EMPLOYMENT AGREEMENT
Exhibit 10.7
This Employment Agreement (the “Agreement”), dated as of January 1, 2006, is made between Home
Diagnostics, Inc., a Delaware corporation with offices (the “Offices”) at 0000 XX 00xx
Xxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx (the “Company”), and J. Xxxxxxx Xxxxxx, Xx., an individual residing
at 0000 XX 00xx Xxxxxx, Xxxx Xxxxx, Xxxxxxx 00000 (the “Executive”).
The Company desires to assure itself of the continued services of Executive as an executive of
the Company, and to that end desires to enter into a contract of employment with him, upon the
terms and conditions herein set forth, and Executive is desirous of entering into such a contract
of employment.
The parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT: Effective as of the date of this Agreement, Executive will be employed by the
Company as President and Chief Executive Officer to perform the duties and services generally
associated with the direction and supervision of the day to day operations of the Company and as
may be assigned to him from time to time by the Board of Directors of the Company (the “Board”) .
Executive accepts such employment and agrees to perform such duties to the best of his ability, and
shall use his best efforts, skill and ability to promote the interest of the Company and otherwise
to assist the Company in such matters as to which his knowledge and expertise may be particularly
relevant. During the term of this Agreement, Executive shall, except during customary vacation
periods and periods of illness, devote all of Executive’s business time, attention and energies to
the performance of Executive duties and to the business and affairs of the Company and to promoting
the best interests of the Company, and shall not, either during or outside of such normal business
hours, directly or indirectly, engage in any activity inimical to such best interests.
2. TERM: The term of this Agreement shall commence on the date hereof and end on December 31,
2008, unless earlier terminated as provided herein.
3. COMPENSATION AND BENEFITS: In consideration of his services during the term of this
Agreement, Executive shall be paid compensation and receive benefits from the Company as follows:
(a) Executive shall receive a salary (“Base Salary”) at an annual rate of Five Hundred
Thousand Dollars ($500,000), payable in bi-weekly installments or in such other installments as may
be agreed upon. Executive’s salary rate may be subject to increase by the Board from time to time
in its sole discretion.
(b) Executive shall be entitled to receive an annual bonus, as determined by the Board in its
sole discretion, of up to 50% of Executive’s salary in subparagraph (a) above.
(c) Executive shall be entitled to participate in the Company’s benefit plans that are
generally available to the Company’s executives and employees, all in accordance with the normal
policies and practices of the Company, including, without limitation, health insurance, life
insurance, disability insurance, 401-K plan and stock option plans. The Company
reserves the right to make such modifications in its benefit plans at any time as it, in its
sole discretion, deems appropriate.
(d) Executive shall be entitled to receive three (3) weeks of paid vacation per annum plus
U.S. holidays applicable to all Company employees.
(e) Executive shall be entitled to receive a one-time bonus payment of $500,000 (the “Sale
Bonus”) upon the occurrence during the term of this Agreement of the sale by the stockholders of
the Company of eighty percent (80%) or more of the issued and outstanding capital stock of the
Company to a third party or third parties, not affiliated with or related to any such stockholders,
in any single transaction or series of related transactions. Executive shall be entitled to
receive a one-time bonus payment of $250,000 (the “IPO Bonus”) upon the occurrence during the term
of this Agreement of a Qualified Public Offering (as hereinafter defined). For purposes of this
Agreement, a “Qualified Public Offering” shall mean the closing of the first underwritten offering
by the Company or any of its subsidiaries (or any successor entity) to the public pursuant to an
effective registration statement under the Securities Act of 1933, as amended, provided that (i)
such registration statement covers the offer and sale of common stock of the Company of which the
aggregate gross proceeds attributable to sales for the account of the Company or any of its
subsidiaries are no less than $40,000,000, and (ii) such common stock is listed for trading on
either the New York Stock Exchange or the NASDAQ National Market. Notwithstanding anything herein
contained to the contrary, Executive may earn and receive payment pursuant to the provisions of
this Section 3(e) only up to a maximum aggregate amount of $500,000 even if both the Sales Bonus
and the IPO Bonus are earned.
(f) Executive’s principal place of service shall not be changed from the present offices,
without Executive’s consent, which may be withheld for any or no reason, except that such principal
place of service may be changed without Executive’s consent to any comparable office space within
15 miles of the residence of Executive.
(g) Except as otherwise provided in this Agreement, all compensation shall be payable only if
Executive is employed by the Company or an affiliate at the time payment is made. All compensation
shall be subject to withholding and other applicable taxes.
