EMPLOYMENT AGREEMENT
Exhibit
10.1
This
Employment Agreement ("Agreement")
is entered into as of January 3, 2008 (“Effective Date”) by and between
PacificHealth Laboratories, Inc. (hereinafter the "Company"), a Delaware
corporation, and Xxxxx Xxx (hereinafter "Employee").
NOW,
THEREFORE, in
consideration of their mutual promises, the parties agree as
follows:
1. EMPLOYMENT: The
Company hereby employs Employee as its President and Chief Operating Officer
reporting to the Chairman of the Board and Chief Executive Officer, and Employee
accepts employment and shall render services in such capacities, under and
subject to the conditions and terms set forth herein. During the period of
his
employment, Employee shall devote his full time, attention, energy, knowledge
and skill to the business and interests of the Company. For 6 months following
the Effective Date, three weeks per month Employee shall perform his duties
in
the United States based out of the offices of the Company in Central New
Jersey
and, at his option, Employee shall work 1 week per month in the United Kingdom
(“UK”). After 6 months from the Effective Date, Employee shall perform his
duties only from the offices of the Company. During the term of his employment
Employee shall not have any other (a) employment or (b) business interests
requiring his services, other than his current business interests which Employee
has disclosed to the Chief Executive Officer in writing and which do not
require
a significant amount of his time. The Company shall be entitled to the profits
and other benefits arising from or incident to the work, services and advice
of
Employee on behalf of the Company or which relate to the business of the
Company. Employee will be named a member of Company’s Board of Directors
(“Board”). During the term of this Agreement, the Board and/or nominating
committee shall nominate Employee for re-election to the Board at each annual
meeting of the Company’s stockholders. If for any reason Employee is
not re-elected to the Board by the stockholders during the term of this
Agreement, Employee shall be entitled to terminate this Agreement upon 30
days’
written notice; provided that such circumstances and termination shall be
deemed
an early expiration and not a breach of this Agreement by any
party.
2. TERM:
The term of this Agreement, and the term of employment of Employee
hereunder, shall commence on the Effective Date, and shall end December 31,
2009
(the "Scheduled Termination Date"), provided:
a. Employee
shall have the right to terminate his employment hereunder for Good Reason,
upon
written notice to the Company referring to this paragraph 2(a) and describing
the condition relied upon by him in invoking the provisions hereof. Good
Reason
shall exist if, without Employee's written consent, (i) the Company fails
to pay
Employee any salary or other compensation or benefit required to be paid
hereunder when due and for a period of thirty (30) days after demand therefore
by Employee; (ii) there occurs any substantial diminution in the authorities,
powers, functions or duties attached to Employee's positions or (iii) Employee
is not elected to the Company’s Board of Directors during the first year of the
Agreement or is not nominated to the Company’s Board of Directors in subsequent
year.
b. Employee
shall have the right to terminate his employment hereunder without cause
at any
time upon not less than thirty (30) days written notice.
c. This
Agreement will renew for an additional one-year term following the Scheduled
Termination Date, unless either part notifies the other of non-renewal at
least
120 days prior to the Scheduled Termination Date. This Agreement shall continue
to renew thereafter for successive one-year terms unless notice of non-renewal
is given at least 90 days prior to the end of the then current term. The
Base
Salary, Benefits, and Termination provisions applicable to any renewal term
shall be those in effect immediately prior to such renewal
term. Employees shall not be entitled to any options in any renewal
term, unless otherwise agreed by the Board of Directors. Notice by
either party of a change in Base Salary, Benefits or Termination provisions
shall be deemed a notice of non-renewal. In the event notice of non-renewal
is
given but Employee continues to be employed by the Company following the
expiration of a term, Employee’s Base Salary and Benefits shall continue to be
governed by Section 3(a) and Section 4, and either party may terminate this
Agreement on not less than 90 days written notice to the other
party.
