EMPLOYMENT AGREEMENT
Exhibit
10.3
Form
8-K
Viking
Systems, Inc.
File
No.
000-49636
Agreement
(“Agreement”), by and between Viking Systems, Inc, a Nevada corporation
(“Viking”), and Xxxx Xxxxxxx (“Executive”) is executed on the 10th day of
October 2005.
RECITALS
The
Company is engaged primarily in the business of the development and supply
of
high
performance 3D endoscopic vision systems to hospitals for minimally invasive
surgery (the
“Business”).
Executive
currently serves as President Vision Systems Group of Viking and Executive
is
willing to continue to serve as an employee of Viking upon the terms and
conditions herein set forth. In respect of such employment, Executive has also
executed that certain Proprietary Information and Inventions Agreement of even
date herewith (the “Proprietary Information and Inventions Agreement”), which is
attached hereto as Exhibit A and incorporated herein by reference.
The
Board
of Directors of Viking (the “Board”) has determined that it is in the best
interests of Viking and its stockholders to assure that Viking will have the
continued dedication of Executive despite the possibility, threat, or occurrence
of a Change of Control (as defined below) of Viking.
The
Board
believes it is imperative to diminish the inevitable distraction of Executive
by
virtue of the personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage Executive's full attention and
dedication to Viking currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation arrangements
upon a Change of Control that afford Executive with a requisite amount of
individual financial security and are competitive with those of other
corporations. In order to accomplish these, and other, objectives, the Board
has
caused Viking to enter into this Agreement.
In
consideration for the options granted to Executive pursuant to Section 3.3
of
this Agreement, Executive has agreed not to compete with the Company in
accordance with the provisions of Section 11 of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises, terms, covenants, and
conditions set forth herein and the performance of each, it is hereby agreed
as
follows:
1. Definitions.
1.1 Change
of Control Period.
The
“Change of Control Period” is the period commencing on the date of a Change of
Control and ending on the first anniversary of such date.
1.2 Change
of Control.
For the
purpose of this Agreement, a “Change of Control” shall mean:
(a) Change
of Control.
A
“Change in Control” shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended, or if
Item 6(e) is no longer in effect, any regulations issued by the Securities
and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
which serve similar purposes; provided further that, without limitation, a
Change in Control shall be deemed to have occurred if and when:
(b)
Turnover
of Board.
The
following individuals no longer constitute a majority of the members of the
Board: (A) the individuals who, as of the date of this Agreement constitute
the
Board (the “Current Directors”); (B) the individuals who thereafter are elected
to the Board and whose election, or nomination for election, to the Board was
approved by a vote of all of the Current Directors then still in office (such
directors becoming “Additional Directors” immediately following their election);
and (C) the individuals who are elected to the Board and whose election, or
nomination for election, to the Board was approved by a vote of all of the
Current Directors and Additional Directors then still in office (such directors
also becoming “Additional Directors” immediately following their
election);
(c)
Tender
Offer.
A
tender offer or exchange offer is made whereby the effect of such offer is
to
take over and control Viking, and such offer is consummated for the equity
securities of Viking representing thirty-three percent (33%) or more of the
combined voting power of Viking's then outstanding voting
securities;
(d)
Merger
or Consolidation.
The
stockholders of Viking shall approve a merger, consolidation, recapitalization,
or reorganization of Viking, a reverse stock split of outstanding voting
securities, or consummation of any such transaction if stockholder approval
is
not obtained, other than any such transaction that would result in at least
75%
of the total voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being beneficially owned
by the holders of outstanding voting securities of Viking immediately prior
to
the transaction, with the voting power of each such continuing holder relative
to other such continuing holders not substantially altered in the
transaction;
(e)
Liquidation
or Sale of Assets.
The
stockholders of Viking shall approve a plan of complete liquidation of Viking
or
an agreement for the sale or disposition by Viking of all or a substantial
portion of Viking's assets to another person, which is not a wholly owned
subsidiary of Viking (i.e., 50% or more of the total assets of Viking);
or
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(f) Stockholdings.
Any
“person” (as that term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under that act), directly or indirectly of more than
thirty-three percent (33%) of the total voting power represented by Viking's
then outstanding voting Securities.
1.3. Change
of Control Effective Date.
The
“Change of Control Effective Date” shall be the first date during the “Change of
Control Period” (as defined below) on which a Change of Control
occurs.
1.4 Employment
Period. The
Employment Period is the period during which Viking employs the
Executive.
1.5 Good
Cause.
For
purposes of this Agreement Good Cause shall mean any one or more of the
following:
(a)
Executive's
willful, material, and irreparable breach of this Agreement;
(b)
Executive's
violation of Company policies and procedures, Code of Ethics, gross negligence
in the performance or intentional nonperformance (continuing for thirty (30)
days after receipt of written notice of need to cure) of any of Executive's
material duties and responsibilities hereunder;
(c)
Executive's material willful dishonesty, fraud, misrepresentation, or misconduct
with respect to the business or affairs of Viking, which materially and
adversely affects the operations or reputation of Viking;
(d)
Executive's indictment for, conviction of, or guilty plea to a felony crime
involving dishonesty or moral turpitude whether or not relating to Viking;
or
(e)
a
confirmed positive illegal drug test result.
1.6 Good
Reason Termination.
