EXHIBIT 10.14
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (together with Exhibit A hereto, 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
Xxxx X. Xxxxxxx (the "Consultant").
WHEREAS, the Company desires to avail itself of the experience,
sources of information, advice and assistance of the Consultant on the terms and
conditions described in this Agreement; and
WHEREAS, the Consultant desires to make available to the Company his
experience, sources of information, advice and assistance on the terms and
conditions described in this Agreement;
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. Consultation. The Consultant hereby agrees to render Consulting
Services (as hereinafter defined) to the Company during the Consulting Period
(as hereinafter defined). "Consulting Services" mean such management consulting
services as the Company may reasonably request from time to time. The
Consultant agrees to devote such of his business time and efforts to providing
the Consulting Services as is reasonably requested by the Company, but shall not
be required to devote more than 140 hours per month to the provision of such
Consulting Services. Notwithstanding any provision to the contrary contained
herein, the Consultant shall have no power or authority, and shall not directly
or indirectly hold himself out as having any power or authority, to act as an
executive, employee or agent of the Company or any of its subsidiaries or to
bind the Company or any of its subsidiaries to any oral or written contract,
commitment or arrangement.
2. Consulting Period. The Consultant shall render Consulting
Services to the Company for a period commencing on December 12, 1997 and ending
upon the earlier to occur of December 31, 2000 or the termination of this
Agreement pursuant to Section 5 hereof (the "Consulting Period").
3. Compensation and Benefits.
(a) Retainer Fee. As consideration for rendering the Consulting
Services, the Company agrees to pay the Consultant, during the Consulting Period
(and
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thereafter to the extent expressly provided in this Agreement), a monthly
retainer fee equal to $25,000 (to be grossed up for any incremental taxes due to
self employment, social security, medicare, and taxable benefits), payable on
the first business day of each calendar month during such period for the
immediately preceding calendar month.
(b) Non-Cash Compensation. During the Consulting Period (and
thereafter to the extent expressly provided in this Agreement), the Consultant
shall receive the special non-cash compensation set forth on Exhibit A attached
hereto.
4. Independent Relationship. At all times during the Consulting
Period, the Consultant is and shall be an independent contractor in providing
the Consulting Services hereunder. Nothing contained in this Agreement shall be
deemed or construed to create a partnership or joint venture, to create the
relationship of employee/employer or principal/agent, or otherwise create any
liability whatsoever as partners, joint venturers, employer, employee,
principal, or agent for either the Company or the Consultant.
5. Termination.
(a) Death or Disability. This Agreement shall terminate
automatically upon the death or total disability of the Consultant. For purposes
of this Agreement, "total disability" shall be deemed to have occurred if
Consultant shall have been unable to provide Consulting Services to the Company
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 Consultant or his estate,
heirs or legal representative, as the case may be, a termination fee equal to
the amount of retainer fees set forth in Section 3(a) hereof (payable in
accordance with Section 3(a) hereof) through the later to occur of December 31,
2000 or the first anniversary of the date of death or total disability. Upon the
death of the Consultant, the Company will provide, through the later to occur of
December 31, 2000 or the first anniversary of the date of death, to the
Consultant's estate, heirs, legal representative, or family members, as the case
may be, the non-cash compensation items set forth in paragraphs 2 and 5 of
Exhibit A attached hereto. Upon the total disability of the Consultant, the
Company will provide, through December 31, 2000, to the Consultant (or his legal
representative, as the case may be) all of the non-cash compensation items set
forth on Exhibit A attached hereto. Except for the foregoing, the Company shall
have no further obligations to pay the Consultant or his estate, heirs or legal
representative any other fees or provide any other cash or non-cash compensation
pursuant to this Agreement upon the death or total disability of the Consultant.
