Exhibit 10.6
Employment Agreement for Xxxxx X. Arabia.
NATUREWELL INCORPORATED
EMPLOYMENT AGREEMENT
XXXXX X. ARABIA
THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of the 1st day of
August, 2002, by and between NatureWell, Incorporated, a Delaware corporation
(the "Company"), its subsidiaries, affiliates, successors and assigns
(collectively, "Affiliates") and Xxxxx X. Arabia, an individual (the
"Executive") with reference to the following facts:
RECITALS
A. The Company desires to employ Executive as its President and Chief
Executive Officer and to have Executive serve as Chairman of the Board of
Directors of the Company (the "Board") on the terms and conditions hereinafter
set forth; and
B. Executive desires to be employed by the Company as its President and
Chief Executive Officer and to serve as Chairman of the Board and to perform
and to serve the Company on the terms and conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, agreements and covenants set forth herein, the parties hereto agree
as follows:
1. EMPLOYMENT.
(a) DUTIES. The Company hereby agrees to employ Executive, and
Executive hereby accepts such employment, as the Chairman of the Board, Chief
Executive Officer and President of the Company. In his role as Chairman, Chief
Executive Officer and President of the Company, Executive shall be responsible
for such duties and functions of a supervisory or managerial nature as may be
directed from time to time by the Board provided that such duties are
reasonable and customary for a Chairman and Chief Executive Officer. Executive
agrees that he shall, during the term of this Agreement, except during
reasonable vacation periods, periods of illness and the like, devote
substantially all his business time, attention and ability to his duties and
responsibilities hereunder; provided, however, that nothing contained herein
shall be construed to prohibit or restrict Executive from (i) serving as a
director of any corporation, with or without compensation therefor; (ii)
serving in various capacities in community, civic, religious or charitable
organizations or trade associations or leagues; or (iii) attending to personal
business; provided, however, that no such service or activity permitted in this
Section 1(a) shall materially interfere with the performance by Executive of
his duties hereunder. Executive shall report directly to the Board.
(b) TERM.
(i) The term of this Agreement and Executive's employment
period shall be for a term commencing on the date of this Agreement and ending
on the third (3rd) anniversary of the date of this Agreement (the "Employment
Period"); provided, however, that commencing on the first day after the date of
this Agreement and on each day thereafter, the Employment Period shall be
extended for one (1) additional day so that a constant three (3) year
Employment Period shall be in effect, unless (A) the Company or Executive
elects not to extend the term of this Agreement by giving written notice to the
other party in accordance with Sections 3(b) and 10 hereof, in which case, the
term of this Agreement shall become fixed and shall end on the third (3rd)
anniversary of the date of such written notice ("Notice of Non-Renewal"), or
(B) Executive's employment terminates hereunder.
(ii) Notwithstanding anything contained herein to the
contrary, (A) Executive's employment with the Company may be terminated by the
Company or Executive during the Employment Period, subject to the terms and
conditions of this Agreement; and (B) nothing in this Agreement shall mandate
or prohibit a continuation of Executive's employment following the expiration
of the Employment Period upon such terms and conditions as the Board and
Executive may mutually agree.
(iii) If Executive's employment with the Company is
terminated, for purposes of this Agreement, the term "Unexpired Employment
Period" shall mean the period commencing on the date of such termination and
ending on the last day of the Employment Period.
(c) LOCATION/TRAVEL. Executive shall work at the Company's
headquarters in La Jolla, California. Executive shall not be required to
relocate from San Diego County during the Employment Period.
2. COMPENSATION. Subject to the provisions of Section 8 hereof, the
Company and its Affiliates shall each be responsible and have joint and several
liability for all compensation and benefits owed to Executive under this
Agreement. A reference to a Company plan, program, obligation or commitment
shall also be considered an obligation or commitment of each of the Company and
its Affiliates but shall not result in duplicate benefits being paid or
provided to Executive.
(a) SALARY. Executive shall receive an annual base salary of
Three Hundred Fifty Thousand Dollars ($350,000) which shall be payable on a
monthly basis. The annual base salary payable to Executive pursuant to this
Section 2(a), which may be increased but not decreased by the Board or the
Compensation Committee of the Board, as the case may be, shall be hereinafter
referred to as the "Annual Base Salary."
(b) ANNUAL BONUS.
