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EXHIBIT 10
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is
entered into as of the 23 day of September, 1999, by and between Integrated
Orthopaedics Inc., a Texas corporation (the "Company"), and J. Xxxxxx Xxxx (the
"Executive").
WHEREAS, the Company and the Executive executed an Executive Employment
Agreement dated as of May 3, 1999 (the "Original Agreement"); and
WHEREAS, the Company and the Executive desire to amend and restate the Original
Agreement as herein set forth;
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. Prior Agreement. Upon execution of this Amended and Restated Executive
Employment Agreement, the Original Agreement hereby is terminated and shall be
of no further force and effect.
2. Employment. The Company hereby agrees to continue to employ, at will, the
Executive, and the Executive hereby agrees to continue to be employed
exclusively by the Company, for a period commencing on May 3, 1999 (the
"Commencement Date") and ending upon , February 29, 2000. After February 29,
2000 this agreement shall renew on the first day of each month until it is
terminated under Section 6 hereof (the "Employment Period").
3. Position and Duties. The Executive, during the Employment Period, shall
continue to serve as Senior Vice President - Chief Development Officer shall
report to the Chief Executive Officer and shall have such powers and duties as
may from time to time be prescribed by the Chief Executive Officer so long as
such duties are consistent with the Executive's position on the date hereof. The
Executive shall devote substantially all of his working time and efforts to the
business and affairs of the Company, shall perform his duties hereunder
diligently and in a prudent and businesslike manner, and shall act in the best
interest of the Company.
4. Compensation and Benefits:
(a) Base Salary. From the May 3, 1999 to September 30, 1999, the Executive
shall receive an annual base salary ("Base Salary") of $150,000. From
October 1, 1999 and during the remainder of the Employment Period
(subject to Section 6 (c) hereof), the Executive shall receive an
annual base ("Base Salary") salary of $163,000. Base Salary is subject
to annual review by the Compensation Committee of the Board of
Directors (the "Compensation Committee"). The Base Salary may be
increased, but not decreased, during the Employment Period upon
recommendation of the Compensation Committee and approval by the Board
of Directors, which recommendation and approval may be withheld at the
sole discretion of the Compensation Committee and the Board of
Directors, respectively. The Base Salary shall be payable in
installments in accordance with the Company's customary payroll
practices, currently twice per month.
(b) Commissions. In addition to the Base Salary, the Executive shall
continue to be eligible to receive sales commissions, calculated per
the terms of the Company commission plan as determined by
recommendation of the Compensation Committee and approval by the Board
of Directors. Commissions will initially be calculated as a percentage
(the "Commission Rate" multiplied by the first year cash contributions
(EBITDA) from all sources of business obtained by the Company
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effective after the hire date. The initial Commission Rate will be 5%.
On September 30, 2000 the Commission Rate will be reduced from 5% to
3.5%. In the case of ancillary services and start up operations, the
one year commission period will begin upon commencement of any
operations that begin rendering services within 24 months of the first
signed contract with the relevant physician group.
Until September 30, 2000, commissions for non-ancillary services will
be paid within 30 days of deal closing based on estimated first year
cash contribution multiplied by the Commission Rate. Beginning October
1, 2000 for non-ancillary and immediately for all ancillary services,
commission will be determined on a "trailing" basis, calculated as
five percent (5%) of actual EBITDA from the previous calendar month of
operations. Except as set forth above, commissions earned during the
employment period will be paid monthly, during the term of employment
for up to twelve months and after termination under contract
termination provisions Section 6 (a) and (c) and (e). In the event
that Executive's employment was terminated under termination
provisions 6 (b) and (d), commission payments will cease as of the
termination date.
The Executive shall be entitled to receive a cash draw against
unearned commissions in the amount of $2,083.33 per calendar month, to
be applied against future commissions earned under the Company
commission plan. In the event the Executive's employment hereunder is
terminated for whatever reason, the Executive shall on the effective
date of such termination immediately repay to the Company any amounts
previously drawn that have not then been earned under the Company
commission plan (the "Unearned Commissions"). The Executive agrees
that the Company may deduct from any amounts that the Company would
otherwise owe to the Executive pursuant to the terms of this Agreement
the full amount of the Unearned Commissions, with the Executive
remaining liable for any amounts thereof not so offset.
(c) Stock Option Eligibility; Amended Options. In addition to the 125,000
stock options previously granted, the Executive shall receive an
additional grant of one hundred twenty five thousand (125,000) company
stock options effective on the date of execution of this agreement.
The exercise price for these stock options shall be the closing price
of the Company's common stock on date this Agreement is signed. At
December 31, 1999 this exercise price will be adjusted downward, but
not upward, to the lowest average share price, calculated over a 10
business day period ending no later than December 31, 1999.
