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Exhibit 10.1
SEPARATION AGREEMENT
THIS AGREEMENT is entered into as of the 15th day of January, 2001 by
and between Nutraceutix, Inc., a Delaware corporation, Bio Techniques
Laboratories, Inc., a Washington corporation (the "Company") and Xxxxxxx X. St.
Xxxx ("St. Xxxx") in order to provide the terms and conditions of St. John's
separation of employment, and to fully and completely resolve any and all issues
that St. Xxxx might have in connection with his relationship with the Company
and any related or affiliated Companies and the termination of such
relationships.
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, the parties agree as follows:
1. Termination of Employment Relationship. On or about April 1, 1998, the
parties entered into an Employment Agreement (the "Employment
Agreement"). By its terms, the initial term of Employment was to be
extended from April 1, 2001 through March 31, 2004, unless "non-renewed"
or otherwise terminated sooner. Rather than renew the Employment
Agreement, the parties wish to conclude their relationship. As a result,
the parties agree that this Agreement shall supercede and replace in its
entirety the Employment Agreement, which is hereby terminated and
rendered null and void.
2. Separation. St. John's employment with the Company shall cease effective
January 15th, 2001 (the "Separation Date"). All of St. John's wages and
employee benefits (except as otherwise provided herein) will also cease
as of the Separation Date. St. Xxxx shall be relieved of all duties as
of January 15, 2001.
3. Resignation. St. Xxxx hereby resigns from all employee, officer and
Director positions with the Company and its subsidiaries. Such
resignation shall become effective as of January 15, 2001 and can be
revoked only pursuant to the provisions of Section 18.
4. Severance. Provided St. Xxxx is at all times in compliance with all
terms to this Agreement, the Company shall make monthly payments in the
gross amount of twelve thousand five hundred dollars and no cents
($12,500.00) to him for the 36 month period of January 15, 2001 through
January 15, 2004, payable semi-monthly and as otherwise provided in
Section 5 below commencing February 15, 2001. These payments shall be
subject to the general tax and other withholdings and deductions
applicable to wages. Any payments made by the Company from January 15,
2001 to the date of execution of this Agreement shall be credited to the
payments due under this Section 4. Such payments shall be subject to
adjustment and offset as set forth in Section 5 below.
5. Offset. The parties agree that the amounts paid to St. Xxxx under
Section 4 shall be offset by any Compensatory Income (as defined in
Section 5.1 below) earned by St. Xxxx during the three-year period from
January 15, 2001 through January 15, 2004 (the "Three Year Term"), as
described in this Section 5.
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5.1 Compensatory Income. The term "Compensatory Income" shall
comprise, without limitation, the sum total of all wages,
salaries, consulting fees, service fees, employment fees, bonus
payments, severance payments, income from self employment, and
any other like and similar items, whether in the form of cash or
other consideration, paid to or earned by St. Xxxx over the Three
Year Term in exchange for the provision of his services as an
employee, consultant, board member, entrepreneur, or independent
contractor. Compensatory Income shall include any income
resulting from the exercise or vesting of any compensatory stock
options, restricted stock, phantom stock, or similar instrument
granted in exchange for St. John's services over the Three Year
Term (not including the Options specified under Section 8
hereof), but only to the extent that such option or similar
income is recognized and taxable to St. Xxxx as ordinary income
during the Three Year Term. In the event that St. Xxxx and his
spouse provide services in connection with a common business
enterprise, whether or not incorporated, then Compensatory Income
shall also include the payments described above that are paid to
or earned by St. John's spouse, but only to the extent that such
payments exceed the total amount earned by St. Xxxx from his
services to such enterprise. If St. Xxxx and/or his spouse
establish or control a business entity and provide services to
such entity without receiving reasonable compensation, then
Compensatory Income shall include the net earnings of such entity
to the extent that such earnings are paid, or are payable, to the
benefit of St. Xxxx and/or his spouse.
Compensatory Income shall otherwise not include earnings or
income from interest, dividends, investments, rental income,
capital gains, passive income, passive royalties, insurance
proceeds, retirement plan payments, cash value of life insurance
policies, annuities, inheritances, gifts, any severance pay
received by St. John's spouse, and any payments made to St. Xxxx
by the Company pursuant to this Agreement.
