EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into effective as of the
_____ day of _______________, 2002 (the "Effective Date"), by and between
MICROTEK MEDICAL HOLDINGS, INC., a Georgia corporation (hereinafter the
"Company"), and (hereinafter the "Employee").
RECITALS:
R-1. The Company develops, manufactures and markets infection control (such
as equipment and patient drapes and encapsulation products) and other products
for use primarily in healthcare markets (the "Business").
R-2. The Company's markets are worldwide.
R-3. The Company maintains certain trade secrets and confidential
information which are proprietary to the Company, the disclosure or exploitation
of which would cause significant damage to the Company.
R-4. The Company desires to employ the Employee, and the Employee desires
to accept such employment, for which purposes each of the Company and the
Employee desire to enter into this Agreement to set forth and clarify certain of
the terms and conditions relevant to such employment.
R-5. The Company recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control (as defined herein) may
arise which may create uncertainty and questions among management resulting in a
departure or distraction of management personnel to the detriment of the Company
and its shareholders. In addition, the Company believes that should the Company
or its shareholders receive a proposal for transfer of control of the Company,
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the Employee should be able to assess and advise the Company whether such
proposal would be in the best interests of the Company and its shareholders and
to take such other action regarding such proposal as the Board of Directors
might determine to be appropriate without being influenced by the uncertainty of
the Employee's own situation.
NOW, THEREFORE, in consideration of the recitals, the covenants and
agreements herein contained and the benefits to be derived herefrom, the
parties, intending to be legally bound, agree as follows:
1. Recitals. The recitals set forth above constitute part of this Agreement
and are incorporated herein by this reference.
2. Employment. From and after the date hereof and for the term herein
provided, the Company agrees to employ the Employee as the
______________________ of Microtek Medical Holdings, Inc. and in such other
executive offices to which the Board of Directors of the Company may appoint
Employee. The Employee accepts such employment with the Company upon the terms
and conditions hereinafter set forth.
3. Term. The Employee's employment shall commence on the Effective Date
and, subject to Section 8 of this Agreement, shall continue through the third
anniversary of the Effective Date. The term of this Agreement shall renew
automatically for successive three (3) year terms unless either party shall have
given written notice of its intent not to renew which notice shall be given at
least ninety (90) days prior to the expiration of the initial or any renewal
term.
4. Duties. Subject to the direction and supervision of the Board of
Directors of the Company, the Employee agrees that: (a) he shall devote
substantially all of his full working time and attention to the business of the
Company and its affiliated companies; (b) he will perform all of his duties
properly assigned to him pursuant to this Agreement faithfully and to the best
of his abilities in a manner intended to advance the Company's interests; and
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(c) he shall not engage in any other business activity except: (i) investing
assets in a manner not prohibited by Section 9(e) of this Agreement, and in such
form or manner as shall not require any material services on his part in the
operations or affairs of the companies or other entities in which such
investments are made, (ii) serving on the board of directors of any company,
subject to the provisions set forth in Section 9(e) of this Agreement and
provided that he shall not be required to render any material services with
respect to the operations or affairs of any such company, (iii) engaging in
religious, charitable or other community or non-profit activities which do not
impair his ability to fulfill his duties and responsibilities under this
Agreement, or (iv) such other activities as may be expressly approved in advance
by the Board of Directors of the Company.
5. Compensation. As full compensation for all services rendered by the
Employee pursuant to this Agreement and as full consideration for all of the
terms of this Agreement, the Employee shall receive from the Company during his
employment under this Agreement the base salary, bonuses and fringe benefits
described below.
(a) Base Salary. For all services rendered pursuant to this Agreement,
the Company shall pay or cause to be paid to the Employee an annual base salary
of $_______________ (the "Floor Amount"). The annual salary may be increased or
(subject to the terms of this Agreement) decreased from time to time during the
term of this Agreement in the discretion of the Company. The base salary shall
be payable in accordance with the customary practices of the Company for payment
of its employees, but in any event, in installments not less frequently than
once monthly.
(b) Bonus Compensation. To the extent that the Company shall
establish, from time to time in its discretion, bonus compensation plans for the
benefit of all of its management level employees, the Employee shall be entitled
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to participate in such bonus compensation plans in accordance with terms and
provisions established by the Board of Directors in its discretion. As used in
this Agreement, the term "Annual Performance Bonus" means a bonus program which
is designed to compensate the Employee based upon annual performance objectives.
The term "Annual Performance Bonus Program" excludes the bonus program described
in Section 5(e) hereof and any other multi-year growth incentive award program
which may create extra bonus compensation on a multi-year basis even if such
bonus is payable on an annual basis.
