BIOSPHERICS INCORPORATED
-------------
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, is entered into on the 17th day of November, 1995,
but should be effective as of the 28th of January, 1995, between Biospherics
Incorporated, a Delaware corporation (the "Corporation"), and Xxxxxxx X. Xxxxx
(the "Executive").
WITNESSETH:
WHEREAS, the Corporation is engaged in providing information services in
health, pharmaceutical and civic areas; in providing services in the areas of
chemistry, biology, exobiology, microbiology, occupational health, air and water
pollution and hazardous wastes control, industrial hygiene; and in the
development of proprietary products; and
WHEREAS, the Executive has been engaged as an expert and corporate
executive in major enterprises in the areas indicated above; and
WHEREAS, the Executive is presently, and has been since the formation of
the Corporation, President of the Corporation; and
WHEREAS, during the period of the Executive's employment the Corporation
has greatly enhanced its activities and prestige largely as a result of the
activities on behalf of the Corporation by the Executive; and
WHEREAS, the Executive has led the Company's effort to commercialize its
non-fattening sugar as a major food products ingredient, and its safe-for-humans
pesticides; and
WHEREAS, the value of the services provided by the Executive to the
Corporation in the past have had a value in excess of the compensation actually
paid to the Executive by the Corporation; and
WHEREAS, the Corporation desires to provide additional compensation to the
Executive for the services previously rendered to the Corporation in order to
assure that the Executive will continue to render substantial services to the
Corporation and to any joint venture or subsidiary which may be formed to
exploit its products and services,
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein set forth and other good and valuable consideration, the receipt of which
is hereby acknowledged, the Corporation and the Executive do hereby agree, each
with the other, as follows:
1. FULL-TIME EMPLOYMENT OF EXECUTIVE.
1.1. DUTIES AND STATUS.
1.1.1. The Corporation hereby engages the Executive as a full-time
executive employee for the period (the "Employment Period") specified in Section
4 and the Executive accepts such employment, on the terms and conditions set
forth in this Agreement. During the Employment Period, the Executive shall
exercise such authority and perform such executive duties as are commensurate
with the authority being exercised and duties being performed by the Executive
for the Corporation immediately prior to the effective date of this Agreement.
1.1.2. During the Employment Period, the Executive shall (i) devote
his full time and efforts to the business of the Corporation and its
subsidiaries or affiliates, including, without limitation, efforts to
commercialize its non-fattening sugar and/or other products and will not engage
in consulting work or any trade or business for his own account or for or on
behalf of any other person, firm or corporation which competes, conflicts or
interferes with the performance of his duties hereunder in any way and (ii)
accept such additional office or offices to which he may be elected by the Board
of Directors of the Corporation or its subsidiaries or affiliates, including,
without limitation, any joint venture or subsidiary
-29-
BIOSPHERICS INCORPORATED
-------------
formed to commercialize the Company's non-fattening sugar and/or other products,
provided that the performance of the duties of such office or offices shall be
consistent with the scope of the duties provided for in Section 1.1.1.
1.1.3. The Executive shall be required to perform the services and
duties provided for in Section 1.1.1. only at the location where the Executive
was employed immediately prior to the effective date of this Agreement or such
other location of the principal executive offices of the Corporation in the
Washington, D.C. greater metropolitan area as the Board of Directors of the
Corporation may designate. The Executive shall be entitled to vacation, leave
of absence, and leave for illness or temporary disability in accordance with the
policies of the Corporation in effect, which shall not be less favorable than
those in effect at the date of this Agreement; and any leave on account of
illness or temporary disability which is short of total disability, as defined
in the Corporation's long-term disability insurance plan ("Total Disability"),
shall not constitute a breach by the Executive of his agreements hereunder.
1.2. COMPENSATION AND GENERAL BENEFITS. As compensation for his services
under this Agreement, the Executive shall be compensated as follows:
1.2.1. The Corporation shall pay the Executive an annual base
salary of $190,000. Such salary shall increase annually by the greater of (i)
three percent (3%) over the previous year or (ii) at such greater amount as is
determined by the Board of Directors of the Corporation. Such salary shall be
payable in equal, semi-monthly installments. Such salary shall be subject to
normal periodic review at least annually for increases based on the policies of
the Corporation and contributions to the enterprises, but in no event shall such
base salary be adjusted downward.
