EMPLOYMENT AGREEMENT
Exhibit
99.1
This
Employment Agreement (the “Agreement”), is made as of this 29th day of
February, 2008, between Xxxxx X. Xxxx (“Executive”) and Implant Sciences
Corporation (the “Company”), a Massachusetts corporation, (the
“Parties”).
1. Term of
Employment. The Company hereby agrees to employ Executive, and
Executive hereby accepts employment with the Company, upon the terms set forth
in this Agreement, for the period commencing as of March 1, 2008 (the
“Commencement Date”) and ending on the third anniversary of the Commencement
Date, unless sooner terminated in accordance with the provisions of Section 5 or
extended as hereinafter provided (such period, as it may be extended or
terminated, is the “Agreement Term”). Beginning on the third anniversary of the
Commencement Date, this agreement shall continue until either party provides the
other with written notice of termination to take effect no less than ninety days
after such notice.
2. Title;
Capacity. The Company will employ Executive, and Executive
agrees to work for the Company, as its Chief Financial Officer to perform the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Company shall from time to time assign to
Executive. Executive shall report to the Company’s Chief Executive
Officer (the “CEO”) and shall be subject to the supervision of, and shall have
such authority as is delegated by the CEO, which authority shall be sufficient
to perform Executive’s duties hereunder. Executive shall devote
Executive’s full business time and reasonable best efforts in the performance of
the foregoing services, provided that Executive may accept other board
memberships or service with other charitable organizations that are not in
conflict with Executive’s primary responsibilities and obligations to the
Company. Notwithstanding the above, it is clearly understood and
agreed by the Parties that the Company will be hiring a new Chief Financial
Officer in calendar year 2008 and when this occurs, this will not be deemed a
“Good Reason”
event as defined herein. It is further understood and agreed by the
parties that Executive shall continue to serve, under the terms herein, as the
VP, Finance and Administration with all the associated duties and
responsibilities of that position upon the hiring of the new Chief Financial
Officer.
3. Compensation and
Benefits.
3.1 Salary. As
of the Commencement Date, the Company shall pay Executive a base salary of
$155,000 per year, payable in accordance with the Company’s customary payroll
practices (the “Base Salary”). The Base Salary thereafter shall be
subject to annual review and adjustment, though it may not be decreased, as
determined by the Company in its sole discretion on the anniversary of the
Commencement Date each year of the Agreement Term.
3.2 Annual
Incentive. For second half of fiscal year 2008, Executive will
be eligible to receive a cash bonus in an amount up to $24,000 subject to
Executive achieving minimum levels of achievement for certain performance
milestones. The performance milestones for the second half of fiscal
2008 are attached hereto as Exhibit A and the minimum level of achievement is
70% for each; payments will be prorated from the 70% minimum achievement
level. The milestones for the next and subsequent fiscal years shall
be reached by mutual agreement no later than 30 days following the end of the
fiscal year. The bonus, if payable, shall be calculated and paid
within 30 days after the attainment of each milestone.
3.3 Long-Term
Incentives. On the date this Agreement is ratified by the
Board of Directors, the Company shall grant Executive equity in the form of an
incentive stock option to purchase 50,000 shares of common stock of the Company
at an exercise price per share equal to the per share fair market value of the
Company’s common stock as of the date this Agreement is ratified (the “Option”).
The Option shall vest in equal installments of thirty-three and a third percent
(33 1/3%) as of the Commencement Date and on the first and second anniversaries
of the Commencement Date. The Option shall be exercisable for a period of ten
years from the date of the grant. Any equity granted shall be
governed in all respects by the Company’s stock and equity plans in effect on
the Commencement Date. The Company warrants that any option granted
to Executive shall be exempt from Section 409A of the Code. (In the
event a Change in Control occurs, as such term is defined in the Company’s 2004
Stock Option Plan, all Options shall accelerate and become fully
exercisable
3.4 Fringe
Benefits. Executive shall be entitled to participate in all
bonus and benefit programs that the Company establishes and makes available to
its executive employees, if any, to the extent that Executive’s position,
tenure, salary, age, health and other qualifications make Executive eligible to
participate, including, but not limited to, health care plans, short and long
term disabilities plans, life insurance plans, retirement plans, and all other
benefit plans from time to time in effect. Executive shall also be
entitled to take four (4) weeks of fully paid vacation annually, in accordance
with existing Company policies.
