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EXHIBIT 10.9
ORTHALLIANCE, INC.
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is dated as of the 13th day
of May, 1997 (the "Effective Date"), by and between XXXXXXXX X. XXXXXXX
("Consultant") and ORTHALLIANCE, INC. ("OrthAlliance"), a Delaware corporation.
Because OrthAlliance desires to retain Consultant and because Consultant desires
to be retained by OrthAlliance, both parties, in consideration of the mutual and
exchanged promises and agreement contained herein, particularly the
non-disclosure, non-solicitation and non-competition covenants set forth herein,
and of fees paid and services rendered hereunder and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby agree as follows:
Section 1. Consulting Services. During the term of this Agreement,
Consultant shall render to OrthAlliance financial and general business services
and such other consultation as OrthAlliance shall from time to time reasonably
request. Consultant, with the prior approval and consent of OrthAlliance, shall
assist OrthAlliance to complete the IPO. During the term of this Agreement,
Consultant will not engage in any activities in conflict with the best interests
of OrthAlliance or of any Affiliate. Affiliate shall mean each corporation or
other business entity directly or indirectly controlling, controlled by, or
under common control with OrthAlliance.
Section 2. Compensation.
In consideration for the services to be provided by Consultant
hereunder, Consultant shall receive the following:
(a) Consulting Fee. On the date five (5) business days after
the closing of the IPO, OrthAlliance shall pay to Consultant a consulting fee of
$50,000 (the "Consulting Fee"). Due to Consultant's status as an independent
contractor during the term of this Agreement, OrthAlliance shall not withhold
any taxes from the Consulting Fee, unless otherwise required by law. As an
independent contractor, Consultant shall not be entitled to any benefits or
payments not expressly provided for in this Section.
(b) Warrant. As of the date hereof, Consultant shall be
granted a warrant to purchase 150,000 shares of Class A common stock of
OrthAlliance (the "Warrant") exercisable at the initial public offering price
per share; provided, however, that the Warrant shall be exercisable upon and
only upon the closing of the IPO. The Warrant shall have a term of five (5)
years from the effective date of the S-1.
(c) Expenses. In addition to the Consulting Fee, Consultant
shall be entitled to reimbursement by OrthAlliance for all actual, reasonable
and direct expenses incurred by Consultant in connection with the services to be
provided
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hereunder; provided, however, that such expenses are properly characterized as
being business expenses that are properly tax deductible for OrthAlliance.
Consultant shall provide OrthAlliance with written documentation for such
expenses in a form complying with the records required by the Internal Revenue
Service and appropriate state authorities for tax deductibility purposes, and
reimbursement for each item of approved expenses shall be made within a
reasonable time after receipt by OrthAlliance of the written documentation
thereof. Any expenditures in excess of $1,000 must be approved in advance by an
officer of OrthAlliance.
Section 3. Term; Termination.
(a) Consulting Term. Notwithstanding anything herein to
the contrary, the term of this Agreement shall commence as of the Effective
Date and shall terminate on September 30, 1997, unless terminated earlier as
set forth below:
(b) Termination.
(i) OrthAlliance may terminate this Agreement in
accordance with the following:
(1) Immediately, upon the death or Permanent
Disability (as defined below) of Consultant.
"Permanent Disability" shall mean, that by reason of
any physical or mental incapacity or other cause,
Consultant has been unable, or it is reasonably
determined by the board of directors of OrthAlliance
that Consultant will be unable, for a period of at
least 30 substantially consecutive days to perform
Consultant's services hereunder in a reasonably
satisfactory manner; or
(2) Upon the delivery by OrthAlliance to
Consultant of written notice of termination for cause
of Consultant's engagement as a consultant. "Cause"
shall mean any conduct by Consultant involving (i)
moral turpitude, (ii) conviction of Consultant of any
felony, fraud or theft, (iii) any misconduct or gross
negligence on the part of Consultant in the
performance of any services hereunder, (iv) any act
on the part of Consultant of fraud, deceit or
misappropriation, (v) any failure or refusal on the
part of Consultant to perform his duties under this
Agreement or to obey lawful directives from the board
of directors of OrthAlliance, (vi) any breach by
consultant of any obligation hereunder, (vii) any act
on the part of Consultant in violation of the spirit
or terms of the nondisclosure or non-competition
covenants contained in this Agreement, regardless of
whether those covenants are deemed to be legally
unenforceable, (viii) any act or omission by
Consultant that has injures the reputation of
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OrthAlliance or (ix) the failure of Consultant to
adhere to any written or established policy of
OrthAlliance.
