EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of January 31,
2003 (the "Effective Date"), is made between Xxxxxx Medical Technology, Inc., a
Delaware corporation (the "Company"), and F. Xxxxx Xxxx (the "Employee").
1. Employment. The Company hereby employs the Employee and the
Employee hereby accepts employment all upon the terms and conditions herein set
forth.
2. Duties. The Employee is engaged as the President and Chief
Executive Officer of the Company and hereby promises to perform and discharge
well and faithfully the duties which may be assigned to him from time to time by
the Board of Directors of the Company (the "Board") in connection with the
conduct of the Company's business.
3. Extent of Services. The Employee shall devote his entire time,
attention and energies to the business of the Company and shall not, during the
term of this Agreement, be engaged in any other business activity, regardless of
whether such activity is pursued for gain, profit or other pecuniary advantage;
but this shall not be construed as preventing the Employee from investing his
personal assets in business which do not compete with the Company in such form
or manner as will not require any services on the part of the Employee in the
operation of the affairs of the companies in which such investments are made and
in which his participation is solely that of an investor, and except that the
Employee may purchase securities in any corporation whose securities are
regularly traded on NASDAQ, a national or regional stock exchange or in the
over-the-counter market provided that such purchase shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to that
of the Company. Nothing in this paragraph 3 shall prevent the Employee from
serving on the Board of Directors of any other company, so long as the Board
shall approve each position held by the Employee.
4. Compensation Matters.
(a) Base Salary. For services rendered under this Agreement, the
Company shall pay the Employee an aggregate salary of $270,000 per annum (the
"Base Salary"), payable (after deduction of applicable payroll taxes) in
accordance with the customary payroll practices of the Company, as may exist
from time to time.
(b) Annual Bonus. During Employee's employment hereunder, in
addition to Base Salary, the Employee shall be eligible to receive an annual
performance bonus (the "Bonus") with a target of 50% of Base Salary for each
calendar year during Employee's employment; provided that, except as otherwise
provided in this Agreement, Employee must be employed on the last day of such
calendar year in order to receive the Bonus attributable thereto. The Employee's
entitlement to the Bonus for any particular calendar year shall be based on the
attainment of performance objectives established by the Compensation Committee
of the Company (the "Committee") and communicated to the Employee in writing at
the beginning of each calendar year. The Committee shall determine the
Employee's entitlement to the Bonus,
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January 31, 2003
Page 2
based on the achievement of the performance objectives of such year, as
determined by the Committee and communicated to the Employee, in good faith
within sixty (60) days after the end of each such calendar year, which shall be
paid by the Company no later than ten (10) days following such determination.
The Employee shall also be eligible for and participate in such fringe benefits
as shall be generally provided to executives of the Company, including medical
insurance and retirement programs which may be adopted from time to time during
the term hereof by the Company. The Employee shall be responsible for making any
generally applicable employee contributions required under such fringe benefit
programs.
(c) Future Option Incentive Grants. In addition to the options
granted pursuant to the prior Employment Agreement of January 31, 2000, during
the term of this Agreement, the Employee shall be eligible for participation in
the Amended and Restated Xxxxxx Medical Group, Inc. 1999 Equity Incentive Plan
(the "Stock Option Plan") and any other stock option plan administered by the
Compensation Committee of the Board of Directors.
(d) The Committee shall review the Employee's Compensation at
least once per year and award such bonuses or make such increases to the Base
Salary as the Committee, in its sole discretion, determines are merited, based
upon the Employee's performance and consistent with compensation policies of the
Company.
5. Sick Leave and Vacation. During the term of this Agreement,
the Employee shall be entitled to annual vacation of at least five (5) weeks, or
such greater time period if permitted by Company policy, to be taken at his
discretion, in a manner consistent with his obligations to the Company under
this Agreement. The actual dates of such vacation periods shall be agreed upon
by mutual discussions between the Company and Employee; provided, however, that
the Company shall have the ultimate decision with respect to the actual vacation
dates to be taken by Employee, which decision shall not be unreasonable. The
Employee shall also be entitled to sick leave consistent with Company policy.
