Exhibit 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
OSTEX INTERNATIONAL, INC.
XXXXXX X. XXXXXXX
Dated as of July 16, 1997
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") between Ostex
International, Inc. (the "Company"), a Washington corporation and Xxxxxx
X. Xxxxxxx ("Executive") is dated and entered into as of July 16, 1997.
In consideration of the mutual covenants and promises contained herein,
the Company and the Executive agree as follows:
1. Employment
The Company will employ the Executive and the Executive will accept
employment by the Company as its President and Chief Executive Officer, with
duties and responsibilities customarily associated with such position. The
Executive will perform such duties as may be assigned from time to time by the
Board of Directors of the Company which relate to the business of the Company,
its subsidiaries or any business ventures in which the Company or its
subsidiaries may participate.
2. Attention and Effort
The Executive will devote his full business time, attention and effort
to the Company's business and will use his skills and render services to the
best of his ability to serve the interests of the Company. Notwithstanding
anything herein to the contrary, the parties agree that Executive may serve as a
member of the board of Directors of other corporations or entities (provided
that such corporations or entities do not compete with the Company) and engage
in consulting and other activities related to such directorships and that such
service shall not constitute a violation of Executive's duties and obligations
to the Company; provided, however, that such directorships and related
consulting and other activities (i) shall be limited to those which the
Executive currently performs pursuant to existing agreements that have been
disclosed to the Company and (ii) shall not materially detract from or interfere
with the Executive's obligations under this Section 2.
3. Term
Unless otherwise terminated as provided in paragraphs 6 and 7 of this
Agreement, the Executive's term of employment under this Agreement shall
commence on the date hereof and shall expire on July 15, 2001; provided,
however, that this Agreement shall be automatically renewed thereafter for
additional terms of one year each unless either the Company or the Executive
gives the other written notice of termination at least 30 days prior to the end
of the then current term.
4. Compensation
4.1 Base Salary
The Executive's compensation shall consist, in part, of an annual base
salary of $275,000 before all customary payroll deductions (the "Base Salary").
The Base Salary shall be paid in substantially equal installments at the same
intervals as other officers of the Company are paid. The Base Salary shall be
increased effective on the first anniversary of this Agreement by not less than
10% of the Base Salary. Thereafter, further increases to the Base Salary will be
reviewed annually by the Board of Directors and any adjustments shall be made at
the sole discretion of the Board of Directors. The Base Salary shall not be
reduced without Executive's express consent.
4.2 Bonus
For services rendered for the period through December 31, 1997, the
Executive shall be paid a bonus of $50,000, of which $25,000 shall be paid on
the date of this Agreement and $25,000 shall be paid on January 10, 1998.
5. Benefits and Expenses
5.1 Expenses
The Company shall promptly reimburse the Executive for all reasonable
and necessary business expenses incurred and advanced by him in carrying out his
duties under this Agreement. The Executive shall present to the Company from
time to time an itemized account of such expenses in such form as may be
required by the Company.
5.2 Benefits
During the term of employment hereunder, the Executive shall be
entitled to participate fully in any and all benefit plans, programs, policies
and any and all fringe benefits which may be made available to the senior
executives of the Company generally, including but not limited to medical,
dental, disability, pension and retirement benefits, life insurance and other
death benefits.
5.3 Travel and Relocation Expenses
During the term of Executive's employment, the Company shall reimburse
the Executive for or pay directly the reasonable expense of (i) round trip air
travel from San Diego to Seattle once per week, (ii) leasing a furnished
apartment in Seattle (including utilities, telephone and similar expenses), such
leases to be subject to the Company's approval (iii) limited moving expenses,
and (iv) temporary living accommodations in Seattle until an apartment is
rented. The Company and the Executive shall agree on a budget for such expenses
as soon as practicable after the date of this Agreement and shall initial such
final budget to acknowledge the agreed levels of expenses. To the extent that
such reimbursement or direct payment shall be treated as taxable income, the
Executive shall receive a "gross up" bonus to compensate the Executive for any
and all income taxes that the Executive may be required to pay with respect to
such reimbursement and gross up bonus (whenever such taxes may be assessed or
paid). The Executive shall report all such reimbursement and "gross up" bonuses
as ordinary income for income tax purposes. Upon termination of Executive's
employment, if Executive so requests, the Company shall reimburse the Executive
for the reasonable expense of relocating to San Diego (or another location
designated by Executive within the United States) and shall assume any lease
which Executive may have entered into in Seattle.