(b) Termination for Cause. The Company may terminate this
Agreement for Cause (as hereinafter defined) upon ten (10) days' prior written
notice to the
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Consultant after formal action by the Board of Directors of the Company at a
regular or special meeting duly called where the Board of Directors of the
Company decides to terminate the Consultant for Cause. The Consultant shall have
the right to receive notice of and appear at such meeting to respond to any
allegations made against him concerning the contemplated termination. 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 breach of Consultant's representations, covenants, duties
and responsibilities hereunder. Upon such termination for Cause, the Company
shall pay to the Consultant, as soon as practicable after such termination, all
compensation of the Consultant 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 Consultant any other fees or provide any other cash or
non-cash compensation pursuant to this Agreement.
(c) Termination Without Cause. The Company may terminate this
Agreement without Cause upon sixty (60) days' prior written notice to
Consultant. Upon such termination without Cause, the Company shall (i) pay to
the Consultant a termination fee (payable in accordance with Section 3(a)
hereof) equal to the amount of retainer fees set forth in Section 3(a) hereof
through December 31, 2001, (ii) provide, through December 31, 2001, to the
Consultant all of the non-cash compensation items set forth on Exhibit A
attached hereto, and (iii) release the Consultant from liability for any acts or
omissions of the Consultant except for the Consultants' gross negligence or
willful misconduct. Termination of this Agreement without Cause shall include
any action by the Board of Directors of the Company that results in the
Consultant being voted out as Nonexecutive Chairman of the Board of the Company
prior to December 31, 2000 (other than removal for cause in accordance with the
Articles of Incorporation and Bylaws of the Company as consistent with
definition of "Cause" set forth in Section 5(b) above).
(d) Termination by Consultant. The Consultant may terminate this
Agreement upon thirty (30) days' prior written notice to the Company. Upon
termination by the Consultant, the Company shall pay to the Consultant, as soon
as practicable after such termination, all compensation of the Consultant
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 Consultant any
other fees or provide any other cash or non-cash compensation pursuant to this
Agreement.
6. Expense Reimbursement. Upon submission of properly documented
expense account reports, the Company shall reimburse the Consultant for all
reasonable travel
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and entertainment expenses incurred by the Consultant in the course of providing
Consulting Services to the Company; provided, however, that the Consultant shall
obtain the written consent of the Company prior to incurring any reimbursable
expense in excess of $5,000.
7. Representations by the Consultant. The Consultant hereby
represents and warrants to the Company that (a) the Consultant's execution and
delivery of this Agreement and his performance of his duties and obligations
hereunder will not conflict with, cause a breach or default under, or give any
party a right to damages under (or to terminate) any other agreement to which
the Consultant is a party or by which he is bound, and (b) there are no
restrictions, agreements or understandings that would make unlawful the
Consultant's execution or delivery of this Agreement or the performance of his
obligations hereunder.
8. Taxes and Other Deductions. The Consultant agrees that he will
be responsible for paying and withholding all taxes with respect to the fees and
other non-cash compensation payable hereunder, including without limitation,
income tax withholding and taxes, self-employment taxes, social security
contributions, and medicare contributions.
9. Confidentiality.
(a) Non-Disclosure Obligation. During the Consulting Period or
at any time thereafter, irrespective of the time, manner or cause of the
termination of this Agreement, the Consultant 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 Consultant as a direct or indirect
consequence of providing the Consulting Services to the Company, or through his
prior service as an executive officer of the Company, 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 Consultant or persons who are not under similar
obligations of confidentiality to the Company and who are not parties to this
Agreement, (ii) obtained by the Consultant from a third party not under a
similar obligation of confidentiality to the Company, (iii) required to be
disclosed by any court process or any government or agency or department of any
government, or (iv) the subject of a written waiver executed by the Company for
the benefit of the Consultant.
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(c) Return of Property. Upon termination of this Agreement, the
Consultant 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. The Consultant shall be
accorded reasonable access to such Confidential Information subsequent to the
Consulting Period for any proper purpose as determined in the reasonable
judgment of the Company.