6. Expenses; Relocation. During the term of this Agreement, the
Company shall reimburse the Employee for all reasonable out-of-pocket expenses
incurred by the Employee in connection with the business of the Company and in
performance of his duties under this Agreement upon the Employee's presentation
to the Company of an itemized accounting of such expenses with reasonable
supporting data.
7. Term.
(a) The Employee employment under this Agreement shall commence on
effective date first set forth above and shall expire on January 31, 2004.
Notwithstanding the foregoing, the Company may at its election, subject to
paragraph 7(b) below, terminate the obligations of the Company under this
Agreement as follows:
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January 31, 2003
Page 3
(i) Upon 30 days' notice if the Employee becomes
physically or mentally incapacitated or is injured so that he is unable to
perform the services required of him hereunder and such inability to perform
continues for a period in excess of six months and is continuing at the time of
such notice; or
(ii) For "Cause" upon notice of such termination to the
Employee. For purposes of this Agreement, the Company shall have "Cause" to
terminate its obligations hereunder upon (A) the determination by the Board that
the Employee has ceased to perform his duties hereunder (other than as a result
of his incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of his duties hereunder, (B) the
Employee's death, (C) the Board's determination that the Employee has engaged or
is about to engage in conduct materially injurious to the Company, (D) the
Employee's having been convicted of a felony, or (E) the Employee's
participation in activities proscribed by the provisions of paragraphs 9 or 10
hereof or material breach of any of the other covenants herein; or
(iii) Without Cause upon 30 days' notice of such
termination to the Employee.
(b) (i) If this Agreement is terminated pursuant to paragraph
7(a)(i) above, the Employee shall receive salary continuation pay from the date
of such termination until January 31, 2004 at the rate of 100% of the Base
Salary, reduced by applicable payroll taxes and further reduced by the amount
received by the Employee during such period under any Company-maintained
disability insurance policy or plan or under Social Security or similar laws.
Such salary continuation payments shall be paid periodically to the Employee as
provided in paragraph 4(a) for the payment of the Base Salary.
(ii) If this Agreement is terminated pursuant to paragraph
7(a)(ii) above, the Employee shall receive no salary continuation pay or
severance pay.
(iii) If this Agreement is terminated pursuant to paragraph
7(a)(iii) above, the Employee shall receive salary continuation pay for a period
of twenty-four (24) months from and after the date of such termination (the
"Salary Continuation Period") equal to the Base Salary. Such salary continuation
payments (less applicable payroll taxes) shall be paid periodically to the
Employee as provided in paragraph 4(a) for the payment of the Base Salary.
During the Salary Continuation Period, the Employee shall also be eligible to
receive continued coverage under all of the Company's current health benefit and
life insurance programs at the same rates that were applicable to the Employee
prior to the commencement of the Salary Continuation Period, all of the
Employee's unexercised Options shall automatically vest and be fully exercisable
and the Employee shall have one (1) year from such date to exercise all
unexercised Options.
(c) During the Salary Continuation Period, the Employee shall be
under no obligation to mitigate any of the costs to the Company of the salary
continuation payments.
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January 31, 2003
Page 4
(d) Not later than ninety (90) days prior to the expiration of the
stated term of the Agreement, the parties shall begin to negotiate in good faith
the terms of any extension of this Agreement, provided that no party shall be
under any obligation to enter into such an extension.
8. Representations. The Employee hereby represents to the Company
that (a) he is legally entitled to enter into this Agreement and to perform the
services contemplated herein, and (b) he has the full right, power and
authority, subject to no rights of third parties, to grant to the Company the
rights contemplated by paragraph 10 hereof.
9. Disclosure of Information. The Employee recognizes and
acknowledges that the Company's and its predecessors' trade secrets, know-how
and proprietary processes as they may exist from time to time are valuable,
special and unique assets of the Company's businesses, access to and knowledge
of which are essential to the performance of the Employee's duties hereunder.