Options with respect to 25,000 shares of this new option grant will
vest immediately. Options with respect to 50,000 shares of this new
option grant will vest with respect to 2,500 shares at the end of each
calendar quarter during a five-year period beginning on the date
hereof, with the first such vesting occurring on September 30, 1999.
Options with respect to the final 50,000 shares of this new option
grant will vest with respect to 2,500 shares at the end of each
calendar quarter during a five-year period beginning on the date
hereof, with the first such vesting occurring on September 30, 2000,
provided that certain performance criteria, as hereinafter set forth,
have been met. The first measurement period shall be the period
October 1, 1999 - September 30, 2000. If the aggregate commissions
earned by the Executive during such period equal or exceed $60,000,
options with respect to 10,000 shares shall vest on September 30,
2000. If the aggregate commissions paid/owed by the Company to the
Executive during such period are less than $40,000, no options shall
vest with respect to such period. If the aggregate commissions
paid/owed during such period equal or exceed $40,000 but are less than
$60,000, options for such period shall vest pro rata, e.g., if
commissions paid/owed equal $50,000, options with respect to 5,000
shares shall vest.
For the four remaining years of the vesting period, the remaining
40,000 options shall vest based upon the attainment of budgeted EBITDA
hurdles as determined by the Compensation Committee and the Board of
Directors from time to time. The options with respect to the initial
125,000 shares granted prior to the date hereof hereby are amended to
conform to the provisions of this Section 4(c).
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The unvested portion of the additional 125,000 stock options granted
to Executive as of the date of this agreement will immediately vest
upon any change of control of the Company. During the Employment
Period, and for the remainder of the period the Executive is employed,
the Executive shall be eligible to receive additional stock option
grants, including annual performance stock option grants, pursuant to
the Company's stock option plans in effect from time to time, all at
the discretion of the Compensation Committee and the Board of
Directors
In the event of a change of control of the Company 33% of the
Executive's unvested options will immediately vest.
(d) Fringe Benefits. During the Employment Period, the Executive shall
continue to be eligible to participate in such retirement, profit
sharing and pension plans and life and other insurance programs, as
well as other benefit programs, which are available to senior
executive officers of the Company, subject to the Company's policies
with respect to all of such benefits or insurance programs or plan;
provided, however, that except as expressly set forth herein, the
Company shall not be obligated to institute or maintain any particular
benefit or insurance program or plan or aspect thereof. The Company
will continue to pay the full cost of family coverage for health and
dental insurance premiums excluding any "out of network" cost incurred
by the Executive. The Company will also pay the cost of Executives
long and short term disability coverage for up to 60% of Executive's
base salary and provide a new $1 million term life insurance policy.
5. Expenses. Upon submission of properly documented expense account reports, the
Company shall reimburse the Executive for all reasonable travel, entertainment
and work-related expenses incurred by the Executive in connection with the
performance of his duties as Senior Vice President, subject to and in accordance
with the expense and reimbursement policies that may be adopted by the Company
from time to time. Expenses will be reimbursed weekly, upon receipt of
acceptable documentation.
6. Termination. This Agreement shall terminate immediately pursuant to any one
or more of the following provisions:
(a) Death or Disability. This Agreement shall terminate automatically upon
the death or total disability of Executive. For purposes of the
Agreement, "total disability" shall be deemed to have occurred if
Executive shall have been unable to perform his duties hereunder for a
period of three (3) consecutive months or for any sixty (60) working
days out of any period of six (6) consecutive months Upon such
termination for death or total disability, the Company shall pay to
the Executive or his estate, heirs or legal representative, as the
case may be, all compensation of the Executive accrued but unpaid in
respect to periods ending on or prior to such termination and the
Company shall have no further obligations to pay the Executive or his
estate, heirs or legal representative any other compensation or
provide any other benefits pursuant to this Agreement. Unpaid
commissions will continue to be paid per the terms outlined in Section
4 (b).
(b) Termination for Cause. The Company may terminate this Agreement for
Cause upon ten (10) days written notice to the Executive. For purposes
of this Agreement, "Cause" shall be deemed in include (i) material
acts of fraud, dishonesty or deceit, (ii) competition with the Company
or its subsidiaries, (iii) unauthorized use of any of the Company's or
its subsidiaries' trade secrets or Confidential Information, (iv)
conviction of a felony involving moral turpitude, (v) any material
violation of any other material duty to the Company or its
shareholders imposed by law or the Board of Directors, or (vi) any
material breach of Executive's representations, covenants, duties and
responsibilities hereunder. Upon such termination for Cause, the
Company shall pay to the Executive, as soon as practicable after such
termination, all compensation of the Executive accrued but unpaid in
respect of periods ending on or prior to such termination and the
Company shall have no further obligations to pay the Executive any
other compensation or provide any other benefits pursuant to this
Agreement.
