence, the fair market value of the Shares
shall be the average of the two fair market values arrived at by the appraisers
who are closest in amount. If one appraiser's valuation is the mean of the other
two valuations, such mean valuation shall be the fair market value. In the event
that the two
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original appraisers cannot agree upon the fair market value of the Shares within
the 30-day period referred to above and cannot agree upon a third appraiser
within ten (10) days following the end of the thirty (30) day period referred to
above, then the third appraiser shall be appointed by the American Arbitration
Association in Boston, Massachusetts. The expenses of the appraiser chosen by
the Company will be borne by it, the expenses of the appraiser chosen by the
Executive (or his estate or guardian) will be borne by him, and the expenses of
the third appraiser, if applicable, will be borne 50% by the Company and 50% by
the Executive (or his estate or guardian).
Section 14. Severable Provisions. The provisions of this Agreement
--------------------
are severable and the invalidity of any one or more provisions shall not affect
the validity of any other provision. In the event that a court of competent
jurisdiction shall determine that any provision of this Agreement or the
application thereof is unenforceable in whole or in part because of the duration
or scope thereof, the parties hereto agree that said court in making such
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the full extent permitted
by law.
Section 15. Notices. All notices hereunder, to be effective, shall
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be in writing and shall be delivered by hand or mailed by certified mail,
postage and fees prepaid, as follows:
If to the Company: American Dental Partners, Inc.
c/o Summit Partners, L.P.
28th Floor
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Chairman
If to the Executive: Xxxxxxx X. Xxxxxx
c/o American Dental Partners, Inc.
c/o Summit Partners, L.P.
28th Floor
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
or to such other address as a party may notify the other pursuant to a notice
given in accordance with this Section 15.
Section 16. Miscellaneous.
-------------
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Section 16.01. Modification. This Agreement constitutes the entire
------------
Agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral.
This Agreement may not be amended or revised except by a writing signed by the
parties.
Section 16.02. Assignment and Transfer. This Agreement shall not be
-----------------------
terminated by the merger or consolidation of the Company with any corporate or
other entity or by the transfer of all or substantially all of the assets of the
Company to any other person, corporation, firm or entity. The provisions of
this Agreement shall be binding on and shall inure to the benefit of any
successor in interest to either party. Neither this Agreement nor any of the
rights, duties or obligations of the Executive shall be assignable by the
Executive.
Section 16.03. Captions. Captions herein have been inserted solely
--------
for convenience of reference and in no way define, limit or describe the scope
or substance of any provision of this Agreement.
Section 16.04 Expenses. The parties will bear their own costs and
--------
expenses incurred in connection with the negotiation and execution of this
Agreement; provided that the Company will pay the reasonable fees and expenses
(not to exceed $20,000) through the date hereof of counsel for the Executive in
connection with the negotiation, preparation and execution of this Agreement and
all other agreements relating to the formation, organization, capitalization, or
initial financing of the Company.
Section 16.05 Governing Law. This Agreement shall be construed
-------------
under and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
a sealed instrument as of the day and year first above written.
AMERICAN DENTAL PARTNERS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx X. Xxxxxx
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