EXHIBIT 10.4
CYNOSURE, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of _ September 2003 by and between Cynosure, Inc., a Delaware corporation (the
"Company") and Xxxxxxx Xxxxx ("Employee").
BACKGROUND
A. The Company desires to retain the services of Employee as Chief
Executive Officer of the Company from the date of this Agreement (the
"Effective Date"). The Company also desires to provide employment security to
Employee, thereby inducing Employee to continue employment with the Company and
enhancing Employee's ability to perform effectively.
B. Employee is willing to be employed by the Company on the terms and
subject to the conditions set forth in this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. EMPLOYMENT. Company hereby employs Employee, and Employee hereby accepts
such employment, upon the terms and conditions set forth herein.
2. DUTIES.
2.1 Position. Employee is employed as the Chief Executive Officer of the
Company and shall have the duties and responsibilities assigned by the
Board of Directors of the Company, both upon initial hire and as may be
reasonably assigned from time to time. Employee shall perform faithfully
and diligently all duties assigned to Employee.
2.2 Best Effort/Full-time. Employee will expend Employee's best efforts on
behalf of Company, and will abide by all policies and decisions made by
Company, as well as all applicable federal, state and local laws,
regulations or ordinances. Employee will act in the best interest of
Company at all times, Employee shall devote Employee's full business time
and efforts to the performance of Employee's assigned duties for Company,
unless Employee notifies Company in advance of Employee's intent to engage
in other paid work and receives Company's express written consent to do
so.
2.3 Work Location. Employee's principal place of work shall be located in
Chelmsford, Massachusetts or such other location as the parties may agree
upon from time to time.
2.4 Change of Location. In the event that the Company relocates its
operations to a location outside of a one hundred mile radius of
Chelmsford, Massachusetts within two years following the date hereof and
Employee elects not to continue employment with the Company, the Company
shall pay to Employee an amount equal to Employee's then Base Salary,
accrued bonus and fringe benefits for a twelve month period.
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3. TERM. The employment relationship pursuant to this Agreement shall be
without a term, and can be terminated in accordance with Section 7 below.
4. COMPENSATION.
4.1 Base Salary. As compensation for Employee's performance of Employee's
duties hereunder, Company shall pay to Employee an initial Base Salary of
$205,000 per year, reduced to $180,000 for the first 12 months, subject
to annual review and adjustment by the Board of Directors, payable in
accordance with the normal payroll practices of Company, less required
deductions for state and federal withholding tax, social security and all
other employment taxes and payroll deductions. In the event Employee's
employment under this Agreement is terminated by either party, for any
reason, Employee will earn the Base Salary then in effect, accrued bonus
and fringe benefits prorated to the date of termination.
4.2 Incentive Compensation. Employee will be eligible to earn incentive
compensation.
(a) Bonus: Upon fulfillment of the goals outlined in annex (1),
$10,000 bonus payments will be made 6, 12, 18 months after the
Effective Date. All bonus payments will be made less required
deductions for state and federal withholding tax, social security,
and other employment taxes and payroll deductions.
(b) Share in profit: from fiscal year 2004 Employee will be eligible
to receive payment of 10% of the Adjusted Net Profit, if positive,
(as defined in Annex (2)) for the first 2 years of employment and of
5% of the Adjusted Net Profit, if positive, for the following years.
Payments will be made less required deductions for state and federal
withholding tax, social security, and other employment taxes and
payroll deductions.
4.3 Performance and Salary Review. After the first two years of
employment, Company will periodically review Employee's performance on no
less than an annual basis. Adjustments to salary or other compensation, if
any, will be made by Company in its sole and absolute discretion.
4.4 Stock Compensation. Employee will be granted stock purchase rights
under the Cynosure Stock Compensation Plan in accordance with the draft
Stock Compensation Plan, Stock Purchase Rights Agreement, and Tax Bonus
attached hereto, as soon as possible after approval by the Company's
shareholders and directors.
5. EMPLOYEE FRINGE BENEFITS AND OTHERS.
5.1 Customary Fringe Benefits. Employee will be eligible for all customary
and usual fringe benefits generally available to executives of the
Company, including but not limited to medical, dental and life insurance
and participation in the Company's 401k plan, subject to the terms and
conditions of the Company's benefit plan documents. The Company reserves
the right to change or eliminate the fringe benefits on a prospective
basis, at any time, effective upon notice to Employee.
