XXXX BIOMEDICAL, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of May 15, 2000 by
and between Xxxxx X. Xxxxx ("Employee") and Xxxx Biomedical, Inc., a California
corporation (the "Company").
1. Employment Term. The Company agrees to employ Employee, and Employee
agrees to be employed by the Company, under the terms and conditions set forth
in this Agreement, for a period commencing on May 18, 2000 and ending May 18,
2002, unless such period is terminated earlier pursuant to Section 5 below (the
"Initial Term"). This Agreement may be extended after the end of the Initial
Term if Employee and the Company mutually agree in writing to such extension(s).
2. Duties.
(a) Position. Employee shall be employed as President and Chief Executive
Officer of the Company. In such capacity, he shall (i) report only to the
Chairman of the Board of Directors and be subject to the reasonable direction
and control of the Company's Board of Directors, and (ii) be the chief executive
officer and chief operating officer of the Company and have the duties,
responsibility and authority commensurate with such positions in public
companies which are similar in size to the Company. Employee shall also serve
on, and be a member of, the Company's Board of Directors.
(b) Obligations to the Company. Employee agrees to the best of his ability
and experience that he will at all times loyally and conscientiously perform all
of the duties and obligations required of and from Employee pursuant to the
terms hereof. During the term of Employee's employment relationship with the
Company, Employee further agrees that he will devote all of his business time
and attention to the business of the Company, he will not render commercial or
professional services of any nature to any person or organization, whether or
not for compensation, without the prior written consent of the Company's Board
of Directors, and he will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of the Company.
Nothing in this Agreement will prevent Employee from accepting speaking
engagements in exchange for honoraria, from serving on boards of charitable
organizations or from investing in other businesses provided he is not actively
participating in any such business as a director, employee, independent
contractor, partner, principal, agent or otherwise, and provided further that
any such business is not competitive with the business conducted by the Company
(as conducted now or during the term of Employee's employment), and no consent
from the Company's Board of Directors shall be required for any such activities.
Employee will comply with and be bound by the Company's operating policies,
procedures and practices in effect from time to time during the term of
Employee's employment and applicable to the Company's executive officers
generally, to the extent that the same do not conflict with this Agreement.
During the term of this Agreement, Employee's principal place of employment
shall be located in Orange County, California.
3. At-Will Employment. The Company and Employee acknowledge that Employee's
employment is and shall continue to be at-will, as defined under applicable law,
and that Employee's employment with the Company may be terminated by either
party at any time for any or no reason, subject only to the specific provisions
of this Agreement. If Employee's employment terminates for any reason, Employee
shall not be entitled to any payments, benefits, damages, awards or compensation
other than as provided in this Agreement. The rights and duties created by this
Section 3 may not be modified in any way except by a written agreement approved
by Company's Board of Directors and Employee.
4. Compensation. For the duties and services to be performed by Employee
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, bonuses stock options, and other benefits described below in this
Section 4 during the Initial Term. Employee's annual salary shall be reviewed
annually by the Company's Board of Directors and shall be subject to increase
(but not decrease) based upon (i) Employee's performance, and (ii) increases in
the compensation levels of executives performing similar services in companies
comparable to the Company.
(a) Salary and Signing Bonus. Employee shall receive an annual salary of
$180,000 (the "Annual Salary") payable twice monthly pursuant to the Company's
normal payroll practices. In addition, on the date of the commencement of the
Initial Term, Employee shall be entitled to receive an up-front signing bonus of
$20,000.
(b) Bonuses. For each fiscal year of the Company during the Initial Term,
Employee shall be eligible to receive a cash bonus which will be mutually agreed
upon by the Board of Directors and Employee. Such bonus shall be based on
achievement of specified corporate profitability targets established by the
Board of Directors or its Compensation Committee.
(c) Stock Options. In connection with the commencement of Employee's
employment, the Board of Directors shall grant to Employee a nonqualified stock
option to purchase 190,000 shares of the Company's Common Stock (the "Shares").
The option shall be granted with an exercise price equal to the greater of $3.00
per share or the fair market value on the date of the grant which date shall be
the first day of the Initial Term. The option grant is effective on the first
day of employment and will provide as follows:
(i) 60,000 shares shall be vested on the first day of the Initial Term;
(ii) 40,000 shares of said options shall vest upon each of the first and
second anniversaries of employment;
(iii) 50,000 shares of said options shall vest upon the third anniversary
of employment; and
(iv) other terms and conditions to be provided in the option agreement.