10. Non-Competition.
(a) Term and Scope. Subject to the other provisions of this
Section 10, from and after the date hereof until the date which is one year
after the termination of this Agreement in accordance with the terms hereof (the
"Noncompetition Term"), without the prior written consent of the Company, the
Consultant shall not directly or indirectly participate as a stockholder,
proprietor, partner, trustee, consultant, employee, director, officer, lender,
or investor in any entity that is engaged in a Competing Business (as defined
below) 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. The
term "Competing Business" shall mean any business that competes with any
business engaged in by the Company or its subsidiaries during the Consulting
Period or during the period in which the Consultant was employed by the Company.
(b) Exception. Nothing contained herein shall limit the right of
the Consultant 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 Consultant'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 Consultant is not in compliance with the terms of
this Section 10, the Company shall be entitled to, among other remedies,
compliance by the Consultant with the terms of this Section 10 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 Consultant hereby acknowledges that the
geographic boundaries, scope of prohibited activities and the time duration of
the provisions of
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this Section 10 are reasonable and are no broader than are necessary to protect
the legitimate business interests of the Company.
11. Non-Solicitation and Non-Interference. During the Noncompetition
Term, the Consultant shall not, directly or indirectly, (a) solicit the
employment of any current or future employee of the Company or its subsidiaries
without the prior written consent of the Company, (b) request, induce or attempt
to influence any employee of the Company or any of its subsidiaries to terminate
his or her employment with the Company or such subsidiary, or (c) request,
induce or attempt to influence any supplier, customer, patient or client of the
Company or any of its subsidiaries to terminate his, her or its relationship
with the Company or such subsidiary.
12. Injunctive Relief. The Consultant acknowledges that the breach
of the confidentiality, non-competition and non-solicitation covenants specified
in Sections 9 through 11 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 such 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 Consultant
waives any requirements for the posting of a bond in connection with the
issuance of such an injunction. The Consultant 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.
13. Indemnification. The Company will indemnify and hold harmless
the Consultant from and against any liabilities, damages, costs (including
reasonable fees of attorneys) and expenses ("Damages") incurred by the
Consultant which arise out of or relate to the services provided by the
Consultant hereunder except to the extent such Damages result from the gross
negligence or willful misconduct of the Consultant. The Company will reimburse
the Consultant for such reasonable expenses (including legal fees and costs) in
advance of the final disposition of any proceeding involving the Consultant and
for which he is entitled to indemnification hereunder. The parties hereto
acknowledge that (a) the indemnification of the Consultant as a former employee
of the Company and as a director of the Company will be governed by the Articles
of Incorporation of the Company, the Bylaws of the Company, and the Company's
insurance coverage in effect at the applicable time (whichever affords the
Consultant the greater protection), and (b) such indemnification permits
(pursuant to Article 2.02-1K of the Texas Business Corporation Act) the
reimbursement of reasonable expenses (including legal fees and costs) in advance
of the final disposition of the proceeding involving the director or officer.
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14. Assignment. This Agreement will be binding upon the parties
hereto and their respective successors and permitted assignees. Because the
Consultant's duties and services hereunder are special, personal and unique in
nature, the Consultant may not transfer, sell or otherwise assign his rights,
obligations or benefits under this Agreement (and any attempt to do so will be
void).
15. 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.
16. Notices. All notices and other communications required or
permitted hereunder must be in writing and (i) delivered personally, (ii)
delivered by a nationally recognized overnight courier service, or (iii) sent by
registered or certified mail, postage prepaid, as follows:
(a) If to the Company, to:
Integrated Orthopaedics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
(b) If to the Consultant, to:
Xxxx X. Xxxxxxx
0000 Xxxx Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 16 will (i) if delivered
personally or by overnight courier service, be deemed given upon delivery; and
(ii) 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.
17. 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
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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.
18. 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 Consultant.
19. 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
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.
20. 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.
21. 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 Consultant have executed this
Agreement as of the date first above written.
COMPANY:
INTEGRATED ORTHOPAEDICS, INC.