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5.2 Vacation. Employee is entitled to a total of three weeks paid leave
per year.
6. BUSINESS EXPENSES. Employee will be reimbursed for all reasonable, out-of
pocket business expenses incurred in accordance with the Company's travel
policies in the Performance of Employee's duties on behalf of Company. To
obtain reimbursement, expenses must be submitted promptly with appropriate
supporting documentation in accordance with Company's policies.
7. TERMINATION OF EMPLOYEE'S EMPLOYMENT.
7.1 Termination for Cause by Company. Although Company anticipates a
mutually rewarding employment relationship with Employee, Company may
terminate Employee's employment immediately at any time for Cause. For
purposes of this Agreement, "Cause" is defined as: (a) acts or omissions
constituting gross negligence, recklessness or willful misconduct on the
part of Employee with respect to Employee's obligations to the Company or
otherwise relating to the business of Company, in each case as determined
in good faith by the Company; (b) Employee's material breach of this
Agreement or the Company's Employee Innovations and Proprietary Rights
Agreement; (c) Employee's conviction or entry of a plea of nolo contendere
for fraud, misappropriation or embezzlement, or any felony or crime of
moral turpitude; (d) Employee's willful neglect of duties as determined in
the good faith by Company; (e) Employee's failure to perform the essential
functions of Employee's position, with reasonable accommodation, due to
a mental or physical disability (f) Employee's knowingly withholding
material information (in his or her area of responsibility)from the Board
of Directors. In the event Employee's employment is terminated in
accordance with this subsection 7.1, Employee shall be entitled to receive
only the Base Salary then in effect, prorated to the date of termination.
All other Company obligations to Employee pursuant to this Agreement will
become automatically terminated and completely extinguished. In addition,
Employee will not be entitled to receive the Severance Payment described
in subsection 7.2 below.
7.2 Termination Without Cause by Company/Severance. Company may terminate
Employee's employment under this Agreement without Cause at any time on
thirty (30) days' advance written notice to Employee. In the event any
such termination shall occur, Employee will receive the Base Salary,
accrued bonus and fringe benefits then in effect, prorated to the date of
termination, and a "Severance Payment" equivalent to TWENTY FOUR (_24_)
months of Employee's Base Salary then in effect on the date of
termination; provided that Employee, (a) complies with all surviving
provisions of this Agreement as specified in subsection 14.8 below; and
(b) executes a full general release, releasing all claims, known or
unknown, that Employee may have against Company arising out of or any way
related to Employee's employment or termination of employment with
Company. Notwithstanding anything in this agreement to the contrary, the
Company's obligation to make severance payments to Employee shall
terminate if Employee accepts an offer of employment or an offer to render
consulting services to a competitor of Company, or otherwise breaches this
Agreement.
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7.3 Resignation by Employee for Good Cause. Employee may resign Employee's
position with the Company at any time for Good Reason as defined below. In
the event of such termination, Employee will receive from the Company the
Base Salary and fringe benefits then in effect, prorated to the date of
termination, and a Severance Payment as set forth in Section 7.2. For
purposes of this Agreement, "Good Reason" is defined as a good faith
determination by Employee that there has (i) a diminution in Employee's
position, authority or responsibilities and a reduction by 10% in
Employee's salary or benefits; (ii) a breach by the Company of this
Agreement.
7.4 Voluntary Resignation by Employee. Employee may voluntarily resign
Employee's position with Company at any time on thirty (30) days' advance
written notice. In the event of such resignation, Employee will be
entitled to receive only the Base Salary, and fringe benefits for the
thirty-day notice period, and Employee will not be entitled to receive
the Severance Payment described in subsection 7.2 above.
8. NO CONFLICT OF INTEREST. During the term of Employee's employment with
Company, Employee must not engage in any work, paid or unpaid, that
creates an actual or potential conflict of interest with Company. Such
work shall include, but is not limited to, directly or indirectly
competing with Company in any way, or acting as an officer, director,
employee, consultant, stockholder (in excess of 5% of publicly traded
companies), volunteer, lender, or agent of any business enterprise of the
same nature as, or which is in direct competition with, the business in
which Company is now engaged or in which Company becomes engaged during
the term of Employee's employment with Company, as may be determined by
Company in its sole discretion, if Company believes such a conflict exists
during the term of this Agreement, Company may ask Employee to choose to
discontinue the other work or resign employment with Company. In addition,
Employee agrees not to refer any client or potential client of Company to
competitors of Company, without obtaining Company's prior written consent,
during the term of Employee's employment.