(c) Long Term Incentive Payments. The Company has or may from time to
time in the future grant to the Employee such long-term incentive compensation
(including, by way of illustration but not limitation, stock options) as the
Board of Directors may determine in its discretion.
(d) Fringe Benefits. The Company has adopted, or may from time to time
adopt, policies in respect of fringe benefits for its management level employees
in the nature of health and life insurance, holidays, vacation, disability and
other matters. The Company covenants and agrees that the Employee shall be
entitled to participate in any such fringe benefit policies adopted by the
Company to the same extent that such fringe benefits shall be available to and
for the benefit of all other management level employees.
(e) Sale of Business Bonus Program. In the event of a Change of
Control under clauses (C) or (D) of Section 8(e)(i) of this Agreement,
regardless of whether or not the Employee's employment with the Company
terminates in connection with or following such Change of Control, the Employee
shall be entitled to participate in the bonus plan described on Schedule 1
attached hereto and incorporated herein by reference.
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(f) Tax Withholdings and Other Deductions. The Company shall have the
right to deduct from the base salary and any additional compensation payable to
the Employee all amounts required to be deducted and withheld in accordance with
social security taxes and all applicable federal, state and local taxes and
charges as may now be in effect or which may be hereafter enacted or required as
charges on the compensation of the Employee. The Company shall also have the
right to offset from the base salary and any additional compensation payable to
the Employee any loan or other amounts owed to the Company by the Employee.
6. Working Facilities. The Company, at its own expense, shall furnish the
Employee with office and working space and such equipment, personal secretarial
and other assistance as may be reasonably necessary for the Employee's
performance of his or her duties.
7. Expenses. The Employee is required as a condition of employment to incur
ordinary, necessary and reasonable expenses for the promotion of the business of
the Company and its affiliates and subsidiaries, including expenses for
entertaining, travel and similar items. The Employee is authorized to incur
reasonable expenses in connection with such business, including travel and
entertainment expenses, fees for seminars and courses, and expenses incurred in
attendance at executive meetings and conventions. If paid by the Employee, upon
presentation by the Employee of an itemized account of such expenditures in a
manner satisfactory to the Company, the Employee shall be entitled to receive
reimbursement for these expenses, subject to policies that may be established
from time to time by the Company. It is intended by the Company and the Employee
that all expenses incurred pursuant to this paragraph are to be ordinary and
necessary business expenses.
8. Termination. The Employee's employment may be terminated in accordance
with the provisions of this Section. The provisions for termination are as
follows:
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(a) Death or Disability. The Employee's employment shall be terminated
upon the death or Total Disability of the Employee. For purposes of the
foregoing, the term "Total Disability" shall mean a mental or physical condition
which renders the Employee unable or incompetent to carry out his or her
material job responsibilities or duties and which continues for a period of 180
days and either (i) results in the payment of benefits to the Employee under the
Company sponsored long term disability insurance policy or (ii) in the opinion
of a physician mutually acceptable to the Company and the Employee in the
exercise of their respective reasonable discretion, is expected to be permanent
or to last for an indefinite duration or a duration in excess of 180 days. Upon
any termination of employment under this paragraph, the Employee shall receive
his or her base salary through the date of termination at the rate in effect
just prior to the date of termination of employment plus any benefits or awards
(including both the cash and stock component) which pursuant to the terms of any
compensation plans have been earned or become payable (including, without
limitation, any portion of any bonus award for which any performance conditions,
other than continued employment, have been satisfied), but which have not yet
been paid to the Employee (including amounts which previously have been deferred
at the Employee's request).
(b) Termination For Cause. The Employee's employment may be terminated
by the Company for Cause. For purposes of this Agreement, the term "Cause" means
(i) Employee's conviction of a felony or a misdemeanor involving fraud,
dishonesty or moral turpitude or Employee's willful or intentional material
breach of this Agreement which results in financial detriment that is material
to the Company and its affiliates as a whole; provided, that, the term "Cause"
shall not include bad judgment, negligence, or any act or omission that Employee
believed in good faith to have been in or not opposed to the interest of the
Company (without intent of Employee to gain therefrom, directly or indirectly, a
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profit to which he was not legally entitled). In the event of the termination of
the Employee's employment for Cause, the Employee shall receive his or her base
salary through the date of termination at the rate in effect just prior to the
date of termination of employment.