5.2 Procedure. At the conclusion of each twelve (12) month period
during the Three Year Term, commencing with the period ending
January 15, 2002, St. Xxxx shall provide the Company with an
accurate accounting of all income items earned during the
preceding year that are properly included within Compensatory
Income. The Company shall be entitled to an independent audit of
such accounting at its own cost. St. Xxxx agrees to cooperate
with any independent audit and to provide all documentation
reasonably requested, including copies of relevant tax returns.
The Company shall be responsible for keeping a running account of
the reported Compensatory Income amount during the Three Year
Term, and shall provide records of such amount to St. Xxxx as
requested.
5.3 Calculation of offset. The severance payments described under
Section 4 above shall be reduced, on a dollar for dollar basis,
by the first $225,000 of Compensatory Income. The following rules
shall apply in calculating the offset:
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(i) There shall be no offset for payments made in the first 12-month
period, from January 15, 2001 to January 15, 2002. Following the
first year, Compensatory Income shall be increased by any
Compensatory Income earned during that year.
(ii) For the second 12-month period (from January 15, 2002 to January 15,
2003), the total amount of payments received under Section 4 shall
be offset by any Compensatory Income attributable to the first year.
Any reduction due to an offset shall be spread evenly over the
monthly installment payments under Section 4. The maximum offset for
this period will be $150,000. Following the second year,
Compensatory Income shall be increased by any Compensatory Income
earned during the second year.
(iii) For the six-month period from January 15, 2003 to June 15, 2003, the
total amount of payments received under Section 4 shall be offset by
any Compensatory Income attributable to the first two years (other
than amounts of Compensatory Income which have already offset
Section 4 payments in the previous year). For the six month period
from June 16, 2003 to January 15, 2004, all Section 4 payments shall
be suspended pending St. John's final report of Compensatory Income
for the third year. This report must be provided to the Company on
or before January 31, 2004. Upon receipt of the report, the Company
will make a final, lump-sum payment for any amount due under Section
4. The minimum amount of all payments under Section 4 shall be
$225,000 and the maximum amount of all offsets under Section 5 shall
be $225,000. If the Company has overpaid St. Xxxx (i.e., paid more
than required once all Compensatory Income offsets are included),
then St. Xxxx is required to refund any overpayment amount within
thirty (30) days of January 31, 2004.
Example 1: In the first year, St. Xxxx receives $150,000 under Section 4
and earns $200,000 of Compensatory Income. In the second year, his total
Section 4 payment of $150,000 is fully offset by $150,000 of the
Compensatory Income reported from the prior year. St. Xxxx also earns an
additional $125,000 in the second year that is included in Compensatory
Income. In the first six months of the third year, St. John's total
Compensatory Income is $325,000, of which $175,000 is available to offset
the $75,000 of Section 4 payments he would otherwise receive. Thus, St.
John's Section 4 payments in this six-month period are fully offset. In
the second six-month period of the third year, all payments under Section
4 are suspended. Following the Three Year Term, St. Xxxx submits his final
report of Compensatory Income. Since St. John's total Section 4 payments
are guaranteed to equal at least $225,000, and St. Xxxx has only received
$150,000, the Company must pay him a lump sum amount of $75,000 within 30
days of St. John's final report of Compensatory Income.
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Example 2: In the first year, St. Xxxx receives $150,000 under
Section 4 and does not earn any Compensatory Income. Therefore,
in the second year he will also receive $150,000 under Section
4. He earns $200,000 in the second year that is Compensatory
Income and reports this amount to the Company at the beginning
of the third year. For the first six-month period in the third
year, the $75,000 payment under Section 4 is fully offset.
Section 4 payments are suspended during the second six-month
period of the third year. At the end of the Three Year Term, St.
Xxxx submits his final report of Compensatory Income, showing
$20,000 earned in the third year. St. Xxxx has received a total
of $300,000 and reported Compensatory Income of $220,000. The
total amount payable under Section 4 ($450,000) is offset by
Compensatory Income of $220,000, leaving a net amount due of
$230,000. Because St. Xxxx has already received $300,000, he
must refund $70,000 to the Company.
6. Cash Value of Insurance. The parties acknowledge that the Company has
been paying the premiums on a life insurance policy where the
beneficiary is St. John's estate. Within ten days of the execution of
this Agreement, St. Xxxx agrees to redeem this insurance policy for its
cash value, and to provide the Company with written proof of such
redemption. St. Xxxx shall be permitted to keep the proceeds from this
redemption which shall not constitute an offset under Section 5 above.