3.5 Reimbursement of
Expenses. Executive shall be reimbursed for such reasonable
and necessary business expenses incurred by Executive while Executive is
employed by the Company, which are directly related to the furtherance of
the Company's business. Executive will be furnished with a corporate
credit card for business expenses. The Executive must submit any request for
reimbursement no later than ninety (90) days following the date that such
business expense is incurred in accordance with the Company's reimbursement
policy regarding same and business expenses must be substantiated by appropriate
receipts and documentation. The Company may request additional
documentation or a further explanation to substantiate any business expense
submitted for reimbursement, and retains the discretion to approve or deny a
request for reimbursement. If a business expense reimbursement is not exempt
from Section 409A of the Code, any reimbursement in one calendar year
shall not affect the amount that may be reimbursed in any other calendar
year and a reimbursement (or right thereto) may not be exchanged or
liquidated for another benefit or payment. Any business expense
reimbursements subject to Section 409A of the Code shall be made no later than
the end of the calendar year following the calendar year in which such business
expense is incurred by the Executive.
3.6 Indemnification. The
Company shall indemnify Executive to the fullest extent permitted under
applicable law, the Company’s charter, or any other corporate designation of
indemnity rights. Likewise, the Company shall insure Executive under
the Company’s Directors’ & Officers’ liability policy. Such
indemnity and insurance shall survive the termination of Executive’s employment
by the Company.
4. Certain Legal Fees.
The Company shall be responsible for reasonable legal fees in connection with
the negotiation, preparation or amendment of this Agreement.
5. Termination of Employment
Period. The Employment Period shall terminate upon the
occurrence of any of the following:
5.1 Termination of the Agreement
Term. At the expiration of the Agreement Term, but only if
appropriate notice is given pursuant to Section 1.
5.2 Termination for
Cause. At the election of the Company for cause upon written
notice by the Company to Executive. For the purposes of this Section,
“Cause” for termination shall be deemed to exist upon the occurrence of any of
the following:
(a) Executive’s
conviction or entry of nolo contendere to any felony or a crime involving moral
turpitude, fraud or embezzlement of Company property; or
(b) Executive’s
dishonesty, gross negligence or gross misconduct that is materially injurious to
the Company or material breach of her duties under this Agreement, which has not
been cured by Executive within 10 days (or longer period as is reasonably
required to cure such breach, negligence or misconduct) after she shall have
received written notice from the Company stating with reasonable specificity the
nature of such breach.
5.3 Voluntary Termination by the
Company, or by the Executive for Good Reason. At the election
of the Company, without Cause, at any time upon 30 days prior written notice by
the Company to Executive or by Executive for Good Reason (as defined
below).
5.4 Death or
Disability. Thirty days after the death or determination of
disability of Executive. As used in this Agreement, the determination
of “disability” shall occur when Executive, due to a physical or mental
disability, for a period of 90 days in the aggregate whether or not consecutive,
during any 360-day period, is unable to perform the services contemplated under
this Agreement. A determination of disability shall be made by a
physician satisfactory to both Executive and the Company, provided that if Executive and
the Company do not agree on a physician, Executive and the Company shall each
select a physician and these two together shall select a third physician, whose
determination as to disability shall be binding on all
parties. Notwithstanding the foregoing, if and only to the extent
that Executive’s disability is a trigger for the payment of deferred
compensation, as defined in Section 409A of the Code, “disability” shall have
the meaning set forth in Section 409A(a)(2)(C) of the Code.
5.5 Voluntary Termination by
Executive. At the election of Executive upon not less than 30
days prior written notice by her to the Company.
6. Effect of
Termination.