4. TERMINATION:
(a) Executive’s employment under this Agreement shall terminate:
(i) upon written notice from the Company to Executive, for Cause (“Cause” being defined for
this purpose as Executive’s dishonesty, willful or intentional harm to the Company or failure to
comply with a reasonable request of the Board, material breach of this Agreement, excessive
absence, conviction of a felony under U.S. Federal, state or local laws or any applicable foreign
laws, misconduct in connection with or affecting the business of the Company, negligence in
performing Executive’s duties hereunder, failure to perform Executive duties hereunder after
delivery to Executive by the Company of written notice identifying the duties not being performed
by Executive or illegal drug use by Employee; provided, however, that “Cause” shall
not include the refusal of Executive to accept a material, unconsented reduction in
responsibilities and duties or to accept relocation from the offices other than
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pursuant to Section 3(h) above, (any such reduction or relocation being hereinafter referred
to as a “Just Cause Event”).
(ii) upon the death of Executive; or
(iii) upon 30 days’ advance written notice from either the Company or Executive to the other
in the event Executive acquires a Permanent Disability (“Permanent Disability”) being defined for
this purpose as it is defined in the Company’s long-term disability insurance policy in effect at
such time by reason of physical or mental disability, Executive is incapable of performing
Executive’s principal duties for a period of two consecutive months or 60 days’ in the aggregate in
any 12 month period.
(b) Executive’s employment under this Agreement shall terminate upon written notice from the
Company to Executive without Cause at any time.
(c) In the event that this Agreement is terminated pursuant to Section 4(a) hereof, Executive
shall be entitled to receive, after termination, all unpaid compensation earned and payable under
Section 3 hereof through the date of termination.
(d) In the event that this Agreement is terminated pursuant to Section 4(b) hereof or by
Executive upon the occurrence of a Just Cause Event, Executive shall be entitled to continue to
receive, after such termination, the greater of (A) one year of his then current Base Salary or (B)
all Salary that would otherwise have been due to Executive under Section 3(a) hereof from the date
of termination, either, at the option of the Company, as a lump sum or bi-weekly in the same manner
and at the same time as if Executive had not been terminated.
(e) In the event that this Agreement is terminated, (A) Executive shall be allowed to continue
to participate in the Company’s health insurance plan during any period that Executive is receiving
bi-weekly compensation hereunder and (B) the Company shall reimburse Executive for the cost of
health insurance made available under COBRA.
(f) Notwithstanding anything herein to the contrary, in the event that this Agreement is
terminated or expires by its terms, Executive and his spouse shall be entitled to continue
participation in the Company’s health insurance plan at the Company’s expense until the earlier of
the first day of full Medicare benefits eligibility or August 21, 2019, which health insurance plan
will continue to provide Executive and his spouse with benefits that are comparable to those
existing at the time of such termination or expiration of this Agreement.
5. COMPANY’S TRADE SECRETS: Executive acknowledges that he understands that in the
performance of his duties with the Company he will be exposed to the Company’s trade secrets and
confidential information. For purposes of this Agreement, “Trade Secrets” and/or “Confidential
Information” means information or material that is commercially valuable to the Company and not
generally known in the industry. This includes, but is not limited to, the following:
(a) any and all versions of the Company’s proprietary computer software (including source code
and object code), hardware, firmware and documentation;
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(b) technical information concerning the Company’s products and services, including training
programs, product data and specifications, diagrams, flow charts, drawings, test results, know-how,
processes, inventions, research projects and product development;
(c) information concerning the Company’s business, including cost information, profits, sales
information, accounting and unpublished financial information, business plans, markets and
marketing methods, customer lists and customer information, purchasing techniques, supplier lists
and supplier information and advertising strategies;
(d) information concerning the Company’s employees, including their salaries, strengths,
weaknesses and skills;
(e) non-public information submitted by the Company’s customers, suppliers, employees,
consultants or co-venturers with the Company for study, evaluation or use; and
(f) any other information not generally known to the public which, if misused or disclosed,
could reasonably be expected to adversely affect the Company’s business.
6. NONDISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION: Executive agrees that he will
keep the Company’s Trade Secrets and Confidential Information, whether or not prepared or developed
by him, in the strictest of confidence at all times, both during and after the term of this
Agreement. Executive will not use or disclose such secrets or information to others without the
Company’s written consent, except when necessary to perform his duties with the Company.
7. CONFIDENTIAL INFORMATION OF OTHERS: Executive agrees that he will not disclose to the
Company, use in the Company’s business, or cause the Company to use any information or material
that is a trade secret of others. Executive hereby represents and warrants that his performance
of this Agreement will not breach any agreement to keep confidential any proprietary information
acquired by him prior to his employment by the Company.
8. NO CONFLICTING OBLIGATIONS: Executive represents and warrants that he has no current or
prior agreements, relationships or commitments that conflict with this Agreement or with his
relationship with the Company.