1.2.2. The Executive shall be eligible to participate in such
profit-sharing, stock option, bonus, incentive and performance award programs
which provide opportunities to receive compensation which are the greater of the
opportunities (i) then provided by the Corporation to executives with reasonably
comparable authority and duties (and in any event not lesser than those provided
to executives with junior authority or duties), or (ii) available to the
Executive immediately prior to the effective date of this Agreement. Upon
signing this Agreement, the Executive shall be given a stock option for 100,000
shares of Biospherics' common stock under the Biospherics Non-Qualified Stock
Option Plan. The exercise price shall be $ 9.375/share. The option shall be
immediately exercisable in whole or part, and otherwise remain in force and
exercisable as to the remainder or any part for a period of five years from the
date issued.
1.2.3. The Executive shall be entitled to receive employee
benefits, including, without limitation, pension, disability, group life,
sickness, accident and health insurance programs and split-dollar life insurance
programs, and perquisites provided by the Corporation to executives which are
the greater of the employee benefits and perquisites (i) then provided by the
Corporation to executives with comparable authority or duties (and in any event
not lesser than those provided to executives with junior authority or duties),
or (ii) available to the Executive immediately prior to the effective date of
this Agreement. The health insurance benefits received by the Executive shall
continue for the Executive and the Executive's spouse following the retirement
of the Executive and until the death of the survivor of the Executive and the
Executive's spouse.
1.2.4. The Corporation shall pay the premiums as required to
maintain a life insurance policy or policies with a death benefit of not less
than $5,000,000 payable on the death of the last to survive of Xxxxxxx X. Xxxxx
and M. Xxxxx Xxxxx to provide liquidity to the last survivor's estate in the
event of his or her death. The benefits paid by policy or policies will be used
in the manner described in the Restated Stock Redemption Agreement signed
January 15, 1996, between the Company and Xxxxxxx X. Xxxxx and M. Xxxxx Xxxxx.
1.2.5. The Corporation shall reimburse the Executive for all
reasonable expenses incurred by the Executive in the performance of his duties
hereunder.
2. COMPETITION; CONFIDENTIAL INFORMATION.
2.1. GENERAL. The Executive and the Corporation recognize that due to the
nature of his prior association with the Corporation and of his engagements
hereunder, and the relationship of the Executive to the Corporation, both in the
past as an executive and in the future hereunder, the Executive has had access
to and has acquired, will have access to and will acquire, and has assisted in
and may assist in developing, confidential and proprietary information relating
to the business
-30-
BIOSPHERICS INCORPORATED
-------------
and operations of the Corporation and its affiliates, including, without
limiting the generality of the foregoing, information with respect to their
present and prospective research projects; products, systems and processes
(whether or not patentable); customers and agents; and sales and marketing
methods. The Executive acknowledges that such information has been and will
continue to be of central importance to the business of the Corporation and its
affiliates and that disclosure of it to or its use by others could cause
substantial loss to the Corporation. The Executive and the Corporation also
recognize that an important part of the Executive's duties will be to develop
good will for the Corporation and its affiliates through his personal contact
with customers, agents and others having business relationships with the
Corporation and its affiliates, and that there is a danger that this good will,
a proprietary asset of the Corporation and its affiliates, may follow the
Executive if and when his relationship with the Corporation is terminated. The
Executive accordingly agrees as follows:
2.2. NON-COMPETITION.
2.2.1. During the Employment Period the Executive will not,
directly or indirectly, either individually or as owner, partner, agent,
employee, consultant or otherwise, except for the account of and on behalf of
the Corporation or their affiliates, engage in any activity competitive with the
business of the Corporation or its affiliates, nor will he, in competition with
the Corporation or its affiliates, solicit or otherwise attempt to establish for
himself or any other person, firm or entity, any business relationships with any
person, firm or corporation which was, at any time during the Employment Period,
a customer of the Corporation or one of its affiliates.
2.2.2. Nothing in this Section 2.2. shall be construed to prevent
the Executive from owning, as an investment, not more than 1% of a class of
equity securities issued by any competitor of the Corporation or its affiliates
and publicly traded and registered under Section 12 of the Securities Exchange
Act of 1934.