(c) Termination Without Cause. The Employee's employment may be
terminated by the Company without Cause. In the event of any termination of the
Employee's employment without Cause, (i) the Employee shall be entitled to
receive a lump sum payment in cash equal to the sum of (A) Employee's base
salary through the date of termination at the rate in effect just prior to the
date of termination of employment, plus any benefits or awards (including both
the cash and stock component) which pursuant to the terms of any compensation
plans have been earned or become payable (including, without limitation, any
portion of any bonus award for which any performance conditions, other than
continued employment, have been satisfied), but which have not yet been paid to
the Employee (including, without limitation, amounts which previously have been
deferred at the Employee's request), and (B) an amount equal to the product of
the number of whole and fractional years included during the balance of the
current term of this Agreement multiplied by the largest of the following: (x)
the Employee's salary and Annual Performance Bonus for the second year
immediately preceding the date of termination, (y) the Employee's salary and
Annual Performance Bonus for the first year immediately preceding the date of
termination, or (z) the Employee's current year annual salary and annualized
Annual Performance Bonus (annualizing the bonus based upon an extrapolation of
any portion of the bonus amount in the current year for which the applicable
performance conditions, other than continued employment, have been satisfied);
and (ii) the Company shall maintain in full force and effect, at the sole cost
of the Company for the continued benefit of the Employee and his or her
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dependents for the unexpired portion of the current term of this Agreement, each
of the Company's health, dental, $250,000 term life and disability insurance
benefits (provided that, to the extent such benefits are not available, the
Company shall provide replacement benefits on terms which, as near as may be
practicable, are as favorable to the Employee as the discontinued benefits
except that life and disability benefits need be provided only if the Employee
remains insurable at standard rates) or, at the election of the Employee, the
Company shall pay to the Employee a lump sum cash payment equal to the present
value (using a 10% discount rate) of the cost to the Company of sponsoring such
Company benefits (for which purposes the cost of sponsoring such Company
benefits shall be assumed to equal the premiums payable for such benefits at the
rate in effect just prior to the date of termination of employment) for the
Employee and his or her dependents for the unexpired portion of the current term
of this Agreement. The Company may require, as a condition precedent to making
any payments under this paragraph to the Employee, that the Employee execute a
customary release and covenant not to xxx in favor of the Company. Any payments
under this Section 8(c) shall be subject to Section 5(f).
(d) Termination By Employee. The Employee may terminate his employment
hereunder with or without Good Reason (as defined below) by written notice to
the Company. In the event the Employee elects to terminate this Agreement
without Good Reason, then the Employee shall offer to continue to provide
services to the Company in accordance with this Agreement for a period of not
less than ninety (90) days from the date that the Employee elects to resign. The
Company may accept such offer in full, accept such offer subject to the
Company's right to terminate the Employee's employment during such ninety (90)
day period (which termination shall nevertheless be treated as a termination by
Employee without Good Reason) or reject such offer in which event the Employee's
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employment shall immediately terminate. Effective upon the date of Employee's
termination of employment following the Employee's resignation without Good
Reason, the Employee shall be entitled to no further compensation or benefits
under this Agreement. In the event the Employee terminates his employment
hereunder for Good Reason, the Employee shall be entitled to the benefits
specified in Subsection (c) of this Section 8 as if Employee's employment was
terminated by the Company without Cause. As used in this Agreement, the term
"Good Reason" shall mean the occurrence of any one or more of the following
events which continues for a period of not less thirty (30) days following
written notice by the Employee to the Company unless the Employee specifically
agrees in writing that such event shall not be Good Reason: (i) any material
breach of this Agreement by the Company, (ii) any material adverse change in the
status, responsibilities or perquisites of the Employee, (iii) any failure to
nominate the Employee for election to the Board of Directors of the Company and
continue the Employee as an executive officer of the Company, (iv) causing or
requiring the Employee to report to anyone other than the President or Chief
Executive Officer and Board of Directors of the Company, or (v) the reduction of
the Employee's salary below the Floor Amount per year without the written
consent of the Employee.
(e) Change of Control.
(i) As used in this Agreement, the term "Change of Control" shall
mean:
(A) Individuals who, as of the date of this Agreement,
constitute the Board of Directors of the Company (the "Incumbent Board") cease
for any reason to constitute at least a majority of such Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company shareholders, was
approved by a vote of at least a majority of the directors then comprising the
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Incumbent Board shall be considered as though such individual was a member of
the Incumbent Board, but excluding, for this purpose, any individual whose
initial assumption of such directorship occurs as a result of either an actual
or threatened election contest (as such terms are used in Section 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act")) or other actual or threatened solicitation of proxies or
consents by or on behalf of an individual, entity or group other than the Board;
(B) The acquisition by an individual, entity or group
(within the means of Section 13(d)(3) or 14(d)(2) of the Exchange Act) other
than a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, of Beneficial Ownership (as defined in that certain
Shareholder Protection Rights Agreement dated as of December 20, 1996 between
the Company and SunTrust Bank, as such agreement may be modified or amended from
time to time (the "Rights Agreement")) of 15% or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the outstanding voting securities of the Company entitled to vote generally
in the election of directors unless the Incumbent Board in good faith determines
in writing that such transaction shall not constitute a "Change of Control"
hereunder;
(C) If there occurs any merger or consolidation of the
Company with or into any other corporation or entity (other than a wholly-owned
subsidiary of the Company) unless the Incumbent Board in good faith determines
in writing that such transaction shall not constitute a "Change of Control"
hereunder; or
(D) There occurs a sale or disposition by the Company of all
or substantially all of the Company's assets.