(i) Executive shall be entitled to receive an annual
guaranteed cash bonus of One Hundred Eighty Thousand Dollars ($180,000),
hereinafter referred to as the "Guaranteed Annual Bonus," beginning on
August 1, 2002 and on the first day of August 2003 and 2004 (after August 2004
there will not be an Guaranteed Annual Bonus, rather Executive's entire Annual
Bonus will be at the discretion of the board of directors) and an additional
cash bonus based upon a formula and subject to certain performance goals having
been achieved (the "Formula"), in an amount determined by the Board, in its
sole discretion, hereinafter referred to as the "Discretionary Annual Bonus"
(the Guaranteed Annual Bonus and the Discretionary Annual Bonus are
collectively referred to herein as the "Annual Bonus").
(ii) Executive's Annual Bonus shall be paid to Executive
within ninety (90) days of calendar year end.
(c) REIMBURSEMENT OF BUSINESS EXPENSES. The Company shall
promptly reimburse Executive for all reasonable out-of-pocket expenses incurred
by him pursuant to his employment hereunder during the Employment Period,
including, but not limited to, all reasonable travel and entertainment
expenses. Executive may only obtain reimbursement under this Section 2(c) upon
submission of such receipts and records as may be initially required by the
Board and, thereafter, as may be required under the reimbursement policies
established by the Company. Notwithstanding the foregoing, Executive shall be
permitted to charge reasonable expenses delineated in this Section 2(c) to
Company charge cards or other credit accounts made available to Executive.
(d) ADDITIONAL BENEFITS; GENERAL RIGHTS. During the Employment
Period, Executive shall be entitled to:
(i) participate in all employee stock option, pension,
savings, and other similar benefit plans of the Company as the Company may
designate from time to time;
(ii) participate in all welfare plans established by the
Company such as life insurance, medical, dental, disability, and business
travel accident plans and programs as the Company may designate from time to
time. In addition, the Company shall reimburse Executive for (i) any premium
costs Executive may incur with respect to the health insurance plan currently
maintained by the Company (and which may be maintained by the Company from time
to time) in which Executive (and his spouse and children) participates, and
(ii) for all other medical and dental expenses not covered by any medical or
dental plan in which Executive (and his spouse and children) participates,
including, without limitation, deductibles and out of pocket expenses;
(iii) four (4) weeks paid vacation per year;
(iv) a monthly automobile allowance of One Thousand
Dollars ($1,000.00); and
(v) any other benefits provided by the Company to its
executive officers.
(e) WITHHOLDING. The Company shall deduct from all
compensation paid to Executive under this Agreement, any Federal, State or city
withholding taxes, social security contributions and any other amounts which
may be required to be deducted or withheld by the Company pursuant to Federal,
State or city laws, rules or regulations.
3. TERMINATION OF EMPLOYMENT; EVENTS OF TERMINATION.
(a) This Agreement may be terminated during the Employment Period
under the following circumstances:
(i) CAUSE. Executive's employment hereunder shall terminate
for "Cause" ten (10) days after the date the Company shall have given Executive
notice of the termination of his employment for "Cause". For purposes of this
Agreement, "Cause" shall mean the commission by Executive of fraud, theft,
embezzlement or an act of serious, criminal moral turpitude.
(ii) DEATH. Executive's employment hereunder shall terminate
upon his death.
(iii) DISABILITY. If Executive becomes unable due to a mental
or physical disability (as defined by Section 12926 of the California Fair
Employment and Housing Act) to perform the essential functions of his position,
with or without reasonable accommodation, for an aggregate of six (6) months in
any twelve (12) month period (a "Disability"), the Company, at its option, may
terminate Executive's employment hereunder (the date of such termination, the
"Disability Date", and, thereafter, Executive shall not be deemed to be
employed under this Agreement. In determining Disability under this Section,
the Company shall rely upon the written opinion of the physician regularly
attending Executive in determining whether a Disability is deemed to exist. If
the Company disagrees with the opinion of such physician, the Company may
choose a second physician, the two (2) physicians shall choose a third
physician, and the written opinion of a majority of the three (3) physicians
shall be conclusive as to Executive's Disability. The expenses associated with
the utilization of any physician other than the physician regularly attending
Executive shall be borne solely by the Company. Executive hereby consents to
any required medical examination and agrees to furnish any medical information
requested by the Company and to waive any applicable physician/patient
privilege that may arise because of such determination. Nothing in this
Agreement is intended to cause the Company to be in violation of the Americans
with Disabilities Act.