Executive shall have “Good Reason” to terminate Executive's employment upon the
occurrence of any of the following events without Executive's prior written
approval:
(a)
Executive is demoted by means of a substantive reduction in authority,
responsibilities, or duties, including but not limited to a substantive change
in the Executive’s reporting relationship(s);
(b)
Executive's Base Salary for a fiscal year as determined pursuant to paragraph
3.1 is reduced;
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(c)
Executive
is required to render his primary employment services from a location more
than
30 miles from Viking's Massachusetts operations at the time Executive began
his
employment with Viking;
(d) Viking
breaches a material provision of this Agreement; or
(e)
Viking
fails to obtain the assumption of this Agreement by any successor or assign
of
Viking or its principal business activities; or.
(f) There
is
a change in the reporting structure of Executive relative to the authority
of
the Executive’s immediate supervisor.
1.7 Severance
Compensation. Severance
Compensation means those payments required by Section 6 or 7 of this
Agreement.
2. Employment
and Duties.
2.1 Employment;
Term
of Employment.
The
Company hereby agrees to continue Executive in its employ, and the Executive
hereby agrees to remain in the employ of Viking. The term of this Agreement
shall continue until such time as the employment of Executive is terminated
pursuant to Section 6 below.
2.2 Duties.
Subject
to the terms and provisions of this Agreement, Executive is employed by Viking
as an executive employee of Viking. Executive’s specific position shall be as
the President Vision Systems Group. Executive covenants to perform Executive’s
employment duties in good faith.
2.3 Exclusive
Services.
Executive’s entire business time, attention, energies, skills, learning and best
efforts shall be devoted to the business of Viking; provided, however, that
this
Section 2.3 shall not be construed as preventing Executive from participating
in
social, civic or professional associations or engaging in passive outside
investment activities which may require a limited portion of time and effort
to
manage, consistent with Company’s policies and procedures and so long as such
activities do not interfere with the performance of Executive’s duties nor
compete, in any way, with the products or services offered by or through Viking.
2.4 Place
of Performance.
Executive shall not be required by Viking or by the performance of Executive's
duties under this Agreement either to perform Executive's principal duties
at a
work location more than thirty (30) miles from Viking's current
offices.
3. Compensation.
For all
services rendered by Executive during the Employment Period, Viking shall
compensate Executive as follows:
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3.1 Base
Salary.
Executive shall receive a monthly base salary of $16,308.33 (“Base Salary”) if
annualized would be $195,700 per year. During the Employment Period, the Base
Salary shall be reviewed at least annually and if increased at any time shall
be
substantially consistent with increases in base salary awarded in the ordinary
course of business to other key executives of Viking and its subsidiaries.
Any
increase in Base Salary shall not serve to limit or reduce any other obligation
to Executive under this Agreement. Base Salary shall not be reduced after any
such increase.
3.2 Annual
Bonus.
Executive
shall be eligible for an annual performance cash bonus of up to 30% of
Executive’s applicable annual base salary (the “Target Bonus”), less standard
deductions and withholdings. Viking will determine the amount of the bonus,
if
any, based on Executive’s performance against specific measurable corporate and
personal goals approved annually by the Compensation Committee of the Board,
and
payable within the first quarter of the year following the bonus
period.
3.3 Inducement
Stock Option.
Upon
the execution of this Agreement, Viking shall grant to Executive a stock option
to purchase an aggregate of 500,000 shares of the common stock of Viking, $0.001
par value per share (the “Common Stock”). The exercise price for such stock is
$.40 per share. Such stock option shall have a 10 year term and become
exercisable or “vest” as described in the stock option agreement (200,000 shares
as of October 1, 2005, 150,000 shares as of July 1, 2006 and 150,000 shares
as
of July 1, 2007, subject to acceleration as set forth below. The other terms
and
conditions of such stock options shall be set forth in the individual stock
option agreements, which shall be Viking’s standard form of option agreement and
consistent with its 2004 Stock Incentive Plan (the“Option
Plan”).
This
stock option is in addition to options previously awarded and any future options
that Executive would otherwise be eligible for based on annual Company or
individual performance, or available under other Company compensation programs.
3.4 Incentive,
Savings, and Retirement Plans.
In
addition to Base Salary and Annual Bonus payable as above provided, Executive
shall be entitled to participate during the Employment Period in all current
incentive, savings, and retirement plans, practices, policies and programs
applicable to other key executives of Viking (including its successors or
assigns) and its affiliates.
3.5 Welfare
Benefit Plans.
Executive and/or Executive's family who are qualified to participate, as the
case may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies, and programs provided
by Viking and its subsidiaries, as in effect at any time thereafter with respect
to other key executives.
3.6 Expenses.
During
the Employment Period, Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Executive in connection
with the business of Viking in accordance with the policies, practices, and
procedures of Viking and its subsidiaries in effect with respect to other key
executives.
3.7 Vacation.
During
the Employment Period, Executive shall be entitled to four weeks paid vacation
per year.
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4. Nondisclosure
of Confidential, Proprietary or Trade Secret
Information.
As a
condition of employment, Executive agrees to execute, deliver to the Company
and
abide by a Proprietary Information and Inventions Agreement (the “Inventions
Agreement”),
the
form of which is attached hereto as Exhibit A. The termination of employment
shall not release Executive from Executive’s obligations under the Inventions
Agreement or as established by applicable laws or the Company’s
policies.
5. No
Solicitation of Customers or Employees.
Executive acknowledges that the Company has invested substantial time, effort
and expense in compiling its confidential, proprietary and trade secret
information and in assembling its present staff of personnel. In order to
protect the business value of the Company’s confidential, proprietary and trade
secret information, during Executive’s employment with the Company and for one
year immediately following the termination of that employment with the
Company:
(a)
Executive agrees that information regarding all customers and all prospective
customers of the Company, of which Executive learns during Executive’s
employment with the Company, may constitute “Proprietary Information” of the
Company as defined in the Inventions Agreement.