9. POST-TERMINATION NON-COMPETITION.
9.1 Consideration For Promise To Refrain From Competing. Employee agrees
that Employee's services are special and unique, that Company's disclosure
of confidential, proprietary information and specialized training and
knowledge to Employee, and that Employee's level of compensation and
benefits and post-termination severance, as applicable, are partly in
consideration of and conditioned upon Employee not competing with Company.
Employee acknowledges that such consideration for Employee's services
under this Agreement is adequate consideration for Employee's promises
contained within this Section 9.
9.2 Promise To Refrain From Competing. Employee understands Company's need
for Employee's promise not to compete with Company is based on the
following: (a) Company has expended, and will continue to expend,
substantial time, money and effort in developing its confidential and
proprietary information; (b) Employee will in the course of Employee's
employment develop, be personally entrusted with and exposed to such
confidential and proprietary information; (c) both during and after the
term of
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Employee's employment, Company will be engaged in the highly competitive
laser manufacturing industry; (d) Company provides products and services
nationally and may provide products and services internationally in the
future; and (e) Company will suffer great loss and irreparable harm if
Employee were to enter into competition with Company. Therefore, in
exchange for the consideration described in subsection 9.1 above, Employee
agrees that for the period of two (2) years following the date Employee is
terminated or resigns for good cause (as described in Section 7.3) and
ceases to render services to Company (the "Covenant Period"), Employee
will not either directly or indirectly, whether as a owner, director,
officer, manager, consultant, agent or employee: (i) work for a
competitor, which is defined to include any individual, firm, entity or
business enterprise that manufactures, sells or distributes lasers, "IPL"
and "LED" devices with cosmetic and/or competing medical applications,
other than Company (or such parent, affiliate or subsidiary), in any
geographical area where Company is now engaged in business, or becomes
engaged, during the term of Employee's employment ("Restricted Business");
or (ii) make or hold any investment in any Restricted Business in the
United States, whether such investment be by way of loan, purchase of
stock or otherwise, provided that there shall be excluded from the
foregoing the ownership of not more than four percent (4%) of the listed
or traded stock of any publicly held corporation. In the case of a
voluntary resignation by Employee in which Employee receives no Severance
Payments, the Covenant Period shall be limited to one (1) year. For
purposes of this Section 9, the term "Company" shall mean and include
Company, any successor to the business of Company (by merger,
consolidation, sale of assets or stock or otherwise) and any other
corporation or entity of which Employee may serve as a director, officer
or employee at the request of Company or any successor of Company.
9.3 Reasonableness of Restrictions. Employee represents and agrees that
the restrictions on competition, as to time, geographic area, and scope of
activity, required by this Section 9 are reasonable, do not impose a
greater restraint than is necessary to protect the goodwill and business
interests of Company, and are not unduly burdensome to Employee. Employee
expressly acknowledges that Company competes on a worldwide basis and that
the geographical scope of these limitations is reasonable and necessary
for the protection of Company's trade secrets and other confidential and
proprietary information. Employee further agrees that these restrictions
allow Employee an adequate number and variety of employment alternatives,
based on Employee's varied skills and abilities. Employee represents that
Employee is willing and able to compete in other employment not prohibited
by this Agreement.
9.4 Reformation if Necessary. In the event a court of competent
jurisdiction determines that the geographic area, duration, or scope of
activity of any restriction under this Section 9 and its subsections is
unenforceable, the restrictions under this Section and its subsections
shall not be terminated but shall be reformed and modified to the extent
required to render them valid and enforceable. Employee further agrees
that the court may reform this Agreement to extend the two (2) year period
or one (1) year period of this covenant not to compete, whichever is
applicable, by an amount of time equal to any period in which Employee is
in breach of this covenant.
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10. CONFIDENTIALITY AND PROPRIETARY RIGHTS. Employee agrees to read, sign and
abide by Company's [EMPLOYEE INNOVATIONS AND PROPRIETARY RIGHTS ASSIGNMENT
AGREEMENT], which is incorporated herein by reference.