(iv) GOOD REASON. Executive shall have the right to terminate
his employment for "Good Reason." This Agreement shall terminate effective
immediately on the date Executive shall have given the Board notice of the
termination of his employment with the Company for "Good Reason." For purposes
of this Agreement, "Good Reason" shall mean (A) any material and substantial
breach of this Agreement by the Company, (B) a diminution of Executive's
responsibilities, loss of title or position in which Executive currently
serves, failure to reelect Executive to the Board or reappoint Executive as
Chairman of the Board, (C) a Change in Control (as defined below) occurs and
Executive voluntarily quits at any time within the six (6) month period on or
immediately following the Change in Control, (D) the Company issues a Notice of
Non-Renewal to Executive, (E) a reduction in Executive's Annual Base Salary or
a material reduction in other benefits (except for bonuses or similar
discretionary payments) as in effect at the time in question, or any other
failure by the Company to comply with Section 2, hereof, (F) the relocation of
Executive's office outside San Diego County, or (G) this Agreement is not
assumed by a successor to the Company.
For purposes of this Agreement, a "Change in Control" of the Company shall be
deemed to have occurred upon the happening of any of the following events:
(i) approval by the Board or stockholders of the Company of a transaction that
would result in the reorganization, merger, or consolidation of the Company
with one or more other "Persons" within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act"), other than a
transaction following which: (A) at least seventy-one percent (71%) of the
equity ownership interests of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by Persons who,
immediately prior to such transaction, beneficially owned (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) at least seventy-one percent
(71%) of the outstanding equity ownership interests in the Company; and (B) at
least seventy-one percent (71%) of the securities entitled to vote generally in
the election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by Persons who,
immediately prior to such transaction, beneficially owned (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) at least seventy-one percent
(71%) of the securities entitled to vote generally in the election of directors
of the Company; (ii) the acquisition of all or substantially all of the assets
of the Company; (iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation or
dissolution; (iv) the occurrence of any event in the nature of an event
described in this Section if, immediately following such event, at least
seventy-five percent (75%) of the members of the Board do not belong to any of
the following groups: (A) individuals who were members of the Board on the date
of this Agreement; or (B) individuals who first became members of the Board
after the date of this Agreement either: (I) upon election to serve as a member
of the Board by affirmative vote of three-quarters of the members of such
Board, or of a nominating committee thereof, in office at the time of such
first election; or (II) upon election by the stockholders of the Company to
serve as a member of the Board, but only if nominated for election by
affirmative vote of three-quarters of the members of the Board, or of a
nominating committee thereof, in office at the time of such first nomination;
provided, however, that such individual's election or nomination did not result
from an actual or threatened election contest (within the meaning of Rule 14a-
11 of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents (within the meaning of Rule 14a-
11 of Regulation 14A promulgated under the Exchange Act) other than by or on
behalf of the Board; and (v) one or more other Persons, other than an employee
benefit plan sponsored by the Company, becomes the "beneficial owner," as such
term is used in Section 13 of the Exchange Act, of thirty percent (30%) or more
of the Common Stock of the Company issued and outstanding prior to such
acquisition.
(v) WITHOUT CAUSE. The Company shall have the right to
terminate Executive's employment hereunder Without Cause subject to the terms
and conditions of this Agreement. In such event, this Agreement shall
terminate, effective immediately upon the date on which the Company shall have
given Executive notice of the termination of his employment for reasons other
than for Cause or due to Executive's Disability.
(vi) WITHOUT GOOD REASON. Executive shall have the right to
terminate his employment hereunder without Good Reason at any time for any
reason subject to the terms and conditions of this Agreement. This Agreement
shall terminate, effective immediately upon the date as of which Executive
shall have given the Board notice of the termination of his employment without
Good Reason.
(b) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or any such termination by Executive (other than on
account of death) shall be communicated by written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated. In the event of the termination of
Executive's employment on account of death, written Notice of Termination shall
be deemed to have been provided on the date of death.
4. PAYMENTS UPON TERMINATION.
(a) WITHOUT CAUSE, FOR GOOD REASON OR DISABILITY. If Executive's
employment is terminated by the Company Without Cause (pursuant to
Section 3(a)(v)) or by Executive for Good Reason (pursuant to Section
3(a)(iv)), or by the Company due to Executive's Disability (pursuant to
Section 3(a)(iii)), Executive, or in the case of Executive's Disability,
Executive's legal representative (assuming Executive's affairs are handled by a
representative rather than Executive himself), shall be entitled to receive
from the Company (i) a lump sum payment in an aggregate amount equal to three
(3) times the sum of (A) the current Annual Base Salary and (B) the average of
Executive's Annual Bonus paid during the two (2) immediately preceding full
fiscal years of employment ending prior to the date of termination (the
"Severance Payment"); (ii) any bonuses which have been earned but not been paid
prior to such termination ("Prior Bonus Payment") and (iii) reimbursement of
expenses incurred prior to date of termination (the "Expense Reimbursement").