By:______________________________
Name:__________________________
Title:_________________________
CONSULTANT:
___________________________________
Xxxx X. Xxxxxxx
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EXHIBIT A
NON-CASH COMPENSATION
The following benefits will be provided to the Consultant during the
Consulting Period (and thereafter to the extent expressly provided in this
Agreement):
1. The Company shall provide the Consultant with an automobile and wireless
telephone.
2. The Company shall provide major medical health insurance coverage for the
Consultant and those members of his immediate family whose primary residence is
the same as Consultant's primary residence. For purposes of the health
insurance coverage referenced in this subparagraph, the Consultant shall be
entitled to the same continuation coverage rights as would be available to an
employee of Company pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985 (COBRA), 29 U.S.C. (S) 1168.
3. The Company shall provide long-term disability insurance coverage for the
Consultant equal to 50% of the monthly retainer fee payable pursuant to Section
3(a) of this Agreement.
4. The Company shall provide term life insurance coverage having a death
benefit of $1,000,000, payable, upon the death of the Consultant, to the
beneficiary or beneficiaries selected by the Consultant.
5. The Company shall provide the following registration rights to the
Consultant:
(a) Piggy-back Rights. Subject to the provisions of hereof, if the
Company at any time proposes to file on its behalf and/or on behalf of any of
its equity holders a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), on any form (other than a registration statement
on Form S-8 or any successor form for securities to be offered to employees of
the Company pursuant to any employee benefit plan) with respect to the
registration of shares of Common Stock, par value $.001 per share, of the
Company ("Common Stock"), the Company will give written notice to the
Consultant, at least 30 days before the initial filing with the Securities and
Exchange Commission of such registration statement, which notice shall set forth
the intended method of disposition of the Common Stock proposed to be registered
by the Company. Subject to the provisions hereof, the notice shall offer to
include in such filing the aggregate amount of shares of Common Stock that the
Consultant may request without expense to the Consultant (except for the fees
and expenses of the Consultant and any underwriters or brokers commissions, SEC
filing fees or expenses applicable to the securities being sold by the
Consultant).
(b) Procedure. The Consultant shall so advise the Company, in
writing, within 20 business days after the date of receipt of such offer from
the Company, setting forth
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the number of shares of Common Stock for which registration is requested by the
Consultant. The Company shall thereupon include in such filing the amount of
such Common Stock for which registration is so requested, subject to the next
two sentences, and shall use best efforts to effect registration under the
Securities Act of such Common Stock. If the managing underwriter of a proposed
public offering shall advise the Company in writing that, in its opinion,
including all the Common Stock requested by the Consultant to be included in
such registration would materially and adversely affect the price or success of
the offering (a "Material Adverse Effect"), then in such event the Common Stock
to be included in such offering shall be allocated first to the Company or the
holder initiating such request for registration, as appropriate, and then, to
the extent that any additional Common Stock can, in the opinion of such managing
underwriter or underwriters, be sold without any such Material Adverse Effect,
pro rata among the Consultant and other holders requesting their Common Stock to
be registered pursuant to similar piggy-back registration rights on the basis of
the number of shares of Common Stock requested to be included in such
registration of the Consultant and the number of shares of Common Stock
requested to be included in such registration of each other holder having
similar piggy-back registration rights. If the managing underwriter of a
proposed public offering shall advise the Company in writing that, in its
opinion, the distribution of any of the Common Stock requested by the Consultant
to be included in the registration concurrently with the Common Stock being
registered by the Company or such other equity holder would materially and
adversely affect the distribution of such Common Stock by the Company or such
other equity holder, then the Consultant shall have no right to have any of his
shares of Common Stock included in such registration. The Company may
discontinue registration of any of its Common Stock, subject to any rights of
other holders to the contrary, at any time prior to the effective date of the
registration statement relating thereto.
(c) Unlimited Rights. The Consultant shall be entitled to the
registration rights set forth in this section for so long as the Consultant owns
Common Stock or is entitled to receive Common Stock upon exercise of the warrant
held by the Consultant for 100,000 shares of Common Stock, regardless of the
number of times the Consultant is offered or has exercised such rights.
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