7. Medical Insurance. St. Xxxx understands that his wages and benefits
shall cease as of January 15, 2001; provided, however, that any medical
and other insurance benefits for which the premium was paid prior to
January 15, 2001, shall continue until January 31, 2001. For the period
of February 2001 through February 2002, the Company agrees to reimburse
St. Xxxx for his health and dental premium costs incurred as a result of
his electing COBRA continuation coverage. After February 2002, St. Xxxx
shall be solely responsible for the payment of such medical and dental
insurance costs without imposition by the Company of any additional
administrative costs.
8. Stock Options. St. Xxxx has been granted stock options (the "Options")
exercisable for up to 85,000 shares of Nutraceutix, Inc.'s common stock.
The terms of the Options are hereby amended as follows:
8.1. The Options shall become vested and immediately exercisable as to
all shares.
8.2. To the extent the Options were Incentive Stock Options, they are
hereby converted to Nonqualified Stock Options.
8.3. The Options shall remain exercisable until the close of business
on January 31, 2002.
8.4. On January 31, 2002, any portion of the Options remaining
unexercised shall be cancelled and shall revert back to the
Plan.
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8.5. St. Xxxx hereby waives any claims to any stock options beyond
the Options. This provision shall not become effective until (a)
approved by Nutraceutix, Inc.'s Board of Directors and (b) the
revocation period set forth in Section 18 has expired.
9. Waiver of Claims. In return for the benefits conferred by this Agreement
and other related events, St. Xxxx, on behalf of himself and his marital
community, heirs, executors, administrators and assigns, hereby releases
in full, and forever discharges, acquits, and holds harmless, the
Company, including any of the Company's past or present parent,
subsidiary or otherwise affiliated (through common ownership to any
extent or otherwise) corporations, partnerships, or other business
enterprises, and all of its or their past or present affiliates, related
entities, partners, subsidiaries, insurers, predecessors, successors,
assigns, directors, officers, shareholders, attorneys, accountants,
representatives, agents and employees (these entities/persons together
with the Company are collectively referred to as "Associated Persons"),
from any and all claims, disputes, suits, demands, causes of action,
liabilities, damages, expenses and obligations of every nature,
character and kind (collectively "Claims") that St. Xxxx xxx possess,
whether known or unknown, which may now exist or hereafter may be
discovered, specifically including without limitation any and all Claims
arising from or relating to St. John's employment or relationship with
the Company, or the Separation of such employment; provided that this
release does not include any Claims arising under the express terms of
this Agreement and since it is the Equal Employment Opportunity
Commission's position that a right to file a claim cannot be waived,
this release does not include the right to file a claim with the Equal
Employment Opportunity Commission (although St. Xxxx expressly waives
his right to obtain any personal relief or damages related to any EEOC
claim or charge). This release includes, but is not limited to, any
Claims that St. Xxxx might have for additional compensation, including
without limitation any Claim for any past, current or future wages,
bonuses, incentive payments, severance or benefits and applies to Claims
for damages or other personal remedies that he might have under federal,
state and/or local law dealing with employment, contract, wage and hour,
civil rights or any other matters, including, by way of example and not
limitation, applicable civil rights laws, Title VII of the Civil Rights
Act of 1965, the Post-War Civil Rights Act of 1964, the Post-War Civil
Rights Acts (42 USC Sections 1981-1988), the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the Family and
Medical Leave Act, the Rehabilitation Act of 1973, the Equal Pay Act of
1963, Executive Order 11246, Washington's Law Against Discrimination,
Chapter 49.60 RCW, and Washington's Minimum Wage Act, Chapter 49.46 RCW,
and any regulations under such laws. This release further applies to any
Claims or right to personal damages or other personal legal or equitable
remedies that St. Xxxx xxx have as a result of filing any complaint,
charge or other action before any administrative agency. This release
shall not affect any reimbursement rights St. Xxxx xxx have under any
medical insurance or any accrued rights under any retirement savings
plan and shall not affect or include any rights he now has or may have
in the future as a shareholder or stockholder of the Company or any
related or affiliated company or entity nor does it nor will it affect
or include any rights he has to indemnification by the Company for
claims against him by third
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parties, and such indemnification rights shall remain in full force and
effect beyond the term of this Agreement. ST. XXXX ACKNOWLEDGES AND
AGREES THAT THROUGH THIS RELEASE HE IS GIVING UP ALL RIGHTS AND CLAIMS
OF EVERY KIND AND NATURE WHATSOEVER, KNOWN OR UNKNOWN, CONTINGENT OR
LIQUIDATED, THAT HE MAY HAVE AGAINST THE COMPANY, INCLUDING ASSOCIATED
PERSONS, EXCEPT FOR THE RIGHTS SPECIFICALLY EXCLUDED ABOVE.