6.1 Termination for Cause, at
the Election of Executive, at Death or Disability, or Upon Expiration of the
Agreement Term. In the event that Executive’s employment is
terminated for Cause, upon Executive’s death or disability, at the election of
Executive, or upon the expiration of the Agreement Term, the Company shall have
no further obligations under this Agreement other than to pay to Executive
salary and accrued vacation through the last day of Executive’s actual
employment by the Company.
6.2 Voluntary Termination by the
Company, or by the Executive for Good Reason. In the event
that Executive’s employment is terminated without Cause, or Executive’s
resignation for Good Reason, beginning immediately after the date of such
termination, the Company shall continue to pay to Executive the annual Base
Salary then in effect for twelve (12) months on a regular payroll
basis. In addition to the foregoing amounts, the Company shall pay
Executive in a single lump sum, immediately upon the effective date of the
release described herein, payment for accrued but untaken vacation days, and a
pro rata portion of any bonus for the year in which termination
occurs. In addition, the Company shall continue Executive’s coverage
under and its contributions towards Executive’s health care, dental, disability
and life insurance benefits on the same basis and level of coverage (i.e.
dependent coverage) as immediately prior to the date of termination, except as
provided below, for twelve months from the last day of Executive’s employment.
Notwithstanding the foregoing, subject to any overriding laws, the Company shall
not be required to provide any health care, dental, disability or life insurance
benefit otherwise receivable by Executive if Executive becomes covered by an
equivalent benefit (at the same cost to Executive, if any) from another
source. Any such new benefit coverage shall be reported to the
Company. No benefits shall be payable under this provision
until after the effective date of a release that Executive executes in favor of
the Company substantially in the form annexed hereto as Exhibit B.
6.3 Upon
Executive’s termination without Cause, other than upon termination at the end of
the term of this agreement, or as a result of Executive’s resignation for Good
Reason, all Options then held by Executive shall be accelerated and become fully
vested and exercisable as of the date of Executive’s termination.
6.4 As used
in this Agreement, “Good Reason” means,
without Executive’s written consent, (a) the assignment to Executive of duties
inconsistent in any material respect with the duties of a CFO and a VP, Finance
and Administration; (b) a material reduction in Base Salary or other benefits;
or (c) relocation to an office more than fifty miles outside the Company’s
current location in the greater Boston area. Notwithstanding the
occurrence of any of the events enumerated in this paragraph, an event shall not
be deemed to constitute Good Reason if, (i) Executive does not report the
conditions which the Executive believes to be good reason to the Company within
45 days of such conditions occurring and (ii) within 30 days after the Executive
provides notice of Good Reason to the Company, the Company has fully corrected
such Good Reason and made the Executive whole for any such losses.
7. Nondisclosure and
Noncompetition.
7.1 Proprietary
Information.
(a) Executive
agrees that all information and know-how, whether or not in writing, of a
private, secret or confidential nature concerning the Company’s business or
financial affairs (collectively, “Proprietary Information”) is and shall be the
exclusive property of the Company. By way of illustration, but not
limitation, Proprietary Information may include inventions, products, processes,
methods, techniques, formulas, designs, drawings, slogans, tests, logos, ideas,
practices, projects, developments, plans, research data, financial data,
personnel data, computer programs and codes, and customer and supplier
lists. Executive will not disclose any Proprietary Information to
others outside the Company except in the performance of her duties or use the
same for any unauthorized purposes without written approval by an officer of the
Company, either during or after her employment, unless and until such
Proprietary Information has become public knowledge or generally known within
the industry without fault by Executive, or unless otherwise required by
law.
(b) Executive
agrees that all files, letters, memoranda, reports, records, data, sketches,
drawings, laboratory notebooks, program listings, or other written,
photographic, electronic or other material containing Proprietary Information,
whether created by Executive or others, which shall come into her custody or
possession, shall be and are the exclusive property of the Company to be used by
Executive only in the performance of her duties for the Company.