(b)
Executive agrees not to, directly or indirectly, induce or solicit any of the
Company’s employees to leave their employment with the Company.
6.
Termination;
Rights On Termination.
6.1 Termination.
Executive's employment under this Agreement may be terminated in any one of
the
followings ways:
(a)
Death
of Executive.
The
employment of Executive shall terminate immediately upon Executive's death
provided that Viking shall, for a period of one (1) month
following such death, pay to the estate of Executive an amount equal to
Executive's Base Salary and continue the welfare benefit programs contemplated
by Section 3.5 including paying all premiums for coverage for Executive's
dependent family members under all health, hospitalization, disability, dental,
life, and other insurance plans that Viking maintained at the time of
Executive's death.
(b) Disability
of Executive.
If, as
a result of incapacity due to physical or mental illness or injury, Executive
shall have been absent from Executive's full-time duties hereunder for two
(2)
consecutive months, then fourteen (14) days after giving written notice to
Executive (which notice may occur before or after the end of such two (2) month
period, but which shall not be effective earlier than the last day of such
two
(2) month period), Viking may terminate Executive's employment provided
Executive is unable to resume Executive's full-time duties at the conclusion
of
such notice period.
(c) Termination
by Viking for Good Cause.
Viking
may terminate Executive's employment without notice to Executive for Good Cause.
In the event of a termination by Viking for Good Cause, Executive shall have
no
right to any severance compensation except for compensation already earned.
.
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(d)
Termination
by Viking Without Good Cause or Termination by Executive With Good
Reason.
Viking
may terminate Executive's employment without Good Cause and without notice
during the Employment Period upon the approval of a majority of the members
of
the Board, excluding Executive if Executive is a member of the Board. Executive
may terminate Executive's employment under this Agreement for Good Reason upon
fourteen (14) days prior notice to Viking.
(e) Termination
by Executive Without Good Reason.
Executive may, without cause, and without Good Reason terminate Executive's
own
employment under this Agreement, effective fourteen (14) days after written
notice is provided to Viking or such earlier time as any such resignation may
be
accepted by Viking. If Executive resigns or otherwise terminates Executive's
employment without Good Reason, Executive shall receive no Severance
Compensation.
6.2 Severance
Compensation Without Change in Control.
Following termination of Executive’s employment without a Change of Control, all
payments and benefits provided to Executive under this Agreement shall cease
as
of the date of such termination, except that in the event Executive’s employment
is terminated by Viking Without Good Cause or by Executive Termination With
Good
Reason pursuant to Section 6.1(d), then subject to Executive’s execution and
delivery to Viking of a Release and Waiver of claims in the form attached hereto
as Exhibit B, Viking shall:
(a)
pay
Executive severance pay in the form of continuation of Executive’s then current
Base Salary, less standard deductions and withholdings, for a period of nine
(9)
months from the effective date of Executive’s termination of employment with
Viking with such payments to be made at the same time as Executive’s base salary
otherwise would have been payable;
(b)
pay
Executive an amount equal to 50% of the Target Bonus on a prorated basis for
the
current year through the date of termination, less standard deductions and
withholdings, in equal monthly installments during the period during which
Executive is entitled to continuation of base salary under clause (i) of this
Section 6.2;
(c)
if
Executive elects continued coverage under COBRA, reimburse Executive for
Executive’s health insurance premiums for Executive and Executive’s family for a
period of nine (9) months from the effective date of Executive’s termination of
employment with Viking, to the same extent Viking paid those premiums at the
time of termination; and
(d)
accelerate
the vesting of all of Executive’s stock options and other equity awards issued
by Viking by a period of nine (9) months after the effective date of Executive’s
termination of employment with Viking.
7. Termination
of Employment Following Change of Control.
If any
of the events described in Section 1 hereof constituting a Change of Control
shall have occurred, Executive shall be entitled to the benefits provided in
Section 7.5 hereof upon the actual termination by Viking or “Constructive
Termination” of Executive’s employment within one year after such Change of
Control, unless such termination is by Viking for Good Cause as defined in
Section 1.5 of this Agreement.
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7.1 Constructive
Termination.
For
purposes of this Agreement, “Constructive Termination” shall mean a resignation
by Executive for Good Reason as defined in section1.6.
7.2 Notice
of Termination.
During
that period commencing on the Change of Control Effective Date and ending twelve
months thereafter, any termination of Executive’s employment by Viking or by
Executive for any reason whatsoever during the term of this Agreement shall
be
communicated by fourteen (14) days written notice of termination to the other
party hereto (“Notice of Termination”).
7.3 Date
of Termination.
For
purposes of this Section 7, “Date of Termination” shall mean a date which is
within twelve (12) months after a Change of Control and is either (1) the date
specified in the Notice of Termination, if Executive’s employment is terminated
by Executive during the term hereof: or (2) the date on which a Notice of
Termination is given, if Executive’s employment is terminated for any other
reason.
7.5 Benefits
Upon Termination Following a Change Of Control. The
Company shall provide Executive as soon as practicable, but not more than ten
business days following the Date of Termination subsequent to a Change of
Control of Viking, each of the following benefits:
(a) Severance
Benefit.
The
Company shall pay Executive a lump sum severance benefit, which shall equal
the
sum of (a) nine (9) months of Base Salary, plus (b) an
amount
equal to 50% of the Target Bonus on a prorated basis for the current year
through the Date of Termination
(b) Equity
Compensation.