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Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred for purposes of this Agreement by virtue of any transaction which
results in the Employee, or a group of persons which includes the Employee,
acquiring directly or indirectly all or substantially of the assets of the
Company.
(ii) In the event of any termination of Employee's employment
with the Company (including, without limitation, a termination by Employee under
Section 8(d) without Good Reason) occurring within six (6) months following the
occurrence of any event constituting a Change of Control other than a
termination of employment occurring as a result of a termination under
Subsections (a) or (b) of this Section 8 (being a termination for death or
disability or a termination by the Company for Cause), the Company shall pay to
the Employee the sum of the following:
(A) The Employee's base salary through the date of
termination at the rate in effect just prior to the date of termination of
employment, plus any benefits or awards (including both the cash and stock
component) which pursuant to the terms of any compensation plans have been
earned or become payable (including, without limitation, any portion of any
bonus award for which any performance conditions, other than continued
employment, have been satisfied), but which have not yet been paid to the
Employee (including, without limitation, amounts which previously had been
deferred at the Employee's request); and
(B) A lump sum payment in cash in an amount equal to the
product of three multiplied by the largest of the following: (x) the Employee's
salary and Annual Performance Bonus for the second year immediately preceding
the date of termination, (y) the Employee's salary and Annual Performance Bonus
for the first year immediately preceding the date of termination, or (z) the
Employee's current year annual salary and annualized Annual Performance Bonus
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(annualizing the bonus based upon an extrapolation of any portion of the bonus
amount for which the applicable performance conditions, other than continued
employment, have been satisfied).
(iii) If Employee's employment is terminated within the scope of
Subsection (e)(ii) of this Section, then the Company shall maintain in full
force and effect, at the sole cost of the Company, for the continued benefit of
the Employee and his or her dependents for a period terminating on the earlier
of (A) the latter of the unexpired portion of the current term of this Agreement
or twelve months after such date of termination or (B) the commencement date of
equivalent benefits from a new employer, each of the Company's health, dental,
$250,000 term life and disability insurance benefits (provided that, to the
extent such benefits are not available, the Company shall provide replacement
benefits on terms which, as nearly as may be practicable, are as favorable to
the Employee as the discontinued benefits except that life and disability
benefits need be provided only if the Employee remains insurable at standard
rates) or, at the election of the Employee, the Company shall pay to the
Employee a lump sum cash payment equal to the present value (using a 10%
discount rate) of the cost to the Company of sponsoring such Company benefits
(for which purposes the cost of sponsoring such Company benefits shall be
assumed to equal the premiums payable for such benefits at the rate in effect
just prior to the date of termination of employment) for the Employee and his or
her dependents.
(iv) If the Company or the Company's accountants determine that
the payments called for under this Agreement either alone or in conjunction with
any other payments or benefits made available to the Employee by the Company or
an affiliate of the Company will result in the Employee being subject to an
excise tax ("Excise Tax") under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or if an Excise Tax is assessed against the
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Employee as a result of such payment or other benefits, the Company shall make a
Gross-Up Payment (as defined in this subsection (iv)) to or on behalf of the
Employee as and when such determination(s) and assessment(s), as appropriate,
are made, subject to the conditions of this subsection (iv). A "Gross-Up
Payment" shall mean a payment to or on behalf of the Employee that shall be
sufficient to pay (A) any Excise Tax in full, (B) any federal, state and local
income tax and Social Security or other employment tax on the payment made to
pay such Excise Tax as well as any additional Excise Tax on the Gross-Up
Payment, and (C) any interest or penalties assessed by the Internal Revenue
Service on the Employee if such interest or penalties are attributable to the
Company's failure to comply with its obligations under this subsection (iv) or
applicable law. Any determination under this subsection (iv) by the Company or
the Company's accountants shall be made in accordance with Section 280G of the
Code, any applicable related regulations (whether proposed, temporary or final),
any related Internal Revenue Service rulings and any related case law, and shall
assume that the Employee shall pay Federal income taxes at the highest marginal
rate in effect for the year in which the Gross-Up Payment is made and state and
local income taxes at the highest marginal rate in effect in the state of the
Employee's residence for such year. The Employee shall take such action (other
than waiving Employee's right to any payments or benefits) as the Company
reasonably requests under the circumstances to mitigate or challenge such tax.