11. NON-SOLICITATION.
11.1 Nonsolicitation of Customers or Prospects. Employee acknowledges that
information about Company's customers is confidential and constitutes
trade secrets. Accordingly, Employee agrees that during the term of this
Agreement and for a period of two (2) years after the termination of this
Agreement, or one (1) year in the case of a voluntary resignation,
Employee will not either directly or indirectly, separately or in
association with others, interfere with, impair, disrupt or damage
Company's relationship with any of its customers or customer prospects by
soliciting or encouraging others to solicit any of them for the purpose of
diverting or taking away business from Company.
11.2 Nonsolicitation of Company's Employees, Employee agrees that during
the term of this Agreement and for a period of two (2) years after the
termination of this Agreement, or one (1) year in the case of a voluntary
resignation, Employee will not, either directly or indirectly, separately
or in association with others, interfere with, impair, disrupt or damage
Company's business by soliciting, encouraging or attempting to hire any of
Company's employees or causing others to solicit or encourage any of
Company's employees to discontinue their employment with Company.
12. INJUNCTIVE RELIEF. Employee acknowledges that Employee's breach of any of
the covenants contained in sections 8-11 (collectively "Covenants") would
cause irreparable injury to Company and agrees that in the event of any
such breach, Company shall be entitled to seek temporary, preliminary and
permanent injunctive relief without the necessity of proving actual
damages or posting any bond or other security.
13. AGREEMENT TO ARBITRATE. To the fullest extent permitted by law, Employee
and Company agree to arbitrate any controversy, claim or dispute between
them arising out of or in any way related to this Agreement, the
employment relationship between Company and Employee and any disputes upon
termination of employment, including but not limited to breach of contract
tort, discrimination, harassment, wrongful termination, demotion,
discipline, failure to accommodate, family and medical leave, compensation
or benefits claims, constitutional claims; and any claims for violation of
any local, state or federal law, statute, regulation or ordinance or
common law. Claims for workers' compensation, unemployment insurance
benefits, breach of the Company's Employee Innovations and Proprietary
Rights Agreement and Company's right to obtain injunctive relief pursuant
to Section 12 above are excluded. For the purpose of this Agreement to
arbitrate, references to "Company" include all parent, subsidiary or
related entities and their employees, supervisors, officers, directors,
agents, fiduciaries, administrators, affiliates and all successors and
assigns of any of them, and this Agreement shall apply to them to the
extent Employee's claims arise out of or relate to their actions on behalf
of Company.
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13.1 Consideration. The mutual promise by Company and Employee to
arbitrate any and all disputes between them (except for those referenced
above) rather than litigate them before the courts or other bodies,
provides the consideration for this Agreement to arbitrate.
13.2 Initiation of Arbitration. Either party may exercise the right to
arbitrate by providing the other party with written notice of any and all
claims forming the basis of such right in sufficient detail to inform the
other party of the substance of such claims. In no event shall the request
for arbitration be made after the date when institution of legal or
equitable proceedings based on such claims would be barred by the
applicable statute of limitations.
13.3 Arbitration Procedure. The arbitration will be conducted in Boston,
Massachusetts by a single neutral arbitrator and in accordance with the
then current rules for resolution of employment disputes of the American
Arbitration Association ("AAA"). The parties are entitled to
representation by an attorney or other representative of their choosing.
The arbitrator shall have the power to enter any award that could be
entered by a judge of the trial court of the State of Massachusetts, and
only such power, and shall follow the law. In the event the arbitrator
does not follow the law, the arbitrator will have exceeded the scope of
his or her authority and the parties may, at their option, file a motion
to vacate the award in court. Subject to the foregoing, the parties agree
to abide by and perform any award rendered by the arbitrator. Judgment on
the award may be entered in any court having jurisdiction thereof.
13.4 Costs of Arbitration. Each party shall bear one half the cost of the
arbitration filing and hearing fees, and the cost of the arbitrator.
14. GENERAL PROVISIONS.
14.1 Successors and Assigns. The rights and obligations of Company under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. Employee shall not be entitled to
assign any of Employee's rights or obligations under this Agreement.
14.2 Waiver. Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such
provision, or prevent that party thereafter from enforcing each and every
other provision of this Agreement.