All
unvested stock options, stock appreciation rights and restricted stock awards
held by Executive at the time of Executive’s Date of Termination shall be deemed
fully vested and exercisable as such Date of Termination, provided, that if
any
such option, right or award would, as a result of such early exercisability
no
longer qualify for exemption under Section 16 of the Exchange Act, then such
option, right or award shall be fully vested but shall not become exercisable
until the earliest date on which it could become exercisable and also qualify
for exemption from Section 16 of the Exchange Act. All vested options held
by
Executive, including those deemed fully vested as of the Date of Termination
shall become automatically exercisable for a period of one (1) year from the
Date of Termination; provided, however, in no event shall any option remain
exercisable beyond the maximum period allowed therefore in the stock option
plan
under which it was granted. This agreement shall serve as an amendment to all
of
Executive’s outstanding stock options, restricted stock awards and stock
appreciation rights as of the Date of Termination.
(c) Other
Benefits.
Viking
shall provide for a period of nine (9) months following the Date of Termination,
health and welfare benefits at least comparable to those benefits in effect
on
Executive’s Date of Termination. At Viking's election, health benefits may be
provided by reimbursing Executive for the cost of converting a group policy
to
individual coverage, or for the reimbursed cost of extended COBRA coverage.
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7.6 Other
Benefits Payable.
The
benefits described in subsection 7.5 above shall be payable in addition to,
and
not in lieu of, all other accrued or vested or earned but deferred compensation,
rights, options or other benefits which may be owed to Executive following
termination of Executive’s employment, irrespective of whether Executive’s
termination was preceded by a Change of Control.
7.7 Mitigation.
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for in this Agreement be reduced or offset in
any
way whatsoever by any amount received by Executive for any reason whatsoever
from another employer or otherwise after the Date of Termination.
8.
Return Of Viking Property.
All
records, designs, patents, business plans, financial statements, manuals,
memoranda, lists, and other property delivered to or compiled by Executive
by or
on behalf of Viking (or its subsidiaries) or its representatives, vendors,
or
customers that pertain to the business of Viking (or its subsidiaries) shall
be
and remain the property of Viking and be subject at all times to its discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials, and other similar data pertaining to the business, activities, or
future plans of Viking (or its subsidiaries) that is collected by Executive
shall be delivered promptly to Viking without request by it upon termination
of
Executive's employment.
9. Non-disparagement
and Neutral Reference.
During
the Employment Term and for the twelve (12) months thereafter, Executive will
not knowingly disparage, criticize, or otherwise make any derogatory statements
regarding the Company, its directors, or its officers. The foregoing
restrictions will not apply to any statements that are made truthfully in
response to a subpoena or other compulsory legal process. The Company will
provide a neutral employment reference to all those requesting information
regarding the Executive’s employment with Company and may, with the appropriate
waivers provided by the Executive to Viking, provide additional reference
information upon request.
10. Confidentiality
and Inventions.
Executive recognizes that Viking has and shall continue to have and develop
information, knowledge and rights regarding inventions, confidential
information, products, services, future plans, business affairs, processes,
trade secrets, technical matters, customer lists, experimental designs and
items
of intellectual property. Executive hereby confirms and ratifies the Proprietary
Information and Inventions Agreement (Exhibit A, which is incorporated herein
by
reference) and agrees to execute and deliver to Viking any other similar
agreement(s) presented to Executive by Viking from time to time.
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11. Prohibited
Competition.
In
consideration of the grant of options by the Company to Executive agreed to
in
this Agreement, Executive agrees to be bound by this Section 3.3. Executive
recognizes and acknowledges the competitive and proprietary nature of the
Company’s business operations. Accordingly, Executive agrees that, during the
term of his employment and for a period of twelve (12) months following
termination of his employment for any reason including, but not limited, to
termination for cause, without cause, voluntary termination, involuntary
termination, or as a result of change of control, Executive shall not, without
the prior written consent of the Company, for himself or on behalf of any other
person or entity, directly or indirectly, either as principal, agent,
stockholder, Executive, Executive representative or in any other capacity:
(i) own, manage, operate or control, or be concerned, connected or employed
by, or otherwise associate in any manner with, or engage in or have a financial
interest in, any of the following companies or in the subsidiaries of any of
the
following companies: Intuitive Surgical, Stryker Endoscopy, Xxxx Xxxxx Imaging,
Inc., ACMI, Olympus Medical, Medtronic Sofamor Xxxxx, Boston Scientific
Endoscopy, Aesculap and Linvatec.
Nothing
contained herein shall preclude Executive from purchasing or owning stock in
any
such competitive business if such stock is publicly traded, and provided that
Executive’s holdings do not exceed one percent (1%) of the issued and
outstanding capital stock of such business. If any part of this section should
be determined by a court of competent jurisdiction to be unreasonable in
duration, geographic area, or scope, then this section is intended to and shall
extend only for such period of time, in such geographic area and with respect
to
such activity as is determined by such court to be reasonable.