If the Company reasonably requests that the Employee take action to mitigate or
challenge, or to mitigate and challenge, any such tax or assessment and the
Employee complies with such request, the Company shall provide the Employee with
such information and such expert advice and assistance from the Company's
accountants, lawyers and other advisors as the Employee may reasonably request
and shall pay for all expenses incurred in effecting such compliance and any
related fines, penalties, interest and other assessments. Subject to the
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provisions of this subsection (iv), all determinations required to be made under
this subsection (iv), including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by the public accounting firm that
is retained by the Company as of the date immediately prior to the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within thirty (30) business
days of the receipt of notice from the Company or the Employee that there has
been a payment that could trigger a Gross-Up Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Employee may appoint
another nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. The Gross-Up Payment under this subsection (iv) with respect
to any payments shall be made no later than sixty (60) days following such
payments. If the Accounting Firm determines that no Excise Tax is payable by the
Employee, it shall furnish the Employee with a written opinion to such effect,
and to the effect that failure to report the Excise Tax, if any, on the
Employee's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment") or Gross-Up
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Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Employee thereafter is required to make payment of any
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly
paid by the Company to or for the benefit of the Employee. In the event the
amount of the Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax as herein set forth, the Accounting Firm shall
determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Employee to or for the benefit of the
Company. The Employee shall cooperate, to the extent the Employee's expenses are
reimbursed by the Company, with any reasonable requests by the Company in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
9. Protective Covenants; Remedies.
(a) Property Rights. The Employee acknowledges and agrees that all
records of the accounts of customers, lists, prospect lists, prospect reports,
vendor lists, samples, desk calendars, briefcases, day timers, notebooks,
computers, computer records and software, policy and procedure manuals, price
lists, catalogs, premises keys, written methods of pricing, lists of needs and
requirements of customers, written methods of operation of the Company or any
subsidiary or affiliate of the Company (collectively, the "Company Group"),
manufacturing techniques, financial records and any other records and books
relating in any manner whatsoever to the customers of the Company Group or its
business, whether prepared by the Employee or otherwise coming into the
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Employee's possession, are the exclusive property of the Company Group
regardless of who actually purchased or prepared the original book, record, list
or other property. All such books, records, lists or other property shall be
immediately returned by the Employee to the Company upon any termination of
employment.
(b) Non-Disclosure of Confidential Information. The Employee
acknowledges that through his employment by the Company, the Employee will
become familiar with, among other things, the following:
Any scientific or technical information, design, process, procedure,
formula or improvement that is secret and of value, and information
including, but not limited to, technical or nontechnical data,
formula, patterns, compilations, programs, devices, methods,
techniques, drawings and processes, and product, customer and
financial data, which the Company takes reasonable efforts to protect
from disclosure, and from which the Company derives actual or
potential economic value due to its confidential nature (the foregoing
being hereinafter collectively referred to as the "Confidential
Information").
The Employee acknowledges that use or disclosure of such Confidential
Information would be injurious to the Company and will give the Employee an
unfair competitive advantage over the Company Group in the event that the
Employee should go into competition with the Company Group. Accordingly, the
Employee agrees that during the term of this Agreement and for a period of two
(2) years subsequent to the termination of employment for any reason, the
Employee will not disclose to any person, or utilize for the Employee's benefit,
any of the Confidential Information. The Employee acknowledges that such
Confidential Information is of special and peculiar value to the Company; is the
property of the Company Group, the product of years of experience and trial and
error; is not generally known to the Company Group's competitors; and is
regularly used in the operation of the Company Group's business. The Employee
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acknowledges and recognizes that applicable law prohibits disclosure of
confidential information and trade secrets indefinitely (i.e., without regard to
the two year period described in this paragraph), and the Company has the right
to require the Employee to comply with such law in addition to the Company's
rights under this paragraph.
(c) Non-Interference With Employees. The Employee agrees not to
solicit, entice or otherwise induce any employee of the Company Group to leave
the employ of the Company Group for any reason whatsoever, and not to otherwise
interfere with any contractual or business relationship between the Company
Group and any of its employees for two (2) years from the termination of the
Employee's employment.
