EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") dated as of
October 14, 1996 between Pacific Biometrics, Inc., a Delaware
corporation (the "Company"), and Xxxxx X. Xxxxxxx (the "Executive").
ARTICLE I
EMPLOYMENT
The Company hereby employs Executive, and Executive
accepts employment with the Company, upon the following terms and
conditions:
1.1 (a) Employment. The Company hereby employs
Executive, and Executive agrees to serve, as the Chairman of the
Company during the Term of this Agreement. Subject to the Board of
Directors of the Company, the Executive shall actively manage, and
have responsibility for and supervision over, business development
activities, investor relations and such other duties as shall be
designated by the Board of Directors. The Executive agrees to devote
her full business time and attention and best efforts to the affairs
of the Company during the Term of this Agreement; provided, however,
that, to the extent that such activities do not otherwise violate the
provisions of this Agreement or interfere with the performance of her
duties hereunder, the Executive may devote such time as shall be
reasonably necessary to perform outside consulting services; provided,
further, that such consulting services do not
exceed 42 days per year and are not deemed a conflict of interest as
determined by the Board of Directors.
(b) Board of Directors. The Company agrees that
during the Term it will use its best efforts to cause the Executive to
be nominated and elected to the Company's Board of Directors.
1.2 Term. The employment of the Executive by the
Company under the terms and conditions of this Agreement will commence
on the date hereof and continue until October 13, 1998 (the "Term")
unless terminated sooner in accordance with the provisions of Article
IV.
ARTICLE II
COMPENSATION
2.1 (a) Annual Salary. During the Term the Company
shall pay to the Executive an annual salary of $140,000 (the "Base
Salary"), payable in equal installments every two weeks. Executive
shall be entitled to an annual performance based increase in the Base
Salary as determined by the Board of Directors a compensation
committee thereof.
(b) Bonus. After the first anniversary of this
Agreement, Executive may be awarded an annual incentive bonus in such
amount as may be deemed appropriate by the Board of Directors or
compensation committee thereof.
(c) Stock Options. In connection with the
negotiation of this Agreement, the Company granted to Executive on
July 9, 1996 an option to purchase 80,000 shares of the Company's
common stock, $.01 par value per share, at $3.45 per share. Such
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options shall vest equally over a four year period commencing on July
9, 1997 (i.e. 20,000 shares per year over four years). In the event
that the Company is acquired by, or merged into, another entity, or
engages in a similar business combination or reorganization, all stock
options shall accelerate and become fully vested upon the earlier to
occur of the execution of definitive agreements relating to any of the
foregoing transactions or the consummation of any such transaction.
2.2 Reimbursement of Expenses. The Executive shall
be entitled to receive prompt reimbursement of all reasonable expenses
incurred by the Executive in performing services hereunder, including
all expenses of a cellular telephone and travel, entertainment and
living expenses while away from home on business at the request of, or
in the service of, the Company, provided that such expenses are
incurred and accounted for in accordance with the policies and
procedures established by the Company.
2.3 Benefits. The Company shall pay the Executive as
additional salary the annual cost of a disability insurance policy
which provides for payments equal to the maximum percentage of the
Base Salary allowable during the term of disability which may be
obtained at reasonable cost to the Company, with payments commencing
three months after the commencement of the disability. The Executive
shall be entitled to participate in and be covered by all health,
insurance, pension, 401(k), stock purchase, stock option and any other
employee plans and benefits established by the Company (collectively
referred to herein as the "Company Benefit
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Plans") for its full-time employees generally, subject to meeting
applicable eligibility requirements. If no health benefits are offered
to employees generally, Executive shall be entitled to a reasonable
allowance for health insurance or reimbursement of health insurance
premiums paid directly by Executive with respect to a health plan for
Executive and his dependent family members.
2.4 Vacations and Holidays. During the Term, the
Executive shall be entitled to an annual vacation leave of a minimum
of four weeks at full pay. The Executive shall be entitled to such
holidays as are established by the Company for all employees and such
other religious holidays as is customary pursuant to Executive's
religious practice.
ARTICLE III
CONFIDENTIALITY AND NONDISCLOSURE
3.1 Confidentiality. The Executive will not during
her employment by the Company or thereafter at any time disclose,
directly or indirectly, to any person or entity or use, or permit the
use of, any trade secrets or confidential information relating to the
Company. "Confidential Information" shall include all information
reasonably expected to be kept confidential, including, without
limitation of the generality of the foregoing, trade secrets,
know-how, production processes, customer lists, supply arrangements,
business and financial plans and projections, marketing plans and
advertising arrangements, the terms of any license agreement relating
to any of the foregoing, and all
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information denominated as "confidential" and is made available
only on a restricted basis.
3.2 Return of Company Material. The Executive shall
promptly deliver to the Company on termination of the Executive's
employment with the Company, for whatever the reason, or at any time
the Company may so request, all Company memoranda, notes, records,
reports, manuals, drawings, computer software, and all documents
containing Confidential Information belonging to the Company,
including all copies of such materials which the Executive may then
possess or have under Executive's control.