12. Indemnification.
In the
event Executive is made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by Viking against Executive), by reason of the fact that
Executive is or was performing services under this Agreement, then Viking shall
indemnify Executive against all expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement, as actually and reasonably incurred
by
Executive in connection therewith to the maximum extent permitted by applicable
law. The advancement of expenses shall be mandatory. In the event that both
Executive and Viking are made a party to the same third-party action, complaint,
suit, or proceeding, Viking agrees to engage competent legal representation,
and
Executive agrees to use the same representation, provided that if counsel
selected by Viking shall have a conflict of interest that prevents such counsel
from representing Executive, Executive may engage separate counsel and Viking
shall pay all attorneys' fees of such separate counsel. Further, while Executive
is expected at all times to use Executive's best efforts to faithfully discharge
Executive's duties under this Agreement, Executive cannot be held liable to
Viking for errors or omissions made in good faith if Executive has not exhibited
gross, willful, and wanton negligence and misconduct or performed criminal
and
fraudulent acts that materially damage the business of Viking. Notwithstanding
this paragraph 12, the provision of any written indemnification agreement
applicable to the directors and officers of Viking to which Executive shall
be a
party shall apply rather than this paragraph 12 to the extent inconsistent
with
this paragraph 12. Without limiting the foregoing, Viking shall continue to
maintain coverage for Executive under any directors' and officers' liability
insurance policies for a period of nine (9) years following any termination
of
Executive's employment by Viking without Good Cause or by Executive with Good
Reason.
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13.
Parachute Payments.
If any
payment or benefit Employee would receive pursuant to a Change in Control from
the Company or otherwise (“Payment”)
would
(i) constitute a “parachute payment” within the meaning of Section 280G of the
Code, and (ii) but for this sentence, be subject to the excise tax imposed
by
Section 4999 of the Code (the“Excise
Tax”),
then
such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be
either (x) the largest portion of the Payment that would result in no portion
of
the Payment being subject to the Excise Tax or (y) the largest portion, up
to
and including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income taxes,
and the Excise Tax (all computed at the highest applicable marginal rate),
results in Employee’s receipt, on an after-tax basis, of the greater
amount
of the Payment notwithstanding that all or some portion of the Payment may
be
subject to the Excise Tax. If a reduction in payments or benefits constituting
“parachute payments” is necessary so that the Payment equals the Reduced Amount,
reduction shall occur in the following order unless Employee elect in writing
a
different order (provided, however, that such election shall be subject to
Company approval if made on or after the effective date of the event that
triggers the Payment): reduction of cash payments; cancellation of accelerated
vesting of stock options; reduction of employee benefits. In the event that
acceleration of vesting of the stock options is to be reduced, such acceleration
of vesting shall be cancelled in the reverse order of the date of grant of
Employee’s stock options (i.e.,
earliest
granted stock option cancelled last) unless Employee elects in writing a
different order for cancellation.
14.
No
Prior Agreements.
Executive hereby represents and warrants to Viking that the execution of this
Agreement by Executive and Executive's employment by Viking and the performance
of Executive's duties hereunder will not violate or be a breach of any agreement
with a former employer, client, or any other person or entity. Further,
Executive agrees to indemnify Viking for any claim, including, but not limited
to, attorneys' fees and expenses of investigation, by any such third party
that
such third party may now have or may hereafter come to have against Viking
based
upon or arising out of any -competition, invention, or secrecy agreement between
Executive and such third party that was in existence as of the date of this
Agreement.
15. Assignment;
Binding Effect.
Executive understands that Executive is being employed by Viking on the basis
of
Executive's personal qualifications, experience, and skills. Executive agrees,
therefore, Executive cannot assign all or any portion of Executive's performance
under this Agreement. Subject to the preceding two (2) sentences and the express
provisions of Section 14 below, this Agreement shall be binding upon, inure
to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
16.
Complete
Agreement.
This
Agreement is not a promise of future employment. Except as specifically provided
herein, Executive has no oral representations, understandings, or agreements
with Viking or any of its officers, directors, or representatives covering
the
same subject matter as this Agreement. This written Agreement is the final,
complete, and exclusive statement and expression of the agreement between Viking
and Executive and of all the terms of this Agreement, and it cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be later modified except
by a further writing signed by a duly authorized officer of Viking and
Executive, and no term of this Agreement may be waived except by writing signed
by the party waiving the benefit of such term. This Agreement hereby supersedes
any other employment agreements or understandings, written or oral, between
Viking and Executive.
11
17.
Notice.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
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To
Viking:
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0000
Xxxxxx Xxxxxx, Xxxxx 0000
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Xx
Xxxxx, Xxxxxxxxxx 00000
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Attention:
CEO
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To
Executive:
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000
Xxxxxxx Xxxxxx
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Xxxxxx,
XX 00000
|
Notice
shall be deemed given and effective on the earlier of three (3) days after
the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this paragraph 17.
18. Severability;
Headings.
If any
portion of this Agreement is held invalid or inoperative, the other portions
of
this Agreement shall be deemed valid and operative and, so far as is reasonable
and possible, effect shall be given to the intent manifested by the portion
held
invalid or inoperative. The paragraph headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define or limit
the
extent or intent of the Agreement or of any part hereof.
19. Arbitration.
The
Parties agree that any and all disputes arising out of the terms of this
Agreement, Executive’s employment by the Company, Executive’s service as an
officer or director of the Company, or Executive’s compensation and benefits,
their interpretation, and any of the matters herein released, will be subject
to
binding arbitration in Boston, MA before the Judicial Arbitration and Mediation
Services, Inc. under the American Arbitration Association’s National Rules for
the Resolution of Employment Disputes, supplemented by the California Rules
of
Civil Procedure. The Parties agree that the prevailing party in any arbitration
will be entitled to injunctive relief in any court of competent jurisdiction
to
enforce the arbitration award. The
Parties hereby agree to waive their right to have any dispute between them
resolved in a court of law by a judge or jury. This
paragraph will not prevent either party from seeking injunctive relief (or
any
other provisional remedy) from any court having jurisdiction over the Parties
and the subject matter of their dispute relating to Executive’s obligations
under this Agreement and the Confidential Information Agreement. Viking shall
bear the costs of the arbitration if Executive prevails. If Viking prevails,
Executive will pay half the cost of the arbitration. Each party shall be
responsible for paying its own attorneys fees.