Similarly, in return for the benefits conferred by this Agreement and
other related events, the Company hereby release in full, and forever
discharge, acquit, and hold harmless, St. Xxxx, from any and all claims,
disputes, suits, demands, causes of action, liabilities, damages,
expenses and obligations of every nature, character and kind
(collectively "Claims") that the Company may possess, whether known or
unknown, which may now exist or hereafter may be discovered,
specifically including without limitation any and all Claims arising
from or relating to St. John's employment with the Company, or the
Separation of such employment and/or his role or status as an officer,
director and agent of the Company.
10. Dismissal of Pending Claims. St. Xxxx represents that he has filed no
Claim or other action against The Company, including Associated Persons.
11. Non-Admission of Liability. The Company is offering these benefits to
St. Xxxx due to its desire to have an amicable separation of employment
with him and in recognition of his past contributions to the Company.
This Agreement shall not be construed as an admission by the Company of
any liability to St. Xxxx, breach of any agreement between the parties,
or violation by the Company of any statute or regulation. St. Xxxx is
accepting these benefits due to his desire to have an amicable
separation of employment from the Company. This Agreement shall not be
construed as an admission by St. Xxxx of any liability to the Company,
breach of any agreement between the parties, or violation by St. Xxxx of
any statute or regulation.
12. Non-Disparagement/Letter of Reference. The parties are entering into
this Agreement, in part, to ensure an amicable relationship between
them. St. Xxxx agrees not to make any negative or disparaging comments
to any person or entity, publicly or privately, concerning the Company,
its products or services, or its past, present or future officers,
directors or employees. Notwithstanding this provision, he shall be free
to make whatever comments he desires in private to his spouse. Xxxxx
Xxxxxx and Xxxxx Xxxxx agree not to make any negative or disparaging
comments to any person or entity, publicly or privately, concerning St.
Xxxx or his performance as an officer, director and employee of the
Company. The Company agrees to execute the Letter of Reference attached
hereto as Exhibit A at the same time as the execution of this Agreement.
This Agreement shall be shown to the Board of Directors so that they
will be aware of its contents and can specifically approve it.
13. Continuing Assistance. St. Xxxx agrees to provide reasonable assistance
to the Company and its employees in a timely and reasonably responsive
manner
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during the period of time during which he is receiving severance
payments for no additional payment from the Company. It shall be the
Company's responsibility through Xxxxx Xxxxxx or other senior management
personnel, to request such assistance when needed. Such requests shall
not require St. Xxxx to perform more than five hours of work per week
and such work shall be limited to that of the type and nature he
performed when employed by the Company. St. Xxxx shall devote his best
efforts and work in the Company's best interests whenever his assistance
is requested pursuant to this Section. Any person requesting assistance
from St. Xxxx will exercise reasonable efforts to avoid the disclosure
of material non-public information to him.
14. Consideration. St. Xxxx acknowledges that the compensation and benefits
granted to him hereunder are in excess of that which employees normally
receive upon separation from the Company or to which he would otherwise
be entitled, and that no other wages are due to him. St. Xxxx further
acknowledges that he has had the opportunity to review this Agreement
and to consult with independent counsel regarding its content and
present and future legal effects.
15. Return of Property. St. Xxxx agrees to and hereby represents that he has
returned to the Company all originals and all copies of the Company's
documents and/or the Company's property in his possession or under his
control including, but not limited to, any documents received or
prepared by him in connection with his employment, cell phone and key
cards. He may keep his laptop computer and he agrees to coordinate any
visits to the company premises with Xxxxx Xxxxxx or his designee.
