EXHIBIT 10.02
EMPLOYMENT AGREEMENT FOR
XXXXX X. XXXXXXXX
EMPLOYMENT AGREEMENT
This Agreement made effective as of the 25th day of August, 1997, between Xxxx
Scientific, Inc. of American Fork Utah (hereinafter referred to as "Xxxx")
and Xxxxx X. Xxxxxxxx, (hereinafter referred to as the "Xxx").
W I T N E S E T H:
In consideration of the mutual covenants and conditions hereinafter set forth,
and other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, Xxxx and Xxx agree as follows:
1. Employment.
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Xxxx hereby employs Xxx, and he hereby accepts such employment, to perform
the Services as hereinafter defined.
2. Term of Employment.
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The term of this Agreement shall begin on the date first above written,
and shall end ten years thereafter.
3. Services:
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(1) Xxx shall devote substantial time and attention to the affairs of
Xxxx as necessary to perform such duties as may be assigned to him as
Chairman and Chief Executive Officer of Xxxx Scientific, Inc., from time to
time, by the Board of Directors. As CEO his duties shall include the
supervision of the construction and operation of the plant or plants of Xxxx,
the purchase and installation of equipment, the employment and fixing of
compensation and discharge of employees, the selection and purchase of capital
equipment and operating supplies and other duties usually incident to those of
the CEO. All duties set out in this Section 3 shall be known as "Services" for
purposes of this Agreement. If Jim's title or duties should change during the
term of this Agreement, such change shall not impact any terms of this
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Agreement including the base compensation, additional compensation, or
benefits.
(2) From time to time Xxx xxx work on additional academic degrees or
teach classes at local universities. Xxxx recognizes that this pursuit will
put certain demands on the time of Xxx which is not within his control. Should
these time demands conflict with his duties, he shall use his best efforts to
resolve the conflicts; however, he shall not be penalized for any conflicts,
time demands, travel or other such duties, including teaching, provided it is
not more than one class per semester ( four hours or less), that may be
required to meet the Ph.D. degree requirements and which can not be resolved
to the satisfaction of Xxxx.
4. Base Compensation:
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For all Services rendered by Xxx under this Agreement, basic compensation
shall be paid to him as follows:
(1) As basic compensation Xxx shall be paid a base salary of $285,000
per year the first year of this agreement, and such base compensation will
rise a minimum of 5% per year for each year of this Agreement. However, based
upon the performance of the company and Xxx, the Board may set his salary
higher than provided for under this section if the Board so chooses. However,
during the term of this Agreement if Xxxx Scientific (only Xxxx) has a year
in which it does not earn a profit, the Board can reduce Jim's salary by no
more than $100,000 annually, and the Board shall fully restore Jim's salary
when the company achieves a before tax profit equal to 3% of gross revenues of
Xxxx only. . All base salaries shall be payable in equal installments not less
than monthly. Xxxx shall deduct and withhold all necessary Social Security and
withholding taxes and any other similar sums required by law from Jim's
salary.
(2) Xxxx will reimburse certain business expenses of Xxx as the Board of
Directors, or other designated party, from time to time shall specify. Normal
business expenses do not require Board approval for reimbursement.
(3) He shall be included in Xxxx'x major medical and hospitalization plan
and other benefit plans including profit sharing, incentive compensation,
executive bonus plan, pension plan, group term life insurance and dental
plans. In addition, at the end of the term of this Agreement, or if this
Agreement is terminated With Cause, Without Cause, or at Jim's request, Xxxx
agrees to provide Xxx with major medical and hospitalization insurance until
Xxx is eligible to receive medicare. Such insurance shall not provide benefits
less than those provided for other employees through Xxxx'x group health
insurance plan. The coverage that Xxxx provides Xxx shall be valid regardless
of where Xxx lives.
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(4) Xxxx shall pay premiums for up to $1,000,000 of life insurance on
Xxx each year provided such premiums do not cost more than $2000 per year. Xxx
must pay the annual premium and submit a receipt for reimbursement by the
company. Failure to pay the annual premium on the part of Xxx shall release
Xxxx from any obligation to provide life insurance to him. In addition, Xxxx
is not obligated to provide life insurance for him should he become
uninsurable.
(5) Xxx shall receive 5 weeks of vacation per year. He can carry over one
week of vacation each year for a total of 6 weeks in any given year; however,
he shall not be entitled to be reimbursed for unused vacation.