20. No
Participation In Severance Plans.
Except
as contemplated by this Agreement, Executive acknowledges and agrees that the
compensation and other benefits set forth in this Agreement are and shall be
in
lieu of any compensation or other benefits that may otherwise be payable to
or
on behalf of Executive pursuant to the terms of any severance pay arrangement
of
Viking or any affiliate thereof, or any other similar arrangement of Viking
or
any affiliates thereof providing for benefits upon involuntary termination
of
employment.
21.
Governing
Law.
This
Agreement shall in all respects be construed according to the laws of the State
of Massachusetts, notwithstanding the conflict of laws provisions of such
state.
12
22.
Counterparts;
Facsimile.
This
Agreement may be executed by facsimile and in two (2) or more counterparts,
each
of which shall be deemed an original and all of which together shall constitute
but one and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
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Viking
Systems, Inc.
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|
|
By:
/s/ Xxxxxx X. Xxxxx
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|
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Xxxxxx
X. Xxxxx, CEO
|
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EXECUTIVE:
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/s/
Xxxx Xxxxxxx
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Xxxx
Xxxxxxx
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13
EXHIBIT
A
PROPRIETARY
INFORMATION AND INVENTIONS AGREEMENT
Viking
Systems, Inc.
0000
Xxxxxx Xxxxxx, Xxxxx 0000
Xx
Xxxxx,
Xxxxxxxxxx 00000
Ladies
and Gentlemen:
I
recognize that Viking Systems, Inc., a Nevada corporation (“Viking”),
possesses a body of existing technology and intellectual property rights and
is
engaged in a continuous program of research, development and production with
respect to its business (present and future). I understand that:
A.
As
part
of my employment by Viking (with the term “employment”,
as
used herein, to include any consulting relationship), I am expected to make
new
contributions and inventions of value to Viking.
B.
I
understand that my employment creates a relationship of confidence and trust
between me and Viking and that my position places me in a unique position of
access to the proprietary technology, trade secrets and research, development
and business information (1)applicable to the business of Viking; or
(2)applicable to the business of any client, partner or customer of Viking,
which may be made known to me by Viking or by any client, partner or customer
of
Viking, or learned by me during the period of my employment.
C. Viking
possesses and will continue to possess information that has been or will be
created, discovered or developed, or has or will otherwise become known to
Viking (including, without limitation, information created, discovered,
developed or made known by or to me during the period of or arising out of
my
employment by Viking), and/or in which property rights have been or will be
assigned or otherwise conveyed to Viking, which information has commercial
value
in the business in which Viking is engaged. All of the aforementioned
information is hereinafter called “Confidential
Information.”
By way
of illustration, but not limitation, Confidential Information includes all
data,
compilations, blueprints, plans, audio and/or video recordings and/or devices,
information on computer disks, software, tapes, printouts and other printed,
typewritten or handwritten documents, specifications, strategies, systems,
schemas, methods (including delivery, storage, receipt, transmission,
presentation and manufacture of audio, video, informational or other data or
content), business and marketing development plans, customer lists, research
projections, processes, techniques, designs, sequences, components, programs,
technology, ideas, know-how, improvements, inventions (whether or not patentable
or copyrightable), information about operations and maintenance, trade secrets,
formulae, models, patent disclosures and any other information concerning the
actual or anticipated business, research or development of Viking or its actual
or potential customers or partners or which is or has been generated or received
in confidence by or for Viking by or from any person; and all tangible and
intangible embodiments thereof of any kind whatsoever including, where
appropriate and without limitation, all compositions, machinery, apparatus,
records, reports, drawings, copyright applications, patent applications,
documents and samples, prototypes, models, products and the
like.
A-1
In
consideration of my employment or continued employment, as the case may be,
and
the compensation received by me from Viking from time to time, I hereby agree
as
follows:
1.
All
Confidential Information shall be the sole property of Viking and its assigns,
and Viking and its assigns shall be the sole owner of all patents, copyrights
and other rights in connection therewith. I hereby assign to Viking any rights
I
may have or acquire in all Confidential Information. At all times during my
employment by Viking and at all times after termination of such employment,
I
will keep in confidence and trust all Confidential Information, and I will
not
disclose, sell, use, lecture upon or publish any Confidential Information or
anything relating to it without the prior written consent of Viking, except
as
may be necessary in the ordinary course of performing my duties as an employee
of (or consultant to) Viking.
2.
Without
limiting the terms of my employment with Viking, I agree that during the period
of my employment by Viking I will not engage in any employment or activity
in
any business that is directly or indirectly competitive with Viking.
3.
All
documents, data, records, apparatus, equipment, sequences, components, programs
and other physical property, whether or not pertaining to Confidential
Information, furnished to me by Viking or produced by myself or others in
connection with my employment shall be and remain the sole property of Viking
and shall be returned promptly to Viking as and when requested by Viking. Should
Viking not so request, I shall return and deliver all such property upon
termination of my employment by me or by Viking for any reason (“Termination”)
and I
will not take with me any such property, any reproduction of such property
or
any materials or products derived from such property.
4.
I
shall
promptly disclose any outside activities or interests, including any ownership
or participation in the development of prior inventions, that conflict or may
conflict with the interests of Viking. I understand that I am required to make
such disclosures promptly if the activity or interest is related, either
directly or indirectly, to (i) an area of research, development, service,
product or product line of Viking, (ii) a manufacturing, development or research
methodology or process of Viking or (iii) any activity that I may be involved
with on behalf of Viking.