5.4 Stock Options
Simultaneously herewith, the Company has granted options to purchase
700,000 shares of Common Stock to the Executive under the authority of its
Amended and Restated 1994 Stock Option Plan and pursuant to the terms and
conditions of the Stock Option Agreement dated July 16, 1997 between the parties
(the "Stock Option Agreement"). Annually, the Board of Directors shall consider,
at its sole discretion, granting additional stock options to the Executive. The
Company represents and warrants to the Executive that all stock options (both
incentive stock options and nonqualified stock options) it has granted under the
1994 Stock Option Plan have contained a provision that vested options will
terminate upon the expiration of 90 days from the date of an optionee's
termination of employment or contractual relationship with the Company for any
reason other than death or disability.
5.5 Insurance
During the term of the Executive's employment, the Company will obtain
term life insurance on the life of the Executive, which insurance will provide
for the payment of an amount equal to the Base Salary for one year (or an amount
equal to two times the Base Salary following a Change in Control) to the
Executive's spouse in the event of the Executive's death; provided that the
Company may obtain such insurance for a larger amount, with the balance payable
to the Company in the event of the Executive's death.
6. Termination
Employment of the Executive pursuant to this Agreement may be
terminated as follows, but in any case, the provisions of Sections 8 and 9 shall
survive the termination of the Executive's employment:
6.1 By the Company
With or without Cause (as defined below), the Board of Directors may
terminate the employment of the Executive at any time during the Term upon
giving Notice of Termination (as defined below).
6.2 By the Executive
The Executive may terminate his employment at any time for any reason
upon giving Notice of Termination.
6.3 Automatic Termination
Employment shall terminate automatically upon death or total disability
of the Executive. The term "total disability" as used herein, shall mean an
inability to perform the duties set forth in paragraph 1 of this Agreement
because of illness or physical or mental disability for a period or periods
aggregating 120 calendar days in any 12-month period, unless the Executive is
granted a leave of absence by the Board of Directors of the Company. Executive
and the Company hereby acknowledge that the Executive's ability to perform the
duties specified in paragraph 1 of this Agreement is of the essence of this
Agreement. Termination hereunder shall be deemed to be effective immediately
upon the Executive's death or 30 days following a Notice of Termination based
upon a determination by the Board of Directors of the Company of the Executive's
total disability, as defined herein.
6.4 Notice
The term "Notice of Termination" shall mean written notice of
termination of the Executive's employment. The Executive's employment shall
terminate effective upon receipt of the Notice of Termination or the date
specified in the Notice of Termination, whichever is later, provided that the
Executive shall be entitled to termination payments in accordance with paragraph
7 of this Agreement.
6.5 Cause
Wherever reference is made in this Agreement to termination being with
or without Cause, "Cause" means cause given by the Executive to the Company and
is limited to the following:
(i) The willful and material breach of any provision of
Sections 1 or 2 (including but not limited to the refusal to follow
reasonable and lawful directives of the Board of Directors) or Sections
8 or 9;
(ii) Conviction of a felony or of a crime involving moral
turpitude;
(iii) Continuing misuse of alcohol or controlled
substances; or
(iv) The willful misconduct or gross negligence of the
Executive that results in a material adverse effect on the Company:
provided, however, that to the extent that a breach of Sections 6.5(i), (iii) or
(iv) is curable, the Board of Directors will give the Executive written notice
of such breach and the Executive will have 30 days from the receipt of such
notice to cure such breach.