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(c) Termination Without Cause. The Company may terminate this Agreement
without Cause upon 30 days' written notice to Executive. Upon such
termination without Cause, the Company shall pay to the Executive, as
soon as practical after such termination, all compensation of the
Executive accrued but unpaid in respect of periods ending on or prior
to such termination. In addition, if a notice of termination without
Cause is delivered to the Executive following the inception of
employment of a new Chief Executive Officer of the Company, the
Company shall continue to pay the Executive the Base Salary in
accordance with the Company's customary payroll practices for a
period, calculated from the effective date of such termination, equal
to the greater of (i) the remainder of the Employment period or (ii)
90 calendar days. In addition, unpaid commissions will continue to be
paid per the terms outlined in Section 4 (b). Upon the effective date
of any such termination, the Executive will receive immediate
accelerated vesting of options previously granted with respect to an
additional 25,000 shares. The Executive shall have six months after
such termination to exercise any vested stock options. All vested
stock options that are not exercised within such six month period
shall be forfeited and cancelled.
(d) Termination by Executive. The Executive may terminate this Agreement
upon thirty (30) days' written notice to the Company. Upon termination
by the Executive, the Company shall pay to the Executive, as soon as
practicable after such termination, all compensation of the Executive
accrued but unpaid in respect of periods ending on or prior to such
termination and the Company shall have no further obligations to pay
the Executive any other compensation or provide any other benefits
pursuant to this Agreement.
(e) Constructive Termination. Any change in Executive's title, general
responsibilities and authority, or work location, without Executive's
prior consent, will constitute "constructive termination". Upon such
termination, the Company shall pay to the Executive, as soon as
practical after such termination, all compensation of the Executive
accrued but unpaid in respect of periods ending on or prior to such
termination. In addition, if such termination occurs following the
inception of employment of a new Chief Executive Officer of the
Company, the Company shall continue to pay the Executive the Base
Salary in accordance with the Company's customary payroll practices
for a period, calculated from the effective date of such termination,
equal to the greater of (i) the remainder of the Employment period or
(ii) 90 calendar days. In addition, unpaid commissions will continue
to be paid per the terms outlined in Section 4 (b). Upon the effective
date of any such termination, the Executive will receive immediate
accelerated vesting of options previously granted with respect to an
additional 25,000 shares. The Executive shall have six months after
such termination to exercise any vested stock options. All vested
stock options that are not exercised within such six-month period
shall be forfeited and cancelled.
7. Representations by the Executive. The Executive hereby represents and
warrants to the Company that (a) the Executive's execution and delivery of this
Agreement and his performance of his duties and obligations hereunder will not
conflict with, cause a breach or default under, or give any party a right to
damages under (or to terminate) any other agreement to which the Executive is a
party or by which he is bound, and (b) there are no restrictions, agreements or
understanding that would make unlawful the Executive's execution or delivery of
this Agreement or the performance of his obligations hereunder.
8. Confidentiality.
(a) Non-Disclosure Obligation. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the
termination of this Agreement, the Executive will not directly or
indirectly reveal, divulge, disclose or communicate to any person or
entity, other than authorized officers, directors, and employees of
the Company, in any manner whatsoever, any Confidential Information
(as hereinafter defined) without the prior written consent of the
Company.
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(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by the Executive as a direct or
indirect consequence of his employment hereunder about the Company or
its subsidiaries or their respective businesses, products and
practices which information is not generally known in the business in
which the Company or its subsidiaries, as the case may be, is or may
be engaged. However, Confidential Information shall not include under
any circumstances any information with respect to the foregoing
matters which is (i) available to the public from a source other than
the Executive or persons who are not under similar obligations of
confidentiality to the Company and who are not parties to this
Agreement, (ii) required to be disclosed by any court process or any
government or agency or department of any government, or (iii) the
subject of a written waiver executed by the Company for the benefit of
the executive.
(c) Return of Property. Upon termination of this Agreement, the Executive
will surrender to the Company all Confidential Information, including
without limitation, all lists, charts, schedules, reports, financial
statements, books and records of the Company and its subsidiaries, and
all copies thereof, and all other property belonging to the Company.