(6) In the event of accident or term illness which prohibits Xxx from
performing his normal job for Xxxx, Xxxx agrees to continue Jim's salary and
benefits for a period of 180 days, even if he is unable to return to work for
Xxxx. If Xxx does not have disability insurance paid for by him, either in a
group plan or individual policy, Xxxx, at its expense, agrees to provide Xxx
with long term disability insurance to cover any long term disabilities beyond
the 180 day period covered by Xxxx. Such insurance shall provide, at the time
of disability, salary replacement of up to 60% of his salary including Social
Security payments, per year through age 65, and not require him to accept jobs
outside of his own occupation through age 65. Xxxx does not have to provide
Xxx with disability insurance if either he or the company, as a whole, becomes
uninsurable. If Xxx is disabled during the term of this Agreement and is
required to stop performing his duties for a period of time in excess of 180
days, this Agreement shall continue in force; however, if Xxx is unable to
perform his duties and is on disability, Xxxx may suspend payments of his base
salary and bonus until he is fit to return to work, or Xxxx can terminate this
contract if his disability lasts more than 4 years. When he is fit to perform
his duties, Xxxx shall allow him to return to work and resume payment of his
compensation as defined in this Agreement.
(7) During the term of this Agreement, if any member of Jim's family
needs major medical care due to accident, injury or illness, Xxx will be
allowed to take up to 4 weeks off with pay in any given year. The Board can
require Xxx to provide reasonable details of the family medical problem he
must attend to. Anytime off beyond the 4 weeks specified herein must be
approved by the Board on a case by case basis.
5. Change in CEO Position
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(1) At the end of year five of this Agreement, the Board can appoint a
new CEO if the Board determines that it is in the best interest of Xxxx. In
such case, Xxx shall remain as Chairman of the Board of Xxxx for the remainder
of his contract. At the time of the change, the Board may reduce Jim's base
salary as they see fit, but in no case can they reduce it to less than 50% of
the base salary he was receiving at the time of the change in position. If
there is a reduction in Jim's base salary, there shall also be a corresponding
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reduction in Jim's duties and the time he is expected to devote to Xxxx. Such
a change of duties shall be negotiated by Xxx and the Board at the time of
the reduction in base salary. As Chairman of the Board, Xxx shall participate
in all other forms of compensation he would have been eligible for as CEO
including his bonus and incentive compensation. The Board will not reduce
those in any larger percentage than the reduction in his base salary.
(2) At the end of year five of this Agreement, Xxx can voluntarily
relinquish the CEO title and retain his position as Chairman of the Board. In
such circumstances the Board will negotiate with Xxx a reduction in duties and
the time Xxx is expected to devote to Xxxx. In addition, the Board can reduce
Jim's salary to an amount not less than 50% of the base salary he is receiving
at the time he relinquished the CEO title. As Chairman of the Board, Xxx shall
participate in all other forms of compensation he would have been eligible for
as CEO including his bonus and incentive compensation. The Board will not
reduce those in any larger percentage than the reduction in his base salary.
(3) At anytime during the term of this Agreement, the Board may negotiate
with Xxx to effect a change in the CEO position. If such a change comes before
the end of year 5 of this Agreement, Xxx shall remain as Chairman of the Board
for the duration of his contract at the base salary he was earning at the time
of the change, except that at the end of year 5 of this Agreement the Board
may act according to paragraph (1) above. As Chairman of the Board, Xxx shall
participate in all other forms of compensation he would have been eligible for
as CEO including his bonus and incentive compensation. The Board will not
reduce those in any larger percentage than the reduction in his base salary.
6. Best Efforts:
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Xxx agrees that he will at all times, faithfully, industriously, and to the
best of his abilities, experience, and talents perform all duties that may be
required of and from him by the Board.. If he fails to perform his duties in a
competent manner as determined by a vote of 75% of the Board, Xxxx shall warn
Xxx in writing identifying the specific deficiencies to be corrected, except
those deficiencies may not be the result of illness or disability. If Xxx does
not correct such deficiencies to the extent an arbiter would require of him in
a reasonable time period after being warned, then Xxx xxx be discharged With
Cause after three such warnings in one year and failure on Jim's part to
correct such deficiencies to the satisfaction of an arbiter.