3.3 Non-Competition; Non-Solicitation. (a) During
the Term of Executive's employment and for a two-year period
thereafter (the "Non-Compete Period") the Executive will not, directly
or indirectly, without the express written approval of the Board of
Directors: (i) own, manage, operate, join, control, or participate in
or be connected with, as an officer, employee partner, stockholder,
director, adviser, consultant, or agent (whether paid or unpaid), any
business, which is at the time engaged in any activities which,
directly or indirectly, compete with the business of the Company (a
"Competitive Business") provided that the Company continues to pay to
Executive, in a timely manner, the amounts required pursuant to
Section 4.2 of this Agreement, and in the event of termination by the
Company without cause, such Non-Compete Period shall be limited to nine
months provided that the Company continues to pay to Executive, in a
timely manner, the amounts required pursuant to Section 4.2 of this
Agreement; the foregoing
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provision being also intended to prohibit the Executive from acquiring
or holding in excess of 5% of any issue of stock or securities of any
Company which is a Competitive Business which has any securities listed
on a national securities exchange or quoted in the daily listing of
over-the-counter market securities; (ii) recruit, solicit or otherwise
induce or influence any proprietor, partner, stockholder, lender,
director, officer, employee, sales agent, joint venturer, investor,
lessor, supplier, customer, consultant, agent, representative or any
other person which has a business relationship with the Company to
discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (iii) employ or seek to employ or
cause any Competitive Business to employ or seek to employ any person or
agent who is then (or was at any time within 90 days prior to the date
the Executive or the Competitive Business employs or seeks to employ
such person) engaged or retained by the Company.
(b) In the event that Executive breaches her
obligations in any respect under this Section 3.3, the Company, in
addition to pursuing all available remedies under this Agreement, at
law or otherwise, and without limiting its right to pursue the same
may cease all payments due to the Executive under this Agreement.
(c) Since a breach of the provisions of this Section
3.3 could not adequately be compensated by money damages, the Company
shall be entitled, in addition to any other right and remedy available
to it, to an injunction restraining such breach or a threatened
breach, and in either case no bond or other security shall be required
in connection therewith, and Executive hereby
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consents to the issuance of such injunction. Executive agrees that the
provisions of this Section 3.3 are necessary and reasonable to protect
the Company in the conduct of its business. If any restriction contained
in this Section 3.3 shall be deemed to be
invalid, illegal, or unenforceable by reason of the extent, duration,
or geographical scope thereof, or otherwise, then the court making
such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof, and in its
reduced form such restriction shall then be enforceable in the manner
contemplated hereby.
3.4 Copyrights, Patents, Etc. Any interest in patents, patent
applications, inventions, technological innovations, copyrights,
copyrightable works, developments, discoveries, designs, and processes
("Inventions") which Executive now or hereafter during the period she
is employed by the Company under this Agreement or otherwise and for
six months thereafter may own, conceive of, or develop and either
relating to the fields in which the Company may then be engaged or
contemplates being engaged or conceived of or developed utilizing the
time, material, facilities, technology or information of the Company,
shall belong to the Company. As soon as Executive owns, conceives of,
or develops any Invention, she agrees immediately to communicate such
fact in writing to the Company, and without further compensation, but
at the Company's expense (except as noted in clause (a) of this
Section 3.4), forthwith upon request of the Company, Executive shall
execute all such assignments and other documents (including
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applications for patents, copyrights, trademarks, and assignments
thereof) and take all such other action as the Company may reasonably
request in order (a) to vest in the Company all Executive's right,
title, and interest in and to such Inventions, free and clear of liens,
mortgages, security interests, pledges, charges, and encumbrances
("Liens") (Executive to take such action at his expense as is necessary
to remove all such Liens) and (b), if patentable or copyrightable, to
obtain patents or copyrights (including extensions and renewals)
therefor in any and all countries in such name as the Company shall
determine.
ARTICLE IV
TERMINATION
4.1 Termination. (a) The Board of Directors may
terminate the Executive's employment hereunder as follows:
(1) upon the death of the Executive, this
Agreement shall immediately terminate, whereupon Executive or
her estate, as the case may be, shall be entitled to receive
her Base Salary and bonus at the rate provided in Section 2.1
to the date on which termination shall take effect;
(2) upon a determination of Permanent
Disability; "Permanent Disability" shall mean a physical or
mental incapacity as a result of which the Executive becomes
totally unable to continue the performance of her duties
hereunder for a period of 180 consecutive days or an
aggregate of 270 days in any consecutive 24 month period. A
determination of Permanent Disability shall be subject to the
certification of a qualified medical doctor agreed to by the
Company and the
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Executive or, in the event of the Executive's
incapacity to designate a doctor, the Executive's legal
representative. In the absence of agreement between the
Company and the Executive, each party shall nominate a
qualified medical
doctor and the two doctors so nominated shall select a third
doctor, who shall make the determination as to the occurrence
and continuance of a Permanent Disability; or
(3) for Cause. "Cause" shall mean only the following:
(i) the willful and continued failure by the
Executive to substantially perform her duties
hereunder (other than such failure resulting from
the Executive's incapacity due to physical or mental
illness);
(ii) willful misconduct by the Executive (which
includes a willful, material breach of this Agreement by
the Executive);
(iii) conviction of a felony;
(iv) theft from the Company or misuse of
Company funds or assets; or
(v) the imposition of a final order issued by
any regulatory authority against the Company which
prohibits the Executive from holding an executive
position with the Company.