The aforesaid amounts shall be payable in cash without discount for early
payment, at the option of Executive, either in full immediately upon such
termination or monthly over the Unexpired Employment Period (the "Payment
Election"). In addition, Executive's fringe benefits specified in Section 2
shall continue through the end of the Unexpired Employment Period; provided,
however, that such benefits which may not continue pursuant to law, such as
participation in a qualified pension plan, shall terminate on the date of
termination and further provided, that Executive shall be entitled to COBRA
continuation coverage and to continue the applicable life insurance policies
thereafter, at his cost ("Fringe Benefit Continuation").
In the event Executive terminates his employment within the six (6) month
period on or immediately following a Change in Control which constitutes a
termination for Good Reason under this Agreement pursuant to Section 5(a)(iv),
Executive shall be entitled to receive from the Company an additional lump sum
cash payment in an amount sufficient to pay any excise taxes which may be
imposed on Executive pursuant to Section 4999 of the Code (or any successor
provisions) plus any excise or income tax liability on the gross up payment
itself so that on a net after tax basis Executive shall be in the same position
as if the excise tax under Section 4999 of the Code (or any successor
provisions) had not been imposed.
In the event Executive is terminated by the Company Without Cause or due to
Executive's Disability or Executive terminates his employment with the Company
for Good Reason, Executive shall have no duty to mitigate the amount of the
payment received pursuant to this Section 6(a), it being understood that
Executive's acceptance of other employment shall not reduce the Company's or
the other Company' obligations hereunder.
(b) DEATH. If Executive's employment is terminated due to death of
Executive, Executive's estate or beneficiary(ies), as the case may be, shall be
entitled to a lump payment in an amount equal to the Severance Payment, the
Prior Bonus Payment and Expense Reimbursement and Executive's spouse and
covered children shall be entitled to receive Fringe Benefit Continuation to
the extent applicable.
(c) TERMINATION WITH CAUSE OR WITHOUT GOOD REASON. If the Company
terminates Executive's employment for Cause (pursuant to Section 3(a)(i)) or in
the event Executive voluntarily terminates his employment without Good Reason
(pursuant to Section 3(a)(vi)), Executive shall be entitled to his Annual Base
Salary through the date of the termination of such employment and Executive
shall be entitled to any bonuses which have been earned but not paid prior to
such termination. Executive shall not be entitled to any other bonuses.
Executive's additional benefits specified in Section 2 shall terminate at the
time of such termination and the entire outstanding balance (principal and
interest) of any loans from the Company to Executive shall be due and owing on
date of such termination. Any amounts owed by Executive to the Company
hereunder shall be set off against any amounts payable from the Company to the
Executive.
(d) TERMINATION BY THE COMPANY UPON CHANGE IN CONTROL. If the
Company terminates Executive's employment for any reason in connection with a
Change in Control which is not approved by the Continuing Directors of the
Company, Executive shall receive from the Company in one lump sum, payable on
the consummation of the Change in Control an amount equal to the Severance
Payment, the Prior Bonus Payment and the Expense Reimbursement. The aforesaid
amount shall be payable in cash without discount for early payment on the
consummation of such Change in Control. In addition, any outstanding balances
(principal and interest) of any loans made by the Company to Executive shall be
forgiven on the consummation of such Change in Control. Executive (and his
spouse and children) shall be entitled to Fringe Benefit Continuation. In
addition to the aforesaid cash payment, the Company shall pay Executive, on the
consummation of the Change in Control, in one lump sum, a cash payment (i) in
an amount sufficient to cover the full tax consequences of the forgiveness of
any loans so that on a net after tax basis Executive shall be the same as if no
taxable events had occurred upon such forgiveness (ii) in an amount sufficient
to pay any excise taxes which may be imposed on Executive pursuant to
Section 4999 of the Code (or any successor provisions) plus any excise or
income tax liability on the gross up payment itself so that on a net after tax
basis Executive shall be the same as if the excise tax under Section 4999 of
the Code (or any successor provisions) had not been imposed.