7. Termination by Xxxx.
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Xxxx may terminate this Agreement for the following reasons:
(1) If i) there is substantial and irrefutable evidence Xxx embezzled
significant assets of Xxxx, or (ii) Xxx is convicted of any felony involving a
crime of moral turpitude the result of which causes substantial embarrassment
or hindrance to Xxxx, or (iii) if he willfully violates the trade secrets
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provisions contained in Section (9) of this Agreement, or (iv) if he is in
breach of Section 6, Best Efforts.. In the event of termination upon a
conviction described above, prior to the completion of the term of employment
specified herein, Xxx shall be entitled to all compensation due him as
provided for in this Agreement, and said compensation shall be paid by Xxxx
within thirty (30) days of the termination date. A termination under this
paragraph shall be considered With Cause.
(2) If Xxx should be disabled for a period of more than 180 days in any
year, then Xxxx may suspend this Agreement with 30 days written notice if the
Xxxx meets the criteria as set out in Section 4, Base Compensation Paragraph
6. If Xxxx is not in compliance with Section 4, Base Compensation, Paragraph
6, and does not insure Xxx or have proof that Xxx purchased his own insurance
at his expense, Xxxx shall be responsible for Jim's disability payments during
his time of disability. If this Agreement is suspended because of disability,
Xxx shall be entitled to all compensation due him as provided for in this
Agreement, and any remaining base compensation shall be paid by Xxxx within
thirty (30) days of the termination date. When Xxx recovers from his
disability he will be allowed to return to work as described in Section 2,
Base Compensation, paragraph 6.
(3) If Xxx should die during the term of this Agreement, Xxxx may
terminate this Agreement immediately upon his death. Jim's heirs or estate
shall be entitled to all compensation due him as provided for in this
Agreement, and any remaining base compensation shall be paid by Xxxx to
Jim's estate within thirty (30) days of the termination date.
(4) If Xxxx terminates this Agreement Without Cause anytime before the
end of the employment term defined in this Agreement,, Xxx shall be entitled
to severance pay of 50% of the base compensation remaining to be paid over
the life of the contract, or one year's salary, whichever is greater. In
addition, to xxxxxxxxx Xxx shall receive all other compensation due him
under this Agreement.
8. Termination by Xxx.
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Xxx xxx terminate this Agreement for the following reasons:
(1) For Good Reason which shall mean for purposes of this Agreement (i) a
change in control of Xxxx as defined below, (ii) a failure of Xxxx to comply
with any material provision of this Agreement which has not been cured within
30 days after notice of noncompliance has been given by Xxx to Xxxx, (iii) any
attempted termination by Xxxx which is not in compliance with the terms and
conditions of this Agreement, or (iv) Xxx is required to move or be based
anywhere other than the location at which he is based at the time of the
Change in Control. A Change in Control of Xxxx shall mean a change in the
basic ownership of Xxxx shares where 45 % or more of the voting shares are
acquired or accumulated in one or several transactions by another entity. In
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addition, if the individuals who constitute the Board at date of this
Agreement and any additions within 90 days after the date of this Agreement
(the "Incumbent Board") cease to constitute at least a majority of the Board
at any time during the term of this Agreement, a Change in Control will be
considered to have taken place. Not withstanding anything to the contrary, no
Change in Control shall be deemed to have occurred for purposes of this
Agreement by virtue of any transaction which results in Xxx, or a group of
persons which includes Xxx, acquiring, directly or indirectly, 45 % or more of
the combined voting power of Xxxx'x securities. If Xxx terminates this
Agreement for Good Reason, Xxx is due the same compensation as described in
Section 7 Termination by Xxxx, paragraph 4, which is termination Without
Cause.
(2) Xxx xxx terminate this Agreement at any time if the termination is
due to health problems which impair Jim's performance to an extent that
makes his continued efforts to do his duties as defined by this Agreement
hazardous to his physical or mental well-being , or his life, provided that he
furnishes to Xxxx a written statement from a qualified doctor to this effect.
If Xxx terminates this Agreement for Health Reasons, Xxx shall be entitled to
three months of his base salary at the time of the termination plus the
continuation of his health insurance benefits as previously stated in
paragraph (3) of Section 4 Base Compensation..
(3) Xxx xxx terminate this Agreement at any time by delivering written
notice of such termination to Xxxx ninety days prior to such termination. If
Xxx voluntarily terminates this Agreement for any reason other than with Good
Reason or for Health Reasons, he is due no severance other than continuation
of his health insurance benefits defined in paragraph (3) of Section 4 Base
Compensation.. Loss of the compensation described herein is the only penalty
of voluntary early termination by Xxx.
9. Trade Secrets:
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(1) Xxx recognizes that during his employment he will receive, develop,
or otherwise acquire information which is of a secret or confidential nature.