9. Non-Competition.
(a) Term and Scope. Subject to the other provisions of this Section 9,
from and after the date hereof until the date which is one year after
the expiration of this Agreement in accordance with the terms hereof
(the "Non-competition Term"), without the prior written consent of the
Board of Directors of the Company, the Executive shall not directly or
indirectly participate as a stockholder, proprietor, partner, trustee,
consultant, employee, director, officer, lender, or investor in any
corporation, business or professional enterprise that provides
management services to medical practices within the musculoskeletal
specialty during the Non-competition Term with the Company or any of
its subsidiaries, in each case within a thirty mile radius of (i) any
location in which the Company or its subsidiaries presently conducts
business or (ii) any location in which the Company or its
subsidiaries, during the Non-competition Term, (x) has initiated
business acquisition or affiliation discussions with physician groups,
(y) has expressed a bona fide interest to conduct business or (z)
conducts business.
(b) Exception. Nothing contained herein shall limit the right of the
Executive to hold and make investments in securities of any
corporation or limited partnership that is registered on a national
securities exchange or admitted to trading privileges there on or
actively traded in a generally recognized over-the-counter market,
provided the Executive's equity interest therein does not exceed 5% of
the total outstanding shares or interest in such corporation or
partnership.
(c) Extension for Noncompliance. If, during any period within the
Noncompetition Term, the Executive is not in compliance with the terms
of this Section 9, the Company shall be entitled to, among other
remedies, compliance by the Executive with the terms of this Section 9
for an additional period equal to the period of such noncompliance.
(d) Reasonableness. The Executive hereby acknowledges that the geographic
boundaries, scope of prohibited activities and the time duration of
the provisions of this Section 9 are reasonable and are not broader
than are necessary to protect the legitimate business interests of the
Company.
10. Non-Solicitation and Non-Interference. During the Noncompetition Term, the
Executive shall not, directly or indirectly, (a) solicit the employment of any
current or future employee of the Company without the prior written consent of
the Board of Directors of the Company, (b) request, induce or attempt to
influence any employee of the Company to terminate his or her employment with
the Company, or (c) request, induce or attempt to influence any supplier,
customer, patient or client of the Company to terminate his, her or its
relationship with the Company.
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11. Injunctive Relief. The Executive acknowledges that the breach of any of the
agreements contained herein, including, without limitation, any of the
confidentiality, Noncompetition and non-solicitation covenants specified in
Section 7 through 10, may give rise to irreparable injury to the Company,
inadequately compensable in money damages. Accordingly, the Company shall be
entitled to injunctive relief to prevent or cure breaches or threatened breached
of the provisions of this Agreement and to enforce specific performance of the
terms and provisions hereof in any court of competent jurisdiction, in addition
to any other legal or equitable remedies which may be available. The Executive
waives any requirements for the posting of a bond in connection with the
issuance of such an injunction necessary for the protection of the Company's
legitimate business interests and are reasonable in scope and content.
12. Assignment. This Agreement will be binding upon the parties hereto and their
respective successors and permitted assignees. Because the Executive's duties
and services hereunder are special, personal and unique in nature, the Executive
may not transfer, sell or otherwise assign his rights, obligations or benefits
under this Agreement (and any attempt to do so will be void).
13. Headings. The captions, headings and arrangements used in this Agreement are
for convenience only and do not in any way affect, limit or amplify the
provisions hereof.
14. Notices. All notices and other communications required or permitted
hereunder must be in writing and (a) delivered personally, (b) sent by
telefacsimile, (c) delivered by a nationally recognized overnight courier
service, or (d) sent by registered or certified mail, postage prepaid, as
follows:
(i) If to the Company, to:
Integrated Orthopaedics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Executive Officer
(ii) To the Executive, to:
J. Xxxxxx Xxxx
000 Xxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 14 will (x) if delivered
personally or by overnight courier service, be deemed given upon delivery; (y)
if delivered by telefacsimile or similar facsimile transmission, be deemed given
when electronically confirmed, and (z) if sent by registered or certified mail,
be deemed given when received. Any party from time to time may change its
address for the purpose of notices to that party by giving a similar notice
specifying a new address, but no such notice will be deemed to have been given
until it is actually received by the party sought to be charges with the
contents thereof.
15. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provision
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. In lieu of each
such illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
16. Entire Agreement: Amendments. This Agreement contains the entire agreement
of the
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parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof. This Agreement may be amended in whole or in part only by an instrument
in writing setting forth the particulars of such amendment and duly executed by
an executive officer of the Company and by the Executive.
17. Waiver. No delay or omission by any party hereto to exercise any right or
power hereunder shall impair such right or power or be construed as a waiver
thereof. A waiver by any party 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 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.
18. Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
19. Governing Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Texas, without regard to conflict of law
principles thereof.
IN WITNESS THEREOF, the Company and the Executive have executed this Agreement
as of the date first above written.
COMPANY:
INTEGRATED ORTHOPAEDICS, INC.
By:
-------------------------------------
Name:
Title:
EXECUTIVE:
By:
-------------------------------------
Name: J. Xxxxxx Xxxx
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AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is
entered into as of the 23 day of September, 1999, by and between Integrated
Orthopaedics Inc., a Texas corporation (the "Company"), and Xxxxxxx X.