In the event Executive is terminated by the Company in connection with a Change
in Control which is not approved by the Continuing Directors of the Company,
Executive shall have no duty to mitigate the amount of the payment received
pursuant to this Section 6(d), it being understood that Executive's acceptance
of other employment shall not reduce the Company's obligations hereunder.
(e) VESTING TRUST. At Executive's option, the Company shall
establish a vesting trust into which the Company shall, to the extent
economically feasible, contribute and/or pledge assets to secure its severance
obligations to Executive under this Agreement.
5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors and assigns. The Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all its assets to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. Executive agrees that this Agreement is personal to him and may not be
assigned by him other than by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive's legal
representative.
6. JOINT AND SEVERAL LIABILITY.
(a) NO DUPLICATION OF PAYMENTS. The Company and its Affiliates
shall be jointly and severally liable for any amounts payable to Executive
under this Agreement. Any amounts payable to Executive shall be paid in the
first instance by the Company, and to the extent not paid by the Company shall
be paid by its Affiliates. In no event shall any amount payable pursuant to
this Agreement be paid by the Company and its Affiliates and Executive shall
not be entitled to receive duplicate benefits or payments under any of the
provisions of this Agreement.
(b) NEW SUBSIDIARIES. Any subsidiary of the Company that is formed
or acquired on or after the date hereof shall be required to become a signatory
to this Agreement and shall become jointly and severally liable with the
Company for the obligations hereunder.
(c) SALE OF SUBSIDIARIES. Upon the sale of the stock or
substantially all of the assets of any subsidiary of the Company, which is
approved by the Board, such subsidiary shall be automatically released from its
obligations hereunder and shall not be considered as having any continuing
liability for the obligations hereunder, and Executive shall be released from
his obligations to such subsidiary hereunder.
7. GOVERNING LAW. This Agreement shall be construed in accordance with,
and its validity, interpretation, performance and enforcement and shall be
governed by, the laws of the State of California without regard to conflicts of
law principles thereof. Substantial obligations under this Agreement are to be
performed in San Diego, California. The parties select San Diego, California,
as the proper and sole venue for any action filed to enforce, construe, or
interpret this Agreement.
8. ENTIRE AGREEMENT. This instrument contains the entire understanding
and agreement among the parties relating to the subject matter hereof, except
as otherwise referred to herein, and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof. Neither this Agreement nor any provisions hereof may be
waived or modified, except by an agreement in writing signed by the party(ies)
against whom enforcement of any waiver or modification is sought.
9. SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid, illegal or unenforceable in any respect, or to any
extent, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
10. NOTICES. Any notice required or permitted to be given under the
provisions of this Agreement shall be in writing and delivered by courier or
personal delivery, facsimile transmission (to be followed promptly by written
confirmation mailed by certified mail as provided below) or mailed by certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: 0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Corporate Secretary
If to Executive: Xx. Xxxxx X. Arabia
Illegible
If delivered personally, by courier or facsimile transmission (confirmed as
aforesaid and provided written confirmation and receipt is obtained by the
sender), the date on which a notice is delivered or transmitted shall be the
date on which such delivery is made. Notices given by mail as aforesaid shall
be effective and deemed received upon the date of actual receipt or upon the
third business day subsequent to deposit in the U.S. mail, whichever is
earlier. Either party hereto may change its or his address specified for
notices herein by designating a new address by notice in accordance with this
Section 12.
11. NO UNDUE INFLUENCE. This Agreement is executed voluntarily and
without any duress or undue influence. Executive acknowledges that he has read
this Agreement and executed it with his full and free consent. No provision of
this Agreement shall be construed against any party by virtue of the fact that
such party or its counsel drafted such provision or the entirety of this
Agreement.
12. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and both of which taken
together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as
of the date first above written.
EXECUTIVE: COMPANY:
NatureWell, Incorporated,
a Delaware Corporation
/S/ Xxxxx Arabia By: /s/ Xxxxxx Xxxxxxx
-------------------------- --------------------------
Xxxxx X. Arabia Xxxxxx Xxxxxxx
Senior Vice President
By: /S/ Xxxxxxx Xxxxx
--------------------------
Xxxxxxx X. Xxxxx, Chairman
Compensation Committee
AFFILIATES:
Diagnos Tech, Inc.,
a California corporation
By: /S/ Xxxxxx Xxxxxxx
--------------------------
Xxxxxx Xxxxxxx, Chairman and CEO
Nasal Mist, Inc.,
a California corporation
By: /S/ Xxxxxx Xxxxxxx
--------------------------
Xxxxxx Xxxxxxx, Chairman and CEO