7. Termination Payments
In the event of termination of the employment of the Executive, all
compensation and benefits set forth in this Agreement shall terminate except as
specifically provided in this paragraph 7:
7.1 Termination by the Company
If the Board of Directors terminates the Executive's employment without
Cause, the Executive shall be entitled to receive (i) any unpaid Base Salary
which has accrued for services already performed as of the date termination of
the Executive's employment becomes effective, (ii) the then existing Base Salary
the Executive would have received if his employment had continued for 12 months,
payable as provided in subparagraph 4.1 of this Agreement, (iii) any bonus that
has been earned but not paid, and (iv) continuation of benefits for himself, his
spouse and his dependents (paid for by the Company) set forth in Section 5.2 for
a period of 12 months following such termination. If the Executive is terminated
by the Board of Directors for Cause, the Executive shall not be entitled to
receive the benefits set forth in clauses (ii) and (iv). If such termination
occurs without Cause in connection with or at any time following a Change in
Control (as defined in the Company's Amended and Restated 1994 Stock Option
Plan), the Executive shall be entitled to a lump sum payment equal to two years'
Base Salary, plus a bonus of 30% of such amount, and continuation of benefits
(paid for by the Company) set forth in Section 5.2 for a period of 24 months
following such termination.
7.2 Termination by the Executive
If the Executive voluntarily terminates his employment, the Executive
shall not be entitled to receive any payments hereunder other than (i) any
unpaid Base Salary which has accrued for services already performed as of the
date termination of the Executive's employment becomes effective and (ii) any
unpaid bonus which has been earned but not yet paid.
7.3 Termination Because of Death or Total Disability
In the event of a termination of the Executive's employment because of
his death or total disability, the Executive or his personal representative
shall not be entitled to receive any payments hereunder other than (i) any
unpaid Base Salary which has accrued for services already performed as of the
date termination of the Executive's employment becomes effective, (ii) any bonus
which has been earned but not paid and (iii) a continuation of medical and
dental benefits for himself, his spouse and his dependents (paid for by the
Company) for a period of eighteen months following such termination.
8. Nondisclosure
As a condition of his employment hereunder, the Executive has executed
and delivered to the Company Employee Confidentiality and Invention Agreement
(the "Nondisclosure Agreement") in the form attached hereto as Exhibit A and
incorporated herein by reference as if set forth in full herein, which
Nondisclosure Agreement shall survive the termination of the Executive's
employment.
9. Noncompetition and Nonsolicitation
9.1 Applicability
This Section 9 shall survive the termination of the Executive's
employment with the Company or the expiration of the term of this Agreement.
9.2 Scope of Competition
The Executive agrees that he will not, directly or indirectly, during
his employment and for a period of two years after the date on which his
employment with the Company terminates, be employed by, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of or be connected with, in any manner, any person or entity engaged in any
business activity anywhere in the world (including without limitation research,
development, manufacturing, selling, leasing, licensing or providing services)
which is competitive with any products or services that the Company is
developing or exploiting during the Executive's employment with the Company,
unless released from such obligation in writing by the Company's Board of
Directors. The Executive shall be deemed to be connected with such business if
such business is carried on by a partnership, corporation or association of
which he is an employee, member, consultant or agent; provided, however, that
nothing herein shall prevent the purchase or ownership by the Executive of
shares which constitute less than 2% of the outstanding equity securities of a
publicly or privately held corporation.
9.3 Scope of Nonsolicitation
The Executive shall not, in addition, directly or indirectly (i)
solicit, or entice any employee or consultant of the Company to cease his
relationship with the Company or (ii) solicit, entice or in any way divert any
customer or supplier of the Company from doing business with the Company. This
Section 9.3 shall apply during the time period and geographical area described
in Section 9.2 hereof.
9.4 Equitable Relief
The Executive acknowledges that the provisions of this Section 9 are
essential to the Company, that the Company would not enter into this Agreement
if it did not include covenants not to compete or solicit and that damages
sustained by the Company as a result of a breach of such covenants cannot be
adequately remedied by damages, and the Executive agrees that the Company,
notwithstanding any other provision of this Agreement, in addition to any other
remedy it may have under this Agreement or at law, shall be entitled to
injunctive and other equitable relief to prevent or curtail any breach of any
provision of this Agreement, including without limitation this Section 9. The
Executive acknowledges that the covenants in this Agreement are reasonable and
that compliance with such covenants will not prevent him from pursuing his
livelihood.