The Employee will not, during or after the term of his employment by any of the
Company, in whole or in part, disclose such secrets, know-how or processes to
any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, nor shall the Employee make use of any such property for his
own purposes or for the benefit of any person, firm, corporation or other entity
(except the Company) under any circumstances during or after the term of his
employment, provided that after the term of his employment these restrictions
shall not apply to such secrets, know-how and processes which are then in the
public domain (provided further that the Employee was not responsible, directly
or indirectly, for such secrets, know-how or processes entering the public
domain without the Company's consent).
10. Inventions. The Employee hereby sells, transfers and assigns
to the Company or to any person, or entity designated by the Company all of the
entire right, title and interest of the Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee, solely or jointly,
during the term hereof which relate to methods, apparatus, designs, products,
processes or devices, sold, leased, used or under consideration or development
by the Company or any of its predecessors, or which otherwise relate to or
pertain to the business, functions or operations of the Company or any of its
predecessors or which arise from the efforts of the Employee during the course
of his employment for the Company or any of its predecessors. The Employee shall
communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to the aforementioned
inventions, ideas, disclosures and improvements; and the Employee shall execute
and deliver to the Company such formal transfers and assignments and such other
papers and documents as may be necessary or required of the Employee to permit
the Company or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyright thereof. Any invention relating to the business of the Company and
disclosed by the Employee within one year following the termination of this
Agreement shall be deemed to fall within the provisions of this paragraph unless
proved to have been first conceived and made following such termination.
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January 31, 2003
Page 5
11. Covenants Not To Compete or Interfere. For a period ending
twenty-four (24) months from and after the termination of the Employee's
employment hereunder, the Employee shall not (whether as an officer, director,
owner, employee, partner or other direct or indirect participant) engage in any
Competitive Business. "Competitive Business" shall mean the manufacturing,
supplying, producing, selling, distributing or providing for sale of any
orthopaedic product, device or instrument manufactured or sold by the Company or
its subsidiaries or in clinical development sponsored by the Company or its
subsidiaries, in each case, as of the date of termination of the Employee's
employment. For such period, the Employee shall also not interfere with, disrupt
or attempt to disrupt the relationship, contractual or otherwise, between the
Company or its subsidiaries and any customer, supplier, lessor, lessee or
employee of the Company or its subsidiaries. It is the intent of the parties
that the agreement set forth in this paragraph 11 apply in all parts of the
world.
Employee agrees that a monetary remedy for a breach of the
agreement set forth in this paragraph 11 will be inadequate and impracticable
and further agrees that such a breach would cause the Company irreparable harm,
and that the Company shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages. In the event of such a
breach, Employee agrees that the Company shall be entitled to such injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions as a court of competent jurisdiction shall determine.
It is the desire and intent of the parties that the provisions
of this paragraph 11 shall be enforced to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular portion of this paragraph 11 shall be
adjudicated to be invalid or unenforceable, this paragraph 11 shall be deemed
curtailed, whether as to time or location, to the minimum extent required for
its validity under the applicable law and shall be binding and enforceable with
respect to the Employee as so curtailed, such curtailment to apply only with
respect to the operation of this paragraph in the particular jurisdiction in
which such adjudication is made. If a court in any jurisdiction, in adjudicating
the validity of this paragraph 11, imposes any additional terms or restrictions
which respect to the agreement set forth in this paragraph 11, this paragraph 11
shall be deemed amended to incorporate such additional terms or restrictions.
12. Injunctive Relief. If there is a breach or threatened breach
of the provisions of paragraphs 9, 10 or 11 of this Agreement, the Company shall
be entitled to an injunction restraining the Employee from such breach. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.