3. COMPENSATION:
a. During
the term of this Agreement, beginning as of the Effective Date Employee shall
receive a base salary paid in equal, semi-monthly installments commencing
with
the first pay period immediately following the Effective Date, in the amount
of
$295,000 per annum. Annual base salary shall be adjusted with a market increase
consistent with the position, Company performance, and responsibilities of
Employee, which shall be no less than the change in the consumer price index
for
urban consumers in each year of renewal.
b. In
addition to his base salary, Employee shall be entitled to an annual bonus,
beginning with calendar year 2008, not to exceed 100% of Employee’s base salary,
the eligibility for and amount of which shall be based upon attainment of
milestones by the Company and/or Employee to be agreed upon by Employee and
the
Company’s Compensation Committee of the Board of Directors.
c. In
addition to base salary and bonus payable pursuant to (a) and (b) above,
Employee will receive a one-time grant of options (“Options”), on the date prior
to the day that a press release is issued announcing Employee's hiring, to
purchase 600,000 shares of the Company’s Common Stock at an exercise price of
the closing price on the date prior to the day that a press release is issued
announcing Employee's hiring subject to the following terms and
conditions:
i) The
Options shall vest as to 150,000 shares on January 3, 2009; as to 150,000
shares
on January 3, 2010; as to 150,000 shares on January 3, 2011; and as to 150,000
shares on January 3, 2012, and shall be exercisable by Employee only to the
extent vested.
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ii) To
the
extent not previously vested, the Options shall terminate upon termination
of
Employee’s employment by (A) Employee, other than pursuant to paragraph 2a of
this Agreement, or (B) by the Company with cause as defined in paragraph
5e.
iii) To
the
extent not previously vested, the Options shall vest as to one-half of the
annual vesting if Employee’s employment is terminated by the Company without
cause as defined in paragraph 5e or with Good Reason as defined in paragraph
2a
in the first six months of a year or to the extent not previously vested,
and
the Options shall vest as to one full year of the annual vesting if Employee’s
employment is terminated by the Company without cause as defined in paragraph
5e
or with Good Reason as defined in paragraph 2a in the last six months of
a
year.
iv) To
the
extent not previously vested, the Options shall vest in full immediately
upon a
“Change in Control” as described in paragraph 3d.
v) To
the
extent not previously exercised, the Options shall terminate upon the earlier
of
(A) the fifth anniversary of the Effective Date or (B) 90 days following
the
termination of Employee’s employment with the Company.
vi) The
Options are not intended to be “Incentive Stock
Options.”
d. In
the
event of a Change in Control, as defined below, and a contemporaneous or
subsequent termination of Employee for Good Reason, or termination by the
Company without cause, Employee shall be paid, as additional compensation,
a
lump sum equal to half the annual base salary in effect immediately prior
to the
Change in Control, payable at closing or completion of the Change in Control,
which amounts shall not be offset by or reduce in any manner payments due
to
Employee under Section 5 of this Agreement, and at such time all of his unvested
options shall vest. A “Change in Control” shall mean any Sale of the Company, as
defined below, or the acquisition of beneficial ownership, by any stockholder
or
group of stockholders, not including stockholders who are officers or directors
of the Company on the date of this Agreement or any affiliate of such officer
or
director, of shares of the Company’s capital stock entitled to cast at least 50%
of all votes which may be cast in the election of the Company’s
directors. Sale of the Company shall mean (A) any merger or
consolidation involving the Company if the stockholders of the Company prior
to
the merger hold less than 50% of the shares of the combined entity after
the
merger, or (B) transfer or sale of all or substantially all of the assets
of the
Company.
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4. OTHER
BENEFITS: The Company shall pay Employee for ordinary and reasonable
business expenses incurred by him in the performance of services pursuant
to
this Agreement. In addition, the Company shall provide Employee with an
all-inclusive relocation/travel/car stipend of $55,000 for the first year
and
$40,000 for the second year of employment. The first year stipend will be
paid
in two equal payments, one on the Effective Date and the other 6 months after
the Effective Date provided the Company still employs Employee on such date.
The
second year stipend will be paid in equal monthly installments provided that
Employee is employed by the Company on the date an installment is payable.