2.3. TRADE SECRETS. The Executive will keep confidential any trade secrets
or confidential or proprietary information of the Corporation and its affiliates
which are now known to him or which hereafter may become known to him as a
result of his employment or association with the Corporation and shall not at
any time directly or indirectly disclose any such information to any person,
firm or corporation, or use the same in any way other than in connection with
the business of the Corporation or its affiliates during and at all times after
the expiration of the Employment Period. For purposes of this Agreement, "trade
secrets or confidential or proprietary information" means information unique to
the Corporation or any of its affiliates which has a significant business
purpose and is not known or generally available from sources outside the
Corporation or any of its affiliates or typical of industry practice.
2.4. INTELLECTUAL PROPERTY. Throughout the Employment Period, the
Executive will disclose to the Corporation all processes, operations, products
or improvements developed by him which relate directly or indirectly to the
business of the Corporation or its affiliates which may be patentable or
copyrightable. The Executive agrees that such will be the property of the
Corporation and that he will, at the Corporation's request and cost, do whatever
is necessary to secure the rights thereto by patent or copyright.
3. CORPORATION'S REMEDIES FOR BREACH. It is recognized that damages in the
event of breach of Section 2 by the Executive would be difficult, if not
impossible, to ascertain, and it is therefore agreed that the Corporation, in
addition to and without limiting any other remedy or right they may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and the Executive hereby
waives any and all defenses he may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude any other rights and remedies at
law or in equity which the Corporation may have.
4. EMPLOYMENT PERIOD.
4.1. DURATION. The Employment Period shall commence on the effective date
of this Agreement and shall continue until the earlier of (i) close of business
on December 31, 1997 or (ii) any termination of this Agreement that does not
constitute an improper termination as defined in Section 4.3.1.
-31-
BIOSPHERICS INCORPORATED
-------------
4.2. TERMINATION PAYMENTS.
4.2.1. In the event of an improper termination of this Agreement
(as defined in Section 4.3.1. of this Agreement), the Corporation shall pay to
the Executive and provide him with the following:
4.2.1.1. During the remainder of the Employment Period, the
Corporation shall continue to pay the Executive his salary at the rate and as
required by Section 1.2.1 and in effect immediately prior to the date of
termination.
4.2.1.2. During the remainder of the Employment Period, the
Executive shall continue to be treated as an executive (at the level provided
for in Section 1.1.1.) under the provisions of the Corporation's profit-sharing,
bonus, incentive and performance award programs and any other incentive
compensation arrangement described in Section 1.2.2. In addition, the Executive
shall continue to be entitled to all benefits and service credits for benefits
under any pension plan, or medical, insurance, split-dollar life insurance and
other employee benefit plans, programs and arrangements of the Corporation
described in Section 1.2.3. as if he were still employed during such period
under this Agreement.
4.2.1.3. If, despite the provisions of Section 4.2.1.2.,
benefits or the right to accrue further benefits under any profit sharing,
bonus, incentive or performance award programs or other long-term incentive
compensation arrangement described in Section 1.2.2. shall not be provided under
any such arrangement to the Executive, or his dependents, beneficiaries and
estate, because he is no longer an employee of the Corporation, the Corporation
shall, to the extent necessary, provide, pay or provide for payment of amounts
equal to the after tax benefits to the Executive, his dependents, beneficiaries
and estate.
4.2.1.4. If, despite the provisions of Section 4.2.1.2.,
benefits or service credits under any employee benefit plan, including, without
limitation, benefits under any pension plan, or any medical, insurance,
split-dollar life insurance and other employee benefit plans, programs and
arrangements described in Section 1.2.3. shall not be payable or provided under
any such plan to the Executive, or his dependents, beneficiaries and estate,
because he is no longer an employee of the Corporation, the Corporation shall,
to the extent necessary, pay or provide for payment of equivalent after tax
benefits and service credits for such after tax benefits to the Executive, his
dependents, beneficiaries and estate.
4.2.1.5. The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 4.2. by seeking employment or
otherwise, nor shall the amount of any payment provided for in this Section 4.2
be reduced by any compensation or remuneration earned by the Executive as the
result of employment by another employer, or self-employment, or as a partner,
after the date of termination or otherwise.