13. Change of Control. Upon the occurrence of a Change of Control
(as defined below), all of the Employee's unexercised Options shall
automatically vest and be fully exercisable and shall remain so exercisable in
accordance with the respective terms of such options. This provision shall apply
without regard to whether the Stock Option Plan or the applicable Stock Option
Agreement specifically provides for accelerated vesting upon a Change
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January 31, 2003
Page 6
in Control. For purposes of this Agreement, "Change of Control" shall mean the
first occurrence after the effective date hereof of:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13 (d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more (on a fully diluted basis) of either (A) the then outstanding
shares of common stock of the Company, taking into account as outstanding for
this purpose such common stock issuable upon the exercise of options or
warrants, the conversion of convertible stock or debt, and the exercise of any
similar right to acquire such common stock (the "Outstanding Company Common
Stock") or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (w) any acquisition pursuant to an initial
public offering of shares of common stock of the Company pursuant to a
registration statement declared effective under the Securities Act of 1933, as
amended, (x) any acquisition by the Company or any "affiliate" of the Company,
within the meaning of 17 C.F.R. ss. 230.405 (an "Affiliate"), (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliate of the Company, (z) any acquisition
by any corporation or business entity pursuant to a transaction which complies
with clauses (A), (B), (C) and (D) of subsection (ii) of this Section 13
(persons and entities described in clauses (w), (x), (y) and (z) being referred
to herein as "Permitted Holders"); or
(ii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, and (B) no Person (excluding any Permitted Holder) beneficially owns,
directly or indirectly, 50% or more (on a fully diluted basis) of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such Business Combination, taking into account as outstanding for this purpose
such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such common stock, or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership
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January 31, 2003
Page 7
existed prior to the Business Combination, (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the incumbent Board of Directors of the
Company at the time of the execution of the initial agreement providing for such
Business Combination and (D) the Employee is the Chief Executive Officer of the
new entity resulting from the Business Combination; or
(iii) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company; or
(iv) The sale of at least 80% of the assets of the Company
to an unrelated party, or completion of a transaction having a similar effect;
or
(v) The individuals who on the date of this Agreement
constitute the Board thereafter cease to constitute at least a majority thereof;
provided that any person becoming a member of the Board subsequent to the date
of this Agreement and whose election or nomination was approved by a vote of at
least two-thirds of the directors who then comprised the Board immediately prior
to such vote shall be considered a member of the Board on the date of this
Agreement.
14. Car Allowance. The Employee shall be entitled to a monthly
allowance of $850.00, which the Employee may utilize to cover expenses relating
to the use of his personal automobile. The Company shall pay for all regularly
scheduled maintenance, insurance, repairs and registration fees for such
automobile. The Company shall not be responsible for any costs, expenses or
other obligations related to such automobile other than regularly scheduled
maintenance costs, insurance, repairs, registration fees and the monthly
allowance payable hereunder.
15. Insurance. The Company may, at its election and for its
benefit, insure the Employee against accidental loss or death, and the Employee
shall submit to such physical examination and supply such information as may be
required in connection therewith.
16. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail
to 0000 Xxxx Xxxx, Xxxxxxxxxxxx, XX 00000, in the case of the Employee, or to
Xxxxxx Medical Technology, Inc., 0000 Xxxxxxx Xxxx, Xxxxxxxxx, XX 00000, Attn:
General Counsel, in the case of the Company, or to such other address as either
party shall notify the other.
17. Waiver of Breach. A waiver by the Company or Employee of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by the other party.
18. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the state of Tennessee,
without reference to the conflicts
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January 31, 2003
Page 8
of laws principles therein.
19. Assignment. This Agreement may be assigned, without the
consent of the Employee, by the Company to any person, partnership, corporation,
or other entity which has purchased substantially all the assets of such
Company, provided such assignee assumes all the liabilities of such Company
hereunder.
20. Entire Agreement. This instrument contains the entire
agreement of the parties with respect to the subject matter referred to herein
and supersedes any and all agreements, letters of intent or understandings
between the Employee and the Company, its subsidiaries, or any of the Company's
principal shareholders with respect thereto. These Agreements may be changed
only by an agreement or agreements in writing signed by a party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
XXXXXX MEDICAL TECHNOLOGY, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Chairman of the Board
Date: 12/27/02
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EMPLOYEE:
/s/ F. Xxxxx Xxxx
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F. Xxxxx Xxxx
Date: 12/10/02
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