(c) Executive
agrees that her obligation not to disclose or use information, know-how and
records of the types set forth in paragraphs (a) and (b) above, also extends to
such types of information, know-how, records and tangible property of
subsidiaries and joint ventures of the Company, customers of the Company or
suppliers to the Company or other third parties who may have disclosed or
entrusted the same to the Company or to Executive in the course of the Company’s
business.
7.2 Inventions
(a) Disclosure. Executive
shall disclose promptly to an officer or to attorneys of the Company in writing
any idea, invention, work of authorship, whether patentable or unpatentable,
copyrightable or uncopyrightable, including, but not limited to, any computer
program, software, command structure, code, documentation, compound, genetic or
biological material, formula, manual, device, improvement, method, process,
discovery, concept, algorithm, development, secret process, machine or
contribution (any of the foregoing items hereinafter referred to as an
"Invention") Executive may conceive, make, develop or work on, in whole or in
part, solely or jointly with others. The disclosure required by this Section
applies (a) during the period of Executive’s employment with the Company and for
one year thereafter; (b) with respect to all Inventions whether or not they are
conceived, made, developed or worked on by Executive during Executive’s regular
hours of employment with the Company; (c) whether or not the Invention was made
at the suggestion of the Company; (d) whether or not the Invention was reduced
to drawings, written description, documentation, models or other tangible form;
and (e) whether or not the Invention is related to the general line of business
engaged in by the Company.
(b) Assignment of Inventions to
Company; Exemption of Certain Inventions. Executive hereby assigns to the
Company without royalty or any other further consideration Executive’s entire
right, title and interest in and to all Inventions which Executive conceives,
makes, develops or works on during employment and for one year thereafter,
except those Inventions that Executive develops entirely on Executive’s own time
after the date of this Agreement without using the Company's equipment,
supplies, facilities or trade secret information unless those Inventions either
(a) relate at the time of conception or reduction to practice of the Invention
to the Company's business, or actual or demonstrably anticipated research or
development of the Company; or (b) result from any work performed by Executive
for the Company.
(c) Records. Executive
will make and maintain adequate and current written records of all Inventions.
These records shall be and remain the property of the Company.
(d) Patents. Subject
to Section 6.4, Executive will assist the Company in obtaining, maintaining and
enforcing patents and other proprietary rights in connection with any Invention
covered by Section 6.1. Executive further agrees that her obligations
under this Section shall continue beyond the termination of her employment with
the Company, but if she is called upon to render such assistance after the
termination of such employment, she shall be entitled to a fair and reasonable
rate of compensation for such assistance. Executive shall, in
addition, be entitled to reimbursement of any expenses incurred at the request
of the Company relating to such assistance.
7.3 Prior Contracts and
Inventions; Information Belonging to Third Parties. Executive
represents that there are no contracts to assign Inventions between any other
person or entity and Executive. Executive further represents that
(a) Executive is not
obligated under any consulting, employment or other agreement which would affect
the Company's rights or Executives duties under this Agreement,
(b) there is no action, investigation, or proceeding pending or threatened, or
any basis therefore known to Executive involving Executive’s prior employment or
any consultancy or the use of any information or techniques alleged to be
proprietary to any former employer, and
(c) the performance of Executive’s duties as an employee of the Company will not
breach, or constitute a default under any agreement to which Executive is bound,
including, without limitation, any agreement limiting the use or disclosure of
proprietary information acquired in confidence prior to engagement by the
Company. Executive will not, in connection with Executive’s employment by the
Company, use or disclose to the Company any confidential, trade secret or other
proprietary information of any previous employer or other person to which
Executive is not lawfully entitled.
7.4 Noncompetition and
Nonsolicitation.
(a) During
the Employment Period and for a period of twelve (12) months after the
termination of Executive’s employment with the Company for any reason, Executive
will not directly or indirectly, absent the Company’s prior written approval,
render services of a business, professional or commercial nature to any other
person or entity in the area of trace explosives detection, in the Boston, MA
area, whether such services are for compensation or otherwise, whether alone or
in conjunction with others, as an employee, as a partner, or as a shareholder
(other than as the holder of not more than 1% of the combined voting power of
the outstanding stock of a public company), officer or director of any
corporation or other business entity, or as a trustee, fiduciary or in any other
similar representative capacity.