4.2.2. In the event of an improper termination, the Executive may
elect, within 60 days after such termination, to elect to be paid a lump sum
severance allowance, in lieu of termination payments, in an amount which is
equal to the sum of all of the salary payments which he would have been entitled
to receive in accordance with Section 4.2.1.1. In the event that the Executive
makes an election pursuant to the preceding sentence to receive a lump sum
severance allowance, then, in addition to such amount, he shall accelerate all
future payments due with respect to (i) the pension benefits he would have
accrued under any pension benefit plan maintained by the Corporation if he had
remained in the employ of the Corporation for the remainder of the Employment
Period, which benefits will be paid concurrently with, and in addition to, the
benefits provided under such pension benefit plan, (ii) incentive compensation
(including, but not limited to the right to participate in all of the
Corporation's profit sharing plans and to receive and exercise stock options and
stock appreciation rights and to receive bonuses and performance awards and
similar incentive compensation benefits) to which he would have been entitled
under this Agreement if he had remained in the employ of the Corporation for the
remainder of the Employment Period, and (iii) employee benefits (including, but
not limited to, coverage under any disability, group life, sickness, accident
and health insurance programs, split-dollar life insurance arrangements or
programs and prerequisite) to which he would have been entitled under this
Agreement if he had remained in the employ of the Corporation for the remainder
of the Employment Period. By accelerating all future payments as described in
this Section 4.2.2., the Executive will have the right to receive an amount
equal to the commuted actuarial value of those payments within sixty (60) days
after the date of Executive's termination.
-32-
BIOSPHERICS INCORPORATED
-------------
4.2.3. In the event of a termination other than an improper
termination, the Executive shall be entitled to any salary accrued to the date
of the termination, but shall not be entitled to any further salary or any
further payments hereunder.
4.3. DEFINITIONS. The following terms shall have the specified meanings
when used in the Sections specified:
4.3.1. In this Section 4, the term "improper termination" means
termination (i) by the Corporation of the employment of the Executive with the
Corporation for any reason other than death or Total Disability of the
Executive, or cause; or (ii) of the employment of the Executive by resignation
of the Executive due to (A) a significant change in the nature or scope of his
authorities or duties from those contemplated in Section 1.1.1., (B) a merger or
consolidation of the Corporation or other similar transaction which is likely to
materially and adversely affect the financial ability of the Corporation or any
successor assign thereto that agrees in writing to assume the obligations of the
Corporation hereunder to perform this Agreement, (C) a reduction in total
compensation and benefits from that provided in Section 1.2, or (D) the breach
by the Corporation in any material respect of any other provision of this
Agreement.
4.3.2. In Section 4.3.1. the term "cause" means (i) a final
judicial finding that Executive has been guilty of fraud, misappropriation or
intentional material damage to the property or business of the Corporation or
the commission of a felony; (ii) continuance of willful and repeated failure by
the Executive to perform his duties in compliance with this Agreement after
written notice to the Executive by the Board of Directors specifying such
failure, provided that such "cause" shall have been found by a majority vote of
the Board of Directors of the Corporation after at least 10 days' written notice
to the Executive specifying the cause proposed to be claimed and after an
opportunity for the Executive to be heard at meetings of such Boards of
Directors; or (iii) a violation of Section 2 of this Agreement.
4.3.3. In Section 4.2., "Employment Period" shall mean the full
period for which the Employment Period would have continued, without any
improper termination, under Section 4.3.1.
4.3.4. In Section 2.2.1., "Employment Period" shall mean the full
period for which the Employment Period would have continued under Section 4.1.
in the event of any termination of the employment of the Executive which is not
an improper termination as defined in Section 4.3.1.
5. LEGAL COSTS. If the Corporation shall fail to pay or provide for payment
of any amounts required to be paid or provided for hereunder at any time, the
Executive shall be entitled to consult with counsel, and the Corporation agrees
to pay the reasonable fees and expenses of independent counsel for the Executive
in advising him or in bringing any proceedings, or in defending any proceedings,
involving the Executive's rights under this Agreement, such right to
reimbursement to be immediate upon the presentment by Executive of written
xxxxxxxx for such reasonable fees and expenses. The Executive shall be entitled
to the prime rate of interest established from time to time at NationsBank, or
its successors or successors in interest for any payments of such expenses, or
any other payments under this Agreement, that are overdue.