Xxxxxxxxxxx (the "Executive").
WHEREAS, the Company and the Executive executed an Executive Employment
Agreement dated as of May 3, 1999 (the "Original Agreement"); and
WHEREAS, the Company and the Executive desire to amend and restate the Original
Agreement as herein set forth;
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. Prior Agreement. Upon execution of this Amended and Restated Executive
Employment Agreement, the Original Agreement hereby is terminated and shall be
of no further force and effect.
2 . Employment. The Company hereby agrees to continue to employ, at will, the
Executive, and the Executive hereby agrees to continue to be employed
exclusively by the Company, for a period commencing on May 3, 1999 (the
"Commencement Date") and ending upon , February 29, 2000. After February 29,
2000 this agreement shall renew on the first day of each month until it is
terminated under Section 6 hereof (the "Employment Period").
3. Position and Duties. The Executive, during the Employment Period, shall
continue to serve as Senior Vice President - Chief Operating Officer shall
report to the Chief Executive Officer and shall have such powers and duties as
may from time to time be prescribed by the Chief Executive Officer so long as
such duties are consistent with the Executive's position on the date hereof. The
Executive shall devote substantially all of his working time and efforts to the
business and affairs of the Company, shall perform his duties hereunder
diligently and in a prudent and businesslike manner, and shall act in the best
interest of the Company.
4. Compensation and Benefits:
(a) Base Salary. From the May 3, 1999 to September 30, 1999, the Executive
shall receive an annual base salary ("Base Salary") of $150,000. From
October 1, 1999 and during the remainder of the Employment Period
(subject to Section 6 (c) hereof), the Executive shall receive an
annual base ("Base Salary") salary of $163,000. Base Salary is subject
to annual review by the Compensation Committee of the Board of
Directors (the "Compensation Committee"). The Base Salary may be
increased, but not decreased, during the Employment Period upon
recommendation of the Compensation Committee and approval by the Board
of Directors, which recommendation and approval may be withheld at the
sole discretion of the Compensation Committee and the Board of
Directors, respectively. The Base Salary shall be payable in
installments in accordance with the Company's customary payroll
practices, currently twice per month.
(b) Commissions. In addition to the Base Salary, the Executive shall
continue to be eligible to receive sales commissions, calculated per
the terms of the Company commission plan as determined by
recommendation of the Compensation Committee and approval by the Board
of Directors. Commissions will initially be calculated as a percentage
(the "Commission Rate" multiplied by the first year cash contributions
(EBITDA) from all sources of business obtained by the Company
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effective after the hire date. The initial Commission Rate will be 5%.
On September 30, 2000 the Commission Rate will be reduced from 5% to
3.5%. In the case of ancillary services and start up operations, the
one year commission period will begin upon commencement of any
operations that begin rendering services within 24 months of the first
signed contract with the relevant physician group.
Until September 30, 2000, commissions for non-ancillary services will
be paid within 30 days of deal closing based on estimated first year
cash contribution multiplied by the Commission Rate. Beginning October
1, 2000 for non-ancillary and immediately for all ancillary services,
commission will be determined on a "trailing" basis, calculated as
five percent (5%) of actual EBITDA from the previous calendar month of
operations. Except as set forth above, commissions earned during the
employment period will be paid monthly, during the term of employment
for up to twelve months and after termination under contract
termination provisions Section 6 (a) and (c) and (e). In the event
that Executive's employment was terminated under termination
provisions 6 (b) and (d), commission payments will cease as of the
termination date.
The Executive shall be entitled to receive a cash draw against
unearned commissions in the amount of $2,083.33 per calendar month, to
be applied against future commissions earned under the Company
commission plan. In the event the Executive's employment hereunder is
terminated for whatever reason, the Executive shall on the effective
date of such termination immediately repay to the Company any amounts
previously drawn that have not then been earned under the Company
commission plan (the "Unearned Commissions"). The Executive agrees
that the Company may deduct from any amounts that the Company would
otherwise owe to the Executive pursuant to the terms of this Agreement
the full amount of the Unearned Commissions, with the Executive
remaining liable for any amounts thereof not so offset.
(c) Stock Option Eligibility; Amended Options. In addition to the 125,000
stock options previously granted, the Executive shall receive an
additional grant of one hundred twenty five thousand (125,000) company
stock options effective on the date of execution of this agreement.
The exercise price for these stock options shall be the closing price
of the Company's common stock on date this Agreement is signed. At
December 31, 1999 this exercise price will be adjusted downward, but
not upward, to the lowest average share price, calculated over a 10
business day period ending no later than December 31, 1999.