5.
I
shall
promptly disclose to Viking, or any persons designated by it, all improvements,
inventions, formulae, processes, programs, techniques, know-how and data,
whether or not patentable or copyrightable, made or conceived or reduced to
practice or learned by me, either alone or jointly with others, during the
period of my employment with Viking which are related to or useful in the
business of Viking, or result from tasks assigned me by Viking, or result from
use of premises owned, leased or contracted for by Viking (all said
improvements, inventions, formulae, processes, techniques, know-how and data
shall be collectively hereinafter called “Inventions”).
Such
disclosure shall continue for one year after Termination with respect to
anything that would be an Invention if made, conceived, reduced to practice
or
learned prior to Termination.
A-2
6.
I
agree
that all Inventions shall be the sole property of Viking and its assigns, and
Viking and its assigns shall be the sole owner of all patents, copyrights and
other rights in connection therewith and all Confidential Information with
respect thereto. I hereby assign to Viking any and all rights I may have or
acquire in all Inventions, including all rights that may be known as or referred
to as “moral
rights.”
I
further agree as to all Inventions to assist Viking in every proper way (but
at
Viking’s expense) to obtain and from time to time enforce patents and copyrights
on the Inventions in any and all countries, and to that end I will execute
all
documents for use in applying for and obtaining such patents and copyrights
thereon and enforcing the same, as Viking may desire, together with any
assignments thereof to Viking or persons designated by it. My obligation to
assist Viking in obtaining and enforcing patents and copyrights for the
Inventions in any and all countries shall continue beyond Termination, but
Viking shall compensate me at a reasonable rate after Termination for time
actually spent by me at Viking’s request on such assistance. In the event that
Viking is unable for any reason whatsoever to secure my signature to any lawful
and necessary document required to apply for or execute any patent or copyright
application with respect to Inventions (including renewals, extension,
continuations, divisions or continuations in part thereof), I hereby irrevocably
designate and appoint Viking and its duly authorized officers and agents, as
my
agents and attorneys-in-fact to act for and in my behalf and instead of me,
to
execute and file any such application and to do all other lawfully permitted
acts to further the prosecution and issuance of patents or copyrights thereon
with the same legal force and effect as if executed by me.
7.
As a
matter of record I have identified beneath by signature hereto a complete list
of all inventions or improvements relevant to the subject matter of my
employment by Viking which have been made or conceived or first reduced to
practice by me alone or jointly with others prior to my employment by Viking
(“Prior
Inventions”)
which I
desire to remove from the operation of this Agreement; and I covenant that
such
list is complete. If no such list is identified, I represent that I have made
no
such Prior Inventions at the time of the commencement of my employment by
Viking. Notwithstanding the foregoing, and without limiting the other provisions
of this Agreement, I agree that (i) any improvements or new inventions to the
item(s) so identified on such list (if any) shall be treated as Inventions
for
purposes of this Agreement if the provisions of Section 5 above are otherwise
applicable and (ii) if, in the course of my employment with Viking, I
incorporate a Prior Invention into a Viking product, process, application,
machine or invention, the Viking is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
rights to sublicense through multiple tiers of sublicensees) to make, have
made,
modify, use and sell such Prior Invention. Notwithstanding the foregoing, I
agree that I will not incorporate, or permit to be incorporated, Prior
Inventions in any Viking product, process, application, machine or invention
without Viking’s prior written consent.
8.
I
represent that my performance of all the terms of this Agreement and that my
employment by Viking does not and will not breach or constitute an event of
default under any agreement (i) obligating me to keep in confidence proprietary
information acquired by me in confidence or in trust prior to, or at any point
throughout, my employment by Viking, (ii) obligating me to assign to or protect
for the benefit of any third party any proprietary information or any
improvement, invention, formulae, process, program, technique, know-how or
data
or (iii) that is designed in any way to limit my employment or activity in
any
business in which I may compete, directly or indirectly, with any other
business, or which might by application have such an effect. I have not entered
into, and I agree that I will not enter into, any agreement (either written
or
oral) in conflict herewith.
A-3
9.
I
understand, acknowledge and agree that, as part of the consideration for my
employment or continued employment by Viking, I have not brought and will not
bring with me to Viking or use in the performance of my responsibilities at
or
for Viking any equipment, supplies, facility or trade secret or other
proprietary information of any former employer which are not generally available
to the public, unless I have obtained (and provide herewith to Viking a copy
of)
written authorization for their possession and use.
10.
I
also
understand that, in my employment by Viking, I am not to breach any obligation
of confidentiality that I have to others, and I agree that I shall fulfill
all
such obligations during my employment by Viking. A copy of any document
reflecting any such obligation, or a description thereof if no document is
available is provided herewith to Viking.
11.
I
agree
that during the term of my employment with Viking and for a period of twelve
(12) months after Termination, I will not directly or indirectly: (i) induce
or
attempt to induce any employee or consultant of Viking to leave the employ
of
Viking or to otherwise end such employee’s or consultant’s relationships with
Viking, or (ii) other than on behalf of Viking, induce or attempt to induce
any
other person to terminate a relationship with Viking.
12.
I
acknowledge that, due to the uniqueness of my relationship with Viking, Viking
would not have an adequate remedy at law for money damages in the event that
this Agreement is not fully performed in accordance with its terms. I agree
that
in addition to any other rights and remedies available to Viking for any breach
by me of my obligations hereunder, Viking shall be entitled to enforcement
of my
obligations hereunder by court injunction (without the posting of a bond or
other security), specific performance or other appropriate equitable relief.