Except as authorized in writing by Xxxx, any information of Xxxx he obtained
during the course of his employment relating to inventions, procedures,
machinery, apparatus, ideas, technical data, or other information which is of
a secret or confidential nature, whether or not acquired or developed by Xxx,
he shall use his best efforts to keep confidential during the term of his
employment.
(2) Xxx will communicate to Xxxx promptly and fully all discoveries,
improvements, and inventions (hereinafter called "Inventions") made or
conceived by him, either solely or jointly with others, during his employment
and for six months thereafter, which are similar to actual or anticipated
business, work, or investigations of Xxxx or which result from or are
suggested by any work Xxx xxx do for Xxxx; and such Inventions, except as
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provided below, shall be and remain the sole and exclusive property of Xxxx or
its nominees. Any product, substance or process for which a United States
patent has been granted and which product, substance or process is developed
directly by Xxx during the term of this Agreement, shall be owned one-half by
Xxxx and one-half by him. Xxxx shall have an exclusive worldwide license to
make, use and sell products, substances and processes covered by patents
obtained. Xxxx shall have sole authority to determine when an application for
a patent shall be pursued for any product, substance or process. If Xxxx
elects to apply for a patent, all expenses incurred in pursuing any patent
shall be borne entirely by Xxxx. If Xxxx elects not to apply for a patent,
the person who should become vested with an interest in the patent, may pursue
a patent application at his sole expense.
(3) Xxx will keep and maintain adequate and current written records of
all such Inventions, in the form of notes, sketches, drawings, and reports
relating thereto, which records shall be the property of and available to Xxxx
at all times. All such records shall remain on the premises of Xxxx at all
times and shall be deemed to be secret and confidential.
(4) Xxx will, during and after his employment, at Xxxx'x expense, assist
Xxxx and its nominees in every proper way to obtain and vest in it or them
title to patents on such inventions in all countries by executing all
necessary documents, including applications for patents and assignments
thereof.
10. Covenant Not To Compete:
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After termination of this Agreement Xxx will not divert or attempt to divert
away business from Xxxx by influencing or attempting to influence any
customers of Xxxx with whom he may have been dealing; provided, however, that
the restrictions contained in this sentence shall apply only for a maximum
period of two years and to such capacities, functions, operations and areas as
shall be reasonably necessary for the protection of Xxxx and shall be
construed to be thus divisible and enforceable provided that Xxxx has paid Xxx
all compensation due under the terms and conditions of this Agreement. If Xxxx
has not paid the compensation defined herein to him for any reason, this
covenant not to compete shall be null and void.
11. Computer Equipment:
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During the term of employment, Xxxx will xxxxxxx Xxx with computer equipment
and software generally consisting of one desk top computer, printer and
software, and at least one portable computer and software. Upon termination
of this agreement he shall have the right to purchase from Xxxx the computers,
printers and software in regular use by him anytime within the prior six
months from the date of termination. The purchase price shall be no more than
the depreciated value of the equipment, whichever is less.
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12. Successors:
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Xxxx will require any successor ( whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business or assets of Xxxx, by agreement in form and substance reasonably
satisfactory to Xxx, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that Xxxx would be required to
perform it if no such succession had taken place. Failure of Xxxx to obtain
this agreement prior to the effectiveness of any succession shall be a breach
of this Agreement and shall entitle Xxx to receive immediate payment in full
of all as yet to be paid compensation and benefits available during the term
of this Agreement and after. During the close of any sale, merger,
consolidation or other form of transfer of the majority of Xxxx'x assets, Xxx
shall be given a new contract prior to the actual close taking place. Such a
contract shall be with the surviving company under the same terms and
conditions as described in this Agreement. If such an Agreement is not forth
coming from the acquiring entity before or at the time of the closing of
the transaction, this shall be considered termination Without Cause. In such
case, any and all monies owed Xxx shall be paid to him prior to close in the
form of a cashier's check for the compensation due him as calculated under
termination Without Cause.
13. Indemnification:
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Xxxx shall indemnify Xxx to the full extent of any expenses, penalties,
damages or other pecuniary loss which he may suffer as a result of his
responsibilities, obligations or duties in connection with carrying out the
employment functions defined in this Agreement and in managing the business of
Xxxx and Xxxx only, and specifically as a Director and/or Officer of Xxxx.