Options with respect to 25,000 shares of this new option grant will
vest immediately. Options with respect to 50,000 shares of this new
option grant will vest with respect to 2,500 shares at the end of each
calendar quarter during a five-year period beginning on the date
hereof, with the first such vesting occurring on September 30, 1999.
Options with respect to the final 50,000 shares of this new option
grant will vest with respect to 2,500 shares at the end of each
calendar quarter during a five-year period beginning on the date
hereof, with the first such vesting occurring on September 30, 2000,
provided that certain performance criteria, as hereinafter set forth,
have been met. The first measurement period shall be the period
October 1, 1999 - September 30, 2000. If the aggregate commissions
earned by the Executive during such period equal or exceed $60,000,
options with respect to 10,000 shares shall vest on September 30,
2000. If the aggregate commissions paid/owed by the Company to the
Executive during such period are less than $40,000, no options shall
vest with respect to such period. If the aggregate commissions
paid/owed during such period equal or exceed $40,000 but are less than
$60,000, options for such period shall vest pro rata, e.g., if
commissions paid/owed equal $50,000, options with respect to 5,000
shares shall vest.
For the four remaining years of the vesting period, the remaining
40,000 options shall vest based upon the attainment of budgeted EBITDA
hurdles as determined by the Compensation Committee and the Board of
Directors from time to time. The options with respect to the initial
125,000 shares granted prior to the date hereof hereby are amended to
conform to the provisions of this Section 4(c).
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The unvested portion of the additional 125,000 stock options granted
to Executive as of the date of this agreement will immediately vest
upon any change of control of the Company. During the Employment
Period, and for the remainder of the period the Executive is employed,
the Executive shall be eligible to receive additional stock option
grants, including annual performance stock option grants, pursuant to
the Company's stock option plans in effect from time to time, all at
the discretion of the Compensation Committee and the Board of
Directors
In the event of a change of control of the Company 33% of the
Executive's unvested options will immediately vest.
(d) Fringe Benefits. During the Employment Period, the Executive shall
continue to be eligible to participate in such retirement, profit
sharing and pension plans and life and other insurance programs, as
well as other benefit programs, which are available to senior
executive officers of the Company, subject to the Company's policies
with respect to all of such benefits or insurance programs or plan;
provided, however, that except as expressly set forth herein, the
Company shall not be obligated to institute or maintain any particular
benefit or insurance program or plan or aspect thereof. The Company
will continue to pay the full cost of family coverage for health and
dental insurance premiums excluding any "out of network" cost incurred
by the Executive. The Company will also pay the cost of Executives
long and short term disability coverage for up to 60% of Executive's
base salary and provide a new $1 million term life insurance policy.
5. Expenses. Upon submission of properly documented expense account reports, the
Company shall reimburse the Executive for all reasonable travel, entertainment
and work-related expenses incurred by the Executive in connection with the
performance of his duties as Senior Vice President, subject to and in accordance
with the expense and reimbursement policies that may be adopted by the Company
from time to time. Expenses will be reimbursed weekly, upon receipt of
acceptable documentation.
6. Termination. This Agreement shall terminate immediately pursuant to any one
or more of the following provisions:
(a) Death or Disability. This Agreement shall terminate automatically upon
the death or total disability of Executive. For purposes of the
Agreement, "total disability" shall be deemed to have occurred if
Executive shall have been unable to perform his duties hereunder for a
period of three (3) consecutive months or for any sixty (60) working
days out of any period of six (6) consecutive months Upon such
termination for death or total disability, the Company shall pay to
the Executive or his estate, heirs or legal representative, as the
case may be, all compensation of the Executive accrued but unpaid in
respect to periods ending on or prior to such termination and the
Company shall have no further obligations to pay the Executive or his
estate, heirs or legal representative any other compensation or
provide any other benefits pursuant to this Agreement. Unpaid
commissions will continue to be paid per the terms outlined in Section
4 (b).
(b) Termination for Cause. The Company may terminate this Agreement for
Cause upon ten (10) days written notice to the Executive. For purposes
of this Agreement, "Cause" shall be deemed in include (i) material
acts of fraud, dishonesty or deceit, (ii) competition with the Company
or its subsidiaries, (iii) unauthorized use of any of the Company's or
its subsidiaries' trade secrets or Confidential Information, (iv)
conviction of a felony involving moral turpitude, (v) any material
violation of any other material duty to the Company or its
shareholders imposed by law or the Board of Directors, or (vi) any
material breach of Executive's representations, covenants, duties and
responsibilities hereunder. Upon such termination for Cause, the
Company shall pay to the Executive, as soon as practicable after such
termination, all compensation of the Executive accrued but unpaid in
respect of periods ending on or prior to such termination and the
Company shall have no further obligations to pay the Executive any
other compensation or provide any other benefits pursuant to this
Agreement.