(ii) Consultant may terminate this Agreement with
or without cause by providing thirty days prior written notice
to OrthAlliance of Consultant's resignation.
(c) Effect of Termination.
(i) Upon the termination of this Agreement by
reason of the death or Permanent Disability of Consultant, OrthAlliance shall be
obligated to Consultant or Consultant's Personal Representative, as the case may
be, for the Consulting Fee only if the S-1 has become effective prior to the
date of such termination. Upon the termination of this Agreement for Cause,
Consultant shall forfeit any and all right to the Consulting Fee, unless the IPO
has closed prior to such termination. For purposes of this Agreement, the term
"Personal Representative" shall mean any person acting in a representative
capacity as the executor or administrator of Consultant's estate or the duly
appointed guardian of the property of Consultant or any attorney-in-fact acting
for Consultant pursuant to a valid and binding power of attorney.
(ii) Notwithstanding anything else in this
Agreement to the contrary, the provisions of Sections 4, 5 and 6 hereof shall
survive the termination of this Agreement.
Section 4. Non-Disclosure of Trade Secrets and Confidential
Information.
(a) Trade Secrets Defined. "Trade Secrets" shall mean all
secret, proprietary or confidential information regarding OrthAlliance and each
Affiliate or OrthAlliance or Affiliate activities, including any and all
information not generally known to, or ascertainable by, persons not employed by
OrthAlliance or any Affiliate, the disclosure or knowledge of which would permit
those persons to derive actual or potential economic value therefrom or to cause
economic or financial harm to OrthAlliance or any Affiliate. Such information
shall include, but not be limited to, customer/orthodontist lists, computer
software (including, without limitation, source code, object code and manuals),
customer billing information, technical information regarding OrthAlliance or
any Affiliate products or services, prices paid by customers, purchase and
supply information, current and future development and expansion or contraction
plans of OrthAlliance or any Affiliate, sales and marketing techniques,
information concerning personnel assignments and operations of OrthAlliance or
any Affiliate and matters concerning the financial affairs, future plans and
management of OrthAlliance or any Affiliate. "Trade Secrets" shall not include
information that has become generally available to the public by the act of one
who has the right to disclose such information without violating any right or
privilege of OrthAlliance or any Affiliate. This definition shall not limit any
definition of "trade secrets" under applicable state or federal law.
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(b) Non-Disclosure of Trade Secrets. Throughout the term of
this Agreement and at all times after the date that this Agreement terminates
for any reason, Consultant shall not directly or indirectly transmit or disclose
any Trade Secret of OrthAlliance or any Affiliate to any person, concern or
entity, and shall not make use of any such Trade Secret directly or indirectly,
for himself or for others, without the prior written consent of OrthAlliance,
except (i) to the extant such disclosure is consistent with Consultant's duties
hereunder or (ii) for a disclosure that is required by an law or regulation or
court order, in which latter case Consultant shall provide OrthAlliance prior
written notice of such disclosure and an opportunity to contest such disclosure.
(c) Confidential Information Defined. "Confidential
Information" shall mean all information regarding OrthAlliance or any Affiliate,
OrthAlliance's or any Affiliate's activities, OrthAlliance's or any Affiliate's
business or OrthAlliance's or any Affiliate's customers that is not generally
known to persons not employed by OrthAlliance but that does not rise to the
level of a Trade Secret and that is not generally disclosed by OrthAlliance
practice or authority to persons not employed by OrthAlliance. "Confidential
Information" shall not include information that has become generally available
to the public by the act of one who has the right to disclose such information
without violating any right or privilege of OrthAlliance. This definition shall
not limit any definition of "Confidential Information" or any equivalent
designation under state or federal law.