The vesting commencement Date shall be the first day of the Initial Term.
Within 270 days following the first day of the Initial Term, the Company shall
file a registration statement on Form-S-8 covering the Shares.
(d) Employee Benefits. Employee shall be entitled to participate, to the
extent he is eligible under the terms and conditions thereof, in the medical
insurance plans, 401(k) plan, and other employee benefit plans which are
generally available to executives of the Company. The Company shall be under no
obligation to institute or continue the existence of any employee benefit plan
described herein and may from time to time amend, modify or terminate any such
employee benefit plan. Employee shall be entitled to paid vacation of four (4)
weeks per annum.
(e) Reimbursement of Expenses. Employee shall be authorized to incur on
behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
5. Termination of Employment and Severance Benefits
(a) Termination of Employment. This Agreement may be terminated upon the
occurrence of any of the following events:
(i) The date written notice is delivered to Employee by the Company stating
that the Company is terminating Employee for Cause (as defined in Section 6
below) ("Termination for Cause");
(ii) The date written notice is delivered to Employee by the Company
stating that the Company is terminating Employee without Cause, which
determination may be made by the Company at any time at the Company's sole
discretion, for any or no reason ("Involuntary Termination");
(iii) The date written notice is delivered to the Company by Employee
stating that Employee is electing to terminate his employment with the Company,
except under subparagraphs (b), (c), (d) or (e) of Section-7 hereof ("Voluntary
Termination"); or
(iv) Following Employee's death or disability (as defined in Section-9
below).
(b) Severance Benefits. Employee shall be entitled to receive severance
benefits upon termination of employment only as set forth in this Section 5(b):
(i) Termination for Cause. If Employee's employment is terminated for
Cause, then Employee shall not be entitled to receive payment of any severance
benefits. Employee will receive payment(s) for all salary and unpaid vacation
accrued as of the date of Employee's termination of employment and Employee's
benefits will be continued under the Company's then existing benefit plans and
policies to the extent, if any, provided for under such plans and policies in
effect on the date of termination and in accordance with applicable law.
(ii) Involuntary Termination. If Employee's employment is terminated as a
result of an Involuntary Termination other than for Cause (as defined in Section
6 below) and other than by reason of Employee's Voluntary Termination, Employee
will be entitled to receive a severance payment as follows: (i) in the event
that such Involuntary Termination occurs on or before the first anniversary of
the date of commencement of employment under this Agreement (the "First
Anniversary Date"), Employee shall receive a payment equal to two times the
dollar amount of the Annual Salary then in effect on the date of such
termination and (ii) in the event that such Involuntary Termination occurs after
the First Anniversary Date but before the conclusion of the Initial Term, then
Employee shall receive a payment equal to two times the dollar amount of the
Annual Salary then in effect on the date of such termination less the dollar
amount of Annual Salary received by the Employee from and after the First
Anniversary Date until the date of such termination; provided however, in any
event, such payment shall not be less than one-half of the dollar amount of the
Annual Salary. Such payment shall be reduced by applicable income and employment
taxes and shall be made in two equal installments as follows: (i) one-half
within seven (7) days of the effective date of the termination, and (ii)
one-half on the six-month anniversary thereof. As a condition of, and in
exchange for, the receipt of such severance benefits, Employee shall execute and
deliver to the Company (and remain in full compliance with): (i) a Settlement
Agreement and Release of Claims in a form reasonably satisfactory to the Company
(such release not to cancel any of Employee's rights to indemnification under
the Standard Indemnification Agreement referred to in Section-9 hereof): and
(ii) a resignation from all of Employee's positions with the Company, including
from the Board of Directors and any committee thereof on which Employee serves,
in a form satisfactory to the Company.
(iii) Voluntary Termination. If Employee's employment terminates by
Voluntary Termination, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment.
In addition, Employee's benefits will be continued under the Company's then
existing benefit plans and policies to the extent, if any, provided for under
such plans and policies in effect on the date of termination and in accordance
with applicable law. At the time of any such Voluntary Termination, Employee
shall execute and deliver to the Company a resignation from all of Employee's
positions with the Company, including from the Board of Directors and any
committee thereof on which Employee serves, in a form satisfactory to the
Company.