(d) Non-Solicitation of Customers. For so long as the Employee shall
be due or shall have accrued salary payments from the Company (including,
without limitation any such payment under Subsections (c) or (d) of Section 8 of
this Agreement which Employee does not waive and refund to the Company in
advance of taking any actions prohibited by this Subsection), and, in the event
of any termination of Employee's employment hereunder by the Company for Cause
or by the Employee without Good Reason, for one (1) year after the date of such
termination of employment, the Employee agrees that the Employee will not,
within the world (the "Territory"), which the parties agree is the territory
from which the Employee shall primarily renders services, for the Employee's own
benefit or on behalf of any other person, partnership, company or corporation,
contact any customer or customers of the Company Group who the Employee called
upon or with which the Employee became familiar while employed by the Company,
for the purpose of engaging in the Business. This Subsection shall apply for one
year following the date of any termination of employment within the scope of
Subsection (e)(ii) of Section 8 of this Agreement.
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(e) Non-Competition. For so long as the Employee shall be due or shall
have accrued salary payments from the Company (including, without limitation any
payment under Subsections (c) or (d) of Section 8 of this Agreement which
Employee does not waive and refund to the Company in advance of taking any
action prohibited by this Subsection), and in the event of any termination of
Employee's employment hereunder by the Company for Cause or by the Employee
without Good Reason, for one (1) year after the date of such termination of
employment, the Employee agrees that the Employee will not (i) within the
Territory, either directly or indirectly, whether on his own behalf or in the
service of others (whether as an employee, director, consultant or advisor) in
any capacity that involves duties similar to the duties of the Employee
hereunder, engage in the Business, or (ii) become an owner (except for the
ownership of not greater than an interest of five percent of a publicly held
company) of any company which is engaged in the Business. This Subsection shall
apply for one year following the date of any termination of employment within
the scope of Subsection (e)(ii) of Section 8 of this Agreement.
(f) Inventions and Discoveries. The Employee agrees to fully inform
and disclose to the Company all inventions, designs, improvements and
discoveries which the Employee now has or may hereafter while employed by the
Company obtain which either constitutes an improvement to or a modification of
any of the products which from time to time are under development by the Company
or being manufactured or marketed by the Company (collectively, the "Products")
or constitute an invention, design, improvement or discovery having unique
application to the Products, whether conceived by the Employee alone or with
others during or outside the usual hours of work. All such inventions, designs,
improvements and discoveries shall be the exclusive property of the Company. The
Employee shall assist the Company to obtain such legal protection of all such
inventions, designs, improvements and discoveries as may be deemed desirable by
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the Company from time to time. This Subsection shall survive any expiration or
earlier termination of this Agreement.
(g) Acknowledgment Regarding Protective Covenants. The Employee
acknowledges that the Employee has read and understands the terms of this
Agreement, that the same was specifically negotiated, and that the protective
covenants agreed upon herein are necessary for the protection of the Company
Group's business. Further, the Employee acknowledges that the Company would not
employ the Employee without the specifically negotiated protective covenants
herein stated.
(h) Remedies. In addition to any other rights and remedies which are
available to the Company, with respect to any breach or violation of the
protective covenants set forth herein, it is recognized and agreed that the
Company shall be entitled to (i) obtain injunctive relief which would prohibit
the Employee from continuing any breach or violation of such protective
covenants, and (ii) commence an action to obtain such relief in any court of
competent jurisdiction.
10. Disputes. Except as set forth in Section 9(h) of this Agreement, any
controversy or claim arising out of or relating to the employment relationship
between the Company and the Employee shall be settled by arbitration by the
American Arbitration Association administered under its National Rules for the
Resolution of Employment Disputes. Such arbitration shall be conducted in the
City of Atlanta, Georgia in accordance with the rules of the American
Arbitration Association. Judgment upon the award entered by the arbitrators
shall be final and may be entered in a court having jurisdiction thereof. If the
Employee is the prevailing party in such proceeding, then the Employee shall be
entitled to recover the Employee's costs (including, without limitation,
reasonable attorneys' fees) of such proceeding. If the Company is the prevailing
party in such proceeding, then the arbitrator may in the arbitrator's discretion
19
award the Company its costs (including reasonable attorneys' fees) of such
proceeding.
11. No Conflicting Agreements. The Employee hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or by which he is bound, and that he is not subject to any covenants
against competition or similar covenants which affect the performance of his
obligations hereunder.
12. Consulting Cooperation. The Employee shall cooperate fully with the
Company in the defense or prosecution of any claims or actions which may be
brought against or on behalf of the Company which relate to events or
occurrences that transpired while the Employee was employed by the Company. The
Employee's full cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Company at
mutually convenient times. The Employee shall also cooperate fully with the
Company in connection with any examination or review by any federal or state
regulatory authority as any such examination or review relates to events or
occurrences that transpired while the Employee was employed by the Company. The
obligations under this Section shall continue, to the extent required, following
the expiration of this Agreement. To the extent the Employee is required to
provide services under this Section subsequent to the expiration of this
Agreement, the Company shall continue to reimburse the Employee for the
Employee's reasonable expenses in connection with the performance of his duties
under this Section and pay a consulting fee in the amount of $100 per hour.
13. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and personally delivered or sent by registered or
certified mail, return receipt requested, in the case of the Company, to the
20
principal office of the Company directed to the attention of the Company's Board
of Directors, and in the case of the Employee, to the Employee's last known
residence address.
14. Construction. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Georgia. The waiver by any party hereto
of a breach of any of the provisions of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
15. Modification; Assignment. This Agreement may not be changed except by
written agreement duly executed by the parties hereto, provided that Schedule 1
of this Agreement may be modified as set forth in such Schedule. The rights and
obligations of the Company under this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company. This Agreement,
being for the personal services of the Employee, shall not be assignable or
subject to anticipation by the Employee. This Agreement shall be binding upon
and inure to the benefit of the Employee, his estate and Beneficiary (as defined
below).
16. Severability. Each provision of this Agreement shall be considered
severable. If for any reason any provisions herein are determined to be invalid
or unenforceable, this Agreement shall be construed in all respects as though
such invalid or unenforceable provisions were omitted, and such invalidity or
unenforceability shall not impair or otherwise affect the validity of the other
provisions of this Agreement. Moreover, the parties agree to replace such
invalid provision with a substitute provision that will correspond to the
original intent of the parties.
17. Number of Agreements. This Agreement may be executed in any number of
counterparts, each one of which shall be deemed an original.
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18. Pronouns. The use of any word in any gender shall be deemed to include
any other gender and the use of any word in the singular shall be deemed to
include the plural where the context requires.
19. Headings. The section headings used in this Agreement are for
convenience only and are not to be controlling with respect to the contents
thereof.
20. Entire Agreement. This Agreement, together with any other written
agreements entered into concurrently herewith, contains the complete and
exclusive statement of the terms and conditions of the Employee's employment by
the Company, and there exists no other inducement or consideration between the
Company and the Employee relative to the employment contemplated by this
Agreement. All prior agreements relative to the subject matter of this Agreement
are terminated.
21. Beneficiary. If the Employee dies prior to receiving all of the amounts
payable to him or her in accordance with the terms of this Agreement, such
amounts shall be paid to one or more beneficiaries (each, a "Beneficiary")
designated by Employee in writing to the Company during his lifetime, or if
either no such Beneficiary is designated or such designation is known to the
Company to not be binding on the Employee's estate, to Employee's estate.
22. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Employee or others. In no event shall Employee be obligated to seek
other employment or take any other action to mitigate the amounts payable to
Employee under any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned as result of
Employee's employment by another employer, except that any continued welfare
22
benefits provided for by Sections 8(c) or 9(e)(iii) shall terminate and expire
on the commencement date of equivalent benefits from a new employer.
23. Survival of Employee's Rights and Duties. All of Employee's rights
hereunder, including his rights to compensation and benefits, and his
obligations under Section 9 hereof, shall survive the termination of Employee's
employment and/or the termination of this Agreement.
24. Legal Fees. The Company shall pay the reasonable costs (including
attorneys' fees and expenses) of Employee in completing this Agreement up to
$2,500.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first set forth above.
MICROTEK MEDICAL HOLDINGS, INC.
By:
------------------------------ ------------------------------------
Its:
-----------------------------
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SCHEDULE 1
SALE OF BUSINESS BONUS PROGRAM
1. Definitions. In addition to terms defined in the Employment Agreement (the
"Employment Agreement") to which this Schedule 1 is attached, the terms
listed below shall be defined as follows:
(a) "Allocation" shall mean a percentage amount of the Bonus Pool which shall
be allocated to a designated Participant in the Bonus Pool as determined by
the Committee from time to time.
(b) "Bonus Pool" shall mean the total gross amount of cash available for bonus
payments under this Bonus Program. The Bonus Pool shall be calculated as a
percentage of the market capitalization (the product of Share Appreciation
multiplied by Shares Outstanding) of the Company. The Committee may assign
different percentages by range of share prices within the market
capitalization. The applicable percentage(s) of the market capitalization
shall be designated by the Committee from time to time. The following is an
example of a Bonus Pool calculation assuming 42,000,000 Shares Outstanding,
a Share Appreciation of $11.00 and percentages of bands of market
capitalization designated as set forth below:
Market Capitalization (Share Bonus
Share Appreciation Appreciation multiplied by 42M) Percentage Bonus Pool
------------------ ------------------------------- ---------- ----------
$0.00 to $ 1.90 $ 80,598,000.00 0.00% $ 0.00
$1.90 to $ 5.00 $130,200,000.00 3.00% $ 3,906,000.00
$5.00 to $10.00 $210,000,000.00 3.50% $ 7,350,000.00
$10.00 to $11.00 $ 42,000,000.00 4.00% $ 1,680,000.00
------------
Total Bonus Pool $12,936,000.00
=============
(c) "Bonus Program" shall mean this Sale of Business Bonus Program.