(d) Non-Disclosure of Confidential Information. During the
term of this Agreement and for two (2) years thereafter, Consultant shall not
directly or indirectly transmit or disclose any Confidential Information to any
person, concern or entity, or make any use of any such Confidential Information,
directly or indirectly, without the prior written consent of OrthAlliance,
except to the extent such disclosure is consistent with Consultant's duties
hereunder. Upon termination of this Agreement, Consultant will return all Trade
Secrets and all Confidential Information of OrthAlliance and Affiliates,
including without limitation, any documents, notes, analyses, compilations or
other materials incorporating or based on any Trade Secrets or Confidential
Information of OrthAlliance or any Affiliate.
(e) Injunctive Relief. Consultant acknowledges that the
nondisclosure covenants contained in this Section are a reasonable means of
protecting and preserving OrthAlliance's and any Affiliate's interest in the
confidentiality of this information. Consultant agrees that any breach of these
covenants will result in irreparable damage and injury to OrthAlliance or
Affiliates and that OrthAlliance will be entitled to injunctive relief in any
court of competent jurisdiction without the necessity of posting any bond.
Consultant also agrees that any such injunctive relief shall be in addition to
any damages that may be recoverable by OrthAlliance.
(f) Enforceability of Covenants. Consultant and OrthAlliance
agree that Consultant's obligations under these non-disclosure covenants are
separate and distinct from its obligations under other provisions of this
Agreement, and a failure or
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alleged failure of OrthAlliance to perform its obligations under any provision
of this Agreement shall not constitute a defense to the enforceability of these
nondisclosure covenants.
Section 5. Non-Solicitation. For a period of twelve (12) months after
the date hereof, Consultant or affiliates shall not directly or indirectly
recruit or attempt to recruit or make an offer of employment to become engaged
in a business that competes with OrthAlliance to any person who is then an
employee, officer, director or independent contractor of OrthAlliance or any
Affiliate or who has terminated such employment or relationship without the
consent of OrthAlliance or any Affiliate within 180 days of such recruitment or
offer. This non-solicitation provision will also apply to offers of employment
as independent consultants.
Section 6. Non-Competition.
(a) During Consultant's engagement by OrthAlliance as a
contractor and for a period of two (2) years following the termination of such
engagement for any reason whatsoever, the Consultant shall not (except on behalf
of or with the prior written consent of OrthAlliance), within the continental
United States (the "Area"), either directly or indirectly, on his or her own
behalf or in the service or on behalf of others, (i) be engaged in or perform
services in any capacity for any Competing Business which involves duties and
responsibilities similar to the services provided by Consultant to OrthAlliance,
(ii) take any action of whatever nature which would require, or undertake any
engagement that could reasonably be expected to result in, the disclosure or use
of proprietary information; or (iii) own, manage, operate, join, contract with,
or participate in the ownership, management or control of or be engaged in or be
connected in any manner with (whether as principal, partner, shareholder,
director, officer, employee, agent, consultant or otherwise) any business which
is or may be competitive in any manner with the business engaged in by
OrthAlliance; it being understood that the business engaged in by OrthAlliance
includes, but is not limited to, consulting services for, and management of the
practices of orthodontists. It is the express intention of the parties that the
Area, as herein defined, is related to the area where the Consultant performs or
performed services on behalf of OrthAlliance under this Agreement as of, or
within a reasonable time prior to, the termination of the Consultant's
engagement hereunder.
(b) "Competing Business" means any business organization of
whatever form directly engaged in any business or enterprise which is the same
as, or substantially the same as, the business of OrthAlliance.
Section 7. Miscellaneous.
