1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), by and between Medical Science
Systems, Inc., a Texas Corporation (the "Corporation"), and Xxxx X. Xxxxx
("Employee"), is effective this 1st day of January, 1996 ("Effective Date").
The Corporation and Employee are hereinafter sometimes referred to, individually
and collectively, as a "Party" or the "Parties."
1 TERM. The term of employment of Employee hereunder shall commence as
of the date hereof and shall continue in full force and effect until the fifth
anniversary of the date hereof (the "Initial Term"), and shall automatically
continue thereafter for successive 12 month periods unless terminated at the
end of such Initial Term or any subsequent 12 month term after the Initial Term
by either party hereto on not less than six months prior written notice to
the other party (the "Employment Term"). The term of this Agreement shall be
coincident with the Employment Term.
2 DUTIES. Employee shall serve as President and Chief Executive Officer
of the Corporation or such other position as may be agreed between Employee and
the Corporation, and shall perform such duties, services and responsibilities
as are consistent with such position. Employee's duties, services and
responsibilities will be performed under the overall supervision of, and
consistent with the policies of, the Board of Directors of the Corporation
(the "Board of Directors"). Employee shall also be entitled to serve as a
director of the Corporation.
During the Employment Term, Employee shall devote his full business time,
attention and skill to the performance of such duties, services and
responsibilities, and will use his reasonable efforts to promote the interests
of the Corporation. Employee will not, without the prior written approval of
the Board of Directors, engage in any other business activity which would
interfere with the performance of his duties, services and responsibilities
hereunder or which is in violation of policies established from time to time
by the Corporation. Personal passive investments and personal business affairs
not inconsistent with this Agreement shall not be prohibited.
3 COMPENSATION. In consideration of the performance by Employee of
Employee's obligations during the Employment Term (including any services as an
officer, director, employee, member of any committee
1
2
of the Corporation or any of its subsidiaries, or otherwise), the Corporation
will pay Employee a salary (the "Salary") at an annual rate of $250,000 per year
during the Employment Term.
The Salary shall be payable in accordance with the normal payroll practices of
the Corporation then in effect. The Salary, and all bonuses or other forms of
compensation paid to Employee hereunder, shall be subject to all applicable
taxes required to be withheld by the Corporation pursuant to federal, state or
local law. Employee shall be solely responsible for income taxes imposed on
Employee by reason of any cash or non-cash compensation and benefits provided
hereunder.
In addition to the payment of the Salary, Employee shall be entitled to
participate in any employee benefit plans then in effect for similarly situated
employees to the extent Employee meets the eligibility requirements for any
such plan, including group insurance, retirement, supplemental pension, bonus
plan, stock option or awards plans; provided, however, that the Corporation
shall provide health or medical insurance benefits to Employee and his spouse
or any dependent of Employee as provided by any health and medical insurance
plans sponsored for employees of the Corporation in general without any
eligibility requirements or waiting periods as permitted under those plans and
provided further that, at Employee's option, Employee shall be entitled to
maintain his current insurance policy and the Corporation shall reimburse or
pay directly Employee's insurance premiums. Employee may switch to the
Corporation's plan at any time.
4 WORKING CONDITIONS. Employee shall be provided with workspace, office
equipment, plain paper fax machine, computer equipment, furniture, supplies,
and such other facilities and services as determined by the Corporation as is
reasonably necessary for the performance of his duties.
5 EXPENSES. The Corporation shall reimburse Employee for all normal and
reasonable business expenses upon presentation of an approved expense report
and related receipts ("Expense Report"). Such reimbursable expenses will
include Employee's business airfare, travel, lodging, car rentals, automobile,
meals, long-distance telephone expenses, subscription dues, car telephone,
home business telephone, home facsimile, mobile telephone, facsimile expenses
(or similar technology as it becomes available) and reasonable client
entertainment. Employee shall be reimbursed for such reasonable business
expenses upon the verification and approval of such expenses. The Corporation
shall either approve or disapprove such expense report no later than thirty
(30) days after the submission of such expense report by Employee, and such
report
2
3
shall be deemed approved unless expressly disapproved by Corporation
within the thirty (30) day period. The Corporation agrees that the accumulation
of frequent flyer mileage benefits shall be credited to Employee personally.