Both
Employee and Company agree that the working arrangement during the period
between the Effective Date and 6 months after the Effective Date is a special
accommodation to the Employee. Employee will be responsible during this time
for
all living expenses incurred in either the United States or the UK, and will
provide his own place of work and related office services during the periods
he
works in the UK (excepting company-related expenses) The Company will
reimburse the Employee for air travel to and from the UK for one trip per
month
during the period starting on the Effective Date and ending 6 months after
the
effective Date up to a maximum of $2,500 per trip. Employee shall keep such
records and shall render to the Company such accounts covering such expenses,
as
the Company shall reasonably require. The Company shall pay for all legal
costs
associated with obtaining a visa and through green card including commitment
for
expedited process for the Employee and his legal spouse.
a. During
the term of his employment and during any restricted period during which
Employee is entitled to receive payments pursuant to subparagraph 5(c) below,
Employee shall be entitled to participate in any medical, health, disability
and
accident or other hospitalization or insurance plan established by the Company
for its executive employees generally.
b. During
the first full year of Employment, Employee shall be entitled to three (3)
weeks
paid vacation time. For each subsequent year, Employee shall be entitled
to four
(4) weeks paid vacation time.
5. COMPENSATION
UPON TERMINATION: If Employee's employment is terminated at
any time during the term hereof, the following provisions shall
apply:
a. If
Employee’s employment is terminated for any reason, the Company shall pay
employee all base salary accrued through the effective date of termination.
If
Employee's employment is terminated by the Company prior to the expiration
or
non-renewal of this Agreement without cause, as defined in subparagraph (e)
below, or Employee terminates employment for Good Reason, the Company shall,
in
addition, continue to pay to Employee as severance, his Base Salary in effect
on
the date of termination for a period of one year following termination
(“Severance Period”), in accordance with the Company’s normal payroll dates and
practices. In the event the Employee continues to receive any other cash
compensation from the Company following such termination in any other capacity,
or commences any substantially full-time employment during the Severance
Period,
the remaining amount of severance pay due pursuant to this Section 5(a)
shall be reduced dollar-for-dollar, as received by the Employee, by the amount
of such cash compensation received in connection with such substantially
full-time employment. These payments shall be in lieu of any other severance
or
post-employment benefits except as otherwise expressly provided for in this
Agreement.
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b. If
Employee's employment is terminated by the Company for any reason other than
Employee's death, the Company, at its election, by notice to Employee given
not
later than ten (10) days after such termination and referring specifically
to
this subparagraph, shall have the right to require for one (1) year from
the
date of termination (the "restricted period") that Employee, except as provided
in this paragraph b., not become employed by, become an officer, director,
partner, member, manager or agent of, serve as an advisor or consultant to,
or
become an investor in, any business engaged in the manufacture or sale of
sports
nutrition or diet/weight loss products, or any other products which the Company
was manufacturing or selling at the effective date of termination that
contribute greater than 5% of the business’ total revenues, or had planned in
writing to manufacture or sell, prior to the date of termination with the
exception of Cadbury Schweppes or a Cadbury Schweppes-owned company (all
of the
foregoing collectively referred to as “Restricted Activities”). As a condition
to Employee’s observance of this paragraph b, (i) the Company shall
pay to Employee during the restricted period when payment of Employee's base
salary would otherwise be due and without interruption, an amount equal to
one
hundred (100%) percent of Employee's base salary in effect immediately prior
to
termination and (ii) the Company honors and timely performs its obligations
to
Employee under the first sentence of subparagraph (a) above. Payments, if
any,
to Employee under the second sentence of paragraph (a) above shall be applied
to
the payments required under this paragraph, and no additional payment shall
be
required except to the extent the restricted period exceeds the Severance
Period. In addition, in the event Employee obtains compensation from other
substantially full-time employment during the Severance Period, the Company
shall have the option to continue the severance payments in full notwithstanding
the provisions of subparagraph (a), in which event Employee will continue
to be
bound by this subparagraph (b). Employee shall not be deemed to violate the
restrictions contained in this paragraph b if, prior to commencing service
with
a business organization that engages in a Restricted Activity as well as
activities which are not Restricted Activities, (x) Employee provides the
Company with the name and address of such organization, his prospective title
and a description of his prospective duties and responsibilities, (y) Employee
certifies to the Company that he will not engage in, or render advice with
respect to, any Restricted Activity and that Employee has informed his superiors
in the new organization of his obligations under this Agreement and any
confidentiality or similar agreement between Company and Employee, and (z)
the
Board of Directors of the Company does not determine, in its good faith and
reasonable discretion, that Employee’s duties and responsibilities with the new
organization are Restricted Activities.