(a) Severability. The covenants got forth in this Agreement
shall be considered and construed as separate and independent covenants. Should
any part or provision of any covenant be held invalid, void or unenforceable in
any court of competent jurisdiction, such invalidity, voidness or
unenforceability shall not render
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invalid, void or unenforceable any other part or provision of this Agreement if
any portion of the foregoing provisions is found to be invalid or unenforceable
by a court of competent jurisdiction because of its duration, the territory, the
definition of activities of the definition of information covered is invalid or
unreasonable in scope, the invalid or unreasonable term shall be redefined, or a
new enforceable term provided, such that the intent of OrthAlliance and
Consultant in agreeing to the provisions of this Agreement will not be impaired
and the provision in question shall be enforceable to the fullest extent of the
applicable laws.
(b) Waiver. The waiver by any party to this Agreement of a
breach of any of the provisions of this Agreement shall not operate or be
construed as a waiver of any other or subsequent breach.
(c) Governing Law. This Agreement shall be deemed to be made
in and shall in all respects be interpreted, construed and governed by and in
accordance with the laws of the State of California (without giving effect to
the conflict of law principles thereof). No provision of this Agreement or any
related documents shall be construed against, or interpreted to the disadvantage
of, any party hereto, by any court or any governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
(d) Entire Agreement. This Agreement is intended by the
parties hereto to be the final expression of their agreement with respect to the
subject matter hereof and this is the complete and exclusive statement of the
terms of their agreement, notwithstanding any representations, statements or
agreements to the contrary heretofore made, This Agreement supersedes any former
agreements governing the same subject matter. This Agreement may be modified
only by a written instrument signed by each of the parties hereto.
(e) Assignability. This Agreement may not be assigned by
either party without the prior written consent of the other party.
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CONSULTANT:
/s/ Xxxxxxxx X. Xxxxxxx
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Xxxxxxxx X. Xxxxxxx
ORTHALLIANCE:
ORTHALLIANCE, INC.
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
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Its: President
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SCHEDULE 10.9
OrthAlliance has succeeded to the rights to agreements substantially
identical to Exhibit 10.9 as follows:
1. Consulting Agreement dated as of June 10, 1996 with Xxxxxxxx
X. Xxxxxxx and Newfound Capital Associates. Material details
in which this agreement differs from Exhibit 10.9 are as
follows:
a. Xx. Xxxxxxx receives a consulting fee of
$250,000.
b. Xx. Xxxxxxx received 225,000 shares of US
Orthodontic Care, Inc. ("USOC") common
stock (converts pursuant to the merger of
USOC and Premier Orthodontic Group, Inc.
with and into OrthAlliance (the "Merger")
into 111,512 shares of Class A Common Stock
and 15,930 shares of Class B Common Stock
of OrthAlliance).
c. Xx. Xxxxxxx received a warrant to purchase
168,750 shares of common stock of USOC at
an exercise price equal to the initial
public offering price net of underwriter
discounts and commissions (converts
pursuant to the Merger into a warrant to
purchase the same number of shares of Class
A Common Stock of OrthAlliance at the same
exercise price.
2. Consulting Agreement dated as of June 10, 1996 with Xxxxxx X.
Xxxxxx and Premier Management, Inc. of Atlanta, Georgia.
Material details in which this agreement differs from Exhibit
10.9 are as follows:
a. Xx. Xxxxxx receives a consulting fee of
$100,000.
b. Xx. Xxxxxx received 95,000 shares of USOC
common stock (converts pursuant to the
Merger into 47,083 shares of Class A Common
Stock and 6,726 shares of Class B Common
Stock of OrthAlliance.
c. Xx. Xxxxxx received a warrant to purchase
56,250 shares of common stock of USOC at an
exercise price equal to the initial public
offering price net of underwriter discounts
and commissions (converts pursuant to the
Merger into a warrant to purchase the same
number of shares of Class A Common Stock of
OrthAlliance at the same exercise price.