9.5 Effect of Violation
The Executive and the Company agree that additional consideration has
been given for the Executive entering into the noncompetition and
nonsolicitation provisions of this Agreement and the Nondisclosure Agreement
described in Section 10, such additional consideration including, without
limitation certain provisions for termination payments pursuant to Section 7 and
other payments pursuant to Section 8 of this Agreement. Material violation by
the Executive of such noncompetition and nonsolicitation provisions or the
Nondisclosure Agreement shall relieve the Company of any obligation it may have
to make such termination payments under Section 7, but shall not relieve the
Executive of his obligation hereunder not to compete or solicit.
9.6 Definition of the Company
For purposes of Sections 9.2 and 9.3 hereof, "the Company" shall
include all subsidiaries of the Company, the Company's parent corporation and
any business ventures in which the Company, its subsidiaries or its parent
corporation may participate.
10. Form of Notice
Every notice required by the terms of this Agreement shall be given in
writing by serving the same upon the party to whom it was addressed personally,
by courier, by facsimile transmission (with hard copy delivered by overnight
courier) or by registered or certified mail, return receipt requested, at the
address set forth below or at such other address as may hereafter be designated
by notice given in compliance with the terms hereof:
If to the Executive: Xxxxxx X. Xxxxxxx
c/o Ostex International, Inc.
0000 Xxxxxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
If to the Company: Ostex International, Inc.
0000 Xxxxxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Copy to: Xxxxx X. Xxxxxxxxx
Xxxxxxx Coie
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
or such other address as shall be provided in accordance with the terms hereof.
Notice shall be effective upon personal delivery, delivery by courier, receipt
of facsimile transmission or three days after mailing.
11. Successors and Assigns
For purposes of this Agreement, "Company Successor" means (a) any
corporation resulting from any merger, consolidation or other reorganization to
which the Company is a party or (b) any corporation, partnership, association or
other person or entity to which the Company may transfer all or substantially
all of the assets and business. The Executive agrees that this Agreement may be
transferred or assigned by the Company to the Company Successor. Any Company
Successor shall succeed to the rights and obligations of the Company hereunder
and shall be bound by the terms of this Agreement. If all or substantially all
of the outstanding voting stock of the Company is transferred to another
corporation, partnership, association or other person or entity, the Company, at
the request of the Executive, will reaffirm in writing it's obligations under
this Agreement. This Agreement is not assignable by the Executive. The Company
agrees that it will require any Company Successor (as a condition to any
transaction described in this Section) to expressly assume and agree to perform
this Agreement, including (without limitation) payment of the amounts set forth
in Section 7 above.
12. Waiver
No waiver of any of the provisions hereof shall be valid unless in
writing, signed by the party against whom such claim or waiver is sought to be
enforced, nor shall failure to enforce any right hereunder constitute a
continuing waiver of the same or a waiver of any other right hereunder.
13. Amendments in Writing
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by the Company
and the Executive, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Company and the Executive.
14. Applicable Law
This Agreement shall be governed by the substantive laws of the state
of Washington, without regard to its conflicts of laws provisions.
15. Severability
All provisions of this Agreement are severable, and the
unenforceability or invalidity of any single provision hereof shall not affect
the remaining provisions.
16. Headings
All headings or titles in this Agreement are for the purpose of
reference only and shall not in any way affect the interpretation or
construction of this Agreement.
17. Attorneys' Fees
The Company will reimburse the Executive for reasonable attorneys fees
in connection with the preparation and review of this Agreement, up to a maximum
or $3,000.
18. Entire Agreement
This Agreement, the Stock Option Agreement and the Nondisclosure
Agreement constitute the full and entire understanding and agreement between the
parties with respect to the subject matter hereof and supersede all prior
agreements with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
EXECUTIVE:
/S/ XXXXXX X. XXXXXXX
-----------------------
Xxxxxx X. Xxxxxxx
COMPANY:
OSTEX INTERNATIONAL, INC.
By: /S/ XXXXXX X. CABLE
----------------------
Its Chairman of the
Board of Directors