(b) During
the Employment Period and for a period of twelve (12) months after the
termination of Executive’s employment for any reason, Executive will not,
directly or indirectly, recruit, solicit or induce, or attempt to recruit,
solicit or induce any employee or employees of the Company to terminate their
employment with, or otherwise cease their relationship with, the
Company.
(c) During
the Employment Period and for a period of twelve (12) months after termination
of Executive’s employment for any reason, Executive will not, directly or
indirectly, contact, solicit, divert or take away, or attempt to solicit,
contact, divert or take away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or accounts, of the
Company.
7.5 If any
restriction set forth in this Section is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
7.6 The
restrictions contained in this Section are necessary for the protection of the
business and goodwill of the Company and are considered by Executive to be
reasonable for such purpose. Executive agrees that any breach of this
Section will cause the Company substantial and irrevocable damage and therefore,
in the event of any such breach, in addition to such other remedies which may be
available, the Company shall have the right to seek specific performance and
injunctive relief. The Company shall be entitled to recover its
reasonable attorneys’ fees in the event it prevails in such an
action. In addition, the Company’s obligation to pay Executive the
amount set forth in Section 5.2(b) shall terminate in the event Executive
breaches any terms and conditions in Section 7.
8. Entire
Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral relating to the subject matter of this
Agreement.
9. Amendment. This
Agreement may be amended or modified only by a written instrument executed by
both the Company and Executive.
10. Governing
Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Massachusetts
without regard to principles of conflicts of laws thereunder.
11. Notices. Any
notice or other communication required or permitted by this Agreement to be
given to a party shall be in writing and shall be deemed given if delivered
personally or by commercial messenger or courier service, or mailed by U.S.
registered or certified mail (return receipt requested), or sent via facsimile
(with receipt of confirmation of complete transmission) to the party at the
party’s last known address or facsimile number or at such other address or
facsimile number as the party may have previously specified by like
notice. If by mail, delivery shall be deemed effective 3 business
days after mailing in accordance with this Section.
12. Successors and
Assigns.
12.1 Assumption by
Successors. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to assume in writing
prior to such succession and to agree to perform its obligations under this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. Successions by virtue of the sale of stock shall be governed
by operation of law.
12.2 Successor
Benefits. This Agreement shall be binding upon and inure to
the benefit of both parties and their respective successors and assigns,
including any corporation into which the Company may be merged or which may
succeed to its assets or business, provided, however, that the
obligations of Executive are personal and shall not be assigned by
her.
13. Miscellaneous.
13.1 No
Waiver. No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion
shall be effective only in that instance and shall not be construed as a bar or
waiver of any right on any other occasion.
13.2 Severability. In
case any provision of this Agreement shall be invalid, illegal or otherwise
unenforceable, the validity, legality and enforceability of the remaining
provisions shall in no way be affected or impaired thereby.
13.3 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year set forth above.
/s/ Xxxxx X. Xxxx
Date
executed: March 20, 2008
IMPLANT SCIENCES
CORPORATION
By direction of the Board
/s/
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chief Executive
Officer
Date executed: March
20. 2008
Exhibit
A
Milestones
1. Executive’s
successful submission of accurate, complete, and timely SEC filings throughout
the fiscal year.
2. Executive’s
providing timely, complete, and accurate internal operating reports to all
operational divisions and departments throughout the fiscal year.
3. Successfully
complete Phase I and Phase 2 of the Xxxxxxxx-Xxxxx Protiviti program by the end
of the fiscal year, complete with a documentation package and a written action
plan regarding compliance with the financial requirements of Xxxxxxxx-Xxxxx as
they apply to Implant Sciences Corporation.
4. Successfully
contribute, in a material way, to significantly improving the Company’s cash
position through a combination of capturing cash from sources owing the company
money, the sale of various assets, and/or an equity raise.