Such indemnification shall be paid by Xxxx to Xxx to the extent that
fiduciary liability or directors and officers insurance is not available to
cover the payment of such items. Expenses incurred by Xxx in defending a claim
against him in a Proceeding shall be paid by Xxxx as incurred and in advance
of the final disposition of such Proceeding. The indemnification under this
Agreement shall continue as to him even though he may have ceased to be a
Director and/or Officer and shall inure to the benefit of the heirs and
personal representatives of Xxx. The indemnification under this Agreement
shall cover Jim's service as a Director and/or Officer and all of his acts in
such capacity, whether prior to, or on or after the date of the Agreement.
This indemnification does not apply to illegal acts.
14. Governing Law:
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This Agreement shall be subject to and governed by the laws of the State of
Utah.
15. Binding Effect:
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This Agreement shall be binding upon and inure to the benefit of Xxxx and
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Xxx and their respective heirs, legal representatives, personal
representatives, successors, and assigns. If he should die while any amounts
would still be payable if he had continued to live, all such amounts, unless
otherwise provided, shall be paid in accordance with the terms of this
Agreement to his designee or, if there is no such designee, to his estate.
16. Entire Agreement:
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This writing contains the entire agreement concerning the employment
arrangements between the parties and shall, as of the date hereof, supersede
all other arrangements between the parties. No waiver or modification of this
Agreement nor of any of the conditions contained herein shall be valid unless
in writing and duly signed by the party to be charged therewith.
17. Illegal Provisions:
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If any provision of this Agreement is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, each provision shall be deemed
amended to conform to applicable laws so as to be valid and enforceable or if
it cannot be so amended without materially altering the intention of the
parties, it shall be stricken and the remainder of this Agreement shall remain
in full force and effect.
18. Section Headings:
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Section headings contained in this Agreement are included for
convenience only and form no part of the agreement between the parties.
19. Written Consent:
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Neither the Agreement nor any right or obligation arising hereunder may be
assigned by Xxx without the prior written consent of Xxxx.
20. Warranties:
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All representations, warranties, indemnifications, obligations of
confidentiality, rights of confidentiality, proprietary rights and
indemnifications shall survive the termination of this Agreement.
21. Arbitration.
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Should any dispute arise between the parties concerning the performance of
this Agreement, the parties agree to mediation and, if not resolved through
such mediation within 30 days, final and binding arbitration in Salt Lake
City, Utah in accordance with the rules of the American Arbitration
Association subject Article XII in the case of alleged breach of Articles X
or XI. The decision rendered in any arbitration proceedings shall be in
writing and shall be set forth the basis therefor. The parties shall abide by
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the award rendered in the arbitration proceedings, and such award may be
entered as a final, non appealable judgment, and be enforced and executed
upon, in any court having jurisdiction over the party against whom
enforcement of such award is sought. Each of the parties agrees ( in
connection with any action brought to enforce the arbitration provisions of
this section) not to assert in any such action, any claim that it is not
subject to the personal jurisdiction of such court, that the action is brought
in an inconvenient forum, that the venue of the action is improper, or that
such mediation or arbitration may not be enforced by such courts. Each party
agrees that service of process may be made upon it by any method authorized by
the laws of the State of Utah.
22. Costs and Attorneys' Fees.
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If Xxx shall incur any costs resulting from enforcement of this Agreement,
whether by institution of suit or otherwise, Xxxx shall be liable to the
prevailing party of such costs, including reasonable attorneys' fees.
23. Waiver.
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Any failure by either party to insist upon strict performance of this
Agreement or any terms hereof shall not be deemed to be a waiver of any of the
terms and provisions hereof.
24. Duty to Mitigate.
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Xxx shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise and Xxxx will
not be entitled to set off against amounts payable to him pursuant to this
Agreement any amounts earned by him from other employment during the remaining
term of this Agreement.
25. Board Resolution.
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This Agreement has been authorized on behalf of Xxxx at a special meeting of
it Board of Directors by a resolution adopted by a majority of the other
directors of Xxxx.
26. Breaches and Remedies.
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In the event Xxx breaches any portion of this Agreement, all remedies and
liabilities have been defined herein. No other remedies or liabilities exist
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outside of those defined in this Agreement.
Xxxx Scientific, Inc. Xxxxx X. Xxxxxxxx
By:XXXXXX XXXXXX XXXXX X. XXXXXXXX
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Xxxxxx Xxxxxx, Director
Xxxx Scientific, Inc.
By:XXXXX XXXXXXXXXX
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Xxxxx Xxxxxxxxxx, Director
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