9. RETURN OF MATERIALS: When Executive’s employment with the Company terminates, for whatever
reason, he will promptly deliver to the Company all originals and copies of all documents, records,
software code and programs, media and other materials containing any of the Company’s Trade Secrets
or Confidential Information and all other property belonging to the Company. Executive will also
return to the Company all equipment, files, software programs and other personal property or
intellectual property belonging to the Company.
10. CONFIDENTIALITY OBLIGATION SURVIVES EMPLOYMENT: Executive acknowledges that he
understands that his obligation to maintain the confidentiality and security of the Company’s Trade
Secrets and Confidential Information remains with him even after his employment with the Company
terminates and continues for so long as such material remains a trade secret or confidential.
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11. WORKS MADE FOR HIRE: Executive acknowledges that he understands that, as part of his
duties to the Company, he may be asked to create or contribute to the creation of documentation and
other copyrightable works. Executive agrees that any and all documentation and other copyrightable
materials that he is asked to prepare or work on as part of his employment with the Company or that
he otherwise works on or creates while employed by the Company and within the scope of his
employment and duties for the Company shall be “works made for hire,” as that term is used and
defined by U.S. copyright law, and that the Company shall own all the copyright and other property
rights in such works. IF AND TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE LEGAL
REQUIREMENTS TO CONSTITUTE A “WORK MADE FOR HIRE,” EXECUTIVE HEREBY ASSIGNS ALL HIS RIGHT, TITLE
AND INTEREST IN ANY COPYRIGHT OR OTHER RIGHTS OR INTEREST IN SAID WORKS TO THE COMPANY.
12. DISCLOSURE OF DEVELOPMENTS: Executive agrees that while he is employed by the Company, he
will promptly inform the Company of the full details of all his inventions, discoveries,
improvements, innovations and ideas (collectively called “Developments”)—whether or not patentable,
copyrightable or otherwise protectible—that he conceives, completes or reduces to practice (whether
jointly or with others) and which:
(a) relate to the Company’s present or prospective business, or actual or demonstrably
anticipated research and development; or
(b) result from any work he does using any equipment, facilities, materials, Trade Secrets,
Confidential Information or personnel of the Company; or
(c) result from or are suggested by any work that he may do for the Company.
13. ASSIGNMENT OF DEVELOPMENTS: Executive hereby assigns to the Company, or the Company’s
designee, his entire right, title and interest in all of the following that he conceives or makes
(whether alone or with others) while employed by the Company:
(a) all Developments;
(b) all copyrights, trade secrets, trademarks and mask work rights in Developments; and
(c) all patent applications filed and patents granted in respect of any Developments,
including those in foreign countries.
14. POST-EMPLOYMENT ASSIGNMENT: Executive agrees that he will fully disclose to the Company
any and all inventions, improvements or discoveries actually made, or copyright registrations or
patent applications filed within six months after his employment with the Company terminates.
Executive hereby assigns to the Company his entire right, title and interest in such inventions,
improvements and discoveries, whether made individually or jointly, which relate to the business of
the Company during the entire period of his employment preceding the termination of his employment.
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15. EXECUTION OF DOCUMENTS: Both while employed by the Company and afterwards, Executive
agrees to execute and aid in the preparation of any papers or filings that the Company may consider
necessary or helpful to obtaining or maintaining any patents, copyrights, trademarks or other
proprietary rights covering work and Developments for which he has or had responsibility for and/or
involvement with during his term of employment at the Company at no charge to the Company, but at
its expense. If the Company is unable to secure Executive’s signature on any document necessary to
obtain or maintain any patent, copyright, trademark or other proprietary rights, whether due to his
mental or physical capacity or any other cause, Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to execute and file such documents and do all other lawfully permitted acts to
further the prosecution, issuance and enforcement of patents, copyrights and other proprietary
rights with the same force and effect as if executed by the Executive.
16. PRIOR DEVELOPMENTS: As a matter of record, Executive must identify at the time of signing
this Agreement all prior developments relevant to the subject matter of his employment by the
Company (“Prior Developments”) that have been conceived or reduced to practice or learned by him,
alone or jointly with others, before his employment with the Company, which he desires to remove
from the operation of this Agreement. Executive represents that he has made no such Prior
Developments at the time of signing this Agreement which he desires to remove from the operation of
this Agreement. Executive further represents and warrants that he is under no prior contractual or
other obligation that in any way impedes his ability to perform this Agreement or carry out his
duties and responsibilities for the Company, including any non-compete obligations and that, in
providing the services contemplated herein, he will not make any improper or unauthorized use of
any property rights, or trade secrets or property belonging to his previous employer or anyone
else.