(d) "Change of Control" shall mean either (i) any merger or consolidation of
the Company with or into any other corporation or entity (other than a
wholly-owned subsidiary of the Company) unless the Incumbent Board (as
defined in the Employment Agreement) determines that such transaction shall
not constitute a "Change of Control" for purposes of this Bonus Program, or
(ii) there occurs a sale or disposition by the Company of all or
substantially all of the Company's assets for which purposes the Incumbent
Board shall have the authority to determine in its sole discretion what
constitutes substantially all of the Company's assets.
(e) "Committee" shall mean the Compensation Committee of the Board of Directors
or, except to the extent prohibited by applicable law or the applicable
rules of any stock exchange or market, such other person or persons (who
may be members of the Compensation Committee or not) to whom the Committee
may expressly allocate or delegate in writing all or any portion of its
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responsibilities and powers. Any such allocation or delegation may be
revoked by the Committee at any time.
(f) "Date of Termination" shall mean the date on which a Participant in this
Bonus Program is no longer actively employed by the Company or any Related
Company unless such date occurs due to a leave of absence approved by the
Committee in which event the "Date of Termination" shall occur upon
expiration of such approved leave of absence without the prior return of
such Participant to such active employment status.
(g) "Participant" shall mean an employee of the Company or a Related Company
designated by the Committee to participate in this Bonus Program.
(h) "Related Company" shall mean any subsidiary of the Company or any business
venture in which the Company has a significant interest, as determined in
the discretion of the Committee.
(i) "Share Appreciation" shall mean the price per share of common stock of the
Company at which the transaction constituting a Change of Control occurs,
as determined in good faith by the Committee.
(j) "Shares Outstanding" shall mean the sum of all of the Company's shares of
common stock issued and outstanding immediately prior to the event
constituting a Change of Control, including all such shares held by
affiliated and nonaffiliated persons.
2. Adjustments. The Committee shall have authority from time to time in its
discretion to terminate this Bonus Program or make such adjustments in this
Bonus Program as it deems appropriate and in the best interests of the
Company even if such adjustments shall result in a decrease in the amount
of bonus compensation payable hereunder. For these purposes, there shall be
no vested right of any Participant to any payments which may potentially
arise under this Bonus Program. Without limiting the foregoing, the
Committee may from time to time adjust the allocation to each Participant
and the variables used in calculating the size of the Bonus Pool.
3. Expiration. Unless previously extended or terminated by action of the
Committee, this Bonus Program shall expire on October 20, 2005.
4. Payment. Provided that Participant's Date of Termination has not previously
occurred, concurrently with the consummation of an event constituting a
Change of Control the Participant shall be entitled to payment of an amount
equal to his Allocation multiplied by the Bonus Pool (the "Bonus Payment").
In the event that the consideration payable by or on behalf of an acquiring
person in the transaction resulting in the Change of Control is paid in
whole or in part in securities, the Bonus Payment shall be payable in a
like fashion and proportion as between securities and cash. The Committee
shall have absolute discretion in establishing the medium and manner of
making the Bonus Payment. The Company or its successors shall immediately
pay such amount to the Participant. Amounts due and unpaid shall accrue
interest at twelve percent (12%) per year.
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5. Withholding. The Company and its successors shall have the right to deduct
from amounts payable hereunder all amounts required to be deducted and
withheld in accordance with social security taxes and all applicable
federal, state and local taxes and charges as may now be in effect or which
may be hereafter enacted or required as charges on the compensation of the
Participant.
6. Transferability. Interests under this Bonus Program are not transferable
except that any amounts which have become payable under this Bonus Program
may transfer as designated by the Participant by will or by the laws of
descent and distribution.
7. Administration. The authority to manage and control the operation and the
administration of this Bonus Program shall be vested in the Committee. Any
interpretation of this Bonus Program by the Committee and any decision made
by it with respect to this Bonus Program is final and binding on all
persons.
8. Disputes. Any controversy or claim between the Company and a Participant
shall be settled by arbitration in accordance with the provisions of the
Participant's Employment Agreement with the Company.
9. Not an Employment Contract. This Bonus Program does not confer on any
Participant any right with respect to continuance of employment or other
service with the Company or any Related Company, nor will it interfere in
any way with any right of the Company or any Related Company or otherwise
to terminate or modify the terms of such Participant's employment or other
service at any time.
10. Construction. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Georgia.
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1470890v5