14.3 Attorneys' Fees. Each side will bear its own attorneys' fees in any
dispute unless a statutory Section at issue, if any, authorizes the award
of attorneys' fees to the prevailing party.
14.4 Severability. In the event any provision of this Agreement is found
to be unenforceable by an arbitrator or court of competent jurisdiction,
such provision shall be deemed modified to the extent necessary to allow
enforceability of the provision as so limited, it being intended that the
parties shall receive the benefit contemplated herein to the fullest
extent permitted by law. If a deemed modification is not satisfactory in
the judgment of such arbitrator or court, the unenforceable provision
shall be deemed
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deleted, and the validity and enforceability of the remaining provisions
shall not be affected thereby.
14.5 Interpretation; Construction. The headings set forth in this
Agreement are for convenience only and shall not be used in interpreting
this Agreement. This Agreement has been drafted by legal counsel
representing Company, but Employee has participated in the negotiation of
its terms. Furthermore, Employee acknowledges that Employee has had an
opportunity to review and revise the Agreement and have it reviewed by
legal counsel, if desired, and, therefore, the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement.
14.6 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the United States and the State of
Massachusetts.
14.7 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be delivered as follows with notice deemed given as
indicated, (a) by personal delivery when delivered personally; (b) by
overnight courier upon written verification of receipt: (c) by telecopy or
facsimile transmission upon acknowledgment of receipt of electronic
transmission, or (d) by certified or registered mail, return receipt
requested, upon verification of receipt. Notice shall be sent to the
addresses set forth below, or such other address as either party may
specify in writing.
14.8 Survival. Sections 9 ("Post-Termination Non-Competition"), 10
("Confidentiality and Proprietary Rights"), 11 ("Non-Solicitation"), 12
("Injunctive Relief"), 13 ("Agreement to Arbitrate"), 14 ("General
Provisions") and 15 ("Entire Agreement") of this Agreement shall survive
Employee's employment by Company.
15. ENTIRE AGREEMENT. This Agreement, including the Company Employee
Innovations and Proprietary Rights Assignment Agreement incorporated
herein by reference, constitutes the entire agreement between the parties
relating to this subject matter and supersedes all prior or simultaneous
representations, discussions, negotiations, and agreements, whether
written or oral. This Agreement may be amended or modified only with the
written consent of both Employee and the Company. No oral waiver,
amendment or modification will be effective under any circumstances
whatsoever.
THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.
[Remainder of page left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date set forth in the first paragraph.
CYNOSURE, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
President
Address: 00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
/s/ Xxxxxxx Xxxxx
--------------------------------------
Xxxxxxx Xxxxx
Address: 00 Xxxxxxx Xx
Xxxxxxxx, XX 00000
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ANNEX (1)
Bonus targets
6 MONTHS
Reorganization of domestic sales force (increase force)
Reorganization of company: meet current budget, substantially above break even
New development lines for R&D
12 MONTHS
Completion of reorganization of sales force
Completion of development of reference sites, including results (pay-back)
20% increase of domestic revenues
Reorganization of international subsidiaries: break even and increase revenues
18 MONTHS
To hit $30 millions consolidated Net Revenues for the previous 12 months, and
achieve profitability in terms of Adjusted Net Profit as defined in annex (2)
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ANNEX (2)
Definition of "Adjusted Net Profit" ANP
ANP will be yearly calculated as follows according to the consolidated audited
financials of the Company. ANP will include all entries related to the operation
under direct control of the CEO, and not include items such as one time write
offs and Sona equity loss or gain. Tax impact will be calculated at a standard
rate in order the incentive not to be affected by the company's fiscal policies
+ (A) Profit before taxation
+- (B) Sona equity loss
+- (C) One time write off or earnings
+- (D) minority interest (China sub)
Adjusted Gross Profit = A +- B +- C +- D
Adjusted Net Profit = Gross Adjusted Profit x (1 - 34%)
For the sake of clarity in case ANP had to be calculated on 2002 financials:
(A)= -$2,193,189
(B) = $158,535 loss not to be considered
(C) NA
(D) = -$70,114 profit share of minority, to be taken out
AGP = -$2,104,760.
If AGP was positive ANP=$1,389,147 = 66% of AGP
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