Exhibit
B
1. Your
Release of Claims. You hereby agree and acknowledge that by
signing this Agreement, and for other good and valuable consideration, you are
waiving your right to assert any and all forms of legal claims against the
Company1/ of any
kind whatsoever, whether known or unknown, arising from the beginning of time
through the date you execute this Agreement (the “Execution
Date”). Except as set forth below, your waiver and release herein is
intended to bar any form of legal claim, complaint or any other form of action
(jointly referred to as “Claims”) against the Company seeking any form of relief
including, without limitation, equitable relief (whether declaratory, injunctive
or otherwise), the recovery of any damages, or any other form of monetary
recovery whatsoever (including, without limitation, back pay, front pay,
compensatory damages, emotional distress damages, punitive damages, attorneys
fees and any other costs) against the Company, for any alleged action, inaction
or circumstance existing or arising through the Execution Date.
Without limiting the foregoing general
waiver and release, you specifically waive and release the Company from any
Claim arising from or related to your prior employment relationship with the
Company or the termination thereof, including, without limitation:
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Claims
under any state or federal discrimination, fair employment practices or
other employment related statute, regulation or executive order (as they
may have been amended through the Execution Date) prohibiting
discrimination or harassment based upon any protected status including,
without limitation, race, national origin, age, gender, marital status,
disability, veteran status or sexual orientation. Without
limitation, specifically included in this paragraph are any Claims arising
under the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the
Americans With Disabilities Act and any similar Federal and state
statute.
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Claims
under any other state or federal employment related statute, regulation or
executive order (as they may have been amended through the Execution Date)
relating to wages, hours or any other terms and conditions of
employment.
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Claims
under any state or federal common law theory including, without
limitation, wrongful discharge, breach of express or implied contract,
promissory estoppel, unjust enrichment, breach of a covenant of good faith
and fair dealing, violation of public policy, defamation, interference
with contractual relations, intentional or negligent infliction of
emotional distress, invasion of privacy, misrepresentation, deceit, fraud
or negligence.
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Any
other Claim arising under state or federal
law.
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You
acknowledge and agree that, but for providing this waiver and release, you would
not be receiving the economic benefits being provided to you under the terms of
this Agreement.
It is the
Company’s desire and intent to make certain that you fully understand the
provisions and effects of this Agreement. To that end, you have been
encouraged and given the opportunity to consult with legal counsel for the
purpose of reviewing the terms of this Agreement. Also, because you
are over the age of 40, the Age Discrimination in Employment Act (“ADEA”), which
prohibits discrimination on the basis of age, allows you at least twenty-one
(21) days to consider the terms of this Agreement. ADEA also allows
you to rescind your assent to this Agreement if, within seven (7) days after you
sign this Agreement, you deliver by hand or send by mail (certified, return
receipt and postmarked within such 7 day period) a notice of rescission to the
Company. The eighth day following your signing of this Agreement is the
Effective Date.
Also,
consistent with the provisions of the Federal Discrimination Laws, nothing in
this release shall be deemed to prohibit you from challenging the validity of
this release under the discrimination laws (the “Federal Discrimination Laws”)
or from filing a charge or complaint of employment-related discrimination with
the Equal Employment Opportunity Commission (“EEOC”), or from participating in
any investigation or proceeding conducted by the EEOC. Further,
nothing in this release or Agreement shall be deemed to limit the Company’s
right to seek immediate dismissal of such charge or complaint on the basis that
your signing of this Agreement constitutes a full release of any individual
rights under the Federal Discrimination Laws, or to seek restitution to the
extent permitted by law of the economic benefits provided to you under this
Agreement in the event that you successfully challenge the validity of this
release and prevail in any claim under the Federal Discrimination
Laws.
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By:
__________________________
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Employee
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Date
signed: _____________
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1/
For purposes of this Agreement, the Company includes the Company and any of its
divisions, affiliates (which means all persons and entities directly or
indirectly controlling, controlled by or under common control with the Company),
subsidiaries and all other related entities, and its and their directors,
officers, employees, trustees, agents, successors and
assigns.