For purposes of this Agreement, no act, or failure to
act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive in bad
faith and without a reasonable belief that such action or
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omission by the Executive was in the best interests of the
Company.
4.2 Termination Benefits. (a) If the Executive's
employment hereunder is terminated by the Company for Cause,
neither party shall have any further obligations hereunder except for
(i) obligations accruing prior to the date of termination, and (ii)
obligations or covenants contained herein that extend beyond the term
of this Agreement.
(b) If the Executive's employment hereunder is
terminated by the Company without Cause or as the result of a change
in control of the Company, the Executive shall be entitled to receive
immediate payment for all debt owed by the Company to Execute,
together with interest thereon, plus the Company shall continue to pay
Executive's Base Salary plus bonus and all benefits for a period of
nine months from such date of termination. In addition, Executive's
stock options acquired subsequent to July 1, 1996 shall immediately
vest. All options acquired prior to the date of this Agreement shall
not be affected by Executive's termination pursuant to any provision
of this Agreement. Executive shall be entitled to exercise all vested
options received subsequent to July 1, 1996 for a period of 90 days
from such date of termination; provided, however, such exercise shall
not extend the expiration date of any option. Further, the Company
covenants and agrees that it shall provide, out of available funds, a
loan to Executive for the purpose of permitting Executive to exercise
such option. The loan will mature in three years with interest payable
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in cash or stock payable quarterly at the rate of 7% per annum and
will be collateralized by the shares of stock received by Executive
upon exercise of the options. A "change in control" shall mean either
of the following events: (i) a third party obtains control of the
Company and fails to assume this Agreement, or (ii) there is
a change in the current majority of the Board of Directors, except
that director nominees approved by the Board from time to time
subsequent to the date hereof shall be considered members of the
current majority of the Board.
ARTICLE V
ASSUMPTION OF OBLIGATIONS BY SUCCESSOR TO COMPANY
5.1 Assumption of Obligations. The Company will
require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company, by agreement in form
and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material
breach of this Agreement. (If at any time during the Term of this
Agreement the Executive is employed by any corporation, a majority of
the voting securities of which is then owned by the Company, "Company"
as used in this Agreement shall in addition include such employer.) In
such event, the Company agrees
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that it shall pay or shall cause such employer to pay any amounts owed
to the Executive pursuant to this Agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notice. For purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt required,
postage prepaid, as follows:
If to the Company:
Pacific Biometrics, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn.: Chairman, Compensation Committee of
Board of Directors
If to the Executive:
Xxxxx X. Xxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
or such other address as either party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
6.2 No Waivers. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and the
Company. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such
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other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time.
6.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Delaware without regard to its conflict of law provisions.
6.4 Severability or Partial Invalidity. The
invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
6.5 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same
instrument.
6.6 Entire Agreement. This Agreement constitutes the
entire agreement of the parties and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings, and
negotiations between the parties with respect to the subject matter
hereof. This Agreement is intended by the parties as the final
expression of their agreement with respect to such terms as are
included in this Agreement and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend
that this Agreement constitutes the complete and exclusive statement
of its terms and that no extrinsic evidence may be introduced in any
judicial proceeding involving this Agreement.
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6.7 Assignment. Subject to the provisions of Article IV
hereof, this Agreement and the rights, duties, and obligations hereunder
may not be assigned or delegated by any party without the prior written
consent of the other party. Any such assignment or delegation without
the prior written consent of the other party shall be void and be of no
effect. Notwithstanding the foregoing provisions of this Section 6.7,
the Company may assign or delegate its rights, duties, and obligations
hereunder to any person or entity which succeeds to all or substantially
all of the business of the Company through merger, consolidation,
reorganization, or other business combination or by acquisition of all
or substantially all of the assets of the Company; provided that such
person assumes the Company's obligations under this Agreement in
accordance with Section 5.1.
6.8 Beneficial Interests. This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts are still payable to her hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
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IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
PACIFIC BIOMETRICS, INC.
By: S/ Xxxx X. Xxxxx
Xxxx X. Xxxxx, President and Chief
Executive Officer
EXECUTIVE
S/ Xxxxx X. Xxxxxxx
XXXXX X. XXXXXXX
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