13.
If any
provision of this Agreement shall be declared invalid, illegal or unenforceable,
such provision shall be severed and all remaining provisions shall continue
in
full force and effect.
14.
If
applicable, this Agreement does not apply to inventions which qualify fully
for
protection under Section 2870 of the California Labor Code (which, if
applicable, could apply to ideas or inventions for which no equipment, supplies,
facility or trade secret information of Viking were used and which were
developed entirely on my own time, and (1) which do not relate at the time
of
conception or reduction to practice of the invention (a) to the actual business
of Viking, or (b) to Viking’s actual or demonstrably anticipated research or
development, or (2) which do not result from any work performed by me for
Viking). Notwithstanding the foregoing, I shall disclose in confidence to Viking
any invention in order to permit Viking to make a determination as to compliance
by me with the terms and conditions of this Agreement.
15.
T his
Agreement shall be effective as of the first day of my employment by Viking.
The
term “employment”
and the
term or duration of my employment, as used herein and for purposes of this
Agreement, shall include, without limitation, any consulting relationship
between myself and Viking (including, if applicable, any such relationship
which
may follow the termination of my status as an employee of Viking or which may
precede my status as an employee of Viking). Accordingly, notwithstanding any
other provision of this Agreement to the contrary (and without limitation),
a
“Termination”
shall
not be deemed to have occurred if a consulting relationship persists following
the termination of my status as an employee of Viking (if applicable).
A-4
16.
The
term
Viking, as used herein, shall include any subsidiary or affiliate of Viking.
17.
This
Agreement shall be binding upon me, my heirs, executors, assigns and
administrators and shall inure to the benefit of Viking, its successors and
assigns.
18.
This
Agreement shall in all respects be construed according to the laws of the state
of Massachusetts, notwithstanding the conflict of laws provisions of such state.
|
Dated:
October 10, 2005
|
/s/
Xxxx Xxxxxxx
|
|
|
|
Xxxx
Xxxxxxx
|
|
|
Prior
Inventions:
NONE.
|
||
|
Accepted
and Agreed to
|
||
|
This
10th day of October, 2005.
|
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|
Viking
Systems, Inc.
|
||
|
By:
/s/ Xxxxxx X. Xxxxx
|
||
|
Xxxxxx
X. Xxxxx, CEO
|
A-5
EXHIBIT
B
RELEASE
AND WAIVER OF CLAIMS
I
understand and agree completely to the terms set forth in the Employment
Agreement, dated ____________, 2005 to which this form is attached (the
“Agreement”).
I understand that this release and waiver (the “Release”),
together with the Agreement, constitutes the complete, final and exclusive
embodiment of the entire agreement between Viking Systems, Inc. (“Viking”) and
me with regard to the Agreement. I am not relying on any promise or
representation by Viking that is not expressly stated
herein.
In
consideration of and except for the benefits I will receive under the Agreement,
I hereby generally and completely release Viking and its directors, officers,
employees, shareholders, members, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring prior to my signing this Release. This Release includes,
but
is not limited to: (1) all claims arising out of or in any way related to my
employment with Viking or the termination of that employment; (2) all claims
related to my compensation or benefits from Viking, including, but not limited
to, salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership
interests in Viking; (3) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing;
(4) all tort claims, including, but not limited to, claims for fraud,
defamation, emotional distress, and discharge in violation of public policy;
and
(5) all federal, state, and local statutory claims, including, but not limited
to, claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended),
the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) (“ADEA”),
and
the California Fair Employment and Housing Act (as amended).
I
acknowledge that I am knowingly and voluntarily waiving and releasing any rights
I may have under the ADEA. I also acknowledge that the consideration given
under
the Release for the waiver and release in the preceding paragraph hereof is
in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I should consult with
an
attorney prior to executing this Release; (C) I have twenty-one (21) days to
consider this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following my execution of this Release
to
revoke the Release; and (E) this Release shall not be effective until the date
upon which the revocation period has expired, which shall be the eighth
(8th)
day
after I execute this Release.
I
represent that I have not filed any claims against Viking, and agree that,
except as such waiver may be prohibited by statute, I will not file any claim
against Viking or seek any compensation for any claim other than the payments
and benefits referenced herein. I agree to indemnify and hold Viking harmless
from and against any and all loss, cost, and expense, including, but not limited
to court costs and attorney’s fees, arising from or in connection with any
action which may be commenced, prosecuted, or threatened by me or for my
benefit, upon my initiative, or with my aid or approval, contrary to the
provisions of this Release.
B-1
I
acknowledge that I have read and understand Section 1542 of the California
Civil
Code which reads as follows:“A
general release does not extend to claims which the creditor does not know
or
suspect to exist in his or her favor at the time of executing the release,
which
if known by his or her must have materially affected his or her settlement
with
the debtor.”
I hereby
expressly waive and relinquish all rights and benefits under that section
and
any law of any jurisdiction of similar effect with respect to my release
of any
claims I may have against Viking, its affiliates, and the entities and persons
specified above.
This
release is not intended to release any continuing obligations of Viking to
me,
if any, under any written employment agreement that I may have with
Viking.
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Dated:
October 10, 2005
|
||
|
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Xxxx
Xxxxxxx
|
|
|
Accepted
and Agreed to
|
||
|
This
10th day of October, 2005.
|
||
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Viking
Systems, Inc.
|
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By:
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Xxxxxx
X. Xxxxx, CEO
|
B-2