(iv) Termination by Reason of Death or Disability. In the event that
Employee's employment with the Company terminates as a result of Employee's
death or Disability (as defined in Section 8 below). Employee or Employee's
estate or representative will receive all salary and unpaid vacation accrued as
of the date of Employee's death or Disability and any other benefits payable
under the Company's then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of death or Disability and in
accordance with applicable law.
6. Definition of Cause. For purposes of this Agreement, "Cause" for
Employee's termination will exist at any lime after the happening of one or more
of the following events, in each case as determined in good faith by the
Company's Board of Directors:
(a) Employee's
(i) willful misconduct or gross negligence in performance of his duties
hereunder, or
(ii) refusal to comply in any material respect with the legal directives of
the Company's Board of Directors so long as such directives are not inconsistent
with the Employee's position and duties, which is not remedied (if remediable)
within ten (10) working days after written notice from the Company's Board of
Directors, which written notice shall state that failure to remedy such conduct
may result in Termination for Cause;
(b) Employee's deliberate attempt to do an injury to the Company;
(c) Employee's conduct, dishonest, fraudulent or otherwise, that materially
discredits the Company or is materially detrimental to the reputation of the
Company;
(d) Employee's conviction of a felony or a crime involving moral turpitude
causing material harm to the standing and reputation of the Company; or
(e) Employee's material breach of any element of the Company's Proprietary
Information Agreement, including without limitation, Employee's theft or other
misappropriation of the Company's proprietary information.
7. Definition of Involuntary Termination. For purposes of this Agreement,
"Involuntary Termination" shall include (a) any termination by the Company other
than for Cause, (b) any reduction in Employee's base salary, (c) any voluntary
termination by Employee following a material reduction or change in job duties,
responsibilities or requirements inconsistent with Employee's position with the
Company and Employee's prior duties, responsibilities, and requirements or a
change in Employee's reporting relationship such that Employee is no longer
reporting to the Company's Chairman of the Board of Directors, provided that, in
the case of subsection (c), Employee provides written notice to the Company
within thirty (30) days of the effective date of such reduction or change (d)
any material breach by the company of any obligation of the Company under this
Agreement and (e) a Change in Ownership of the Company (as hereinafter defined)
shall have occurred. For purposes hereof, a "Change of Ownership of the Company"
shall be deemed to occur if (i) any person or group of persons who, as of the
date hereof, do not have beneficial ownership, either individually or in the
aggregate, of more than five percent (5%) of the currently outstanding shares of
common stock of the Company acquires beneficial ownership of more than fifty
percent (50%) of the outstanding shares of common stock of the Company, or (ii)
the Company is a party to a merger, consolidation or reorganization (a
"Reorganization Transaction") with any other person and, as a result of the
consummation thereof, persons who were beneficial owners of the Company's common
stock immediately prior to such Reorganization Transaction no longer own,
beneficially, any voting securities, or own, beneficially, voting securities
with less than fifty percent (50%) of the voting power, of the Company or of any
other corporation or other entity which, as a result of such Reorganization
Transaction, has become owner of more than fifty (50%) of the voting securities
of the Company, or (iii) the Company sells all or substantially all of its
assets to another person (a "Sale of Assets Transaction") and as part of or
pursuant to such Sale of Assets Transaction such person (the "Buyer") assumes
this Agreement, provided that such a Sale of Assets Transaction shall not be
deemed a Change of Ownership if any person or group of persons who, as of the
date of this Agreement, own beneficially more than five percent (5%) of the
Company's outstanding common stock own beneficially securities of the Buyer
representing more than fifty percent (50%) of the Buyer's voting power. For
purposes hereof, the terms "beneficial ownership" and "group" shall be defined
in the same manner as such terms are defined in Rules 13d-3 and 13d-5,
respectively, under the Securities Exchange Act of 1934, as amended, and the
term "person" shall mean any natural person, corporation, partnership, joint
venture, unincorporated association, trust or other entity, and, if there occurs
a Reorganization Transaction in which the Company is not a surviving entity or
there occurs a Sale of Assets Transaction in which the Buyer assumes this
Agreement, then the term "Company" shall thereafter mean the surviving company
in such Reorganization Transaction or the Buyer in such Sale of Assets
Transaction (as the case may be).