6 MISCELLANEOUS. The Corporation agrees to purchase professional books,
professional journals and publications in an amount that Employee and the
Corporation reasonably agree, for use by Employee during the term of this
Agreement. Such books, publications and journals shall be considered and shall
remain the property of the Corporation. The Corporation shall also pay
continuing education and certification fees of Employee.
7 LIFE INSURANCE. During the Employment Term, the Corporation shall pay
the premium on a policy of life insurance with a value of $1,000,000, naming
the Employee's spouse as beneficiary. At the end of the term of the Agreement
all rights under such policy (including any cash surrender value) shall belong
to Employee; prior thereto, they shall belong to the Corporation.
8 AUTOMOBILE REIMBURSEMENT. In recognition of Employee's need for an
automobile for business purposes, the Corporation shall reimburse Employee Six
Hundred Dollars ($600.00) per month for automobile expenses, including
automobile payments, maintenance, gasoline and car telephone costs incident
thereto.
9 VACATION. Employee shall be entitled to four (4) weeks vacation
annually, without loss of compensation, during Employee's full time employment
under the terms of this Agreement. The times for these vacation periods shall
be those most convenient to the Corporation's business, as may be orally
agreed upon by the Corporation. In the event Employee's total accrued vacation
is in excess of twelve (12) weeks vacation at the end of any calendar year
(December 31st), accrual of vacation shall cease.
10 LEAVE OF ABSENCE. Employee shall be entitled to take anunpaid leave of
absence (no compensation or benefits under this Agreement) only if approved by
the Corporation.
11 HOLIDAYS. Employee shall be entitled to all holidays designated by the
Corporation, without loss of compensation.
12 TERMINATION OF AGREEMENT.
12.1 TERMINATION WITHOUT CAUSE. Employee's employment with the
Corporation shall be terminated and, except as provided below, this Agreement
shall terminate as follows:
12.1.1 Whenever the Corporation and Employee shall mutually
agree, in writing, to termination; or
12.1.2 Upon the death of Employee; or
12.1.3 If (i) Employee is absent from work for 180 calendar
days in any twelve month period by reason of illness or incapacity (whether
physical or otherwise) or (ii) an independent
3
4
medical examiner reasonably determines that Employee is unable to perform his
duties, services and responsibilities hereunder by reason of illness or
incapacity (whether physical or otherwise) for a total of 180 calendar days in
any twelve-month period during the employment Term ("Disability"), the
Corporation shall not be obligated to pay Employee any compensation (Salary or
bonus) for any period in excess of such days; furthermore, any such payments
shall be reduced by any amount Employee is entitled to receive as a result of
such disability under any plan provided through the Corporation or under state
or federal law. If the independent medical examiner certifies that Employee
can work part-time after the expiration of the 180 day period, the Corporation
shall reasonably accommodate Employee to allow him to work part-time.
Compensation will be reduced proportionately. All of Employee's non-compete
obligations shall survive any period of disability.
12.1.4 The existence of a disabling mental or physical condition
and the date upon which such condition preventing performance of such duties
commenced shall be determined by an independent medical examiner. In the event
either party requests to have an independent medical examiner determine whether
Employee is disabled, then the Corporation and Employee agree to meet and
confer in good faith with one another to mutually select an independent medical
examiner. The Corporation or Employee, whichever elects to request an
independent medical examiner, shall give written notice of that election to the
other party. The parties, or their legal representatives, agree to meet, at the
offices of the Corporation, within ten (10) days of the notice of election to
select an independent medical examiner. In the event that after meeting and
conferring in good faith, the Corporation and Employee are unable to agree on
the selection of an independent medical examiner within five (5) days, one
medical examiner shall be selected by the Corporation and one medical examiner
shall be selected by Employee, which two (2) medical examiners shall select
a third medical examiner, and the third medical examiner shall determine,
within fifteen (15) days after his or her appointment, if Employee is disabled.
In the event that Employee (or Employee's legal representative) refuses to
meet promptly with the Corporation to confer in good faith, or Employee
(or Employee's legal representative) fails to select a medical examiner within
said five (5) day period, the Corporation's selection of a medical examiner
shall be binding.
In accordance with the foregoing, Employee (or Employee's legal representative)
shall cooperate fully and comply with any requests made by the Corporation
and/or the medical examiner in allowing said medical examiner to make a
determination whether or not Employee is disabled and the estimated
commencement date of
4
5
Disability.