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(c) Termination Without Cause. The Company may terminate this Agreement
without Cause upon 30 days' written notice to Executive. Upon such
termination without Cause, the Company shall pay to the Executive, as
soon as practical after such termination, all compensation of the
Executive accrued but unpaid in respect of periods ending on or prior
to such termination. In addition, if a notice of termination without
Cause is delivered to the Executive following the inception of
employment of a new Chief Executive Officer of the Company, the
Company shall continue to pay the Executive the Base Salary in
accordance with the Company's customary payroll practices for a
period, calculated from the effective date of such termination, equal
to the greater of (i) the remainder of the Employment period or (ii)
90 calendar days. In addition, unpaid commissions will continue to be
paid per the terms outlined in Section 4 (b). Upon the effective date
of any such termination, the Executive will receive immediate
accelerated vesting of options previously granted with respect to an
additional 25,000 shares. The Executive shall have six months after
such termination to exercise any vested stock options. All vested
stock options that are not exercised within such six month period
shall be forfeited and cancelled.
(d) Termination by Executive. The Executive may terminate this Agreement
upon thirty (30) days' written notice to the Company. Upon termination
by the Executive, the Company shall pay to the Executive, as soon as
practicable after such termination, all compensation of the Executive
accrued but unpaid in respect of periods ending on or prior to such
termination and the Company shall have no further obligations to pay
the Executive any other compensation or provide any other benefits
pursuant to this Agreement.
(e) Constructive Termination. Any change in Executive's title, general
responsibilities and authority, or work location, without Executive's
prior consent, will constitute "constructive termination". Upon such
termination, the Company shall pay to the Executive, as soon as
practical after such termination, all compensation of the Executive
accrued but unpaid in respect of periods ending on or prior to such
termination. In addition, if such termination occurs following the
inception of employment of a new Chief Executive Officer of the
Company, the Company shall continue to pay the Executive the Base
Salary in accordance with the Company's customary payroll practices
for a period, calculated from the effective date of such termination,
equal to the greater of (i) the remainder of the Employment period or
(ii) 90 calendar days. In addition, unpaid commissions will continue
to be paid per the terms outlined in Section 4 (b). Upon the effective
date of any such termination, the Executive will receive immediate
accelerated vesting of options previously granted with respect to an
additional 25,000 shares. The Executive shall have six months after
such termination to exercise any vested stock options. All vested
stock options that are not exercised within such six-month period
shall be forfeited and cancelled.
7. Representations by the Executive. The Executive hereby represents and
warrants to the Company that (a) the Executive's execution and delivery of this
Agreement and his performance of his duties and obligations hereunder will not
conflict with, cause a breach or default under, or give any party a right to
damages under (or to terminate) any other agreement to which the Executive is a
party or by which he is bound, and (b) there are no restrictions, agreements or
understanding that would make unlawful the Executive's execution or delivery of
this Agreement or the performance of his obligations hereunder.
8. Confidentiality.
(a) Non-Disclosure Obligation. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the
termination of this Agreement, the Executive will not directly or
indirectly reveal, divulge, disclose or communicate to any person or
entity, other than authorized officers, directors, and employees of
the Company, in any manner whatsoever, any Confidential Information
(as hereinafter defined) without the prior written consent of the
Company.
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(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by the Executive as a direct or
indirect consequence of his employment hereunder about the Company or
its subsidiaries or their respective businesses, products and
practices which information is not generally known in the business in
which the Company or its subsidiaries, as the case may be, is or may
be engaged. However, Confidential Information shall not include under
any circumstances any information with respect to the foregoing
matters which is (i) available to the public from a source other than
the Executive or persons who are not under similar obligations of
confidentiality to the Company and who are not parties to this
Agreement, (ii) required to be disclosed by any court process or any
government or agency or department of any government, or (iii) the
subject of a written waiver executed by the Company for the benefit of
the executive.
(c) Return of Property. Upon termination of this Agreement, the Executive
will surrender to the Company all Confidential Information, including
without limitation, all lists, charts, schedules, reports, financial
statements, books and records of the Company and its subsidiaries, and
all copies thereof, and all other property belonging to the Company.
9. Non-Competition.
(a) Term and Scope. Subject to the other provisions of this Section 9,
from and after the date hereof until the date which is one year after
the expiration of this Agreement in accordance with the terms hereof
(the "Non-competition Term"), without the prior written consent of the
Board of Directors of the Company, the Executive shall not directly or
indirectly participate as a stockholder, proprietor, partner, trustee,
consultant, employee, director, officer, lender, or investor in any
corporation, business or professional enterprise that provides
management services to medical practices within the musculoskeletal
specialty during the Non-competition Term with the Company or any of
its subsidiaries, in each case within a thirty mile radius of (i) any
location in which the Company or its subsidiaries presently conducts
business or (ii) any location in which the Company or its
subsidiaries, during the Non-competition Term, (x) has initiated
business acquisition or affiliation discussions with physician groups,
(y) has expressed a bona fide interest to conduct business or (z)
conducts business.