6. NOTICES. Any notices, requests, demands and other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Corporation or, in the case of the Corporation, at its
principal executive offices.
7. BINDING AGREEMENT. This Agreement shall be effective as of the effective
date hereof and shall be binding upon and inure to the benefit of the Executive,
his executors, administrators and personal representatives. The rights and
obligations of the Corporation under this Agreement shall inure to the benefit
of and shall be binding upon any successor of the Corporation as defined in
Section 1-l0l(u) of the Maryland General Corporation Law as now in effect;
provided, that this Agreement may not be assigned by the Corporation without the
consent of the Executive, and in the case of a successor by transfer of all or
substantially all of the assets of the Corporation, or any other successor in
which the Corporation does not cease to exist by operation of the transaction in
question as a matter of law, the Corporation shall not be relieved of its
obligations hereunder.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of
the Executive and the Corporation with respect to the subject matter hereof and
supersedes any and all prior understandings written or oral (including but not
-33-
BIOSPHERICS INCORPORATED
-------------
limited to the Employment Agreement dated as of December 31, 1987, between the
Corporation and the Executive). This Agreement may not be changed, modified, or
discharged orally, but only by an instrument in writing signed by the parties.
This Agreement shall be governed by the laws of the State of Maryland and the
invalidity or unenforceability of any provisions hereof shall in no way affect
the validity or enforceability of any other provision.
9. INDEMNIFICATION. In addition to any indemnification rights the Executive
may have by statute, by-law or otherwise, the Corporation to the fullest extent
permitted by, and in accordance with and subject to the requirements of, the
General Corporation Law of the State of Delaware, (i) shall indemnify the
Executive and hold him harmless for all losses, costs, expenses or liabilities
(whether or not arising during the Employment and pay all expenses, including
reasonable attorneys' fees and court fees, actually and necessarily incurred by
the Executive in connection with the investigation or defense of, or being a
witness in, any such action, suit or proceeding and in connection with any
appeal thereof.
10. OTHER AGREEMENTS. Each of the Supplemental Executive Retirement Plan
Agreement dated as of February 17, 1993, by and between the Corporation and the
Executive (the "SERP Agreement"), and the Consulting Agreement dated as of
February 17, 1993, by and between the Corporation and the Executive (the
"Consulting Agreement") are amended by deleting from Section 1 thereof the
phrase "Employment Agreement dated December 31, 1987" and substituting in lieu
thereof the phrase "Employment Agreement dated November 17, 1995".
The Deferred Compensation Agreement dated as of march 13, 1981, by and between
the Corporation and the Executive, and amended on October 14, 1982, and December
31, 1987, is amended by deleting from the second Whereas of the December 31,
1987 Amendment the phrase "January 27, 1995" and substituting in lieu thereof
the phrase "until the end of the Employment Period as defined in Section 4.1 of
the Executive's Employment Agreement dated November 17, 1995." The Stock
Redemption Agreement dated as of August 16, 1978, by and between the Corporation
and the Executive, as amended October 14, 1982, and as must be further amended
to comport to the changed dollar benefit of the insurance currently funding said
Stock Redemption Agreement, and to the changed designation of the insured from
the Executive to the last to service of the Executive and M. Xxxxx Xxxxx, is
amended by deleting from Amendment No. 1, dated October 14, 1982, First, all
phrases "three million dollars ($3,000,000)", and "three million dollar
($3,000,000)" and substituting in lieu thereof the phrases "five million dollars
($5,000,000) and "five million dollar ($5,000,000)", respectively. This same
amendment No. 1, First, is further amended by adding the phrase "the Executive
or" before the phrase "M. Xxxxx Xxxxx".
In all other respects, the SERP Agreement, the Consulting Agreement, the
Deferred Compensation Agreement and the Stock Redemption Agreement are ratified
and confirmed as of the date hereof.
IN WITNESS WHEREOF, the parties have executed, under seal, and
delivered this Agreement the date first above written.
BIOSPHERICS INCORPORATED
BOARD OF DIRECTORS
ATTEST_____________ By: _____________
Xxxxxx X. Xxxxxxx, Chair
Compensation Committee
ATTEST______________ _____________
Xxxxxxx X. Xxxxx
-34-