16. Confidentiality. The parties acknowledge that, by virtue of his
employment, St. Xxxx has had access to the Company's trade secrets,
proprietary and confidential information. St. Xxxx agrees to execute the
Business Protection Agreement attached as Exhibit B hereto and
incorporated herein at the same time as the execution of this Agreement.
17. Miscellaneous.
17.1. Entire Agreement. This document is the entire, final and
complete agreement and understanding of the parties with respect
to the subject matter hereof, and supersedes and replaces all
written and oral agreements and understandings heretofore made
or existing by and between the parties or their representatives
with respect thereto. There have been no representations or
commitments by The Company or St. Xxxx to make any payment or
perform any act other than those expressly stated herein.
17.2. Waiver. No waiver of any provision of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions,
whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
17.3. Binding Effect. All rights, remedies and liabilities herein given
to or imposed upon the parties shall extend to, inure to the
benefit of and bind,
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as the circumstances may require, the parties and their
respective heirs, personal representatives, administrators,
successors and permitted assigns. The Company's merger into
another entity where immediately following the completion of
such merger, the Company's shareholders do not continue to hold
more than 50% of the outstanding securities of the surviving
corporation or the Company's sale or transfer of all or
substantially all of its assets shall entitle St. Xxxx to
acceleration and immediate payment of the aggregate minimum
payment of $225,000 provided for in Section 5.3(iii). It shall
not accelerate payment of any payments which may be owed to St.
Xxxx pursuant to Section 4 that are subject to offset under
Section 5.
17.4. Amendment. No supplement, modification or amendment of this
Agreement shall be valid, unless the same is in writing and
signed by all parties hereto.
17.5. Severability. In the event any provision or portion of this
Agreement is held to be unenforceable or invalid by any court of
competent jurisdiction, the remainder of this Agreement shall
remain in full force and effect and shall in no way be affected
or invalidated thereby.
17.6. Enforcement. In the event that there is a breach of this
Agreement by either party or noncompliance with the terms
contained herein, the nondefaulting or prevailing party shall be
entitled to recovery of any reasonable attorney's fees and costs
incurred in enforcing this Agreement.
17.7. Governing Law and Venue. This Agreement and the rights of the
parties hereunder shall be governed, construed and enforced in
accordance with the laws of the State of Washington, without
regard to its conflict of law principles. Any suit or action
arising out of or in connection with this Agreement, or any
breach hereof, shall be brought and maintained in the federal or
state courts in Seattle, Washington. The parties hereby
irrevocably submit to the jurisdiction of such courts for the
purpose of such suit or action and hereby expressly and
irrevocably waive, to the fullest extent permitted by law, any
objection it may now or hereafter have to the venue of any such
suit or action in any such court and any claim that any such
suit or action has been brought in an inconvenient forum.
17.8. Counterparts. This Agreement may be executed by the parties
individually or in separate counterparts, each of which shall be
an original, and each of which taken together shall constitute
one in the same agreement.
17.9. Further Acts. The parties agree to execute such additional
documents and take such other actions as are reasonably
necessary to implement the terms of this Agreement.
17.10. Legal Fees. The Company shall reimburse St. Xxxx for his legal
fees incurred in connection with the preparation and review of
this Agreement up to a maximum of Seven Thousand, Five Hundred
Dollars ($7,500.00)
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payable within thirty (30) days after receipt by St. Xxxx of an
invoice for such fees.
18. No Pressure or Coercion. St. Xxxx acknowledges that he has read this
Agreement and is being given an opportunity to consider it for up to
twenty-one days, although he may sign it and deliver it to the Company
during the twenty-one day period. St. Xxxx has been advised to discuss
it with financial and legal counsel of his choice. The parties further
acknowledge that he may revoke this Agreement within seven (7) days
after he has signed and delivered it. Only after that seven-day period
has passed, will the obligations under this Agreement become effective.
IN WITNESS WHEREOF, the parties have executed this agreement freely,
voluntarily and with a complete understanding of its terms and present and
future effect as of the date set forth above.
XXXXXXX X. ST. XXXX NUTRACEUTIX, INC.
/s/ Xxxxxxx X. St. Xxxx By: /s/ Xxxxx X. Xxxxxx
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Title: President & CEO
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Date: 3/23/01 Date: 3/24/01
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BIO TECHNIQUES LABORATORIES, INC.
By: /s/ Xxxxx X. Xxxxxx
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Title: President
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Date: 3/24/01
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