(b) Exception. Nothing contained herein shall limit the right of the
Executive to hold and make investments in securities of any
corporation or limited partnership that is registered on a national
securities exchange or admitted to trading privileges there on or
actively traded in a generally recognized over-the-counter market,
provided the Executive's equity interest therein does not exceed 5% of
the total outstanding shares or interest in such corporation or
partnership.
(c) Extension for Noncompliance. If, during any period within the
Noncompetition Term, the Executive is not in compliance with the terms
of this Section 9, the Company shall be entitled to, among other
remedies, compliance by the Executive with the terms of this Section 9
for an additional period equal to the period of such noncompliance.
(d) Reasonableness. The Executive hereby acknowledges that the geographic
boundaries, scope of prohibited activities and the time duration of
the provisions of this Section 9 are reasonable and are not broader
than are necessary to protect the legitimate business interests of the
Company.
10. Non-Solicitation and Non-Interference. During the Noncompetition Term, the
Executive shall not, directly or indirectly, (a) solicit the employment of any
current or future employee of the Company without the prior written consent of
the Board of Directors of the Company, (b) request, induce or attempt to
influence any employee of the Company to terminate his or her employment with
the Company, or (c) request, induce or attempt to influence any supplier,
customer, patient or client of the Company to terminate his, her or its
relationship with the Company.
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11. Injunctive Relief. The Executive acknowledges that the breach of any of the
agreements contained herein, including, without limitation, any of the
confidentiality, Noncompetition and non-solicitation covenants specified in
Section 7 through 10, may give rise to irreparable injury to the Company,
inadequately compensable in money damages. Accordingly, the Company shall be
entitled to injunctive relief to prevent or cure breaches or threatened breached
of the provisions of this Agreement and to enforce specific performance of the
terms and provisions hereof in any court of competent jurisdiction, in addition
to any other legal or equitable remedies which may be available. The Executive
waives any requirements for the posting of a bond in connection with the
issuance of such an injunction necessary for the protection of the Company's
legitimate business interests and are reasonable in scope and content.
12. Assignment. This Agreement will be binding upon the parties hereto and their
respective successors and permitted assignees. Because the Executive's duties
and services hereunder are special, personal and unique in nature, the Executive
may not transfer, sell or otherwise assign his rights, obligations or benefits
under this Agreement (and any attempt to do so will be void).
13. Headings. The captions, headings and arrangements used in this Agreement are
for convenience only and do not in any way affect, limit or amplify the
provisions hereof.
14. Notices. All notices and other communications required or permitted
hereunder must be in writing and (a) delivered personally, (b) sent by
telefacsimile, (c) delivered by a nationally recognized overnight courier
service, or (d) sent by registered or certified mail, postage prepaid, as
follows:
(i) If to the Company, to:
Integrated Orthopaedics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Executive Officer
(ii) To the Executive, to:
Xxxxxxx X. Xxxxxxxxxxx
000 Xx. Xxxxx Xxxx
Xxxxxx, XX 00000
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 14 will (x) if delivered
personally or by overnight courier service, be deemed given upon delivery; (y)
if delivered by telefacsimile or similar facsimile transmission, be deemed given
when electronically confirmed, and (z) if sent by registered or certified mail,
be deemed given when received. Any party from time to time may change its
address for the purpose of notices to that party by giving a similar notice
specifying a new address, but no such notice will be deemed to have been given
until it is actually received by the party sought to be charges with the
contents thereof.
15. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provision
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. In lieu of each
such illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
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16. Entire Agreement: Amendments. This Agreement contains the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, if any, relating to the subject matter
hereof. This Agreement may be amended in whole or in part only by an instrument
in writing setting forth the particulars of such amendment and duly executed by
an executive officer of the Company and by the Executive.
17. Waiver. No delay or omission by any party hereto to exercise any right or
power hereunder shall impair such right or power or be construed as a waiver
thereof. A waiver by any party 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 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.
18. Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
19. Governing Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Texas, without regard to conflict of law
principles thereof.
IN WITNESS THEREOF, the Company and the Executive have executed this Agreement
as of the date first above written.
COMPANY:
INTEGRATED ORTHOPAEDICS, INC.
By:
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Director
EXECUTIVE:
By:
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Name: Xxxxxxx X. Xxxxxxxxxxx
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