12.2 TERMINATION FOR CAUSE. Notwithstanding anything herein
set forth in this Agreement to the contrary, the Corporation may, at any time,
terminate this Agreement for "cause." For purposes of this Agreement, "cause"
shall include, but not be limited to, the occurrence of any of the following
events:
12.2.1 Employee has committed an act of theft or embezzlement
from or fraud on the Corporation;
12.2.2 Employee shall materially breach any of the terms,
covenants and conditions of this Agreement, which shall include but not be
limited to, any violation of the restrictions against competition contained in
Section 14;
12.2.3 Employee shall have committed an act of sexual
harassment or discrimination;
12.2.4 Employee shall have been convicted of a felony and
sentenced to more than fourteen (14) days in jail;
12.2.5 Employee shall fail or refuse to abide by the lawful
directions set by the Board of Directors.
Notwithstanding the foregoing, in the event the Corporation decides to
terminate Employee under this Paragraph 12.2.5, then the Corporation shall
first give Employee written notice of the breach of this Agreement, specifying
the details thereof and shall give Employee thirty (30) days to cure ("Cure
Period") said conduct. If the conduct is not cured within said thirty (30) day
period, the Corporation may terminate this Agreement at the expiration of the
Cure Period. The Corporation may immediately terminate this Agreement for
violation under Sections 12.2.1, 12.2.3 and 12.2.4.
12.3 CONTINUING OBLIGATIONS. Employee shall be only entitled to a
pro-rata share of basic compensation and benefits, up to the Termination Date,
based on the ratio that the number of days that Employee has performed in
accordance with the terms and provisions of this Agreement in the relevant
term year that bears to three hundred sixty-five (365).
13 EMPLOYEE'S DUTIES UPON TERMINATION. In the event of termination of
working relationship with the Corporation, Employee agrees to deliver promptly
to the Corporation all Corporation owned equipment, notebooks, documents,
memoranda, reports, files, manuals, models, notes, logs, technical data,
software, samples, books, correspondence, lists, or other written or graphic
records,
5
6
keys, credit cards and the like, relating to the Corporation's
business, which are or have been in his possession or under his control.
14 COMPETITIVE ACTIVITIES. During the Employment Period, Employee agrees
that Employee will not, directly or indirectly, work for, provide consulting
services on his own behalf for, own an interest in (excluding a passive
investment in a public company where employee owns less than 5% of the stock of
such company), operate, join, control, or participate in, or be connected as an
officer, employee, agent, independent contractor, partner, shareholder, or
principal of any corporation, partnership, proprietorship, firm, association,
or person marketing products, goods, equipment, and/or services which directly
or indirectly competes with the Corporation's services or products or the
Corporation's business, without the prior written consent of Corporation.
15 NOTICES. Unless otherwise specifically provided, all notices and
demands required to be given hereunder shall be deemed to be duly given at the
time of delivery if such notice or demand is personally delivered, or
forty-eight (48) hours after mailing if such notice or demand is deposited with
the United States Postal Service, postage prepaid, for mailing via registered
or certified mail, return receipt requested, to the Secretary of the Corporation
and to Employee at the addresses set forth below. Such addresses may only be
changed by giving written notice of such change to all of the other Parties
hereto.
To Corporation: Chairman, Board of Directors
Medical Science Systems, Inc.
A Texas Corporation
0000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
To Employee: Xxxx X. Xxxxx
0 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx 00000
Any notice so given by mail or delivery service shall be
deemed effectively given on the date actually received. Any Party
may by like written notice to the other specify a different address
for notice purposes.
16 ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement
described in Paragraph 16 contain the entire understanding between and among
the Parties hereto, and supersedes any prior written or oral agreement or
negotiations between or
6
7
among the Parties concerning the subject matter contained herein. There are no
representations, agreements, arrangements, or understanding, oral or written,
between or among the Partie hereto, relating to the subject matter contained
in this Agreement, which are not fully expressed herein.
17 AMENDMENTS. This Agreement shall not be modified or amended except by
a writing signed by Employee and a duly empowered officer of the Corporation.
18 BINDING EFFECT. Subject to the restrictions against transfer or
assignment herein contained, the provisions of this Agreement shall inure to the
benefit of and shall be binding upon the heirs and legatees, successors-in-
interest, personal representatives, estates and assigns of each of the Parties
hereto.