8. Definition of Disability. For purposes of this Agreement, "Disability"
shall mean that Employee has been unable to perform his duties hereunder as the
result of his incapacity due to physical or mental illness, and such inability,
which continues for at least 90 consecutive calendar days or 120 calendar days
during any consecutive twelve-month period, if shorter, after its commencement,
is determined to be total and permanent by a physician selected by the Company
and its insurers and acceptable to Employee or to Employee's legal
representative (with such agreement on acceptability not to be unreasonably
withheld).
9. Proprietary Agreement; Indemnification. Employee shall sign the
Company's standard Proprietary Information Agreement (the "Proprietary
Agreement"). Employee hereby agrees to continue to abide by the terms of the
Proprietary Agreement and further agrees that the provisions of the Proprietary
Agreement shall survive any termination of this Agreement or of Employee's
employment relationship with the Company. The Company shall provide the Employee
the Company's Standard Indemnification Agreement currently executed by and for
the benefit of each of the Company's directors and executive officers.
10. Nonsolicitation Covenant. Employee hereby agrees that he shall not,
during the term of his employment pursuant to this Agreement and for the shorter
of (a)-the period that severance payments are to be made under Section-5(b)(ii)
hereof or (b)-twelve (12) months thereafter, but in any event not less than six
(6) months thereafter, do any of the following, directly or indirectly, without
the prior written consent of the Company's Board of Directors:
(a) Solicit Business. Solicit or influence or attempt to influence any
client, customer or other person either directly or indirectly, to direct his or
its purchase of the Company's products and/or services to any person, firm,
corporation, institution or other entity in competition with the business of the
Company: and
(b) Solicit Personnel. Solicit, induce, recruit or encourage any person
employed by the Company to terminate or otherwise cease his employment with the
Company. This Section-10(b) is to be read in conjunction with the Proprietary
Agreement executed by Employee.
11. Conflicts. Employee represents that his performance of all the terms of
this Agreement will not breach any other agreement to which Employee is a party.
Employee has not, and will not during the term of this Agreement, enter into any
oral or written agreement in conflict with any of the provisions of this
Agreement. Employee further represents that he is entering into or has entered
into an employment relationship with the Company of his own free will.
12. Miscellaneous Provisions.
(a) No Duty to Mitigate. Employee shall not be required to mitigate the
amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
(b) Amendments and Waivers. Any term of this Agreement may be amended or
waived only with the written consent of the parties.
(c) Sole Agreement. This Agreement, including any Exhibits hereto,
constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(d) Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient upon receipt, when delivered personally
or by a nationally-recognized delivery service (such as Federal Express or UPS),
or forty-eight (48) hours after being deposited in the U.S. mail as certified or
registered mail with postage prepaid, if such notice is addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(f) Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in connection with
this Agreement shall be finally settled by binding arbitration in Orange County,
California in accordance with the rules of the American Arbitration Association
applicable to commercial arbitration by one arbitrator appointed in accordance
with said rules. The arbitrator shall apply California law, without reference to
rules of conflicts of law or rules of statutory arbitration, to the resolution
of any dispute. Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. Notwithstanding the foregoing, the
parties may apply to any court of competent jurisdiction for preliminary or
interim equitable relief, or to compel arbitration in accordance with this
paragraph, without breach of this arbitration provision. This Section 15(h)
shall not apply to the Proprietary Agreement.
(i) Advice of Counsel. Each Party to this Agreement acknowledges that, in
executing this Agreement, such party has had the opportunity to seek the advice
of independent legal counsel, and has read and understood all of the terms and
provisions of this Agreement. This Agreement shall not be construed against any
party by reason of the drafting of preparation hereof.
The parties have executed this Agreement the date first written above.
XXXX BIOMEDICAL, INC.
By: /s/ Xxxx X. Xxxxxxxx, Xx.
---------------------------------
Title: Chairman
Address: 0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
XXXXX X. XXXXX
Signature: /s/ Xxxxx X. Xxxxx
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Address: 00000 Xxxxxxxxxxx Xxxxxx,
Xxxxxxxxxx Xxxxx, XX 00000