c. Nothing
in subparagraph (c) above or elsewhere in this Agreement shall prohibit Employee
from acquiring a passive equity stake representing less then five (5%) of
any
class of an issuer’s outstanding securities.
d. For
the
purposes of this Agreement, "cause" for termination of Employee's employment
shall exist only in the event of (i) Employee's gross negligence or intentional
malfeasance in the performance of his duties as an officer of the
Company (ii) Employee’s conviction of any felony or of a misdemeanor
involving fraud, theft or moral turpitude provided that, if such conviction
is
appealed by Employee, the conviction is upheld by the appellate courts, (iii)
any final determination by any governmental agency, court or any securities
exchange or by The Nasdaq Stock Market, Inc. (“Nasdaq”) that Employee has
violated any securities laws or exchange or Nasdaq rules, (iv) Employee’s
material breach of this Agreement which is not completely cured within 30
days
after Employee has received written notice of such breach or (v) Employee
enters
into a consent order with respect to any matter referenced in clause
(iii).
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6. ASSIGNMENT: This
Agreement is personal in its nature and neither of the parties hereto shall,
without the consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder, except that, subject to the provisions hereof,
including but not limited to the Change in Control and related provisions,
the
Company may assign or transfer this Agreement to a successor organization
in the
event of merger, consolidation, or transfer of sale of all or substantially
all
of the assets of the Company, in which case the term Company shall mean such
successor, provided that in the case of any such assignment or transfer,
the
obligations of this Agreement are assumed by such successor or are binding
upon
and inure to the benefit of such successor as a matter of law.
7. NOTICES: All
notices hereunder shall be in writing and shall be deemed to have been given
at
the time when mailed in any general or branch United States Post Office enclosed
in a certified post-paid envelope, addressed to the respective parties stated
below, or to such changed address as such party may fix by notice as
aforesaid:
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To
the Company:
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PacificHealth
Laboratories, Inc.
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Attn:
Board of Directors
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000
Xxxxxxx Xxxx, Xxxxx 000
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Xxxxxxx,
XX 00000
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With
a copy to:
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Xxxxxx
Xxxxxxx Xxxxxx & Xxxxxxx, LLC
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Attention:
Xxxx Xxxxxx
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0
Xxxxxxx Xxxxx, 00xx
Xxxxx
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00
X. 00xx
Xxxxxx
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Xxxxxxxxxxxx,
XX 00000
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To
Employee:
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Xxxxx
Xxx
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XXX
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XXX
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in
each
case with copies of such notice to each director of the Company then in
office.
8. GOVERNING
LAW: This Agreement and all performance under this Agreement shall be
governed by the laws of the State of New Jersey.
9. WAIVER,
MODIFICATION: No waiver or modification of this Agreement or
of any covenant, condition or limitation contained herein shall be valid
or
effective unless it is in writing and duly executed by Employee and the
Company.
10. RESOLUTION
OF DISPUTES: Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, including without limitation
a
claim for declaratory relief or relief which is equitable in nature, shall
be
settled by arbitration in either Philadelphia, Pennsylvania or Newark, New
Jersey, by an arbitrator selected by Employee and the Company. If the
Company and Employee cannot agree on the appointment of an arbitrator within
ten
(10) days after a request for arbitration, then such arbitrator shall be
an
attorney-at-law with no prior professional association with any of the parties
or their affiliates who is selected in accordance with procedures established
and implemented by the American Arbitration Association. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except as otherwise provided in this paragraph
10. Except as otherwise provided herein, all costs of the arbitration
shall be borne by the Company. Judgment upon any award rendered by
the arbitrator may be entered in any court having jurisdiction over the parties.
Any award of the arbitrator shall include interest at a rate or rates considered
just under the circumstances by the arbitrator and may include, in the
discretion of the arbitrator, an award of legal expenses and costs to the
prevailing party.
IN
WITNESS WHEREOF,
Employee has signed his name and the Company, by the signatures of its duly
authorized officers, has executed this Agreement, as of the date and year
mentioned at the top of page one.
| PACIFICHEALTH LABORATORIES, INC. | ||||
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/s/
Xxxxx Xxx
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By: |
/s/
Xxxxxx Xxxxxxx
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Xxxxx
Xxx
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Xxxxxx
Xxxxxxx, CEO
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