17. CONFLICT OF INTEREST: During Executive’s employment by the Company, he agrees that he
will not engage in any business activity competitive with or adverse to the Company’s business
activities Executive also agrees that he will not engage in any other activities that conflict
with the Company’s best interests.
18. POST-EMPLOYMENT NON-COMPETITION AGREEMENT: Executive acknowledges that he understands
that, during his employment by the Company, he may become familiar with Confidential Information of
the Company. Therefore, it is possible that Executive could cause grave harm to the Company if he
worked for a competitor. Accordingly, Executive agrees for twelve (12) months after the
termination of his employment with the Company not to engage in, or contribute his knowledge to,
any business entity or activity that is in competition with or adverse to the Company’s business
activities, including, without limitation, with respect to the blood glucose monitoring business.
(a) Diversion of Company Business: For a period of one year from the date Executive’s
employment terminates, he will not divert or attempt to divert from the Company any business the
Company enjoyed or solicited from its customers during the period two years prior to the
termination of his employment.
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(b) Geographic Restrictions: Executive acknowledges and agrees that the restrictions
on his post-employment competitive activity shall apply throughout the entire United States.
19. ADDITIONAL POST-EMPLOYMENT NON-COMPETITION TERMS: During any period in which Executive is
not receiving compensation payments from the Company only, the following post-employment
non-competition term(s) shall apply:
(a) Written Consent: Executive acknowledges that he understands that he will be
permitted to engage in the work or activity described in Section 18 of this Agreement if he
provides the Company with clear and convincing written evidence, including assurances from his new
employer and him, that the contribution of his knowledge to that work or activity will not cause
him to disclose, base judgment upon or use any of the Company’s Confidential Information. The
Company will furnish Executive a written consent to that effect if he provides the required written
evidence. Executive agrees not to engage in such work or activity until he receives such written
consent from the Company, which consent will not be unreasonably withheld.
(b) Inability to Secure Employment: If, solely as a result of this non-competition
agreement, Executive is unable to secure employment appropriate to his abilities and training,
despite his diligent efforts to do so, the Company shall release him from his non-competition
obligations, but only to the extent necessary to allow him to obtain such employment. In all other
respects, the non-competition and confidentiality restrictions herein shall continue to apply.
20. NONINTERFERENCE WITH NON-SOLICITATION OF COMPANY EMPLOYEES: While employed by the
Company, and for one year after, Executive agrees that he will not directly or through the use of
agents induce, or attempt to induce, any Company employees to quit the Company’s employ.
21. ENFORCEMENT: Executive agrees that in the event of a breach or threatened breach of this
Agreement by Executive, money damages would be an inadequate remedy and extremely difficult to
measure. Executive agrees, therefore, that the Company shall be entitled to an injunction to
restrain him from such breach or threatened breach. Nothing in this Agreement shall be construed
as preventing the Company from pursuing any remedy at law or in equity for any breach or threatened
breach.
22. GENERAL PROVISIONS:
(a) Successors: The rights and obligations under this Agreement shall survive the
termination of Executive’s service to the Company in any capacity and shall inure to the benefit
and shall be binding upon: (i) his heirs and personal representatives, and (ii) the successors and
assigns of the Company.
(b) Governing Law: This Agreement shall be construed and enforced in accordance with
the laws of the State of Florida.
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(c) Severability: If any provision of this Agreement is determined to be invalid or
unenforceable, the remainder shall be unaffected and shall be enforceable against both the Company
and Executive.
(d) Entire Agreement: This Agreement supercedes and replaces all former agreements or
understandings, oral or written, between the Company and Executive.
(e) Modification: This Agreement may not be modified except by a writing signed both
by the Company and Executive.
(f) Assignment: This Agreement may be assigned by the Company to any affiliate of the
Company. Executive may not assign or delegate his duties under this Agreement without the
Company’s prior written approval.
(g) Notices: Any notice required to be given hereunder shall be deemed to have been
sufficiently given either when served personally, by facsimile transmission or when served by first
class mail addressed to either party at the applicable address set forth on the first page of this
Agreement.
(h) Counterparts. This Agreement may be executed in several identical counterparts,
each of which when so executed shall be deemed an original, but all such counterparts shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto duly executed this Agreement as of the day and year
first above written.
| HOME DIAGNOSTICS, INC. | |||||||||
| By: | /s/ Xxxxxx X. Xxxxxx | ||||||||
| Name: Xxxxxx X. Xxxxxx | |||||||||
| Title: Chairman | |||||||||
| /s/ J. Xxxxxxx Xxxxxx, Xx. | |||||||||
| J. Xxxxxxx Xxxxxx, Xx. |
|||||||||
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