19 CAPTIONS. Captions at the beginning of each numbered section of this
Agreement are solely for the convenience of the Parties and shall not be
deemed part of the context of this Agreement.
20 DEFINITIONS.
20.1 GENDER. As used herein, the masculine, feminine and neuter
gender, and the singular or plural number, shall each be deemed to include the
others whenever the context so indicates.
20.2 LEGAL REPRESENTATIVE. As used herein, the term "legal
representative" shall refer to the executor, administrator, attorney-in-fact,
guardian or conservator of the estate of Employee, Employee's surviving spouse,
if applicable, and any trustee or successor.
21 WAIVER. No waiver of any breach or default of this Agreement by any
Party hereto shall be considered to be a waiver of any other breach or default
of this Agreement.
22 FURTHER ACTS. Each Party hereto agrees to perform any further acts and
to execute and deliver any further documents which may be reasonably necessary
to carry out the provisions of this Agreement.
23 ATTORNEYS' FEES. Should any litigation or arbitration be commenced
between the Parties hereto or their personal representatives concerning any
provision of this Agreement or the rights and duties of any person in relation
thereto, the Party substantially prevailing in such litigation or arbitration
shall be entitled, in addition to such other relief that may be granted, to
all costs, expenses, expert witness fees, etc. and reasonable
7
8
attorneys' fees.
24 CHOICE OF LAW; VENUE. This Agreement has bee construed under and
governed in accordance with the laws of the State of California. Venue shall be
in Orange County, California.
25 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but such counterparts, when taken
together, shall constitute but one Agreement.
26 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions of
this Agreement shall be given effect separately from the provisions so
determined and the other provisions shall not be affected by the illegality or
unenforceability.
27 BINDING ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof (whether arising out of
contract, tort, statute or any legal or equitable theory, including, without
limitation, the issue of arbitrability), shall be settled by binding arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules, except as expressly modified in this Agreement,
and judgment on the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The arbitration shall be conducted in
Orange County, California. The parties shall have the right to conduct
discovery as if the dispute were being litigated in the California Superior
Court. Without limiting the generality of the foregoing, the limitations on
discovery contained in Section 1283, 1283.50, and 1283.1 of the California Code
of Civil Procedure shall not apply. The only exception to the preceding
provisions of this paragraph 27 is that either party shall have the absolute
right, at any time prior to the entry of the award by the arbitrator, to seek
any provisional remedy including but not limited to temporary injunctive relief
(without waiver of any other rights or remedies under this Agreement) against
the other party or any third party from any court of competent jurisdiction on
such grounds as would exist for the granting of such provisional remedy in the
absence of this Agreement.
28 INDEMNITY. The Corporation shall hold harmless and indemnify Employee
against any and all liabilities, costs, damages, expenses and attorney fees
resulting from or attributable to any and all acts or omissions of Employee
relating to or arising out of Employee's employment with the Corporation
provided that Employee has acted in good faith and in a manner which Employee
reasonably
8
9
believed to be in, or not opposed to, the best interests of the
Corporation. Except as provided herein, Employee shall not be required to
indemnify or reimburse the Corporation or any insurer for any such liabilities,
costs, damages, expenses and attorneys' fees, relating to or arising out of
actions of Employee undertaken in good faith and in a manner which Employee
reasonably believed to be in, or not opposed to, the best interests of the
Corporation.
29 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Agreement,
the provisions hereof shall be binding upon and shall inure to the benefit of
the Parties hereto, their personal representatives, heirs, executives,
administrators, successors and/or permitted assigns.
30 ASSIGNMENT. Neither this Agreement nor the rights, duties or
obligations arising hereunder shall be assignable by Employee.
9
10
31 CONFIDENTIALITY AND INVENTION ASSIGNMENT AGREEMENT (the "CONFIDENTIALITY
AGREEMENT"). Employee will be required to sign and abide by the Corporation's
Confidentiality Agreement attached hereto, which the Corporation requires all
of its employees to sign.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the day and year first above written.
DATED: January 1, 1996 MEDICAL SCIENCE SYSTEMS, INC.,
A TEXAS CORPORATION
By: _____________________________
Xxxxxxx X. Xxxxxx
Secretary
By: _____________________________
Xxxxxxx X. Xxxxxxx
Chief Scientific Officer
EMPLOYEE
By: _____________________________
Xxxx X. Xxxxx
10
